Inflate, Deflate, Confiscate, Investor Authentic Wealth Enhancement Essentials
Economics / Fiat Currency Mar 19, 2010 - 02:48 PMBy: DeepCaster_LLC
"Inflate, Deflate, Confiscate"
U.S. Senator Robert A. Taft (RIP) on the Mega-Banks favorite technique.
“The shadow banking system is still alive and growing. According to a new paper (PDF) by the Levy Economics Institute of U Miss, the derivative exposure of Goldman Sachs was 33,823% of its assets in 2009 (as compared to 25,284% in 2008). They are still leveraged to the hilt and the US government (i.e. the U.S. taxpayer) is the backstop.”
"The U.S. Federal Reserve's framework is a corrupt one in that its regional banks are managed by board members who are officers from the very private institutions they are designed to govern, says Nobel laureate economist Joseph Stiglitz.
Stiglitz, also a former chief economist at the World Bank, says if a country had come to him looking for aid while running a central bank in such a manner, alarm bells would have gone off.
“If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure,” says Stiglitz according to the Huffington Post.
“It's time for us to reflect on our own structure today, and to say there are parts that can be improved.”
The New York Fed presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase, according to the Huffington Post.”
"Stiglitz: Federal Reserve Framework is Corrupt" Forrest Jones, MoneyNews.com March 15, 2010
WARREN: "I understand financing that comes in once a business is in distress... We call it post-petition financing in the bankruptcy world. The price for that is that equity gets wiped out, top management loses their jobs, and the old debt takes a hair cut of some proportion...What we did when we (the US taxpayer--ed.) rescued these (Mega--ed) banks is that we left the shareholders intact, we left their top management intact, we paid their debt in full...We were far too generous."
ROSE: "So you could have saved the economy without going to the extent in making the deal you did?"
WARREN: "I think you could have…
Secretary Paulson said there's too much concentration in the banking industry, and there's even more concentration today than there was...
It’s not that bigness is bad, it's that we've got concentrated risk and that's what creates too big to fail and that's creating distortions throughout the economy...we have hollowed out America's middle class. It will not save us if a handful of Wall Street banks prosper and the rest of America fails."
Elizabeth WARREN, Chair, Congressional Oversight Committee as interviewed on the Charlie Rose Show
In an Era of skyrocketing Sovereign Debt, ongoing Mega-Bank Bailouts and Taxpayer backstopping, and ever-increasing Wealth for the Mega-Bankers (but virtually nothing for the Middle Class worldwide or for local and regional banks), Cartel* Market Manipulation, and Bogus Official Statistics, determining what constitutes Authentic Wealth Enhancement, as opposed to that which is merely illusory, is difficult. Once such a determination is made, achieving Authentic Wealth Enhancement is also difficult.
But neither is impossible.
If the investment one is considering passes the following tests, it is likely that that investment can provide Authentic Wealth Enhancement. (Note: our regular readers are familiar with the key points we make in #1 and #2 below. But their reiteration is essential to the essential points we make in #3 and ff.)
1) The investment must outperform Real Inflation. That is to say, Total Return (i.e. Yield plus capital appreciation) must outperform REAL CPI. That is, it must outperform very real Purchasing Power Degradation. The problem is that Real CPI is today (and has been for some time) well above the bogus official numbers (and not just the bogus U.S. Numbers…a topic for another day.) For example, while Official U.S. CPI is 2.14% in March, 2010, Real U.S. CPI, as calculated by shadowstats.com is 9.39%. Shadowstats.com calculates Statistics the way they were calculated before Official Manipulation began in earnest in the 1980s and 1990s. Consider the following Chart of Key Statistics, all per shadowstats.com.
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported March 18, 2010
2.14% 9.39% (annualized March Rate)
U.S. Unemployment reported March 5, 2010
9.7% 21.6%
U.S. GDP Annual Growth/Decline reported February 26, 2010
0.15% -4.62%
Thus, for example, when one considers a recent recommendation of one sophisticated and successful fund manager -- to buy an emerging markets sovereign debt fund with a 6.5% yield -- one must realize that that investment must ALSO achieve a 3% capital appreciation, simply to "stay even", given today's Real Inflation numbers.
