19 Mar 2011

US to Default on Debt, Dollar Headed Much Lower

With the US dollar tumbling, today King World News resident expert Michael Pento had this to say when asked how the US will fund social security and some of those other critical items such as defense with its heavy debt load, “Well, for me it means a form of default. You know when you can’t pay your debt, so there has to be some kind of restructuring. It’s either going to be done by a direct reneging on our obligations to our foreign creditors, it could be in the form of inflation, but without a doubt the US is headed for some form of default on its outstanding national debt.”

Michael Pento continues:

“Who is going to fill the gap when Banana Ben stops his counterfeiting spree in June of this year? When he stops, there is going to be a vacuum created. The Federal Reserve will hopefully end their purchases of US debt (in June), and Japan will also dramatically attenuate their purchases of US debt. They (the Japanese) have no choice in that matter.
So if that’s the case, who supplants that buying? And if it is not supplanted, at what price is that debt filled? What interest rate satisfies that debt?”

When asked what kind of move he is looking for on the long bond Pento stated, “Well I was going on a 10 year...I think that the ten year yield will creep up to 7% by the year 2013.”

When asked how much that will cripple the United States Pento replied, “That probably means around that time frame of 2013 to 2015, we’re going to be paying close to 50% of all of our revenue just to pay the interest cost on our debt. 50% of our revenue going just to service the interest on our debt.

For me that means that our annual deficits will be well north of $2 trillion, probably closer to $3 trillion on an annual basis. And that means our annual deficits will be running 15 to 20% of GDP.”

Regarding the US dollar Pento stated, “We just broke through 76 on the DXY that is a 52 week low. I think it’s headed much, much lower...that to me spells a very perilous condition for the value of our currency and for the purchasing and for the purchasing power of the US citizen.”

To listen to Michael Pento’s KWN interview CLICK HERE.

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20,000 Dead in Japan, BoJ Desperate to Avoid Banking Crisis

When the tragedy in Japan still unfolding, today King World News interviewed James Lucier, Managing Director at one of the top botique firms in the world, Capital Alpha Partners. Lucier was quick to point out that the human casualties have been underestimated, “I do want to emphasize the extent of the human tragedy here. The number that one sees in the public press is about 15,000 people dead. The reality according to sources in Japan is going to be higher, more like 20,000 dead. We are talking about whole families, whole trains full of people, whole villages, tremendous human suffering.

James Lucier continues:

“Well obviously we are looking at a great natural disaster, perhaps the most serious earthquake in Japanese history. Perhaps even surpassing the scale of the great Kanto earthquake of 1923. In this case clearly the modern city of Tokyo has escaped the sort of devastating damage that every city in Japan saw during the great quake of ’23.

But we still see tremendous damage up north and Japan has a formidable task before it in terms of reconstruction. However the record shows that modern industrialized nations tend to recover fairly quickly from such disasters, and that if any country is prepared for such an event it is Japan.

After the shock of the Kobe earthquake of 1995 Japan performed a fairly thorough overhaul of the many deficiencies in response. And yet even after the Kobe quake which many saw as having a less than stellar performance by the first responders, we still saw Japan recovering 98% of its industrial capacity in that area within about 18 months.

So here, with regard to the northeastern regions of Japan, where many of Japan’s heavy manufacturing industries are located, we do see a reasonably good prognosis for rapid reconstruction.

The real question of course is with regard to how Japan would finance this recovery. The estimates we are seeing are anywhere from 100, 200, even 300 billion dollars. By comparison the cost of hurricane Katrina in the United States was roughly $80 billion.

The real issue is whether Japan can finance this reconstruction internally. There are commentators who argue that this would mean adding only about 7 percentage points to Japan’s current debt to GDP ratio. But only 7 percentage points I think is a pretty big deal when your debt to GDP is already over 200%.
It really depends on whether the patient Japanese bondholders who so far finance about 95% of Japan’s debt internally are able to sustain this. The question is does Japan still have the pools of savings necessary to provide these funds, or does Japan have to go to the global markets the way the United States does?

If Japan does go to the global markets I think it will very likely face a rise in the interest rates it pays. Perhaps even the Japanese public, depending on how the market responds, might also require a rise in Japanese interest rates.
This is something that is potentially a significant issue for Japanese regional banks which hold Japanese government bonds. Rising interest rates might require these banks to take a haircut on the value of those bonds and so there is potentially a banking issue here.

You see the Bank of Japan stepping in aggressively with liquidity in order to not only cope with the rising value of the Yen but also to forestall a difficulty of this sort (higher interest rates creating a banking problem). It remains a dangerous situation, I mean how many times can you do the equivalent of quantitative easing if you’ve already been doing it for 20 years? How much financial flexibility does the country really have at this point?”

When asked about the horrendous problems at the Japanese nuclear reactor James Lucier remarked, “This is clearly qualitatively worse than Three Mile Island. You have not one, not two, but three reactors that are in effect dead at this point. Perhaps the entire complex of six reactors in the worst case might be written off. So we are watching this and hoping that the reactor situation remains under control and that any release of radiation is minimal.

I do want to emphasize the extent of the human tragedy here. The number that one sees in the public press is about 15,000 people dead. The reality according to sources in Japan is going to be higher, more like 20,000 dead. We are talking about whole families, whole trains full of people, whole villages, tremendous human suffering.

Let me close on a more positive note by adding that we do not see the possibility of a Chernobyl incident here, but of course we are watching the situation carefully because of the structural failures that we have seen at these reactor buildings and the reactor vessels themselves. Having said that, I think we are beginning to approach the point now where you can take the possibility of a meltdown off of the table.”

Seed for QE3 is official- Dollar on brink of collapse.

If the Puppeteers Treasury Secretary is coming out and saying that we must raise the debt ceiling, who now thinks that QE2 will stop in June?
QE3 is happening, then QE4,5,6; if the economy can even sustain QE3 before hyperinflation.

Use this warning to get out of the dollar now. Convert your fiat it to physical Gold and Silver.  The end is nigh.

