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2/20/2016

AdviceforInvestorsBuygoldandsilverbullionbeforeannushorribilisPrint

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Buygoldandsilverbullionbeforeannushorribilis
PostedByInvestor'sDigestofCanadaOnFebruary18,2016@3:00pmInAlternative
Investments,InvestmentStrategy,MarketOutlook|CommentsDisabled

TheU.S.federalgovernmenthasover$19trillioninfundeddebt,atleast
$6trillioninoffbalancesheetobligations,andstaggeringunfunded
liabilitiesforMedicare,Medicaid,SocialSecurity,etc.,whicharethought
toexceed$100trillion.ThemarketoutlookfromJohnEmery,aToronto
basedinvestmentstrategistwithSprottAssetManagement,saysno
countrywillbeimmunefromthefalloutofanupcomingannushorribilis.
Themarketoutlookfor2016,isthatitsshapinguptobeanannushorribilisgloballyand,despite
theconstantcheerypropagandaemanatingfromgovernmentsourcesandthemainstreammedia
intheU.S.,nocountrywillbeimmune.
Theproblemis,verysimply,excessiveandincreasinglyunserviceabledebteverywhere.Theworld
haslongsincepassedthepointwheredebtcanbecreatedinaproductivesense.
ThiswasforeseenmanyyearsagobythosewhoareadherentsoftheAustrianSchoolof
economicsbut,unfortunately,theKeynesianshavebeenincontrolandcontinuetopeddlethe
notionthatmoredeficitsanddebtaretheanswertooureconomicandfinancialproblems.
Inthewakeofthe200708financialcrisis,whatthisapproachhasdoneistobuymoretime,but
whatitmostassuredlyhasntdoneisprovideanysolutionswhatsoevertoourmyriadeconomic
andfinancialissues.
Atthetimethecrisisstruckin2007,globaldebtwasintheneighborhoodofUS$140trillionand
thatamountnearlybroughtthesystemtoitsknees.
Today,thatnumbercomfortablyexceedsUS$200trillionandthesystemicleverageisfurther
enhancedbyanalmostunfathomableamountofderivativeswithanotionalvalueofmorethan
US$1quadrillion(thatis,athousandtrillion).
Thisedificeofdebthasbeenkeptafloatbyazerobasedinterestratepolicyinmostofthe
developedwesternworld,massivequantitativeeasing(QE)programsglobally,andaccounting
chicanerythatdoesntcomeclosetorecognizingtheseriouslyimpairedvalueoftheassetsonthe
balancesheetsofbanksglobally.
Therefore,itwasfascinatingthatRichardFisher,theformerFederalReservegovernorforthe
Dallasregion,recentlywentonCNBCandessentiallytoldthetruth.
HeadmittedthattheFed,ofwhichhewasamemberatthetime,thoughtitcouldcreatea
wealtheffectbyitsextensiveimplementationofQEandthatitwouldbenefittheU.S.population
asawhole.
However,intheinterview,heacknowledgedthathadntoccurredandwewerenowconfronted
withovervaluedmarkets(wherethemoneyflowedratherthanintoeconomicendeavours)and
thatitwouldtaketimetoworkout.
HiscandourwascertainlywelcomebutIthinkheseriouslyunderstatedtheultimatenegative
impact.BoththebondandstockmarketsintheU.S.arenowgrosslyovervaluedbyvirtuallyany
historicmetricthatonewouldcaretoapply.
Thedebtload,atalllevelsofU.S.society,isunsustainableandtheeconomyisnowstartingto
givegroundnoticeablydespitealltheofficialpropagandatothecontrary.
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2/20/2016

AdviceforInvestorsBuygoldandsilverbullionbeforeannushorribilisPrint

Thus,IwasinitiallyamusedbytheupbeatnatureofPresidentBarackObamasfinalStateofthe
Unionaddressbutwasappalledwhenheboldlystated:AnyoneclaimingthatAmericaseconomy
isindeclineispeddlingfiction.
Iamoneofthoseindividualsandwillnowcitenumerousreasonsforthatpointofview.
Despitethebogusstatisticsbeingconstantlyprovidedbyvariousgovernmentsources,any
objectivemarketoutlookwillrevealtheU.S.economyisfadingbadlyonmanyfronts.
Manufacturinghasbeenindeclineforyears.Now,thissectorissufferinggreatlyduetothe
overvaluedU.S.dollarinaworldwherecompetitivedevaluationistheruleoftheday.
Constructionandhousing,whichinitiallybenefitedmightilyfromthelowinterestrate
environmentinconjunctionwitheasyavailabilityofmoney,nowappeartohavetopped.

