"A Tremendous Secret" (resetting the monetary system)

[ninakat]

http://jsmineset.com/2009/08/06/in-the-news-today-272/

Jim Sinclair’s Commentary

I have the deepest respect for Dean Harry, but would normally not believe the potential for what dear Harry proposes.

However, with the present war between politically directed monetary policy and FOMC directed monetary policy I have to suggest serious consideration of the following.

There certainly is no harm to be done by doing what Dean Harry suggests.

Harry Schultz newsletter

Conclusion: Stand by for a possible bank run & bank holiday on Aug 26th, after the news breaks on the 25th. (FDIC 2nd Qtr. Report)

This is in line with the HSL prediction of a US bank holiday in Aug/Sept.

If you live in the US, get 3 to 6 months household expense money out of banks now.

[Grower]

Well, good. That was close. My birthday is Aug. 25 and we were planning to go to Joe's Crab Shack.

[goanna]

Did his predictions worked out so far?
And does he talk about American bank holidays or does he talk of other countries too (Australia)?

[graveday]

Governments need a certain agreement with their subjects.

Goanna, this is a quote from your first post.  I would just like to clarify that kings have subjects.  Governments have citizens.  There are many who would agree with your linkage, and there is certainly a wide range of what constitutes citizenry these days, but I wonder if you are an English as a second, or some multiple, language learner.  Just to add, Robin Hood made for a pretty interesting subject.

[LuckyLarry]

I think buying is better than renting too and that's what we're doing.  What if you pay your rent and the landlord doesn't make the mortgage payment?  You might have to move rather unexpectedly. Shocked

Not to mention, the landlord can raise your rent at some point.
A mortgage on a house/property is fixed by contract*. If the dollar is devalued then you're paying back the mortgage debt with cheaper dollars -- if you have them. A way to insure that you do is to have a sufficient investment in PMs that you can convert back into the cheap dollars and pay down/off the mortgage.
This sounds logical to me.

*I can't see any arbitrary abrogation of contracts to enable banks to weasel out of mortgage terms. Contract law as I understand it is pretty powerful and a fundamental underpinning to the world of business. Perhaps Jeromie could way in on this.

[ninakat]

Pressure (Countdown) Toward Breakdown
by Jim Willie, CB. Editor, Hat Trick Letter | August 13, 2009

~snip~

For those looking to dismiss the rumors of a widely orchestrated plan to shut down the US banking system, for whatever stated or actual reasons, perhaps attention should be directed at the US Dept of Homeland Security (HSA) and the Federal Emergency Mgmt Agency (FEMA). Not only are they spanning the nation in making tentative preparations for a series of bank holidays, but they are working to enlist the police forces at the state and city level under the federal law enforcement system, in addition to the national hospital system. Anecdotal stories stream in from around the country, impossible to ignore. Who knows what legal grounds or unfolding events precede such a development? Watch a turf battle perhaps between HSA and the FBI. To be sure, tremendous stress is at work within USGovt agencies, ministries, and elsewhere.

~snip~

SHOCKS, STRESSES, BREAKDOWNS, PLANS

Back to reality on US soil. Many reports have come to the effect that at the end of August, a financial breakdown is due, and a shutdown of US banks is planned. We await the trigger events with mystery and intrigue as overtones. Some on Wall Street, arrogant to the end, believe that widespread awareness prevents the actual unfolding of events. They are suffering from a terminal disease though, as they believe they are in control. They are not. The USGovt creditors are in control. The August Hat Trick Letter reports have identified five major factors pointing to a severely stressful period of time at the end of August and into September. The FDIC is scheduled to release its Second Quarter Report that could reveal up to 1000 banks expected to croak, surely enough to exhaust their rescue fund by between 20-fold and 100-fold. Tin cups are heading to the USCongress committees. The USGovt federal limit must be extended again, and Treasury Secy Geithner has requested a $12.1 trillion limit. That limit must be extended sometime again soon, like before next spring 2010.

(more)

[ninakat]

The Motivation Behind The Countdown
Posted: Aug 14 2009     By: Jim Sinclair

Dear Friends,

85 days to go!

(...)

The primary reason for this “out on the limb statement” is that the recent China/US financial Summit meeting in Washington which was requested by China, was not significantly pre-planned.

As I understand it there are two things wanted and one thing disapproved of.

The US financial leadership wants, but more so needs, Chinese buying of US Treasury offerings to remain at these levels but more so to increase to offset the wholly unavoidable increase in offering of US Federal Debt.

The Chinese wish to see the USA support the creation of a Super Sovereign Currency as an offset to dependence on the dollar for international settlements and national reserves.

(...)

You will note that the QE program was extended until October, particularly the end of October.

(...)

Tools of timing, some I have not shared with you, indicate a major potential turning point that could easily see a break below .7600 or .7200 [U.S. dollar index] coming in the final quarter of this year.

Add this all together and you get a November bull’s eye for a loss of confidence in the US dollar internally as well as externally.