Timothy F. Geithner, Secretary of the Treasury, holds papers before testifying to the Financial Services and General Government Subcommittee on Capitol Hill in Washington on March 16, 2011. REUTERS/Joshua Roberts

(Reuters) - Treasury Secretary Timothy Geithner said on Wednesday that there was no alternative except for Congress to raise the debt ceiling so that the government can keep borrowing.
"Congress has to do it. There's no alternative," he said in response to questions at a House of Representatives appropriations subcommittee.
He repeated a warning that it would be have "catastrophic" consequences for the economy if the debt ceiling was not raised and the country defaulted on its debt obligations.

Reports Of “Harmless” Radiation Reaching California Are a Whitewash

Exactly as we predicted would happen, authorities have cited “miniscule” levels of radiation reaching California as an excuse with which to downplay the threat to Americans of fallout crossing the Pacific from Japan, completely ignoring the fact that the bulk of the radiation from the two blasts at the Fukushima power plant will not reach the west coast until Monday.
“Radioactive fallout from Japan’s crippled nuclear plant has reached Southern California but the first readings are far below levels that could pose a health hazard, a diplomat said Friday.”
“Initial readings are “about a billion times beneath levels that would be health threatening,”the diplomat told The Associated Press, speaking on condition of anonymity because the CTBTO does not make its findings public.”
The diplomat called the level of radioactivity “irrelevant,” while another unnamed source told Reuters that the level was “very low.”
If the two individuals quoted in the reports are so confident that there is no threat, why are they so keen on remaining anonymous?
As we have emphasized, the radiation now hitting the west coast is from the early leaks suffered by the Fukushima plant after the earthquake and tsunami last Friday, which actually occurred Thursday U.S. time. These leaks were minimal in comparison to the radiation emitted after explosions on Saturday, Monday and Tuesday tore apart the buildings housing the reactors.

We will not know the true level of the threat until the radiation particles emitted as a result of the three explosions that devastated Fukushima hits the west coast over the weekend and into Monday. The fact that authorities have completely failed to point this out suggests they are actively trying to whitewash the threat that the fallout poses to Americans.In addition, the radiation currently being measured does not take into account radiation emitted by pools of deadly spent nuclear rods, which only began to emit serious amounts of radiation a few days ago.
For the sake of people in America and around the globe, we hope that levels of radiation have dissipated over the Pacific and that future generations are not made to suffer. But for officials to hastily dismiss the threat before the vast majority of the radiation has even reached the west coast, and while Fukushima is still smoking, in a stage of partial melt down, and emitting more radiation every second, is completely irresponsible and suggests a cover-up.
We heard a similar theme during Obama’s speech yesterday when he all but insulted Americans for preparing themselves for fallout by purchasing potassium iodide pills.
“The Centers for Disease Control and Prevention and public health experts do not recommend people in the U.S. take precautionary measures beyond staying informed,” said Obama, which is precisely what those affected by both Chernobyl and the 3 Mile Island accident were told, trust your government, a mistake that led to nearly a million deaths in the case of Chernobyland a dramatic rise in cancers in the case of 3 Mile Island.
It was also what ground zero workers heard in the days after 9/11, that the air was “safe to breathe,” a contrived cover-up on behalf of the EPA and the White House that led to thousands of crippling illnesses and deaths of firefighters, police and first responders.
History tells us that government have habitually lied about radiation, air quality and the true scope of health threats to the American people. Only through the use of private monitoring stations will we be able to confidently gauge the true levels of radiation hitting the west coast, and we won’t know the full extent of the danger Americans face until Monday at the earliest.

18 Mar 2011

Economic Crisis 101 and how it impacts you: Must see

This is a good video for anybody wanting to understand how the Federal Reserve, or more specifically the US dollar being the world reserve currency is going to bring financial chaos globally.



Look at this chart... it's one of the scariest I've seen in a long time. It shows an overlay of what happened in the stock market in 1937 compared to 2008. 

Look at this chart...

This chart shows that China's holdings of U.S. dollars peaked in 2009, but China is unloading as many dollars as they can, as quickly as possible. 

The chart below shows how much a few key commodities have skyrocketed in price, just since the beginning of 2009...

Of course, skyrocketing commodity prices are just the beginning.  Have you noticed normal food priced have increased? Pay more attention.

There are other disastrous consequences to the U.S. dollar losing status as the world's currency... 

Again, if you don't believe a currency crisis is coming, just take another look at the price of gold and silver compared to the U.S. dollar over the past decade. 

Sourced from: http://www.stansberryresearch.com/pro/1011PSISBBVD/PPSIM309/PR

17 Mar 2011

Alert: Japanese Nuclear (and Global Economic) Meltdown In Progress

Important note: 

It is with a heavy heart that I am now issuing the highest level alert to my readers than I have to date. The threshold for an alert is one or more world events that personally cause me to take action.
I'm making this alert publicly available less than 36 hours after releasing it to my enrolled subscribers given its importance and the speed at which events are accelerating.

The substance of this alert centers on the unknown aftershocks that may result from the world's third largest economy, Japan, rapidly shifting from an exporter of funding to a consumer of it. In situations like these, we are by definition operating with incomplete and often confusing information, and events are developing more rapidly than they can be fully analyzed and internalized. We regret in advance any mistakes that we might make due to making calls and decisions in this highly fluid environment.

This alert warns you that major world-changing events are now underway and that your personal preparations for an uncertain future should either be completed or take on a new sense of urgency. On the basis of the information contained here and in the past two days of posts, I am personally ratcheting up my preparations, making purchases, and topping off what needs to be topped off.

Important caveat: At this point in time, I cannot fully support 100% of my concerns with hard data and evidence. Some of what has tipped me into this state of urgency is data, evidence, and stories that I can point to. Some is due to the absence of data or information, the remainder results from watching market gyrations and correlations shift into new patterns, which tell me something is afoot.

I have not been this concerned since October of 2008.