Lowlabourparticipationrate
Theimportantretailsectoriscurrentlytakingabighitduetoanongoinglackofrealincome
growthforthevastmajorityoftheU.S.populace.
Thisisoccurringdespitealargedropinenergycosts.Therecenttravailsofleadingretailerslike
WalMartandMacysareproofpositiveofthisreality.
Despitetheglowing(butincorrect)unemploymentnumbersproducedbytheBureauofLabour
Statistics,thelabourparticipationrateintheU.S.hasfallentolevelsnotseensincethemid
1970s,whenwomenwerejustbeginningtobeamajorfactorintheoveralllabourmarket.
Itistrulyshockingtomethatapproximately94millionpeopleofworkingageintheU.S.currently
donothaveajob.
However,theareathatiscurrentlyinmostdifficultyistheenergysector,whichironicallywasone
ofthefewrealgrowthenginesintheU.S.economypost2008.
Duetothefrackingboom,theU.S.dailyoilproductiongrewfrom5.35millionbarrelsperdayin
2009to8.7millionbarrelsperdayin2014andemploymentintheindustryboomed.
Unfortunately,thisincreasewastotallyattributabletothehighcostfrackingbusinessandwas
largelyfundedbydebt.
WithSaudiArabialeadingthechargetomaintainitsmarketsharewhileglobaldemandrapidly
slows,theoilpricehascollapsedbyover70percentfromthepeakpricesin2014.
Inthatmilieu,theU.S.frackingboomhasmorphedintoadisasterofjoblosses,debtdistressand
averyuncertainfuture.
SuperimposethisrealityontothedifficultiesbeingencounteredbytheothersectorsoftheU.S.
economyand,inmyopinion,PresidentObamaswordslookhollowatbest.
However,therealproblemfortheU.S.governmentmaylieinitsownfinances.Withouteven
recitingthefinancialwoesofmanycitiesandstatesintheU.S.,thefederalgovernmentitselfisin
deeptrouble.
Itcurrentlyhasinexcessof$19trillioninfundeddebt(comfortablyover100percentofGDP,a
historicdangerzoneforanysovereigncountry),atleast$6trillioninoffbalancesheetobligations,
andastaggeringamountofunfundedliabilitiesforMedicare,Medicaid,SocialSecurity,etc.,which
arethoughttoexceed$100trillion.

Russia,Chinafightingpetrodollarpricing
TheU.S.is,forallintentsandpurposes,flatbrokebutbecausethecountrystillpossessesthe
exorbitantprivilegeofprovidingtheworldsreservecurrency,ithasbeenabletogetawaywith
itsdebtorgyuptothispoint.
However,therearemovesafootgloballytorelievetheU.S.ofitsroleasthesoleproviderofthe
worldsreservecurrency.Oneofthekeyunderpinningshasbeenthepetrodollarstatuswhich
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AdviceforInvestorsBuygoldandsilverbullionbeforeannushorribilisPrint

hasseenalltheoiltradedintheworldpricedonlyinU.S.dollars.
NowRussiaandChinaaremakingseriousmovestopriceoilincurrenciesotherthanthedollar.At
thesametime,thevirtualcollapseintheoilpricehassharplyreduceddollardemandfromthe
otherplayers.
Thegreatestrisk,however,maybethemassiveoverhangofdollarsglobally.
Thevastproportionofcentralbankreservesintheworldaredenominatedindollarsandthe
growingconcernaboutthedollarslongertermvalueisbeingdemonstratedbyunprecedented
largesalesofU.S.Treasurybillsbynumerousglobalcentralbanks.

Metal,likescissors,beatspaper
Istronglysuspectthatsomethingverydisruptiveisonthehorizonfortheworldspresentfiat
currencysystemasaresultofallthesemachinations.
Thisbringsmetomyfavouritesubject,goldandsilver,bothofwhicharehistoricallyundervalued
duetothecontinuedabuseofbothinthepapermarkets.
Theabilitytosellmassiveamountsofpapergoldandsilver,whichareminimallybackedwith
physicalmetal,inconjunctionwiththewidespreaduseofderivativeshasallowedthecentral
banksandtheirbullionbankaccomplicestodrivegoldandsilvertounsustainablelowlevels.When
thisPonzischemeisovercome,observersaregoingtobestunnedbythepriceexplosioninboth
preciousmetals.
Toprovideananalogy,ifathirdpartywereallowedtocounterfeit,withnorestraints,several
billionFacebook,GoogleorAmazonsharesandselltheminthemarket,wheredoyouthinkthe
priceofthoseshareswouldbe?
Essentially,thisiswhathasoccurredinthegoldandsilverpapermarkets.
Thispresentsahistoricbuyingopportunityandmybeststrategicinvestmentadviceistotake
advantageofitbypurchasingphysicalgoldandsilverassoonaspossible.

InvestorsDigestofCanada[1] ,MPLCommunicationsInc.
133RichmondSt.W.,Toronto,On,M5H3M8,18008048846

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Copyright2012MPL.Allrightsreserved.

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