Silver Update 08/04/11

Submitted by: Francis Soyer

Good morning, with currency wars heating up overnight with Japan's central bank selling 500 billion Yen to intervene the recent pull back in the USD and the Swiss National Bank also selling the Swiss Franc to lower its currency as investors flee to safety... Gold and Silver remain strong in the overnights as those late to the game are begining to realize just how screwed the fiat money system is.

Also a good article out from smartknowledge U on Gold and Silver here:

http://www.zerohedge.com/contributed/why-gold-and-silver-prices-will-more-double-again-even-current-expensive-levels?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Why Gold and Silver Prices Will More than Double Again Even From Current "Expensive" Levels

Submitted by smartknowledgeu on 08/04/2011 07:34 -0400

Those that are familiar with my writings about gold and silver for the last six years know that I have said gold was cheap at $500, $600, $700, $800, $1000 and $1,200 a troy ounce and know that I have said silver was cheap at $11, $12, $14, $16, $25, and $30 a troy ounce. Today, I will reiterate that gold is still cheap in the $1500 to $1600 range and that silver is still cheap in the $40 range because the largest movements in gold and silver prices as well as gold and silver mining stocks have still not happened and will materialize over the next four to five years. Again, this doesn’t mean that gold and silver can’t or won’t correct or consolidate again in the future because both PMs always do. I have written publicly so much about this topic over the years (and even in much greater depth to my subscribing members) because I truly believe it is insanity not to participate in one of the best ways to invest in gold and silver today - the ownership of physical gold and physical silver.


Hundreds of millions of investors worldwide, influenced by the propaganda of Western bankers, have consciously made poor decisions not to own a single ounce of physical gold and physical silver today. One of the first realities an investor must understand about the gold and silver market is that the Economics 101 concept of price being set by physical supply and physical demand is an utter lie. In today’s world of banking and financial industry lies, the price of gold and silver are NOT set by the physical demand and physical supply of either of these metals, but rather by the artificial supply and demand of paper contracts predominantly backed by no physical metal.


By now, the following facts are very well known by seasoned physical gold and physical silver buyers but likely still unknown to the average investor worldwide. A CPM Group document released in the year 2000 stated, “With the start of the London Bullion Market Association's release of monthly trading data, the market has become aware that 100 times more gold and silver trade hands each year, just in the major markets, than is produced or used. Some market participants have wondered aloud how 10 billion ounces of gold could trade via the major markets each year, compared to 120 million ounces of total supply and demand, while roughly 100 billion ounces of silver change hands, compared to around 628 million ounces of new supply.” Thus, one can see that the fraud perpetrated by bullion banks in the silver futures market exceeds even the fraud they commit in the gold futures markets. Take the figures provided above, and a quick calculation reveals that bankers were trading nearly 160 times of paper ounces of silver every year than the annual physical supply of silver mined from the earth.


However, break down these numbers even more and the fraud becomes even more astounding. While in 2000, about 628 million ounces of new supply of physical silver came to market, in 2010, mine production of new silver supply was slightly higher at 735.9 million ounces. Net government sales accounted for another 44.8 million ounces, old silver scrap provided an additional 215 million ounces, and producer hedging accounted for the final 61.1 million ounces. Thus a total annual supply of roughly 1 billion ounces of silver existed in 2010. However, industrial usage, photography and jewelry used up nearly 78% of the one billion ounces of physical silver supply in 2010 and left less than 100 million ounces available for minting in the form of silver coins. (Source: The Silver Institute). Despite this tightness of new investment silver supply, there have been days in recent months when more than 250 million ounces of paper silver traded on the COMEX in less than one minute! During the times ridiculous volumes of paper silver were trading on the COMEX, usually the price of silver was plummeting in intra-day trading. Thus, bankers were clearly using this massive artificial supply of paper silver contracts to knock down prices. On top of this fraud, bankers have stretched the landscape of imaginary supply of gold and silver with their introduction of the gold ETF, the GLD, and the silver ETF, the SLV, both of which started trading in 2006. Both the GLD and SLV are highly suspect, likely fraudulent vehicles that probably are either (1) only partially backed by physical gold and physical silver and/or (2) respectively backed by unallocated physical gold/silver that have multiple claims upon them. Again, fraudulent derivative paper gold and paper silver products create a perception of increased supply even when there is no REAL increase in the underlying physical supply or even at times when physical supply is shrinking. Bankers have created this mechanism specifically to suppress the price of gold and silver and to keep their Ponzi fiat currency scheme alive - a scheme that they utilize every single day to silently steal wealth from every citizen on this planet.


I have heard the criticisms levied against Eric Sprott and James Turk regarding their pro-silver and pro-gold stance in that they are just selling their books as PM fund managers and bullion dealers. However, I believe these criticisms to be patently unfair. I don’t believe that either Mr. Sprott or Mr. Turk are so enthusiastic about the future prospects of gold and silver returns because they just want to “talk their books”. Rather, I believe that they are so enthusiastic due to their deeper level of understanding about PM markets than the average retail investor and the vast majority of uneducated commercial investment industry advisers. Furthermore, I’ve been one of the most passionate supporters of gold and silver for the last decade and I have never acted as a bullion dealer, have never received any commissions from any sales of mining stocks, and have never accepted a single cent from any mining company to provide coverage of their company to my subscribing members though I have been approached many times to do so over the years.


To illustrate the level of misunderstanding that still exists about gold and silver prices, here’s one piece of investment “advice” that landed in my email inbox on August 16, 2008: “The barbarous relic – gold – is another good choice, usually. But gold has already appreciated from just over $300 an ounce six years ago to almost $900 today. It could be a little late.” This adviser went on to push stocks and confidently declared that stocks would be the “big winner” once again over the next several years. From August 16, 2008 until today, the S&P 500 has lost 2.92% while gold has risen +111.33% and silver, +284.47%. Stocks, the big winner? I think not. But selling stocks is the big bread and butter money winner of most commercial investment advisers so that is the primary reason why they overwhelmingly always push their clients into purchasing stocks as opposed to the real big winner of precious metals. I recall reading a newspaper article several years ago from a financial adviser in Florida that claimed she was proud of convincing here clients NOT to buy gold at $800 an ounce because the gold price was too expensive and that it was her duty to protect her clients against their own foolish impulses. On November 8, 2007, thousands of people that subscribe to my free newsletter read the following statements from me:


“So with gold over $800 an ounce, is it still cheap? Emphatically yes, and here's why. I'm not really sure how all the ‘Gold at 27-year high’ headlines came to be, but… if we experience a correction any time soon, and gold breaks back down to the $720 level again before continuing higher, it will just be really cheap. Here's why. Anyone that's ever studied the formula that is used to calculate the Consumer Price Index(CPI) in the U.S. knows that the formula has been greatly tinkered with over the years to produce absurdly low inflation numbers that are merely an artificially manufactured number that probably fits some pre-determined number the government would like to report.”


So back then, even with gold trading at $800 an ounce, the banker-owned and controlled media in the Western world was filled with stories about an imminent “gold bubble” collapse because gold was at a “27-year high.” It’s important to review history from time to time to be reminded how easily you may have accepted patently absurd proclamations about gold and silver prices in order to avoid falling victim to the same banker-originated and banker-spread propaganda today. The reason I have been overly passionate about gold and silver for years and still am today is because it takes great passion to overcome the widespread ignorance and deceit spread by the commercial investment industry to their clients about gold and silver.