Some Background

Within hours of learning of the event at Reactor 1 in Japan, I had looked at the evidence available, drawn a few conclusions, and then checked to see what the experts were saying. Never quite sure of what sort of personal and/or professional limitations are in play, I rarely start with anyone's assessment but my own. It's part of trusting myself and it has worked remarkably well for me and my subscribers over the years.

Here's what I wrote in the blog on the morning of Saturday, March 12, 2011 on Japan's nuclear incident:
There have been reports from Japan's nuclear agency that radioactive cesium and iodine were detected outside of the facility, which can only happen if the core has been exposed somehow. Perhaps that's all under control now, but the evidence for very high temperatures, the explosion of the containment building, a 12-mile evacuation zone, and the presence of cesium and iodine all indicate that perhaps the complete situation is not being shared with the public.
If you live in Japan, you should be heading well upwind of this facility and have potassium iodide pills on hand. I would personally be reading the wind forecasts and assuring that I was upwind.

My expertise involves making sense of the world in relatively short order. It also helps me smell B.S. remarkably quickly, especially from official sources. The nuclear situation in Japan struck me from the outset as being rather more serious than described, and this has proven true. I take no pride in this particular 'victory,' and instead feel the burden of having to be the bearer of bad news.

The nature of this alert is to let you know that I consider the chance of a renewed round of economic and fiscal crises to result from the chaos that is currently engulfing Japan and the MENA region to be extremely high.

A Global Meltdown

For decades, the world has been running its own nuclear-style reaction, only in the currency and debt markets, where exponentially-accelerating piles of debt and money have spun about faster and faster in a gigantic, complex, coordinated reaction, the core of which is, and always has been, the United States.

At the very center of this ungainly money reactor is the main fuel pile itself, the US Treasury market. With any interruption to smooth flow of money through this pile, it will immediately become unstable.

The threat I see goes like this:

Stage 1: The world watches, riveted, as Japan suffers a tragic and horrible earthquake and tsunami, but as horrifying as these are, they are localized phenomenon affecting a relatively small percentage of the country. The real trouble lurks within damaged nuclear plants, which are now ruined and will never again produce electricity for Japan, creating instant shortages that will take years to remedy. Worse, a dangerous plume of radioactivity is carried south by winds. Tokyo partially empties and shuts down for all practical purposes.

Stage 2: The abrupt slow down of the world's third largest economy alters the smooth flow of cash around the globe, and even causes reversals of some other long-standing flows. Chaotic eddies emerge in a decades-old pattern of ever-increasing flows of money into and out of the money centers, and various carry-trade and other interest-rate-sensitive strategies blow up. Manufacturing in Japan screeches to a halt, disrupting just-in-time manufacturing strategies both internally and across the globe.

Stage 3: In order to fund the rebuilding effort, Japan has to buy a lot of items from foreign suppliers at the same time that its exports plunge precipitously. At first Japan simply does not participate in US Treasury auctions, leading to a shortage of buyers. But eventually Japan has to sell some of its vast hoard of US bonds in order to pay for external items needed for its reconstruction. Further, insurance companies, huge holders of US bonds, face stiff liability claims in the wake of the worst natural disaster to hit a heavily industrialized center and are forced to redeem enormous amounts of Treasury paper. US Treasury yields begin to climb.

Stage 4: Continuing unrest in the MENA region serves to keep oil elevated and local funding needs high, while Europe's weaker players (the PIIGS) continue to slip under the waves. Money continues to ebb away from the US Treasury market. Forced by circumstance, the Federal Reserve reverses its linguistic course and opens the monetary floodgates once again. There's nothing like a crisis to justify more money printing, especially to a one-trick pony (the Fed) that only knows how to stamp its hoof on the 'print' button.

Stage 5: An increasingly chaotic monetary and fiscal situation spills over into the derivatives arena, creating a number of financial accidents. Stressed governments find themselves in more of an arguing mood than a pull-together-and-sing-Kumbaya mood, and agreements are hard to come by. Banks begin to fail again, global trade falls off, unrest continues to build, and then it happens - a currency crisis.

Stage 6: Everything changes. Faster than you think.

I wish I could completely quantify and justify the reason for this assessment, but I cannot at this time. Yes, we've got some very serious market turbulence to point to:
From ZeroHedge:
Japan's nuclear crisis has deepened and we deeply regret to say that there is now the real possibility of a nuclear catastrophe. Investor panic has set in with the Nikkei down over 16.5% in two days and the Topic index down by 17% - its worst two-day loss since the 1987 Wall Street stock market crash.
The cost to insure Japanese debt has surged to a record with credit-default swaps protecting Japanese government debt for five years soaring 27 basis points to a record of 125 basis points.
One UBS trader said that the deteriorating nuclear crisis had led to "near panic across local credit-default swap markets." While most equity indices and commodities have fallen, some sharply, gold has remained resilient and is down 1% in US dollar terms and is higher in Australian dollars which like other so called 'commodity' currencies has come under pressure in recent days.
The nuclear meltdown has led to a market meltdown. Market breaks can quickly lead to supply shortages and other unpleasant realities.

Shifting Baselines

The problem with these fast-moving situations is that everything shifts from beneath your feet and events fundamentally change so quickly that you do not have time to adjust properly before the next insult arrives.

For example, I pride myself on ingesting massive amounts of information and processing it logically and relatively completely. But right now I am overwhelmed by too many situations. I should know who the opposition leaders are in Bahrain, how many troops have crossed from Saudi Arabia, what sorts of equipment they brought (as an indication of whether they plan to stay for a little while or a long while), and so forth. But I only know that troops have crossed the border; I consider this to be a bad sign for global oil price stability, but know very little else.

And I am not entirely clear on the inner machinations of the European debt crisis any more. I am completely consumed by following the developing nuclear crisis in Japan and trying to determine how that could, will, should impact our readers in Japan, and the world economic landscape.