(see link for more)

[RMolineaux]

Sinclair's citing of Von Mises, Ricardo and Smith is, IMO, not very helpful to his argument.  Von Mises was wrapped up in a rigid orthodoxy common in Eastern European thinking.  Over the long haul, Western flexibility and open mindedness has proven (until now) more useful in confronting the economic questions.   Smith and Ricardo made many useful observations on economies that were much simpler in a nascent capitalism.  Their current usefullness is also questionable. 

That said, I agree with his conclusions as to the closely approaching showdown with sovereign creditors regarding balooning US debt and its unwillingness to take any practical measures to contain it.   Whatever its merits, the administration's efforts to promote health care revisions at this time demonstrate its state of denial on the debt question.

When the world monetary system came off the Pound Sterling in the aftermath of WWII, the British, of course, refused to consider it...until it was forced upon them nevertheless.  A similar process can be predicted for the dollar.   The Chinese are rightfully angry, but they will be careful not to do anything precipitous in light of their own social challenges.  The process will be drawn out, but it is inevitable.  Holders of nominal wealth in dollars are scrambling to find a way to protect this wealth from a current dollar debacle.  IMO, shifting into commodities, whether precious metals or oil will only disrupt the markets for those items, as demonstrated by their erratic price movements of the last two years.   A bit of Chinese wisdom is to buy land.  Unfortunately, large corporations and governments are already doing so, to secure future food supplies.

[graveday]

That brings up a question, RMolineaux, that you may be uniquely qualified to answer, at least on the basis of your name.  What happened when the franc, the former lingua franca, heh, lost its power?
Also, have you emigrated?  If so, from where to where?

[RMolineaux]

Answering Graveday, my surname is actually English, unless you want to go all the way back to the Norman conquest.   There are lots of Molineaux's in the Liverpool area of England.
I am a multi-generation US citizen, but I have emigrated to Panama out of shame at what my country of birth has become.   This is a demonstration project for my children and grandchildren, to show them other possibliities.    I'll have to check it out, but I believe the term "lingua franca" is used to designate a common second language frequently used in a area with a vlariety of mother tongues.  Examples would be Swahili in east Africa, or, for that matter, English the world over.

[graveday]

Yes.  I may be a little off, but French used to be "the language of money".  Not sure if the franc was powerful, my history is weak here, but it seems to follow.  I did look at your homepage and saw you are in Panama.  How is that going for you?  I do wish you had stayed here to add your voice and knowledge to help out, but I guess that is what the internet does.

[goanna]

hi graveday, yes I'm English as second, but, I have chosen the expression subject because I've lost a bit the faith in what's called democracy.
At the moment it's quite calm out there. Holidays? We'll see in September.

[graveday]

OK, goanna, got it, and thought so.

[coney]

So, say one were to trade in all the extra money they had in their account for silver or gold. When TSHTF, and paper money is worthless, could you realistically go to the store and buy food/supplies with a handful of silver coins? Or gold for that matter?

I know everyone here says to "buy gold!!!!" but could you really trade it for goods? Who would be able to take it? Would they take it?

[ninakat]

There's a separate thread on this already, but I thought it seemed appropriate here as well.

Antal Fekete: Dress rehearsal for the last contango
By Antal E. Fekete
The Gold Standard Institute
Canberra, Australia
Monday, August 24, 2009
http://www.goldstandardinstitute.com/

I have written about "the last contango in Washington" before. The phrase covers the gold crisis that has been brewing under the surface in the world for 60 years due to the insane gold policies of the U.S. Treasury. As a result all newly mined gold, surpassing the quantity of all gold ever mined prior to 1947, has gone into private hoards, from which it will be next to impossible to coax out. The measure of this act of disappearance of gold is the vanishing of the basis, or the last contango.

~snip~

But if you break that final link, when gold is no longer for sale at any price quoted in U.S. dollars, then the rug will have been pulled from underneath this house of cards, and the international monetary system will collapse like the twin towers of the World Trade Center. And this is the situation that we are confronted with.

Look at it this way. There is a casino where the lucky gamblers can gamble risk-free. Their bets are "on the house." This casino is the U.S. bond market. There is only one catch. The pile of the winning chips in front of each gambler may become irredeemable at the exit when the hairy godfather waves his magic wand.

As the gold markets enter their phase of permanent backwardation, all rational basis for holding U.S. Treasury debt -- or any debt, for that matter -- will disappear. There will be a mad rush to the exits, and holders of debt will trample one another to death in trying to cash in on their winnings.

~snip~

Yet the Last Contango in Washington will be different from all previous crises. It will be elemental, devastating, and apocalyptic. It will destroy virtually all paper wealth and render virtually all physical capital idle. It will involve hordes of unemployed people roaming the streets, caring for no law and order, pillaging homes and institutions. It will destroy our freedoms. It may destroy our civilization unless we take protective action.

On the positive side, it will sweep away the complacency of the managers of the regime of irredeemable currency and fundamentally weaken the sway of Keynesian and Friedmanite economics as it has a stranglehold on the teaching of economic science.

The Last Contango in Washington will eclipse the Great Depression of the 1930s. Be prepared.