Let’s see how things have panned out in the stocks versus PM investment game over the past few years. From the launch of my Crisis Investment Opportunities newsletter on June 15, 2007 until July 25, 2010, in a little over four years, my newsletter has returned a cumulative profit of +211.49%. Over the same investment period, the S&P500, the FTSE100, the ASX200, and top 5 ETF iShares Dow Jones EPAC Select Dividend Fund have respectively returned -21.39%, -11.99%, -26.51%, and -2.69%. Furthermore, during the next four year period, from 2011 to 2015, I sincerely believe that an attainable goal for my Crisis Investment Opportunities newsletter is to double or even triple my previous four-year cumulative returns, simply due to the following three reasons:


(1) Western bankers are increasingly losing control over the price suppression schemes they have enacted against gold and silver through their creation of bogus paper derivatives;
(2) The conditions that have lead to Euro and US dollar devaluation are worse today than they were 10 years ago and no underlying fundamental problem of the 2008 financial crisis has been adequately addressed as of today; and
(3) The percentage of people that have the amount of faith I hold in gold and silver to produce superior returns around the world is still minute.


Thus, once the average Dick and Jane retail investor finally believe in the facts surrounding gold and silver versus the garbage propaganda disseminated by crooked bankers and ignorant advisers, the price of gold/silver and PM stocks will finally experience a truly parabolic rise.


Once a small percentage of retail investors worldwide, or even just a small percentage of retail investors in a densely populated country like China, finally realize that bankers have created insane massive paper supplies of artificial gold and silver backed by nothing but air and consequently are moved to purchase their first troy ounce of pure gold and/or pure silver, this very small action will exert tremendous upward pressure on the price of gold and silver. And once this happens, I hope that you will have already secured your physical reserves of gold and silver because it is then that PM prices will truly go ballistic.

Silver Update Mid Morning 08/03/11

Submitted by: Francis Soyer

In the you can't make this shit up category here we have a story of a mental breakdown of none other than the Bernanke himself after getting hammered at a local bar in NE. Yes silver is up another 3.3 percent this morning. Given the commentary if true and the feel of it is no wonder. Story below:

Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is
 SEWARD, NE—Claiming he wasn't afraid to let everyone in attendance know about "the real mess we're in," Federal Reserve chairman Ben Bernanke reportedly got drunk Tuesday and told everyone at Elwood's Corner Tavern about how absolutely fucked the U.S. economy actually is.

Bernanke, who sources confirmed was "totally sloshed," arrived at the drinking establishment at approximately 5:30 p.m., ensconced himself upon a bar stool, and consumed several bottles of Miller High Life and a half-dozen shots of whiskey while loudly proclaiming to any patron who would listen that the economic outlook was "pretty goddamned awful if you want the God's honest truth."

"Look, they don't want anyone except for the Washington, D.C. bigwigs to know how bad shit really is," said Bernanke, slurring his words as he spoke. "Mounting debt exacerbated—and not relieved—by unchecked consumption, spiraling interest rates, and the grim realities of an inevitable worldwide energy crisis are projected to leave our entire economy in the shitter for, like, a generation, man, I'm telling you."

"And hell, as long as we're being honest, I might as well tell you that a truer estimate of the U.S. unemployment rate is actually up around 16 percent, with a 0.7 percent annual rate of economic growth if we're lucky—if we're lucky," continued Bernanke, nearly knocking a full beer over while gesturing with his hands. "Of course, if everybody knew that, it would likely cripple financial markets across the entire fucking globe, even in various emerging economies with self- sustaining growth."

After launching into an extended 45-minute diatribe about shortsighted moves by "those bastards in Congress" that could potentially exacerbate the nation's already deeply troublesome budget imbalance, the Federal Reserve chairman reportedly bought a round of tequila shots for two customers he had just met who were seated on either side of him, announcing, "I love these guys."

Numerous bar patrons slowly nodded in agreement as Bernanke went on to suggest the United States could pass three or four more stimulus packages and "it wouldn't even matter."

"You think that's going to create long-term economic growth, let alone promote job creation?" Bernanke said. "We're way beyond that, my friend. There are no jobs, okay? There's nothing. I think that calls for another drink, don't you?"

While using beer bottles and pretzel sticks in an attempt to explain to the bartender the importance of infusing $650 billion into the bond market, the inebriated Fed chairman nearly fell off his stool and had to be held up by the patron sitting next to him.

Another bargoer confirmed Bernanke stood about 2 inches from her face and sprayed her with saliva, claiming inflation was going to "totally screw" consumer confidence and then asking if he could bum a smoke.

Silver Update 08/03/11

Submitted by Francis Soyer

There are three things driving silver higher rite now. First is that the U.S. debt ceiling hike of 2.5 trillion will last the U.S. until December at which point congress will need to reconveen and hammer out another increase. So in essence what has occured this week is the U.S. balance sheet or debt to equity ratio has increased on the debt side by 17 percent e.g. diluted the value of the dollar by 17 percent give or take...And in December to get through 2012 the treasury will need to further dilute the value of the dollar by another 5 + trillion or 30% for a total decline in dollar value of roughly 52 percent. By December ish expect Dollar purchasing power to be cut in half especially for core inflation items such as Food and Energy.

Second is that given the above expect the U.S's credit rating to get cut thus making it harder for the U.S. to borrow and making treasuries no longer "Risk Free" as evidence of the CME's decision in margin requirement increases taking treasuries off the list of Risk Free assets.

Third is that Default for the U.S. and most of the European Union is also still a real and probable outcome. Where can investors shelter themselves from this type of environment? Many have fled to the Swiss Franc (which also is being considered to becoming backed by gold) or Gold and Silver itself. Unlike paper these metals can not be printed out of thin air are hard to mine and have a finite supply. Citi Group is looking for silver to be in the $100 range by year end. They are probably correct. In the interim on a six month basis our opportunities to acquire below VWAP prices (volume weighted average price) are over. Those who are a bit late to the game can still try and acquire on a 5 day basis such as in the chart below. The red line represents the VWAP price hence buyers should be looking to add at prices below $18.55.

Cheers

China Downgrades US From A+ To A, Outlook Negative

The U.S. House of Representatives on Monday approved legislation to raise the U.S. debt limit by at least 2.1 trillion U.S. dollars and cut federal spending by 2.4 trillion U.S. dollars, one day before a threatened default.

The downgrade is a result of fights between U.S. political parties over debt issues, which reflects the government's inability to completely solve the debt problem, said Dagong Global.

The interests of the country's creditors are short of systematic protection both politically and economically, said the agency.

China is by far the largest holder of U.S. debt, with holdings amounting to 1.15 trillion U.S. dollars as of the end of April.

Dagong announced last month that it had put the U.S. credit rating on negative watch for a possible downgrade on expectations of a long-term economic recession in the world's largest economy, partially caused by its economic governance and policies.

Dagong downgraded the U.S. rating from AA to A+ in November of last year after the U.S. government announced a second round of quantitative easing.

The agency said the approval to raise the debt ceiling indicated that there will not be any positive changes in factors that will influence the country's debt-paying ability in the long run.