The problem is captured perfectly in this post by Debu:
Another slightly surreal day in Tokyo which I largely spent buying food in case we have to stay indoors for an extended period due to fallout and/or if food supplies are disrupted by distribution problems. (I have been remiss in my prepping, I admit. I will spare you my lame excuses as to why.) Near pandemonium in some supermarkets which surprised me given the generally anodyne tone of the reactor situation coverage on the TV. Possibly it is simply worries about empty shelves feeding on itself.
Still, despite the devastation a few hundred kilometres away in the areas affected by the earthquake/tsunami (words fail), in Tokyo we are only inconvenienced in trivial ways. And so, the sense of unreality. There were emails today from my Japanese mates saying they were resigned to there being no hockey for awhile because the rinks will be closed because of the power cuts (and serious damage to the roof of our home rink). Or, whether it is milk is hard to come by (but still lots of wine and whiskey available), or some shops are closed to save power, or limited train service, etc. it is all inconsequential trifles. Given what is happening up north it is enough cause a bit of survivors' guilt.
Many thanks to all on this forum for the info and the insights. It has, and will continue to be I suspect, my best source of information and advice.

One name for this process of only very slowly coming to grips with an enormous change when it happens at a slow enough pace is "shifting baselines." It means that if you had put these same people to sleep a week ago and woke them up today, the shock of the reality of today's situation would immediately jar them into action. But somehow, as things change seemingly gradually from hour to hour and day to day, the change itself can prove oddly paralyzing, and this is because our baselines shift. What would have been abnormal yesterday is normal today.

Last week the residents of Tokyo were sympathizing with the plight of their neighbors to the north, and then they were hearing about some controllable problems with some nuclear plants, and then they were hearing about maybe some more serious difficulties, and today they find themselves scrambling to empty store shelves and get out of Dodge, so to speak.
(Reuters) - Radiation wafted from an earthquake-stricken nuclear power plant toward Tokyo on Tuesday, sparking panic in one of the world's biggest and most densely populated cities.
Women and children packed into the departure lounge at an airport, supermarkets ran low on rice and other supplies and frightened residents, tourists and expatriates either stayed indoors or simply left the city.
"I'm not too worried about another earthquake. It's radiation that scares me," said Masashi Yoshida, cradling his 5-month-old daughter Hana.
The nail-biting eased in the afternoon after Chief Cabinet Secretary Yukio Edano appeared on national television saying radiation levels at the troubled Fukushima Daiichi nuclear-power complex had fallen dramatically since morning.
But confidence in the government is shaken and many decided not to take chances, especially after radiation levels in Saitama, near Tokyo, were 40 times normal -- not enough to cause human damage but enough to stoke fears in the ultra-modern and hyper-efficient metropolis of 12 million people.
Many hoarded food and other supplies and stayed indoors. Don Quixote, a multistory, 24-hour general store in Tokyo's Roppongi district, was sold out of radios, flashlights, candles, fuel cans and sleeping bags on Tuesday.
At another market near Tokyo's Yotsuya station, an entire aisle was nearly empty on both sides, its instant noodles, bread and pastry gone since Friday's earthquake and tsunami killed at least 10,000 people nationwide and plunged Japan into a twin nuclear and humanitarian crisis.

Time to Prepare

Okay, folks, this is not a drill.

Events have now sped up to the point that we cannot predict what will happen next. At this point a systemic banking crisis, complete political upheaval in one or more countries, a currency crisis, or a debt crisis are all within the realm of the possible.

This is the most difficult Alert I've ever had to write, because I know I have not yet processed all the necessary information to truly assess the risks. I am operating on gut instinct here, and several of you have already reminded me to trust myself. Thank you. That's what I am doing now.

The risks I am most concerned about striking outside of Japan are:
A derivative-fueled banking crisis. Another banking crisis could shut down international monetary flows for a period of time, which would severely impact your ability to access your money, conduct trades, or otherwise take care of business.
Critical shortages. Already we know that much of Japan's manufacturing output will be crippled for a while due to quake damaged plants being destroyed, workers failing to show up as they attend to their families in a moment of deep crisis, and electricity shortages due to destroyed power plants being taken permanently off-line. How much and which products will be affected will take weeks of effort to discover, as our highly integrated global supply network has an unknowable number of nodes that originate in or pass through Japan.
A global GDP insult. Building on the idea of critical supply chain disruptions and shortages, it is a safe bet that the world economy will take a hit now that various products cannot be manufactured and sold. Rather than a gentle slow-down that can be easily managed, the risk I see here is akin to a large wrench being tossed into a delicate transmission. The risk springs less from how much you slow down, but rather how fast you do it. This global GDP hit will further expose the weakness at the periphery, probably taking down the weaker players once and for all.

The main story line here is that Japan is a critical and embedded player in both the financial and productive economies, and it has suddenly, almost instantly, been taken off-line. We don't know what might happen next, but we should be prepared for anything.

My Advice

Recently I had advised readers to be ready for a big downturn linked to the idea of a QE cessation. I am going to retract that somewhat (almost entirely), because this Japan crisis will provide all the political cover necessary for more printing.

Nonetheless, a market rout is on, but for entirely different reasons than I first projected.

At any rate, the time to move to cash from stocks is slipping quickly past, if not already gone, but if you haven't made that move yet, you should consider waiting for the next "Bernanke bounce" in which a few hundred billion are tossed into the kitty to stabilize the markets.

This alert is going to be a living document in the sense that I will be constantly updating it as time goes on and events unfold. The first stage of my advice centers on the basics. You need to have all of your basic preparations completed at this time. Food, water, medical kits, shelter, cash out of the bank, and all the rest should absolutely be in place at this time.