2) The Investment can return a Real Profit despite Cartel* Market Manipulation. Over the past several years, clear and convincing evidence has been amassed that a Fed-led Cartel* of Key Central Bankers and their agents and allies are overtly AND COVERTLY regularly involved in manipulating Major Markets including Precious Metals, Strategic Commodities, and Equities. _______________________________________
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2009 Letter entitled "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
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As Hard Money/Hard Assets Partisans like Deepcaster know, Gold and Silver prices have been the number one victim of Cartel Price Suppression. Had there been no such price suppression over the past few years, Gold would have exceeded its 1980 high of appx. $2,400 (inflation-adjusted) some time ago, in our view.
Instead, the Gold Price is still subject to periodic Cartel Takedowns as the $50 down days in early December, 2009 and early February, 2010, attest. Deepcaster has developed a Strategy designed to profit despite Cartel intervention, the details of which can be found in "Profit & Protection from Cartel Intervention" (12/25/09) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
3) An Investment must not suffer as a result of ONGOING Mega-Bank Bailouts and U.S. Taxpayers' (and many Investors worldwide) ONGOING backstopping of the increasing Leveraged Risks of the Mega-Banks. These Bailouts and the Ongoing Backstopping are merely a couple of Steps in the ONGOING implementation of The Cartel's 'End Game'.
Consider carefully the claims (with which Deepcaster agrees) made by Congressional Oversight Committee Chair Warren and Nobel Laureate Economist Stiglitz above.
In effect, considered together with the figures regarding the INCREASING leverage and risk by one of the Mega-Banks, Goldman Sachs, they reflect the fact that NO significant Financial 'Reform' is likely to be forthcoming from this U.S. Congress unless constituents mount a massive lobbying effort very soon.
Indeed, Senator Chris Dodd's (to say that he bends over backward to please the Mega-Banks is too kind) recent proposal to house the 'Consumer Protection Agency' within the Cartel Leader, the private for-profit U.S. Fed, would be laughable were it not most serious. Though Deepcaster is typically quite skeptical of Cabal Theories, our view is that if 'it' talks like a Cabal, and acts like a Cabal, then perforce one must conclude...
Describing, and providing evidence for, an ongoing Cartel 'End Game' is beyond the scope of this article.
But that evidence is surely available. First, note that A Major Goal of that 'End Game' is revealed by considering Deepcaster's (and F.W. Engdahl's, and eminence grise of the Newsletter writer's Harry Schultz's) conclusion regarding the 2008 Equities Market Takedown -- it was planned.
And of course one result of that Market 'Crash" was that the Mega-Banks acquired more power and wealth (some $11.9 Trillion more, in the six months between June, 2008 and December, 2008 per the Central Bankers Bank's own figures. (See www.bis.org, Path: Statistics, Derivatives, Table 19).
For More details on the multifaceted Cartel 'End Game' see Deepcaster's articles: "Surmounting The Cartel's 'End Game Juggernaut" (9/25/09) in the Articles by Deepcaster cache at www.deepcaster.com.
In sum, in order to enhance, and protect, ones Real Wealth, it is essential to understand, and surmount the effects of, the Cartel 'End Game'.
4) The Reality of The Multi-Country Sovereign Debt Risk must be Addressed and Surmounted.
Perhaps the reason that the plight of economically tiny (some 3% of Eurozone GDP) Greece resonates so much across the Developed and Emerging Markets' World is that it provides a probable harbinger of Crises to come. And it is not just the well-publicized and developing Sovereign Debt Crises of France, or Great Britain, or the United States (with a $10 Trillion National Debt, and some $70 Trillion of downstream unfunded liabilities).
But it is also the bubbles in, say, China which has potentially trillions in bad loans on the books and a massive overinvestment in infrastructure.
No wonder legendary, and successful, 'short' speculator Chanos is reportedly betting big time against China.
For investors worldwide, unsustainable Sovereign Debt entails Sovereign Debt defaults. And that entails Fiat Currency Purchasing Power Degradation, and ultimately, (currently extant) Fiat Currency Failure. Thus, those who rely on Assets "stored" or denominated in Fiat Currencies are likely to be seriously damaged (N.B. The articles referenced above outline the probable Cartel 'End Game’ response to this—to substitute its own global currency for the extant ones and to achieve considerable wealth confiscation in the process. Note that the recent introduction of a de facto Global Fiat Currency -- the IMF's SDR's, is likely a Trial Run for the introduction of such a Global Currency).
It is unlikely that such a Major Sovereign Nation Debt Default would be blatant. Rather, in the case of e.g. the USA, (still) in possession of the World's Reserve Currency, one can expect an ongoing devaluation of the U.S. Dollar, until surprise, surprise, The Cartel is ready to seriously push for the Broad Usage of Their Global Currency.