Silver update 7/29/11

Shit Just Got Real: Primary Dealers Called To New York Fed For Emergency Noon Meeting

Submitted by Tyler Durden on 07/29/2011 09:44 -0400

From an email just sent out by Morgan Stanley's David Greenlaw:
The NY Fed just asked primary dealers to come downtown today at noon to meet with Fed and Treasury Dept officials. We expect to hear them outline a contingency plan for next week. Details to follow.

More from Bloomberg which confirms this is not the previously scheduled meeting:

• The Treasury has canceled its regularly scheduled individual meetings with bond dealers in favor of the group meeting, according to the people, who declined to be identified because the meeting hasn’t been publicly announced
• All 20 primary dealers were invited
• Treasury spokesmen in Washington didn’t immediately reply to a request for comment on what will be discussed at the meeting .

What Happens When a Currency Becomes Worthless?

Submitted by Francis Soyer 7/27/11

Recently Zimbabway had its currency turned to toilet paper as a result of its governments debt problems. Sound familiar? While this disaster recieved little to no main stream media attention because it with out doubt raise questions about our own fiscal health here is the answer to the question what happens when a currency becomes defacto dead.

White House Says Treasury Will Be "Running On Fumes" Shortly

Contrary to calculations performed by Barclays and other analysts (including Stone McCarthy first presented on Zero Hedge), which speculated that the Treasury would have enough cash to last it through August 15th due to an increase in tax receipt, the White House's press secretary Jay Carney said that the Treasury will be "running on fumes" if the debt ceiling is not raised by August 2, naturally adding the traditional doomsday phrase that it is a "crisis situation." He had also added previously that tax revenues are not coming at an accelerated pace and that the cash will not last longer than Tim Geithner's original forecast of August 2. As the chart below shows the Treasury had $75 billion in cash as of last night, and will raise another $55 billion in net cash over upon settlement of this week's auctions. In other words, Geithner now predicts that the pro forma cash of $130 billion will last the US just one week. Well, at least we can see what the source of all the problems is.

From Reuters:

White House press secretary Jay Carney said that at midnight on August 2 the country will lose its authority to borrow for the first time, meaning there is no alternative for Democrats and Republicans other than to compromise over a deal to reduce the deficit and lift the debt ceiling.

"People keep paying their taxes. Revenue comes in. Money comes in. The problem is there is not enough money because we can no longer borrow money to pay all our bills. You're basically running on fumes," Carney told reporters. "It is a crisis situation."

Rating agencies warn they could downgrade the top-notch U.S. AAA credit rating if the United States misses debt payments or if it fails to take significant steps toward controlling the long-term budget deficit.

Carney said that if there is no deal by August 2, the failure of Congress to have acted would send shock waves through financial markets. "There will be assessments made by investors around the globe about what the heck is happening in Washington," he said.

We will present an updated cash burn analysts from Stone McCarthy as soon as one is available, probably in the next 2 hours.

Silver Update 07/27/11

Submitted by: Francis Soyer

With the debt ceiling drama / soap opera continuing some may wonder what is the debt ceiling, what is the total debt and how does it all break down into numbers?

To help us keep our eye on the ball so to speak here is the answer to those questions.

Click Here

What is the Probability of a U.S. Default?

Submitted by Francis Soyer:

To answer that question we should ask House Majority Leader Eric Cantor (R-Va.) who has doubled down on his investment in ProShares Trust Ultrashort 20+ Year Treasury ETF.

Another Journalist Max Keiser described this situation well by saying this is like the investors who shorted airline stocks just prior to the 9/11 attacks. An act of terrorism and outrite treason. And Yes this pisses me off too... disgusting human being. What a piece of shit.



Silver Update 07/19/11

Submitted by Francis Soyer:

What the price chart below is showing is that CDS aka Credit Default Swaps in Germany and the U.K. two major members of the European Union have rallied an astonishing %50 in the last two weeks. What is a Credit Default Swap? It is a fake and somewhat useless form of insurance in times of fiscal chaos. It is useless in that if you have ten bondholders each paying one dollar to insure a bond they hold that has a face value of ten dollars the net insured value of those bonds would be one hundred dollars. Each have paid one dollar for the insurance so the seller of those default swaps would be 10 dollars. Now what happens when all of those bonds for all ten holders goes into default. The seller of the default swaps is on the hook for one hundred dollars to make those buyers of the swap whole. The problem is that the seller only has ten dollars of capital to distribute to the buyers. This is what is on the horizon for the EU. The reason being that the EU is in its first stages of being blown apart. The destruction of the EU resulting from the list of members in the process of defaulting such as Greece, Portugal, Italy, Ireland and Spain. The U.K. and Germany will no longer have the will or resources to continue to hold the union together and hence the end of the Euro eminant.

Silver Update 7/18/11

Submitted by Francis Soyer:

Good morning folks. The good news is PSLV / SLV are on a tear to the north side after the CME's margin raid in May. The bad news is our time frame for acquiring more below VWAP (Volume Weighted Average Price) has come to an end. Hopefully we will see a couple more CME margin raids int he coming months so we can leg in. Cheers

Silver Update 7/15/11

Bob Chapman - Discount Gold Silver Trading 14 July 2011



Bob Chapman : ...this is probably one of the most powerful rallies that you'll ever gonna see in anything not just in gold and silver , what happens is the manipulation by owners of the federal reserve JP Morgan Chase Goldman Sachs Citi Group HSBC and others to drive the price of gold and silver down did work to a certain extent but what they did do in that process is form a base a lower base than they had before and that base has been tested now 8 times , usually a base of support does not get tested more than 3 or 4 times , 4 is unusual 8 never happens , and when you have a base like that it is so powerful that usually beyond that you'll have a rally of a 100% to a 150% in both metals that's what's coming

US Needs To Generate 254,000 Jobs A Month For 65 Months To Get To Pre-Depression Employment By End Of Obama Second Term

Every time we update the projection chart of how many jobs have to be created by the end of Obama's now improbable second term, the number goes up. First it was 245,500 in April, then 250,000 in June, now it is 254,000: it seems to increase by 5,000 each month. As a reminder this chart looks for the breakeven number that has be attained to restore (not surpass) the jobs that the US economy had back in December 2007 as the Depression started, when accounting for the natural increase of 90,000 people/month in the labor force. Needless to say, there is no way in hell the US economy can create a quarter million jobs per month from now for the next 65 months, as long as the president continues to pander to Wall Street's "wealth creation" via asset returns instead of directing capital into actual economically viable projects that focus on wealth creation through labor.

Swiss Parliament to discuss gold backed Franc

http://www.marketwatch.com/story/swiss-parliament-to-discuss-gold-franc-2011-07-07?reflink=MW_news_stmp

Silver Update 7/5/11

Submitted by Francis Soyer:

Eric Sprott manager of the Sprott Physical Silver Trust is interviewed by Chris Martenson. The key take aways from this interview are that we have two silver markets a paper one (fake one) and a physical (real). The fake one or the one that has no real inventory, could and will never be able to actually facilitate delivery of physical metals the (SLV) etf managed by none other than JP Morgan one of the banks employed by the Federal Reserve to artificially depress silver and gold prices as a function of ongoing monetary policy and then (PSLV) a physical trust with physical 1000 oz bars held and recorded via serial number that will deliver these bars via brinks truck for holdings of 600 pounds and up for silver. The other option is of course silver eagles purchased and taken in hand from the U.S. Mint now legal tender in the state of Utah and with a current spot sprice from most bullion and coin dealers at $39.00 a $5 delta from paper markets. Expect this delta to widen further in the future as fake markets go by the wayside and are exposed to be the frauds they are. The interview in detail below.