Get the basics done. Now.
If you live on the west coast of the US, you must prepare for a fallout event even though this is extremely unlikely due to the distances involved. The concern here is that nearly 40 years of spent fuel is stored onsite and apparently boiling away its water and possibly burning. This means buying KI tablets for at least a week for every member of your family and being prepared to spend up to a week 'taped up' inside your house if it comes to that. Plastic, duct tape, and board games are what you need. I hate having to even suggest this sort of preparation. But while remote, there's always the chance that a quirk in the air flow patterns could lead to less dilution than expected across the ocean and that a relatively small area of the west coast could receive a surprisingly strong concentration of contamination. Again, this is very remote, but so was the idea of four plants all melting down at the same time.
Get what cash you can out of the bank. You can always put it back later on. Keep it somewhere safe.
Move any money you can from less liquid to more liquid vehicles. You want to be able to access your money in a hurry should that become necessary. Re-read Taking Control of Your Personal Finances if necessary. I outline all the reasons and a few methods for 'becoming more liquid.'
Top off your fuel tanks.
Buy extra food at the grocery store.
Have long-term storage food put aside.
Take medicines? Be sure to get extras.

I am still holding onto all of my gold and silver holdings as I cannot imagine any possible policy responses that will bolster anyone's faith in fiat currencies. That said, I am expecting short-term declines, possibly significant, in the US paper price for these metals on the basis of a liquidity crisis skimming the speculative component of their price off the top. I really don't know how much this will be, but it's certainly not insignificant.

When you stock up on things at the store(s), think also about friends family, neighbors, and all the other assorted people you care about who have almost certainly done little or nothing to prepare. What would they like? Don't overlook comfort and luxury items that command a mental premium in a time of crisis. Chocolate comes to mind.


As always, I have no idea if anything is going to transpire or not, or when. How's that for indecisive? But I can tell you that the pressures are larger than they’ve ever been throughout this long emergency and that conditions are ripe for an avalanche. My sincerest hope is that this will all blow over. But hope alone is a terrible strategy, and so we prepare.

My best guess is that the situation in Japan will unfold over the next two weeks, with a full blown funding and fiscal crisis (of confidence) blossoming there over that time. Already we are seeing credit spreads on Japan's sovereign debt begin to skyrocket, meaning that an increasing chance of a sovereign default is being priced into the debt markets. This is the same dynamic we saw with Greece, then Ireland, Iceland, too, and so on. Only this time it is happening to the world's third largest economy.

Two weeks after that, I expect that the first real product shortages and associated work stoppages will begin to hit the US and European economies. I expect the difficulties to surface first in Europe followed by the US. Somewhere in this zone we will get the next solid commitment to print, print, print, probably as a joint exercise of both continents.

Taken together, I think we've got at least a month until things have shifted enough that preparations will become either difficult or irresponsible.

Use this next month very wisely.

Remember, it's better to be a year early than a day late. So get out there and prepare responsibly.

Above all, it is our duty to remain calm, focused, and helpful to those around us. We are all experiencing anxiety and fear to greater and lesser degrees. It is my hope that we can use the privacy of the comment thread below to work through whatever issues arise for each other, whatever those may be, and to help each other make the best decisions we can in an increasingly chaotic and uncertain environment.

Welcome to the nexus of multiple exponential curves. We always knew things would speed up along the way, and so they have. Let's do the best we can.

Events are unfolding in a manner entirely consistent with the framework I laid out in my recent Guide to Navigating the Coming Crisis. As the report predicts: things are speeding up, events are progressing from the outside in, and soon enough everything will be substantially different than you remember and it won't be completely obvious how that happened due to the phenomenon of shifting baselines. Reading it should be a particular priority for those with family or substantial investments to protect. Click here to read the free executive summary.

Below you will find the original post I started on Saturday, hours after the explosion in the first reactor. It has since become a primary source on the unfolding tragedy for tens of thousands of people around the world - largely due to the extremely knowledgable contributions of experts in the CM.com community. More to come as circumstances develop.

Your faithful information scout,
Chris Martenson

A Note on Prepping Responsibly

To prepare responsibly, you should do it before a crisis hits, when there are plenty of goods, food, and other necessities available for purchase and your purchases actually increase the local resilience of your community. After a calamity has struck, say after the earthquake in Northern Japan, then any buying or accumulating you might do can be perceived as an act of hoarding, something we'd like to see everyone avoid.

If you have not done so, you need to be sure that you have covered all of the basic steps recommended in our What Should I Do? guide.

At the very least, you'll get peace of mind and have the chance to be among the people who are in a position to help others when the time comes. At the most, it could be the difference between a rather miserable piece of time spent wishing you’d done more to prepare and a relatively comfortable stretch of time.

Japan adopting Quantitative Easing

The world seemed to hold its breath yesterday. People watched videos of the tsunami...of the earthquake..of the nuclear reactors. Japan's nuclear reactors were on the verge of a meltdown.

Here at The Daily Reckoning, we predicted a meltdown in Japan - but not that kind of meltdown!
In January, seers and forecasters turned in their predictions for the year ahead. Now, we are in March, and we have already run into two major events that no one predicted.
First, the Arab world exploded. Now, the blow-ups are happening in the least-explosive part of the world, Japan.
Japanese stocks sold off yesterday. If they were a bargain when we recommended them a couple weeks ago, they are an even bigger bargain today. US stocks didn't do much of anything.
Perhaps some kind of turning point has been reached.
Japan has been suffering from a manmade disaster for the last 20 years. It is a long, slow, painful form of national economic suicide. Now it is time to pick up the pace. This from Bloomberg:

The Bank of Japan poured a record amount of cash into the financial system and doubled the size of its asset-purchase program to shield the economy from the effects of the nation's strongest earthquake on record.
The central bank pumped 15 trillion yen ($183 billion) into money markets to assure financial stability amid a plunge in stocks and surge in credit risk. Governor Masaaki Shirakawa and his board also increased their facility that buys assets from government bonds to exchange- traded funds to 10 trillion yen.
"We are providing as much funds as needed to dispel anxiety in financial markets," Kazushige Kamiyama, an official in charge of the central bank's money market operations, said before the policy announcement. "We will continue to add ample funds to stabilize financial markets."

