Monday, November 12, 2012

Entitlement Nation

The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.  – Alexis de Tocqueville
The monthly Government report for August on food stamp usage was conveniently released, on a delayed basis supposedly because of the storm, after the election.  The food stamp usage numbers are beginning to go beyond shocking.  August saw close to half a million more people added to the food stamp usage list, the largest increase in a year.  47.1 million people and 22.6 million households in this country are now using food stamps.  Zerohedge has compiled some nice charts, which you can see here:  LINK

According the latest Census reports, there's 311 million people in this country and 114 million households.  As of the August food stamp report, 15.1% of the population and 19.8% of the households are using food stamps.  Nearly 1 out of every 6 people and nearly 1 in 5 households are using food stamps.  To put this in perspective, next time you are driving thru a standard middle class housing development, know that roughly 1 out of every 5 homes is using food stamps.  I don't know about anyone else, but this fact blows my mind.

Even more staggering is that food stamp usage is becoming more common among college students:  LINK  Please note that the linked article is from the Washington Post, so know that any possible positive "spin" has put on the facts.  What the article does not talk about is the fact that student loan usage hits a new record every month - with $1 trillion in outstanding student loans guaranteed by the Government now.   In essence, it's becoming more common that the taxpayer is now financing 100%  of the entire college experience for a growing number of students. 

I guess in an ideal world, it's great that someone who can't put food on the table is able to get assistance from the Government for this purpose.  Please note:  "an ideal world."  Unfortunately, not only do we not live in an ideal world, but the financial condition of the country we do live in is approaching catastrophic conditions.  Not only can we not afford to pay for food stamps and finance college tuition, but even if  the Government stopped all spending except that which is "mandatory" it would still be operating at a deficit.

Blogger Simon Black has written an excellent piece which puts the raw numbers into black and white.  Mandatory Govt spending encompasses anything required by law and everything else is "discretionary."  Surprisingly, "discretionary" expenditures include:  "nearly everything we think of related to government– the US military, Air Force One, the Department of Homeland Security, TSA agents who sexually assault passengers, etc."

He goes on to run the math on the mandatory vs. discretionary spending, and if we cut out all spending except for things like social security, medicare and Treasury debt interest we are still left with a $250 billion spending deficit.  Just think about that for a minute and understand that military spending is not part of the "mandatory" category.

I recommend that everyone read Mr. Black's brief essay:  LINK  He's an ex-pat living in South America. I've been reading his work for quite some time and it's excellent analysis usually devoid of any hyperbole or political spin.  After you read it, you'll understand why neither Romney or Obama could articulate some kind of gameplan to address this country's catastrophic fiscal condition.  I honestly believe that voters voted Obama back into office because they figured his puppeteers wouldn't loot the system quite as quickly as would Romney his handlers. 

The bottom line with all of this is that either the Government is going to have to print a whole helluva lot more paper money over the next four years or our economic and financial system will collapse.  Moreover, and probably an even stronger argument for the "more printing" view, unless the Government keeps printing there's 47.1 million food stamp recipients who will start rioting in the streets.  That's why Mr. de Tocqueville, the quote at the top, said what he said about the United States and that's why gold and silver are going a lot higher in price...


  1. Dave,

    Can you explain the goodwill reduction of 57.2mm from aumn in the q3 report. Is this a good or bad thing? How does this effect them going forward? I'm not too savvy in accounting but the balance sheet looks excellent or am I missing something.

    Based on its recent trading it is apparently going to zero shortly.

    1. sure. Valerdena isn't worth as much as thought it was. The book value is 45% of the market value, so the market was already saying that the goodwill should be reduced. this stock is cheap on a value basis. value stocks require more patience than most are willing to give them. the goodwill reduction is irrelevant.

  2. Real Danger of “Obamacare”: Insurance Company Takeover of Health Care

    Election rhetoric shuns the big picture in favor of the bigger platitude. Now that The Show is over, we are left with the equivalent of a Sunday morning hangover following a binge of promises and lies. We leave the theatre of political spectacle on steroids for the real world of unstable economy, a globally and publicly subsidized financial sector, and increased costs of living on everything from food to education to health-care; outpacing declining median incomes. The average cost for health insurance for a family is $15,745 per year vs. a median income of $50,502, or about half post-tax take-home pay.