To listen to the audio of this interview go here:  http://www.chrismartenson.com/

Chris Martenson: Welcome Eric, it's a real pleasure to have you today.




Eric Sprott: Chris, good to be here and thank you for all the work you are doing in apprising your investors of what's really going on in the world.



Chris Martenson: Oh thank you. We’ve been at it many years and unfortunately much of what I think both you and I saw coming - though unfortunately not enough others along the way - is really coming to pass. If I could, let’s start with your views. You have been advocating and creating investment vehicles for people to own gold and silver for a long time. How did you get to that position and what are your views on owning gold and silver at this point?



Eric Sprott: Sure. Well it all started, Chris, with our studies back in 2001 where we were entering into a secular bear market and wondering how you deal with that. And a typical response would be to own gold and silver, which is what we decided to do. I think the one thing that really tipped us into it was an analysis of the physical supply and demand for gold and some work by Frank Veneroso that suggested things would have to change dramatically in the physical gold market because the central banks were selling four to five hundred tons a year. And as you know, here we are eleven years later and now they are buying four hundred tons a year on balance, and this is in a market where the mines supply only twenty-six hundred tons a year. So that is a huge change that had to take place that Frank identified back then. He also identified that the gold companies would stop hedging. We’ve had the ETF’s come along. So we have had a lot of dramatic changes in the physical balance between supply and demand in gold. And that is really what took us there in 2000; to get actively involved in that particular market.



Chris Martenson: And looking at it today, has anything changed in that analysis? You mentioned a secular bear market, are we still in one and also has anything changed in the fundamental supply/demand equation that has actually tipped it one way or the other, further or less, since the initial analysis you looked at?



Eric Sprott: Sure. Well I do think we are still in the secular bear market and basically what people describe with the phrase “extend and pretend”. And we had the zero interest rate policy, the housing boom, the lending boom, TARP and TALF and all those things which try to delay what naturally should happen. When I look at the headwinds for gold and silver, I really believe that we have been aided and abetted by a lot of these policies, particularly QE1 and QE2 and the various printing mechanisms of the ECB and the Japanese government and almost all governments in the world. So as much as I would not have anticipated those types of developments happening, they have happened and they provide an even stronger headwind for people realizing that currencies are not going to survive and to maintain your purchasing power you have to own precious metals.



Chris Martenson: You know, I too have been surprised by how long all of this has stretched out. If you had told me five years ago - Eric if you had said “Chris, the Federal Government in the U.S. is going to be running a $1.6 trillion dollar deficit and the Federal Reserve is going to monetizing 75% of that and the bond markets will be relatively tame and the dollar will still be roughly where it is at”; I would have said you’re nuts. But here we are. And my view on this is that what we are kicking the can down the road. We have bought some time, - which I am thankful for personally - however the risks are now increasing. And the risk that I have identified that concerns me a lot is that, sooner or later, much is happening in Greece right now where suddenly the world wakes up and says “Hey, wait a minute. They can’t possibly pay that back. And at 22% interest rates on 2-year paper, they really can’t pay that back.” So suddenly the illusion is lifted. We have collectively suddenly gone, “Greece is not solvent. Oh, that’s terrible.” And now we are grappling with that. But that same dynamic can be extended to, I think, any of the governments that you just mentioned. It varies across Europe somewhat, but in Japan and the U.S. there certainly are fundamental mismatches between current productive economic output and the levels of indebtedness. We are printing our way to that. Is there a way that you can see that this could actually be turned around where it all sort of pencils out? Is there a solution to this that does not have to pass through a fiscal crisis and possibly a currency crisis?



Eric Sprott: Well Chris, it is very hard to imagine that happening. And then I look at really what has happened over the last eleven years since we hit the high in that, we basically created a problem in the world of banking business and I always think of banks as being levered 20 to 1. And when your paper assets start to decline, of course it does not take much of a decline to get rid of all the capital. And we have seen that in so many instances whether it is Iceland or Ireland or now the Greek banks. And all the moves that have happened so far, really have been in response to the problems in the banking system. That is why you have TARP and TALF and all those things because the banks basically were losing deposits and somebody had to come in and support them. That is what happened in the UK, it happened in Iceland, it happened in Ireland, it’s happening in Greece as is transpiring right now. And I think the big fear is that you cannot let one banking system go down without an impact on all the other banking systems. So collectively everyone is trying to support the banking system and I think people see through the ruse. And the natural reaction is “Well, why have your money in a bank when you earn nothing, why not have it in something that might at least maintain it’s purchasing power?”

Chris Martenson: Well absolutely. So all kinds of productive assets springto mind as well as wealth preservation vehicles, gold and silver being obvious. But also we are seeing some of that dynamic in the commodity complex in land prices, particularly for farmland and timberland. There are, I think, many people who have come to the same conclusion which is, that there is something structurally flawed both internally to the whole economic and fiat money model, and also externally, which is my metaphor for bringing in peak oil and the idea that we are really going to be facing an enormous headwind of rising energy prices - no matter how we slice it at this point unless we discover something really magnificent. And so these are all upon us. And here we are, when you look forward into this there is a big debate out there: does this end up in an inflationary crunch, or do we go down a deflationary crunch? In my mind, I hold gold under both circumstances. What are your views?




Eric Sprott: Well, first of all, I can’t agree with you more. I think three of the safest areas to be involved in are the precious metals, agriculture, and energy. Energy, unfortunately, might if there is some kind of economic crisis, go down in the short term. But I think if you would withdraw funding for the energy industry with the decline rates we have in oil and gas production, if people stop drilling, we would certainly see a very, very quick recovery. So I could not agree with you more. There is obviously does not seem to be any solution at hand of the problems and I think people should stay focused on those particular areas.



Chris Martenson: And how would they do that in your mind? I know you have got a couple of funds that deal with these pieces. I know that I get questions all the time from people who are concerned about geopolitical risks, there are jurisdictional risks, taxes - it is a very complicated environment. And I think increasingly complicated as governments struggle to maintain revenues and receipts and all of that. How do you suggest people begin to approach getting into these areas, many of which like agricultural land are very, very difficult. Most people are stumped about how they would get into that particular area at all. What is your advice there?



Eric Sprott: Well, agriculture is the toughest because there are not really that many public companies I know of. In Canada, there is not much. I mean for example we have potash companies which we have been active in but there is not a lot of opportunity there in the public domain. I guess in the private domain, people could own farmland which you have already alluded to. But there are way more opportunities in precious metals and oil and gas. And I particularly emphasize precious metals because they are amongst the most liquid markets in the world. There are many, many vehicles available. Some have way better attributes than others, that is why we created funds where if you buy our gold or silver trust, you can actually receive the gold or silver. Of course, they could always buy coins, which they have been doing in great quantities here. So those would be my primary recommendations to people, buy something where you can get access to physical metal.



Chris Martenson: Physical metal. And do you ever give out - I know this is a complicated topic, depends by age and economic bracket, other things - but do you have a range for a percent of somebody’s portfolio that should be allocated to precious metals?