It used to be that central banks were charged with maintaining the integrity of the people's money. Then, mission creep set in. Maintaining full employment was added to the job description. And then, Ben Bernanke took it upon himself to boost stock prices. Higher stock prices would encourage people to spend and invest, he thought.
And now, the Bank of Japan takes another step. It is playing a leading role in earthquake remediation - like the Red Cross or the National Guard.
The Bank of Japan is going all out. Not only is it putting emergency funds into the economy, it's also stepping up its own QE program.
What else can it do? It was already doing all it could. The BOJ has been "zero bound" for the last 15 years - meaning, it has been lending money as cheaply as it possibly could. If monetary policy were a pair of pants it would be around Japan's ankles. And fiscal policy? The country already has $20 of debt for every dollar of tax receipts. What's left? Thirty dollars, surely - or bankruptcy!
There's unconventional stimulus too. That's right...the old printing press...is getting a good workout.
And more thoughts...
The Japanese camel has a remarkably strong back. He's held up to more than two decades of counter-cyclical stimulus programs...and central government debt that now measures 200% of GDP.
The poor long-suffering beast has seen everything. The Japanese trusted the government with their retirement money. The government spent the money. And yet, bond buyers seem none the wiser. They still lend to the Japanese government at less than 2% yield.
And now the old-timers are beginning to dis-save. That is, after saving so much for their retirements, now they are retired. And now they are drawing down their savings.
This puts the Japanese government is in a real fix. Net savings in Japan are now negative. So, who will buy the bonds Japan needs to sell in order to rebuild its economy? Who will buy the bonds Japan needs to sell in order to rebuild its infrastructure? Who will buy the bonds Japan needs to sell in order to fund its government? Who will buy the bonds Japan needs to sell in order to pay back the people who bought bonds last year...and the year before...and all the way back to 1990?
The answer is likely to be: no one.
Instead, Japan will be forced into more QE, forced to print money to make up for the money she can no longer borrow.
This will have a couple knock-on effects. First, the Japanese famously helped Europe and America finance their deficits and bailouts. Recently, Japan funded a major part of Europe's bond sales - helping to hold down rates. Also, the last time we looked, Japan had the largest stash of US bonds in the world.
Under pressure to bring money back to the home island, you can expect Japan to be doing some selling - which might be the final straw.
Second, the Japanese are making such an obvious mess of their finances that they are bound to attract attention. Investors might notice that the Japanese aren't the only ones. As we've pointed out several times, the developed economies all now count on low interest rates, huge deficits, and printing press money. Even with these massive in-puts of cash and credit grease, the economy still barely creaks forward. Without the extra grease, they will probably slip backward.
*** The ides of March are upon us already. Little blue flowers are pushing their way up through the cold earth. There are buds on lilac bushes. Cherry trees are already in bloom... Another winter seems to be history already. Where did it go?
They seem to go by so fast now...and now we've already put our clocks forward. Here it is, 5PM... It is bright and sunny outside.
We're worried about the way time seems to be speeding up. As near as we can tell, we're in good health...but we can only expect to live a decade or two more. What a pity it would be if they went by too fast.
We're on the downhill slope now. Picking up speed as we go down. Every year that goes by will find us with less hair...less muscle...maybe even less able to think clearly and remember where we left the car keys. Next year, is nothing to look forward to in other words, not compared to this year.
The odd thing is that we tend to think about things that will happen in the future...and we're impatient. We tell ourselves to "slow down...smell the flowers...enjoy the here and now." But the here and now never seems as good as tomorrow.
We're looking forward to finishing the fences...to having the orchard cleaned up...to fixing up the loft apartment in the barn. But why? What will we do next? What's the point?
We are racing ahead...but only so that time can rush forward to meet us.

16 Mar 2011

Confession of an economic hitman

When reading the article below after watching the video- keep in mind what influence an economic hitman will have on this catastrophic opportunity in Japan through their eyes.

It’s often said that in times of crisis, there is tremendous opportunity. This is true… especially for a nation in turmoil. Sometimes leaders capitalize on the opportunity to make difficult decisions that put their country on a path to long-term success. Other times, they rely on the new goodwill to advance a corrupt, deleterious agenda.

The United States, for example, found itself in a position after 9/11 when the entire world was joined together in common humanity. US leaders cashed in on this unity to invade two countries and pass a host of legislation that ended financial privacy, granted sweeping powers to police agencies, and eroded individual freedom.

The French Revolution, with its roots in a desire for freedom and an end to the antiquated feudal system, lagged in the mid 1790s with the Reign of Terror and Committee of Public Safety. A handful of men capitalized on the national solidarity to seize dictatorial control of the country and put over 15,000 people under the guillotine.

Estonia, the tiny Baltic nation that had spent decades under Soviet rule, effectively found itself without an economy after the fall of the Soviet Union in the early 1990s. National leadership used this ‘blank slate’ as an opportunity to build, from scratch, conditions where hard work and creative talent could thrive.

After a few years, its citizens grew very wealthy and the Estonian economy became a model for the rest of the world– high growth, high efficiency, low taxes, low bureaucracy.

In each crisis, leaders have the opportunity to wipe the slate clean and rebuild from scratch… choosing an entirely new way to do business that is a marked departure from the bad habits of the past. As history shows us, some nations choose wisely, others choose poorly.

Japan is at the crossroads right now brought on by an incredible force of nature that literally washed away a significant portion of their island nation. Friday’s earthquake and tsunami necessitates a sobering look at the issues:

Japan’s economy hasn’t grown in years. Its debt has exploded. The nation’s finances have been downgraded by rating agencies (who are always the last to the party). Its population is growing older at an alarming rate, forcing larger burdens onto smaller portions of the population in the younger generations who earn less than their parents.

Though the economy opened up at the point of a gun in the 1850s when Matthew Perry forced his way in to the Tokugawa shogunate, Japan has remained culturally isolated and closed to foreigners. Similarly, Japanese corporate culture is bureaucratic, insular, and collectivist.