    “Obamacare” is the name commonly used for the Patient Protection and Affordable Care Act (PPACA) of 2010. The very moniker is indicative of how name-and-image-centric our world has become; Medicare was never called “Johnsoncare” when President Johnson signed it into law in 1965 and Johnson was not exactly a man of small-personality. At any rate, Obamacare or the PPACA ranks as one of the most misrepresented issues from the campaign, by both sides of the ever-slimming aisle.

    The Tea-Party Conservative types get it embarrassingly wrong when they call it a “government takeover of health care.” Likewise, Progressive Obama-supporters are deluded in accepting it as the most sweeping healthcare reform since Medicare. (Side note: I wish the word ‘sweeping’ could be retired from politics until it actually means -sweeping.)

    Here’s why. The PPACA does nothing to restructure the health insurance industry, anymore than the Dodd-Frank Act restructures the banking industry. This means everything else it attempts to do, positive or negative, will be vastly overshadowed by an industry accelerating to morph itself into a acquisition machine in order to circumvent anything that even smells like a restriction, including laws that exist and ones to come.

    How? By doing the same thing energy and telecom companies did after they were deregulated in 1996, and that banks did after they were summarily deregulated (after moving that way for decades) in 1999. They are merging, consolidating, eliminating competitors, and controlling their domain. They are manufacturing power.

    Investment bankers are roaming the world to exploit this hot new opportunity. That’s one reason insurance companies don’t even call themselves that anymore. Now, they are ‘managed health care’ companies. Call yourself a managed health care company, and you can buy everything from other insurance companies to hospitals to clinics to doctors. The more consolidation, the more fees bankers rake in, and the more premiums and medical reimbursements and health care procedures, each company can control.

  3. Didn't they just ship all of their equipment from Argentina to the velardena property? Why is velardena worth so much less and id so why have they spent so much time and money tramping up production at it?

    1. JD, I'm really fatigued from AUMN. The valuation analysis has nothing do with ramping up production on Valerdena other than that it's worth a little less than they valued it when they acquired it. It's a GAAP accounting adjustment. If silver goes to $200/oz., which I think it will, AUMN is a $20 stock.

      If you want specific details on AUMN, call the company. Jerry Danni will return your call. It might take a couple days but he'll call you back.

    2. For the most part, GAAP accounting is a snapshot that looks "back." What you want to do is take what AUMN looks like today and project forward what you think it's worth given future variables - like silver going to $100

    3. So silver goes from $32 to $200 or 6.25* and AUMN goes from $3.86 to 20 or 5.18* and this is a good thing?

    4. If silver goes to $200/oz., which I think it will, AUMN is a $20 stock.

      Dave in Denver

    5. ya whatever. i don't get paid for this. i have a stock that is a producer that had the shit beat out of it and i spoke with management today and it's dirt cheap. easy double from here w/out gold and silver moving higher. if anyone wants to pay me for that work i'd be happy to share it...

  4. Turkish PM Erdoğan – It is thought-provoking that the IMF is not using gold as a global currency
    Turning his attention to the IMF, Erdoğan continued to issue criticisms. “It is thought-provoking that the IMF is not using gold as a global currency rather than any currency, and it only gives aid on a where and what basis,” he said. Reminding his audience of Turkey’s “bitter” experiences with the fund, the premier said the prescriptions of the IMF often caused serious problems for countries in trouble. “One would wish that the IMF would help the countries in trouble, but this is not the case, we should achieve this,” he said.

  5. Gary Shilling and Barry Ritholtz explain the concept of the "Greenspan Put" in this never-before-seen clip from Money For Nothing.

  6. So what you're saying, Dave, is that in terms of the black hole of debt confronting us, we've passed the event horizon. If that's the case, then a lot of us are going to get an awful lot thinner in the days ahead.

  7. Max Keiser talks to Teri Buhl about the investigation into fraud at
    Sun Trust Bank where whistleblowers allege the bank mis-sold mortgages
    to Fannie Mae, the government sponsored enterprise. Max and Teri also
    talk about recent developments in the case of residential mortgage
    back securities fraudulently sold to investors by JP Morgan’s Bear
    Stearns holding and Teri proposes a million man march on the SEC and
    the NY Fed.