Eric Sprott: Chris, it’s a favorite question I am asked all the time. And I always respond with what I do. And I know in our equity funds, we are probably 75% involved in precious metals. And probably 30% of that is physical metals and the other 45% is in precious metals equities. In my own instance, I am seriously involved in owning physical gold and silver and I do always point out that I do not have any trouble going to sleep at night knowing that I own these metals because there is no way that they are not going to hold their value in whichever environment you have, whether it is deflation or inflation that you mentioned earlier. And I happen to be of a view that we will see deflation in paper assets, but we will see inflation in real assets.



Chris Martenson: Deflation in paper assets, inflation in real assets. One distinction, do you include real estate in your description of real assets?



Eric Sprott: I do not include real estate. And the reason I do not include real estate is because it is basically a function of interest rates and the economy. You know most real estate is backed by loans and that creates a great problem. So I would certainly distinguish as you have, that owning farmland, which is something that produces something real, is more important than owning let’s say, a commercial building that really is not producing anything but is backed by some mortgage where ultimately the mortgage lender is going to have concern that his loan will not be repaid and the price of that property would go down.



Chris Martenson: Yeah, I share that view. In this story, we get a lot a questions from people who are just sort of new to the game and they look at gold at $1,500+ dollars, they look at silver right around $36 now. They look at the historical chart and they gasp, and they say “I can’t buy now.” How do you talk to people; what is your advice around buying gold and silver now at these particular levels or at any point in time? How would you advise people to go about building a core position if they did not have one?



Eric Sprott: Well, I think that the prices will continue higher. I mean the amount of money printing is unbelievable. I just think you have to take that initial stand in terms of buying it. I use the James Turk analogy: just keep dollar averaging. We have gone up eleven years in a row, this year it looks like it will be no exception; I would certainly think next year will be no exception. If we ever have QE3 announced, I think gold and silver will just go absolutely bonkers here. And so I just think you have got to step in there and own it; we’ve had these fears all the way along. You know, $400, and $500 and $700 and $800 dollar gold, everyone was afraid it was a one-time thing. I don’t think it is a one-time thing, I think it is a secular thing. It’s going to carry on for quite a while here until we find some resolution of these problems. And the resolution probably will be some form of default where people just have to expunge debts that cannot be repaid. So, you have got to be in some asset which will not be affected by that.



Chris Martenson: I agree. You know I hear a lot where people will say “gold is in a bubble” and they use price as the indicator to prove that. Bubbles are not indicated by price to me. They are indicated by psychology. A bubble is a component of social psychology; finance is sort of an afterthought, we put prices on it. I still can go to parties and find almost nobody who actually owns any physical gold themselves or even anyone who own paper representations of gold. It is still a very tiny minority I think, in the overall investing public at this point. What I do see a lot of are ads to buy all of your ‘junk’ gold, as if there is such a thing you know. Yeah, I keep all my junk gold in a barrel out in the garage waiting to haul it off to the local motel where they are holding a gold buying spree. I do not feel we are in a bubble yet, because the psychology is not there. The housing bubble had that psychology; we had hairdressers in Las Vegas with 19 homes. I do not know anybody who is a gold trader, who has taken up gold trading at home or has become a broker or even owns any. What are your views here on gold being in a bubble?



Eric Sprott: We’ve done some work on that and we looked at the amount of money that had been invested in gold from 2000 to 2010. And I think the waiting in gold went from 2% of people’s portfolio to 0.8% of people’s portfolio. But if you just look at the rise in the price of gold over that time period, it accounted for by far the majority of the increase in the total investment in gold and silver. Which really means very few people were making new investments in the area. And I think that is still the case. Yes, we have had some early movers in gold. You know we had some of the hedge funds in the States buy gold. We recently had that Texas pension fund buy physical gold. But these are a few outliers here and I do not think it has hit the mainstream to any extent whatsoever. And I might say in silver, I do not really see the institutional participation in silver. When we went out marketing our silver fund in October 2010, we had very, very weak response from the institutions, which sort of told me, you know, they have not really taken the time to study silver and the supply and demand situation there. And I think that is all yet to come in both gold and silver, that it will hit a tipping point where people do realize exactly what is going on and that these investments would have a lot of merit in all funds.



Chris Martenson: Oh, I agree. And I think that particularly longer-term funds who have a bigger view - these are endowments, these are pension funds, these are people who are looking out across decades - I don’t know how you can look across decades at silver and its fundamental supply demand equatio, its industrial utility, and its potential monetary utility - for all of its pieces, I see an enormous structural shortfall over time and that is, to me, a perfect investment opportunity and something that anybody with a longer view would get involved in. My silver, personally I have every intention of at least passing it to my children, but possibly my grandchildren, should I ever have any. It is my Rip Van Winkle portfolio. Because everything that I look at there, says there is really not very many places for that to go except to become far more valuable as we progress through time.



Eric Sprott: When I look at the physical silver market, I mean there are some stunning developments. The world supplies over 900 million ounces of silver a year. But if you simply go back to the Chinese, in ’05 they were an exporter of 100 million ounces; today they are an importer of 100 million ounces. That is a shift of 200 million ounces.



Chris Martenson: Wow



Eric Sprott: From one source, in a 900 million ounce market. Let’s go back to ’05, there were no ETF’s. Now we have ETF’s that have 500 million ounces. You had hedging which you do not have now, although there was some action put on late last year, particularly by Carlos Slim. But I think all of the physical data we see on silver is just screaming that there is a shortage. And in fact this morning, I just looked at the Silver Institute’s study of supply and demand for silver and I mean I find it almost ridiculous that they always show supply equals demand and they have a plugged in number for investment demand. Our own analysis suggests that demand for silver far outweighs supply and ultimately the price has to go higher. As you have mentioned, the industrial uses, I think last year were up something like 18% to 20%, the investment demand was skyrocketing. I do not know where all this silver is coming from, you have to ask yourself, well who in ’05 was getting silver that today is not getting silver? The Chinese are buying so much and coin sales are so high. I mean it just boggles the mind that somebody has not come out and said they cannot access silver. And that is the day I am waiting for, when let us say Eastman Kodak says, they cannot buy enough silver or there is not silver available. That will really stun the silver market.



Chris Martenson: Hmm, so I really want to wade into the CFTC and all of that in just a second but I remember reading that your silver fund had bought quite an amount of silver, I think it was several million ounces, I forget the number. And that it took a number of months to actually receive it. Is that true?



Eric Sprott: Yes, when we started the fund, we had to go into the market and buy fifteen million ounces of silver, which is not a lot in the 900 million ounce market. The stunning thing is that took about two and a half months to receive that silver. And when we looked at the bars we see some of that silver we ultimately purchased, was manufactured after we purchased it. In other words, it was manufactured in November and we bought it in October. So it just told me there is no silver lying around to be delivered against contract. And when you look at the Comex inventory for length of dealer inventories they are something like 28 or 29 million ounces, I mean that is $1.2 billion. I mean that is nothing. Any one of 500 institutions could buy it and there would be no Comex silver. I mean the whole takedown of silver, the manipulation of silver that has been suggested in lawsuits, I think, stands a good chance of proving to be the case. The raid that took place on May 1st was a joke. We are just in the process of analyzing it now and there was no way that speculators and the long sides could maintain their position when you wake up on a Monday morning and you are already down $6.00 an ounce which would have basically would have gotten rid of all your margins already. And then they bang on four subsequent margin rate increases. It was a perfectly orchestrated raid by the people who were short but I think it indicates that there was a real physical problem in the silver market. I expect that to manifest itself as we move into the latter part of this year.