These are all major issues that need to be addressed. For years, Japanese leaders have been playing ‘kick the can down the road’. This game ended on Friday. The country is now forced to put all options on the table, including a complete revolution of cultural norms, national finances, and its way of doing business.

For example, the cleanup and rebuilding effort is certainly going to require labor… lots and lots of labor… and this will likely require hiring legions of foreigners to do the heavy lifting. Do you think that the economic hitmen are already there selling their "services"?

Japan isn’t set up for this right now, and it will take massive (and rapid) policy changes to bring in workers and integrate them across the social landscape. However the government tackles this issue will be a strong indicator– will Japan opt for the pro-growth, market-oriented Estonian model of dealing with a crisis?
If so, this period of crisis may be the low point for Japan.

So- What role do you see an economic hitman have in this situation?

Post comments below:

Article sourced from: http://www.sovereignman.com/expat/the-silver-lining-in-japan/
Video from youtube

It's the End Game Now

With the tragedy in Japan and paper currencies becoming more suspect, today King World News interviewed James Dines who is legendary for his bull market calls in uranium, rare earths, gold, silver and more. When asked about worries over food supplies globally Dines remarked, “Well I think you’ve got plenty of people all over the world worried about food supply. You know you have 20 years of a financial boom from 1980 to 2000 and since then we’ve had a boom in reality, hard assets and food.”

James Dines continues:

“When you’re running the printing presses with this QE2 you have more paper chasing each bushel of wheat, corn and each pound of sugar so prices are going up...So we’re in super major bull market in food and that’s what’s beginning to sink in on the world.

Right now in the aftermath of the printing presses of the 80’s and 90’s, their solution is to run them even faster. They can’t figure out why it’s not working, it’s because they don’t understand what’s happening. Anybody who doesn’t understand currencies will not keep their wealth in what is coming. There is going to be the biggest transfer of wealth in history.

What’s happening is it’s the end game now. They have printed all they can, the debts are completely out of control, there’s a terrible crisis coming and it’s typical that type of situation leads to a war...It happened in the 1930’s and it’s going to happen again. I’m looking for a nuclear war somewhere on the Asian land mass, I’ve been making that prediction for many years, probably between India and Pakistan.”

When asked about silver Dines stated, “I think it’s going way higher, this metal (silver) is the most overlooked, underpriced, undervalued, under-appreciated commodity in the world in my opinion...It’s going to go well over $100.”

James Dines also discusses gold and gold shares as well as the tragedy in Japan.

The complete interview with James Dines has now been released and you can listen to it by CLICKING HERE.

Sourced from: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/15_James_Dines_-_Its_the_End_Game_Now.html

Hitler on the Silver manipulation expose`- Funny Vid

With all the ongoing Doom and Gloom, I thought i would break it up a little today with a send up of the silver manipulation via Jamie Dimon (played by Hitler). Explicit Language used.


The Silver Door Is Closing

I have a little theory that I’ve been kicking around for a couple of years.  The theory is that there will come a time that you will not be able to buy silver at any price. It will not be because there is not any silver around to be purchased or that silver will not have any value.  I think that we won’t be able to buy silver at any price because there will be a very sudden and a very dramatic shift in the perception of silver’s value. A time will come when the value of silver is so strong and the value of the dollar so weak, that only a fool would ever trade silver for the dollar.
I have stated in many previous articles that silver is the Achilles Heel of the Global Power structure. This honest money will not only bring down the fraudulent banking system, but it will bring down all of the forces that are a scourge to humanity. You see, without a corrupt monetary system, trillions of dollars will not be available to fight needless wars, fund Wall St schemes and a myriad of other horrible events.

Right now, we have two separate forces fighting over a precious, limited and diminishing resource called silver. In one corner, we have the Elite that know that they have Quadrillions in paper assets riding on the perceived value of the dollar.  They use that wealth to control politicians, armies, natural resources, medias, corporations, capital markets and ultimately you.  They can sustain unlimited paper losses to keep the game going.  The problem for them is that their infinite money is running into a very finite world, especially in silver.
In the other corner is an increasingly Aware group of people, that know that the end is near for the dollar. Fathers are worrying about how to secure their family’s future and mothers are concerned about rising food and fuel costs. Business owners are starting to see that they need to protect their assets. Investors are worried about rigged markets and inflation destroying their returns.  Corporations are becoming increasingly aware that their market capitalization might be at risk if they do not have the materials necessary to make their products.  Even nations like China are seeing the value of this strategic resource.  This Aware group sees that owning tangible assets is the best strategy to not only defeat this enslaving system, but also to protect their wealth.  No other tangible asset in the world is as attractive as real, physical silver.  (Read the Silver Bullet and the Silver Shield.)
The Elite use a multi-pronged attack on silver to hold it down. All of their weapons are nothing more than paper tigers. The Aware have found that by taking physical delivery of silver, the Elite’s powerful weapons are rendered useless. Actually even worse than useless, these paper weapons actually help the Aware to buy more physical silver at discounted and subsidized prices, hastening the Elite’s ultimate demise. Keep those shorts coming and we will keep stacking!
As a result of this battle, the CRIMEX now has less than half of what it had in registered inventory than it did at the bottom of the Bear Trap of 2008. In July of 2008 there were 87 million ounces in the registered CRIMEX vaults. Today, there is just over 40 million ounces left. The trend line is  dramatically down even as the price of silver spikes up. Less than $1.5 billion would empty the CRIMEX of the last bit of silver at current prices. With no silver to deliver, the jig is up for the Elite.

The Silver Door is closing on this game and I feel it could happen by the end of this month. I made the prediction that silver would be $50 by the end of March but I also said that it might not be available at any price. Both of these predictions center around a physical silver default at the CRIMEX. This would be the equivalent to a bank run where people turn in their receipts/contracts to get their money/silver only to find out that there are much more receipts/contracts than there is money/silver. We all know that banks run on a fractional reserve banking system. According to whistle blower Andrew Maguire, the CRIMEX/LBMA are trading 45 to 1 paper versus real metal. Got physical?