  8. Dave, thanks for this piece. I wish more readers would comment on the pieces you take time to create and not ask for free analysis of miners like AUMN as much. Perhaps stop responding to the worst abusers...

    I think your conclusion is dead-on: food stamps and students loans are only 2 of the many drivers that don't require but COMPEL further money printing in increasing amounts for the foreseeable future. The resulting ongoing debasement of FRN's leave anyone with a pulse little alternative than to shift wealth and savings into metal money form.

    The only source of wonder is how the cartel has been able to keep gold and silver down as the debasement unfolds. Paper PM prices are lower today than when QE-ternity was announced... That shouldn't be seen as a discouraging development, it should be seen as an indicator of the desperation of the cartel as well as an invitation to continue to accumulate and save in physical silver and gold at artifically low, govt subsidized low prices. The value of Real Money will not be held down forever and those with vision and brass will accumulate theur asses off as long as this Twilight Zone-like interval lasts.

    Miner shares will respond accordingly when PMs inevitably move up. Those with the discipline and investment horizon to wait should keep nose down on dollar cost averaging and dip buying strategies. Those without the vision or brass should get the hell out of what is admittedly a very hot kitchen.

    Oh, and JD: get off AUMN and look very carefully at Fortuna Silver Mines and Aurcana. Their near term production growth profiles are 2 of the best of any junior resource player.

    Ed from FSN

    1. Thanks Ed. The only reason the cartel has been able to keep down the price of gold and silver is thru the unregulated use of paper futures and the barely regulated use of paper ETFs. Think about all of the money GLD has sucked into its trust without and credible way to enforce that they actually have 1:1 physical bullion sitting in the vault.

      If most of the money going into ETFs were to go into coins instead, there would be a big problem with physical supply. I suspected back in 2004 when GLD was first rolled out that they would use paper ETF's to divert a lot of the cash that should be going into physical in order to bolster their ability to manipulate the price using paper derivatives.

  9. Eric Sprott: Western Central Banks Have No More Gold…Only Gold Receivables!

    Bloomberg has released a MUST WATCH interview with our good friend Eric Sprott of Sprott Asset Management discussing his thoughts on gold. While unable to specifically discuss silver due to the current PSLV follow-on, Sprott simply destroyed the MSM pundits’ anti-gold arguments, stating that gold has beat the Dickens out of every other asset class over the last 12 years, and questioned whether the Western Central Banks have any physical gold left in the vaults, as the gold listed on their balance sheets includes gold receivables, which has been leased out and is gone for good.

    The legendary Eric Sprott’s full MUST WATCH interview below:

    Bloomberg kicked the interview off by asking Sprott whether he is as much a fan of precious metals today as he once was, ”given the fact that they’ve treated you so poorly over the past 18 months?” Sprott replied:

    A little history is probably important here. Gold has gone from $250 to over $1700. It’s beat the Dickens out of every other asset class over the last 12 years…To specifically answer your question, am I more optimistic today than I might otherwise be? Absolutely. I wrote an article recently questioning whether the Western Central Banks had any gold left. We simply did a physical analysis of the people that are coming into the gold market and the changes that have happened since 2000, (and the supply of gold has not changed since 2000 on an annual basis, it’s still 4,000 tons). When you look at the fact that the central banks used to sell 400 tons annually, now they buy 500 tons. The ETF didn’t even exist in 2000, now they buy 300 tons a year.

  10. In this edition of the show Max interviews Michael Panzner from He talks about whether the bond market is in a bubble? If so what are the implications?

  11. Entitled?..this is beyond,,

    Colbert Super PAC SHH! - Secret Second 501c4 - Trevor Potter
    Stephen learns how to give Colbert Super PAC money to himself and thereby hide it forever from all eyes and use it in a way that he wishes.