Chris Martenson: Yeah, I watched that one in real time. I was up late that night on Sunday and I saw that huge plunge and actually recovered a bit of that plunge. But the plunge started, I think the only markets open at that point were maybe Hong Kong or maybe Sydney. And they are tiny. So the raid started in the very thinly traded Globex Market and to me it is kind of like the analogy would be the price of beef plummets in Hawaii one night and the next morning, all of Oklahoma wakes up and finds out that their beef is worth 20% less. It just did not make any sense to me at all. Is that what you are seeing there?



Eric Sprott: Well, just imagine the margin calls. You know you drop $5.00 or $6.00 bucks like that, I mean most people against a $48.00 contract probably only had up $5.00 or $6.00 bucks of collateral. So you have to double it overnight. And then they bang out the four margin rate increases. By the time it was all over you are down $15.00 off the high. Just imagine the flow of money needed to maintain your position. And of course, now we see the evidence of what happened. I think the SLV lost 50 million physical ounces. The specs were forced to liquidate and the commercials, who were short the whole time, were able to buy back a lot of paper silver in the process and book profits. But it is such a classic setup in the silver market, to force the speculators to cover. I mean yes, they won that little battle but I certainly do not think they are going to win the war.



Chris Martenson: And your view then is that somehow this is, we have got the commercials, we have got the big banks, I presume you mean the bullion banks in this case. The players, if you do not want to name names that is fine. But your view is that they have some outsized abilities to influence this market and let us call it what it is, they manipulate the market in order to extract economic advantage for themselves. Are they doing this simply because this is a bear raid strategy they know how to pull off and it has been successful and they make money at it? Or are they doing this to hold prices down, or is it both? What is your view on this then?


Eric Sprott: Well I think Chris, when you realize how much money these shorts were losing. I mean we had silver rally from $18.00 to $50.00 or $49.50. I mean the losses would have been monumental. They were being forced to deal with the short position. It was a perfect night for a raid because as you mentioned, China was closed that day, the UK was closed, nobody was really up when this decline took place and I gather it took place on very, very few contracts. So it is a typical tactic in the precious metals market. We have seen it all along in gold. I mean I cannot tell you how many raids we have seen from the gold price over the last eleven years but they occur with great regularity. But ultimately they fail and again I refer to James Turk and he describes the gold price as a measured retreat by the central banks and the bullion shorts. They just know that there is a shortage of physical gold and I would like to use analogy: imagine if in the world, everything was the same today save one thing. Let us say the silver price was still $5.00. Imagine the amount of money that is going into silver today and how much silver you would buy at $5.00. You would be buying ten times more than you would have imagined. But the supply was relatively the same so they have to let the price go up to decrease the physicalness of the market. That the money wanting to go in, can buy fewer and fewer ounces as the price goes up.


Chris Martenson: Well certainly, you mentioned increased Chinese demand. Also, India an important source of demand. And this is just economics 101: if you hold the price down, demand will go up. And I am sensitive to the idea that central banks have long been interested in the price of gold and politicians too. They like it to stay relatively tame. They like inflation to stay relatively tame because a higher raising, spiking signal from gold says something. And it says something that I think casts dispersions on their policy decisions and other things. And we know this from the London Gold Pool in ’69 and Ruben’s strong dollar policy and all kinds of things that this has been a one of many things that the banks look at. So I know they look at it and I am sure they do not cry many tears when the price of gold is held in check but the flip side to that is, that then we have more demand than we would otherwise have. And part of that process then involves, I think, a hemorrhaging of the gold and silver away from those places of low prices and towards the people who want to buy it. Are you seeing it change patterns of flows in the overall global precious metals market? I mean grossly speaking, is it leaking from west to east?


Eric Sprott: Well I don’t think there is any doubt about it. As people assess the economic policies throughout the world, they realize that fiat currency is just paper. The demand for physical silver and gold is of course is strongest in India and China. I think as you noted the interest in gold and silver in the developed countries is not nearly the same as it is in the less developed countries. So I think those trends are going to continue when the developed countries catch on which might start happening pretty quickly here with the recent data we have seen which basically shows that we are falling off a cliff. And one of the things I challenge investors with these days is: if you do not know what is going to happen on July 1, when QE2 ends, are we all just like a herd of lemmings going over a cliff here? Because there better be a QE3 or you are going to have some economic crisis. And of course, economic crisis are not good for banks and my ultimate view of what happens to gold and silver is that people decide to take their money out of the banks and there is only one place to go. And we have seen this happen in various countries that run into trouble. We hear about money flowing out of Greek banks and why wouldn’t it? And the next one was the money will be flowing out of Portuguese banks. And sooner or later, instead of just moving from bank A to bank B, people might start moving it from bank A, B and C to precious metals. Which I think is what ultimately will happen here and provide this huge supernova for gold and silver.


Chris Martenson: I want to talk about what this end game might look like. I have been expecting at some point there might be a day when I wake up and there are two prices for silver. One that is set at the COMEX and the other one which is what I actually have to pay to get some. And the wider that spreads the greater the pressure on the overall market. You have already hinted, you have said that you think that there is not that much in the COMEX, the CFTC has been complicit in some way in helping to preserve - the CFTC might actually be just trying to preserve the amount of silver in the warehouses by going through their margin hikes and all of that and supporting all of that. What is your view of how this actually comes into fruition if we suddenly see this shortfall? Eastman Kodak says “Hey, where is the silver? We want it, we have to stop our industrial processes until we get it.” Tell us about that moment and how that comes about.


Eric Sprott: Well first of all I think COMEX is a joke and I think all the paper markets are a joke. As you are probably aware, we trade a billion ounces of silver a day. A billion ounces. The world produces 900 million a year. And you know, rather than us saying well the buyers are speculators, what are the sellers thinking? He is trading a billion ounces in the sell side, and there is all 28 million in the COMEX there is obviously a shortage of silver. What is the guy selling it thinking? He is the guy with the unlimited losses. At least the guy long silver, he knows what his loss can be but the guy shorting silver? We have already seen silver from a year ago go up by 150%, I mean just think of the outside losses. So I do not really think that the COMEX and the LBMA are serving much purpose in terms of supposedly being involved in the physical market. They are not physical whatsoever. They are just paper markets. And on a daily basis, at most, we probably have got about a million ounces of silver everyday available for investment. Because most of it is used for industrial. So here we have a million ounces available, we trade a billion ounces a day. I mean it just, it is almost beyond belief. It is surreal in a way that it would be that much trading. It is all paper. And I do not, I do not know how we resolve what is obviously a physical shortage here. I mean there is not much primary silver production, it is not a big part of all silver production. And you see the kinds of moves we have where coin sales are up 30% and the industrial demand is up 20% and demand for solar goes up 100% .I mean the numbers are astounding in terms of growth of silver demand but the supply goes up by 3% or 4% a year. So there is no way out of the physical imbalance in my mind. Maybe we end up with two markets, one physical, and one paper. I think the more likely thing is that COMEX probably defaults somewhere along the line. If somebody just staood up and said “Fine, I will take the 28 and 29 million ounces” - it would be all over. So and that may happen some day.