The first part of my prediction may have already come true with $50 silver according to this articleIt was reported that Blythe Mastersoffered a deal that no trader could refuse. She offered an 80% premium NOT to take physical delivery of silver in March. The trader was told that JP Morgan could not deliver 20 million ounces (4,000 contracts) and that if the trader did not take this pay off, they would be left holding the bag as an unsecured creditor.  Vito Corleone would have been proud of Blythe with this offer. Of course this is all rumors at this point, but where there is smoke, there is fire.
Another interesting twist in this silver saga is noted in this article form Along the WatchtowerThere are claims that JP Morgue, through silver derivative bets, could have exponential loses when silver goes above $36. They estimate that if silver goes to $50 they might be out $40 billion. And that is IF they don’t cover their shorts! The article claims JPM has a $170 billion market cap with $40 billion in cash. That means if silver goes to $50, JPM will be insolvent. (That is IF the Fed doesn’t give them their own QE3 or IF JP Morgue does not set up Enron like banks to dump these bad positions into in the Caribbean.)
We can see the inventory of silver they are able to deliver is depleting, which is one side of the closing door. The other side of the closing door is as the silver’s price rises, the more silver goes into Aware hands. The further the price of silver rises, the larger the floor there is for the silver market. Buying silver is not like buying a stock, bond or any other asset. It almost has a cult like following that is growing stronger every day. Some buy for the financial opportunities. Some buy as a way to “stick it to the man.” Some buy for the honesty of the money. Some buy as a preservation of wealth. For me, it is a shot in the next American Revolution for freedom. There are hundreds of reasons to buy silver but very few reasons to ever sell for dirty green pieces of paper with “all seeing eyes.”

The total amount of silver production sold short between the 8 largest banks equals 150 days of world silver production. If silver starts marching up and these banks are forced to not only cover their paper shorts, but also deliver the real physical silver, this will cause the largest short squeeze the world has ever seen. This will cause severe dislocations in the world’s economy to say the least. I believe will coincide with a crash in all of the world’s fiat currencies. At that point the Silver Door will then be closed.
Sooner or later the silver door will be shut, as all of the physical silver sits in the hands of the Aware. The Aware will not sell until a new paradigm of freedom comes into existence. They will not care about a world wide military empire. They will not care about public pensions. They will not care about vampire squid banks on Wall St. They will not care about sock puppet politicians and their budgets. They will not care about propaganda from controlled media. They will hold, because they will then have the power.
“He who has the silver, makes the rules.” -Chris Duane
When the Silver Door is closed, you will hear a deafening silence from around the world. When there is a silver default on the CRIMEX, the Elite will be forced to admit that they have been playing a huge game of illusion. Everyone will then know the world has changed, forever. Those who do have silver will be awe struck at their new found wealth they now have. They will have hit the lottery because the real purchasing power of their silver will rise astronomically. They might be able to trade 1 ounce of silver for 1 ounce of gold. They might be able to pay off their mortgage with a few ounces of silver. They may be able to buy the entire Dow Jones share for a handful of silver.
“It is better to be 6 years too early than 1 day too late on this silver rocket.” -Chris Duane
I believe that we are in the beginning of a Mania Phase in this silver bull market as I said in my article the Silver Rocket. If we are in the Mania Phase, the game has changed already. Things that worked in the past will no longer work in the future. Traders that don’t see this sea change will either be left off of the rocket or burned. Those that short silver with leverage in the Mania Phase will be wiped out as the market stays irrational longer than they can stay solvent. Ultimately these silver shorts are the ones that will send silver to the moon because they HAVE to buy or risk bankruptcy.
Silver traders may sell silver at a “top”. When they see the silver price keep going higher, they will get back into the market buying less silver for more money. They will learn this hard lesson once. When they get back into the silver market they will stay in.

I have had my run ins with more than one silver trader who has said that it is frothy and it time to short silver. The very well respected David Morgan thinks we are going to have a pull back in silver. Even one of my favorite analysts of the silver market, Adam Hamilton of Zealllc., is saying we are in unprecedented territory as silver is 50% over its 200dma.  Even the very fact that I am spending so much time talking about silver in this delivery month of March, would seem very bubble like. For the reasons stated above and many more, I think we could be seeing the Silver Door closing. If that is the case, then these traders could be in a very dangerous space.
I would caution traders that silver has or will decouple from the control of the Elite into the hands of the Aware. If you are taking “FRN profits”, that is one thing. If you are shorting silver, like some guys I know, be prepared to be swept up in the largest short squeeze of all time.  (Remember, you don’t have the luxury of the Fed’s printing press to back you up.) If we are truly in the Mania Phase of the Silver Rocket, there might not be a way back into the market.
I would also caution silver buyers, do not ever use leverage in this most volatile of commodities. Stick to physical silver in your possession only. I watched my holdings take a 60% hit in 2008. Thankfully I was in physical and knew enough to buy more when silver was on sale. If I were buying today and did not have a single ounce, I would be buying a good first shot right now to have something. I recommend averaging in on a weekly or monthly basis. Think of it as just trading your fake digital and paper money for the real stuff and it becomes less scary. Find your own comfort level and do your own due diligence. And for Pete’s sake, don’t panic if a hit does come. (It looks like they tried last Thursday and Friday. All of that work shorting silver got reversed in a few hours to finish 1.7% higher.)

If silver does what it did in 2008 and dumped 60%, would you have enough confidence in buying more or would you be selling into that trap? If you said you would be selling, then don’t buy now or ever, because you are weak handed. You will have your money taken from you and be left with no metal. How sad.

If that happened again would you actually be a little excited to buy more at a discounted price?  Then get going and buy now. Be sure leave some powder dry for the smack downs. 10 am EST seems to be a good time to buy just about everyday thanks to Blythe

I will sleep soundly regardless if silver dumps or moon shots in the near term. I have seen this movie before and I know the ending. All of the dramatic plot twists mean nothing to me. In the end, the good guys ride off into the sunset with their girls, guns, and sacks of silver.