  12. “There is no freedom without justice." Simon Wiesenthal

    13 November 2012

    Bart Chilton On Silver Manipulation - Gold and Silver Coiling For a Major Move - The Next Disaster

    In discussing the government's lack of reaction in reforming the high frequency trading developments in the market, the CFTC's Bart Chilton remarks in the video below about the unfortunate tendency of regulators not to act until something unfortunate happens as being a:
    "...tombstone mentality, when you wait for a disaster before you put something in place."
    The CFTC is hampered and opposed at every step of the way by the financial powers and their exchanges, who unfortunately wield a powerful and well-funded lobbying effort that tends to lead the political element in Washington by the nose, or their wallets as you prefer.

    I have come to believe that the US government will do nothing effective to reform the gold and silver markets and the equity exchanges until there is a MAJOR dislocation in the markets, and a virtual 'run on the exchange.'

    Change will come after the US financial system is threatened by a major solvency or liquidity event.

    Whether it comes from a failure to deliver in gold and silver markets that exposes them as a highly artificial and overleveraged house of cards, or another 'flash crash' that brings down a major exchange or trading house through counter party failures, I now believe that this is what it will take to bring meaningful reform to this highly unstable financial system.

    Change will be not voluntary with these greedy, self-destructive jackals, especially after the moral hazard that was introduced by the unfortunate policy of no-strings bailouts from the last financial crisis. That was a policy error of the first order.

    Reform will be accomplished, but only under the duress of the next financial disaster.

  13. Who's entitled?

    Stewart Rahr, a New York pharmacy billionaire, just got banned from the celebrity sushi chain, Nobu.

    Why? Well, apparently for a number of reasons. The fight started when billionaire Rahr (who sold Kinray to Cardinal Health for for $1.3 billion in 2010) made a scene at Nobu on 57th street when he found a group sitting at what he considered his table. The New York Post says Rahr called the Nobu manager some very nasty names. The Daily Mail claims he threatened to kill her.

    Stewart Rahr's Nobu Tantrum: Pharma Billionaire's Epic Fit Gets Him Banned For Life

    Restaurant managers beware: Stewart Rahr is a loose cannon.

    The flamboyant pharmaceutical billionaire, who calls himself “Stewie Rah Rah, the No. 1 king of all fun,” recently lost his cool after staffers at Nobu Fifty-Seven, a swanky restaurant in midtown Manhattan, refused to move diners so Rahr could sit at his favorite table, according to the New York Post.

    “He called me the C-word and said he would kill me,” a Nobu manager told the Post, which has reported that Rahr is now banned from the restaurant’s 25 locations worldwide.

  14. I wasn't looking for free analysis. I already own the stock and I know Dave has mentioned he owns it as well in the past. Since hes in the business figured all my questions he could answer off the top of his head. Didn't want or expect him to dig into any research over my questions. I apologize if it looked or appeared different then I intended.

    Regarding your comment about 200 or even 100 silver my question is this. Keep in mind I am a precious metals bull. Looking at the price of silver in 2008 or 2009 when it was approximately $10 an oz we are now up over 200% with a current price of 33. Has the money supply really tripled from here to justify a rise to 100? I mean silver was 5 in 2006. Do you really think inflation is higher than a rise from 5 to 33 in 6 years? What other commodity has risen as much as 5 to 100 or 200 to justify that kind of move? Now granted I know you don't expect to see that price tomorrow but I belie you are implying in the very near future.

  15. Vatican City: True Financial Crime and Murder

    After Sindona’s arrest, Italian banking authorities began investigating Calvi. The Vatican Bank allegedly set up foreign dummy subsidiaries for Roberto Calvi’s holding company, and Marcinkus was on the board of some of them. These subsidiaries lent millions of Banco Ambrosiano’s money to the Vatican’s special purpose corporations. When Banco Ambrosiano crashed, $1.3 billion of deposits were missing.
    Yet in July 2012, Der Spiegel reported that the Vatican Bank is allegedly engulfed in another scandal involving suspect money transfers and shady bank accounts. Gotti Tedeschi, former head of the Vatican Bank and Pope Benedict XVI's confidant, was detained by Carabinieri, Italy's military police, in a corruption investigation involving an Italian subsidiary of Spain's Banco Santander. Tedeschi's files suggest Church complicity in circumventing European money-laundering rules. Details of the scope of this new financial scandal are still unfolding.

    nothings sacred, nothing matters, and no one is accountable so whatever you think...protect yourselves.