Chris Martenson: Well, you raise an interesting point for me, which is why I actually prefer to own physical gold and silver. I was a pretty active futures trader for a while but that was just a game. I am convinced that when that event comes - and it will at some point - that what they will do, the CFTC in this case and other rule setters, is they will just change the rules. Like they did with the Hunt Brothers. Like they always do, right? When the going gets tough, what they do is they just change the rules and say “Oh were you long this contract? We are very sorry, we’re doing a cash settlement at some arbitrary level.” I think the warning shot across everybody’s bow should have been the flash crash, May 10, 2009, what the NYSE did was arbitrarily write in and say “Oh, any trades that happened below this level it’s as if they did not happen. But up to this level, they happened.” And what I would love to be able to do in this case is peek into the books and find out who really benefitted from having the floor of the broken trades be set at that level. And I will be shocked if it does not turn out that it is the most well-connected players who ended up at the best advantage off of that. So my view, and this is perhaps cynical, is that the rules get changed rather frequently and this erodes the most fundamental underpinnings of a market, which is that it needs to be free and fair. As soon as you have arbitrariness in there which clearly - it is not arbitrary, because arbitrary sounds random - as soon as you have rule-changing that clearly benefits one set of players over another on a consistent basis, it’s only a matter of time before people lose faith, refuse to participate, and do what I did which is just default into the physical market which was a set of decisions I made a while ago.


Eric Sprott: Sure, well I think that just the fact that the CFTC did what they did in the Hunt Brothers situation, where you could only liquidate which is a bit of a joke. And even its most recent example, where you just pile on these margin rate increases as it is working for the shorters. And the fact that they have had this CFTC investigation into the silver manipulation of ’08 with no results, not withstanding Bart Chilton coming out and saying it seems obvious there was some manipulation going on. So the CFTC I think has abandoned their principles here.


Chris Martenson: Yeah, well certainly, there is some complicity in there. And where there is smoke there is fire. It is not a clean story at this point. That much is absolutely clear. So what I would like to do now is ask another important question for people I think you have got some insight into here, for sure, is gold versus silver. I have always maintained a 2/3 to 1/3 gold to silver ratio on a value basis as sort of my general rule of thumb. And I invest in them for different reasons. Gold for me is a monetary asset. I invest in it because there is always the option value that gold will be remonetized on the international scale. Pick a number for what it might be worth under that scenario. Silver to me is still primarily an industrial metal and one without useful substitutes in many critical applications. So I split those metals and do not lump them both as precious in the sense that they have the same characteristics. What is your view there?


Eric Sprott: Well, my view is this. That I think silver should trade something like 16 to 1 ratio to gold. If the gold price was $1,600.00, silver should be $100.00. It has always historically been the rate. If gold was made a currency, which I think it will be, I think the market has already made it a reserve currency, the general market. You still need something for exchange that is workable. In other words, you can’t be exchanging one tenth of an ounce of gold for $150.00 bucks, I mean, try to get it down to $10.00 bucks. I mean it is impossible because whatever you have in your hand would be so small it would be unrecognizable. And therefore I think that when that day comes, silver would also be included as a currency. And we are sitting here with theoretically a billion ounces of silver available, which today is only worth $36 billion dollars. You cannot have something in the currency that is only worth $36 billion dollars because it serves no purpose. There is just not enough of it around. So I happen to be of the school of thought that silver should out perform gold and we came of that view strongly in the middle of last year, just about this time. And it has sort of demonstrated that certainly in the last twelve months. And I think that that will continue. So I tend to favor silver over gold these days.


Chris Martenson: Right, just on a price appreciation and a ratio basis, we’re agreed and also the fundamental supply-demand equation there is also I assume driving that decision at some point on that point of view.


Eric Sprott: It is

Chris Martenson: So here we are and it is 2011, where do you see - if you are willing to do this - where do you see gold going to? Pick a number, by 2015 – 2020. I mean where do you see it ultimately getting to? What I am really trying to back around into in this question is understanding when do we know it is time to sell? Like there is always a time to be long and then there is a time to exit. What does that look like for you?


Eric Sprott: First of all you can’t tell where it is going to go because you have to assess events that will happen in the future that have not happened yet. So for example, if we both agreedthere is going to be a QE3? Wow, no doubt it quickly goes to $2,000.00. If it is QE4, 5 and 6, it is almost unlimited. So it is hard to identify a price. I just think it is for sure going higher, depending on the actions of the government. But that rate of escalation may accelerate here. When people ask me when it is over, I sort of look at three things: one would be if you saw some kind of exponential move and you just thought that the gold and silver market will become maniacal and you might just say okay fine, it is over, that is number one. Number two would be if governments around the world and central banks of the world started acting responsibly, then they are taking away momentum out of the gold and silver markets. I do not see that happening however. And of course, the third thing, which is kind of obvious, is if they make gold and silver reserve currencies, well you do not need to own them anymore, depending on the circumstances at the time. So those are the three things I kind of look to. The most obvious would be governments and central banks getting responsible. And I just see no signs of that whatsoever. In fact, I almost think that their irresponsibility is increasing as time going on here.


Chris Martenson: I completely agree. I have several of the same signposts and I have one other one and which is keeping my eye carefully on the role of the dollar as the world’s reserve currency. If that starts to slip in earnest, that is where I pile a lot of dollars into things, gold and silver being two very obvious choices for me at that moment. So I really need to thank you for your time here. And I follow your writings very closely. I love your missives; they are always packed with information. If people want to follow you, or find out more about the funds you offer and operate, how do they do that?


Eric Sprott: Well, they can go to Sprott.com and all the things that we write on the various markets and as you are aware, we have been focusing in on precious metals, particularly silver lately. And we have some pretty interesting analysis of the silver market. We also have given many, many commentaries on the economic outlook over the last fifteen-odd years and most of those articles have been reasonably prescient in predicting most of the things that have happened. So if they go to Sprott.com, all the information is available. If they are interested in the purchase of gold and silver Maple Leafs we have a little web site called Sprott Money where we are involved in that market.


Chris Martenson: Oh fantastic. Well thank you so much for your time today. I hope we can do this again, and best of luck this year.
Eric Sprott: Thank you very much Chris, all the best to you.

How Much Would It Cost To Buy Congress Back From Special Interests?

Submitted by Charles Hugh Smith from Of Two Minds
How Much Would It Cost To Buy Congress Back From Special Interests?
Here's a thought: let's buy our Congress back from the special interests who now own it.

We all know special interests own the U.S. Congress and the Federal machinery of governance (i.e. regulatory capture). How much would it cost the American citizenry to buy back their Congress? The goal in buying our Congress back from the banking cartel et al. would not be to compete with the special interests for congressional favors--it would be to elect a Congress which would eradicate their power and influence altogether.

A tall order, perhaps, but certainly not impossible, if we're willing to spend the money to not just match special interest contributions to campaigns but steamroll them.

A seat in the U.S. Senate is a pricey little lever of power, so we better be ready to spend $50 million per seat. Seats in smaller states will be less, but seats in the big states will cost more, but this is a pretty good average.

That's $5 billion to buy the Senate.