The only Assets likely to survive the Devaluation of the extant Fiat Currencies are Gold and Silver and select Strategic Commodities such as Crude Oil and Basic Foods.
BUT, recall that these are subject to Cartel price manipulation, so one must implement a Strategy to profit, and protect wealth, despite such manipulation.
See "Defeating The Cartel...with Profit" (6/19/09) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com for Deepcaster's Strategy.
Conclusion and Recommendations: The next very few years, or perhaps we have only a few months, will determine whether the Mega-Bankers, or Citizen/Investors worldwide, will prevail.
It is not merely economic freedom which is at stake, but rather the whole panoply of freedoms which many in the Western World have come, alas, to take for granted. Thus political action is essential. Consider
Be aware of and Active in the overall Geopolitical Landscape in order to gain an adequate understanding of how that Landscape might affect the present and future direction of the Markets. It is essential that one understand the motivations of the major players in the market and the resources at their disposal.
For example, a Major Motivation of the private for-profit U.S. Federal Reserve and other key Central Banks is the protection and enhancement of the legitimacy of their Treasury Securities and Fiat Currencies as Measures and Stores of Value. Therefore, one can understand that one of their Major Goals will be to attempt de-legitimize Gold, Silver and the Strategic Commodities, including especially Crude Oil, as Stores and Measures of Value. With this in mind, the periodic takedowns of Gold and Silver prices and, since July, 2008, of Crude Oil, become understandable. Moreover, such an insight applied daily to the market can result in a tremendous edge in understanding market performance, present and future.
Moreover, regarding the assets at The Cartel’s disposal, if one tracks the Repurchase Agreement and TSLF Pools regularly for example, and is aware of the other Interventional tools that The Cartel has at its disposal, then one gains a considerable edge.
Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of The Cartel. It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets and/or Retirement Accounts only to have those assets effectively de-valued by Cartel Takedowns, U.S. Dollar Devaluation and other Cartel actions. This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them. In order to help prevent this and similar outrages, we recommend taking three steps:
- Become involved in the movement to Audit and then abolish the private-for-profit U.S. Federal Reserve as Deepcaster, former Presidential candidate Rep. Ron Paul, and legendary investor Jim Rogers, all have advocated. The ‘Audit The Fed’ Bill is H.R. 1207 (and has over 200 co-sponsors) and S604 in the Senate; and The Abolish The Fed Bill is H.R. 2755.Unfortunately these bills have been watered down in this session of Congress. www.carryingcapacity.org is a nonprofit organization which actively supports these bills.
- Join the Gold AntiTrust Action Committee, which works to eliminate the manipulation of the Gold and Silver markets (www.gata.org). GATA is a nonprofit organization, which makes a great contribution by gathering evidence regarding the suppression of prices of Gold, Silver and other commodities.
- Work to defeat The Cartel ‘End Game.’ Deepcaster has laid out the evidence regarding the Ominous Cartel “End Game” in “Coping with Power Moves in the Cartel's 'End Game' “ (04/24/2009) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com. Clearly (and notwithstanding the recent U.S. Dollar bounce which Deepcaster earlier forecast) The Cartel is sacrificing the U.S. Dollar over the long-term to prop up Favored International Financial Institutions and to maintain its power. But this sacrifice cannot continue forever. See Deepcaster’s July, 2008 Letter in the ‘Latest Letter’ Archives at www.deepcaster.com.
Additional insights and details regarding the foregoing Strategy, which are essential to profiting and protecting from The Cartel’s Interventions, are laid out in Deepcaster’s article of 3/06/09 entitled “Investor Advantage: Revisiting The Cartel’s ‘End Game’ ” in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.
Details of the Strategy designed to profit in spite of Cartel Intervention specifically in the Precious Metals markets are described in “Defeating The Cartel…With Profit” (3/28/2008) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.
Indeed, the Key Point of the Strategy for Protection and Profit is careful attention not only to the Fundamentals and Technicals but also to the Interventionals. These Overt and Covert Cartel-generated Interventions have the power to move markets as those who study the matter can attest.
In sum, the Key to Profit and Protection is a Strategy: Successful Investors must become Long-Term Position Traders, with their trading choices informed by the Interventionals, as well as the Fundamentals and Technicals. Moreover, engaging in the Actions suggested above can help prevent The Cartel’s obtaining Superpower status, and aid in achieving wealth protection and profits as well.
Best Regards,
By DEEPCASTER LLC
www.deepcaster.com
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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