A seat in the House of Representatives is a lot cheaper to buy: $10 million is still considered a lot of money in this playground of power. But the special interests-- you know the usual suspects, the banks, Wall Street, Big Pharma, Big Insurance, Big Tobacco, the military-industrial complex, Big Ag, public unions, the educrat complex, trial lawyers, foreign governments, and so on--will fight tooth and nail to maintain their control of the Federal machinery, so we better double that to $20 million per seat. Let's see, $20 million times 435....

That's $8.7 billion to buy the House of Representatives.

It seems we're stuck with the corporate toadies on the Supreme Court, but the President could scotch the people's plans to regain control of their government, so we better buy the office of the President, too.

It seems Obama's purchase price was about $100 million, but the special interests will be desperate to have "their man or woman" with the veto power, so we better triple this to $300 million.

Add these up and it looks like we could buy back our government for the paltry sum of $14 billion. This is roughly .0037% of the Federal budget of $3.8 trillion, i.e. one-third of one percent. That is incredible leverage: $1 in campaign bribes controls $300 in annual spending--and a global empire.

Once we bought back our government, what would be the first items on the agenda? The first item would be to eradicate private bribes, a.k.a. private campaign contributions and lobbying.

If you allow $1 in campaign contributions, then you also allow $10 million. There is no way to finesse bribery, so it has to be cut and dried: no member of Congress can accept any gift or contribution of any nature, monetary or otherwise, and all campaigns will be publicly financed.

Is this system perfect? Of course not. There is no perfect system. But the point here is that a system which allows even a $1 private contribution to a campaign cannot be restricted; after the courts have their say, then all attempted limitations prove worthless.

So it's really all or nothing: either we put our government up for auction to the highest bribe, or we ban all gifts and private campaign financing and go with public financing of all elections in the nation.

That is the only practical and sane solution. Any proposal that seeks to finesse bribery will fail, just like all previous attempts at campaign finance reform.

Any member of Congress who accepts a gift, trinket, meal, cash in an envelope, etc. will lose their seat upon conviction of accepting the gift. Once again, you can't finesse bribery. It has to be all or nothing, and the only way to control bribery is to ban it outright.

As for lobbying, thanks to a Supreme Court dominated by corporate toadies, it will be difficult to ban lobbying outright. However, that doesn't mean Congress shouldn't try to force the toadies on the Supreme Court to make a distinction between a corporation with $100 billion in assets and billions to spend on bribes and a penniless citizen.

(Those two are not coincidental; in a nation run by and for corporations, the citizens all end up penniless unless they own or manage said corporations, or work for a Federal fiefdom which can stripmine the nation at will.)

Congress should pass a law banning paid-for lobbying. If a citizen wants to go to Congress and advocate a position, they are free to do so--but they can't accept money to do so. If they receive any compensation from any agency, enterprise, foreign government, other citizen, you name it, from any source, then they will be sentenced to 10 years of fulltime community service in Washington D.C., picking up trash, etc.

If the Supreme Court toadies strike down that law, then here's another approach:

Require all paid lobbyists to wear clown suits during their paid hours of work.

In addition, all lobbyists are required to wear three placards, each with text of at least two inches in height.

The first placard lists their total annual compensation as a lobbyist.

The second lists the special interest they work for.

The third lists the total amount of money that special interest spent the previous year on lobbying, regulatory capture, bribes to politicos and political parties, etc.

Every piece of paper issued by lobbyists must be stamped in large red letters, "This lobbying paid for by (special interest)", and every video, Powerpoint presentation, etc. must also be stamped with the same message on every frame.

The second item on the agenda is a one-page tax form. The form looks like the current 1040 form except it stops at line 22: TOTAL INCOME. A progressive flat tax is then calculated from that line. Once again, you cannot finesse bribery or exemptions, exclusions, loopholes and exceptions. Once you allow exemptions, exclusions, loopholes and exceptions, then you've opened Pandora's Box of gaming the system, and the financial Elites will soon plow holes in the tax code large enough to drive trucks through while John Q. Citizen will be paying full pop, just like now.

The entire charade of punishing and rewarding certain behaviors to pursue some policy has to end. Any deduction, such as interest on mortgages, ends up creating perverse incentives which can and will be gamed. It's really that simple: you cannot finesse bribery or exemptions, exclusions and loopholes, because these are two sides of the same coin.

The tremendous inequality in income, wealth, power and opportunity which is distorting and destroying our nation all flow from the inequalities enabled by bribery and tax avoidance. The only way to fix the nation is to eliminate bribery (campaign contributions and lobbying) entirely, and eliminate tax avoidance entirely by eliminating all deductions, exemptions, loopholes, etc. State total income from all sources everywhere on the planet, calculate tax, done.

When you think about how tiny $14 billion is compared to the $3.8 trillion Federal budget and the $14.5 trillion U.S. economy, it makes you want to weep; how cheaply we have sold our government, and how much we suffer under the whip of those who bought it for a pittance.

Silver Update 6/20/11

Submitted by: Francis Soyer

Not alot to talk about these days. The Greek debt issue as far as I can recon is a side show intented to divert attention away from the facts that the U.S. is still in a state of defacto default with a deadline approaching of 8/2/11 to either raise the debt ceiling or begin defaulting on U.S. treasury payments.

If a debt ceiling comprimise is reached, the size of that package by lets says 2 or 3 trillion will do little more than buy Geitner 12 months of time to avoid bouncing checks. Yes the debt is that big and the force of compounding interests on that debt 16 or so trillion is so massive that next year Geitner will be asking for an additional 5 to 7 trillion to avoid bouncing checks for the next year. Even with draconian austerity measures of multi trillions a default or total collapse in value of the USD is a dead certainty. To understand more about the mechanics of how that works visit: http://www.chrismartenson.com/

In the meantime while the fed and their clepto banking freinds crash the equity markets to build political will for the next QE program or whatever they decide to call it expect sideways movement in precious metals.

Economic Recovery?

Sumbitted by: Francis Soyer 5/31/11

From time to time, on the radio or maybe on propoganda sources like CNBC the spin continues that here in the USA we are experiencing economic recovery. Take a look below and tell me if this looks like economic recovery to you.

Co-Founder Of Reaganomics, Paul Craig Roberts, "There Is Probably More Democracy In China Than There Is In The West"

Paul Craig Roberts: "The west prides itself that it is the standard for the world, that it is a democracy. But nowehere do you see democratic outcomes: not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty. And that's what the Greeks are in the streets, protesting. We see this all over the west. There is no democracy, there are oligarchies, some of these smaller European countries are not even run by their own governments, they are run by Wall Street... There is probably more democracy in China than there is in the west. Revolution is the only answer... We are confronted with a curious situation. Throughout the west we think we have democracy, we hold ourselves up high, we demonize China, we talk about the mafia state of Russia, we talk about the Arabs and so on, but where is the democracy here?"

David Stockman "A Technical Default (on U.S. Debt) Is a Virtual Certainty"

Submitted by: Francis Soyer 5/24/11

Who is David Stockman? He is the former budget director for Ronald Reagan, affiliated with neither party and has seen and predicted the current fiscal mess that exists years ago and has been more vocal lately as we approach financial Armageddon.

He has some salient points listed below in addition to the very basic fact that the U.S. Treasury has to borrow $6 Billion per day just to prevent checks from bouncing. Video below

"I don't have any hope they'll come to a substantive agreement on the big things that need to be done because both parties have ruled off the table the essential things that are necessary.”