We are happy to here Pat is getting back to where we all like him to be, out front, showing people the road to truth.
We appreciate Pat Gorman, have listened to his show for years, have attended his events and got to know his family.

A smart and sensible man we listen to.

Thanks DB for the interview, we haven't from Pat for a while.

Get well soon my friend.

SP

There has been a fundamental shift for fund managers including myself as an individual investor. Currencies used to be intertwined in fundamentals and technical analysis. That has changed. Currency traders who looked at interest rate differentials now have nothing to invest in because the world is basically at zero interest rates.

It has created what is described as a fear portfolio. The downgrading of debt. China dumping U.S. bonds or perhaps their own economic down turn. I mention the Southeast Asian problem in an earlier feedback. I have established a fear based portfolio.

But no matter what I look at, I have one fear. And that is liquidity. It is highly possible to get caught in a illiquid market whether it's physical or not. I have 3 rules in investing today. Liquidity, liquidity and liquidity!

The world situations puts an investor at odds with the fundamental/technical reasoning. Until it swings back to stability, fear is the name of the game and liquidity is paramount.

Just a thought....

Since I wrote that, and thought about it some, it doesn't seem scary. There's just so many things individuals have little or no control over,... it can be frustrating.

I couldn't imagine what it must be like not knowing many of the particulars about the causes. Somehow, it makes a difference knowing why.

Still...

If there were a, "massive rally in the US dollar"

Long-Term Chart of Swiss Franc in USD
Click to view link

...would gold and silver drop significantly? It does not seem like it.

Wouldn't the Fed pump like mad to reverse a big rally? I.e. get banks to lend.

Darryl Schoon's motto seems appropriate here, "Buy gold, buy silver, have faith."

Clark it's not good. But until we change it, it's simply going to continue. The little guy doesn't understand what to do. He has never had to compete against global forces. Now that he has lost his job, there are no answers, there is only bewilderment.

And the spread between the have and have nots will simply will get wider.

Sharks and social chaos combined with a more ruthless police state, I don't know about you all but I find that scary, and I don't easily scare.

This short talk by Ron Paul seems to support the discussion a bit:

Click to view link

"...if we refuse to change our gluttonous appetite for a free lunch."

I hope more People take this stuff seriously and start paying attention,... oh, I think we are in trouble.

Dottie, you have hit the nail on the head. Bond markets are interest hounds. They sniff the world out for interest rates. The more trouble, the more interest. Since I am a currency trader (by admission)lol, most of the time they take the heat for chaotic movement. However I have a different view.

Bond markets can for a lack of better wording, extort on demand. And they can demand and extort for long periods of time. Which we are currently seeing in the ECU. The currency markets really don't go into clean-up mode unless the extortion payment isn't timely. I have always looked at the currency trader, perhaps being an ex forex fund manager, as a white shark.

Nobody knows them. Nobody has seen them mate or witnessed a birth.(lol) They can smell blood in the water for thousands of miles. They don't intentionally devour surfers, but surfers are sometimes mistaken for food. But when they attack, it is swift, it is brutal and it cleanses to the bone. In all my trading years I have never seen attacks happen without cause.

And countries that don't manage their people, their finances and their governments correctly, get attacked. They don't wait for the bond market to make that determination. They don't wait for the sovereign funds to make that determination. Those two will tolerate bad management, currency traders will not. Bad management is nothing but chum to the currency markets.

I travel extensively throughout Asia. The Sovereign funds are viewed as acquisition creatures. Buy, hold and destroy. The bond markets don't disturb most of the Southeast Asian governments, mainly because they know their governments don't give much credibility to the rating agencies (don't care) and major funds can't invest in unrated or less than perfect ratings, although both are subject to change. But whom governments despise with much reverence, are the currency traders.

But for the currency markets, that is where the coups and assassinations take place. Where the graft and corruption takes place. Where governments play their finances like slot machines and as I said before, the bond markets and Sovereign funds will tolerate it, but the currency markets will not. The so called white shark doesn't for the most part go looking for trouble. But as long as governments keep throwing chum in the water they ask for trouble. And our government is no different.

I depart for another trip to Southeast Asia in the near future. The Philippines to be exact. It's a wonderful country with wonderful people. It is also where corruption, assassinations, terrorism and government mismanagement is the norm.

However this little country is being stripped of its natural resources by a Sovereign fund,(China)and they booted the American military out a few years back and now want and need our assistance in keeping them at bay. Which by the way will not becoming anytime soon. Mainly out of payback.

The repercussions of what we do in the Philippines, Taiwan, and Korea will have great bearing on the future relationship we have with China, our debt and the sovereignty issues that linger between our two countries. It has the potential to disrupt interest rates. Huge interest rates. It may or may not happen, but I put my boots on the ground to at least assess the possibilities of which way the winds may blow.

The EU is not a concern for currency traders. The Middle East is not a concern for currency traders. Those are bond and Sovereign fund problems, at least for the current moment. But the little countries of Southeast Asia may be the tipping point of where the financial mold is cast.For all the world. At least that's the way I see it from here.

pre-cash should be pre-crash

Thanks, Dotti. I like your insights as well!

On your question, what the sovereigns do is PRINT (actually, printing would cost too much so they just hit a key) fiat currency and buy up each others' bonds with them. Japan is a basket case and yet still buys huge amounts of U.S. treasuries.

What they are trying to do is paper over all the worthless assets the banks are holding on their books that are backed by crashed real estate collateral, while holding them on the books at pre-cash values. They have to do it slowly, or there will be a bank run the likes of which the planet has never seen. What do you do when there's a tsunami coming and you can't run? You close your eyes, stick your fingers in your ears and say, "la la la I can't hear you go away".

Here's a snapshot of what the situation is:

Click to view link

John: 'Thank you for sharing your insightful wisdom and experience!'
That goes double from me to the two of you (John and injun1)!!! And other posters here, as well. Thanks to all.

John: 'The main players themselves are plenty worried. Because the entire system is insolvent, hopelessly insolvent, and they are desperate to keep everyone stupefied and placid. If the booboisie or sovereign funds lose faith in this last 'safe haven', the results could be huge, because this is the lifeblood of the central banks and the governments they own.'

Very succinct, indeed!

John and injun1, there are certain things that seem so obvious to me that are not being talked about in the MSM-not even much here at DB. You have touched on one of them.

The sovereigns all purchase one another's bonds, creating a circle of something that is really worthless. Why does one sovereign pay 4% interest to borrow money to 'invest' in bonds for a 2% return. (They all do it, right? Am I wrong about that?) It gives some sort of credibility (false) to all of them. My suspicion is that it is also the old thing of creating an alliance among all the sovereigns based on a mutual dependency.

I remember in the 80's being startled that a purely defensive weapon (what was it called, Starwars?) was considered an aggression. Then it was explained: it changed our level of vulnerability-making it theoretically possible for us to attack with less fear of reprisals. The system then in place depended on a shared threat of mutual annihilation-which provided security that no one would attack.

The other thing that seems to be largely ignored is that we are already functioning under manipulated interest rates. Without the Fed's open intervention in the bond markets, interest rates would be much higher. Yet, all the talk of the chaotic consequences of 'default' included the threat (I know I'm using the word 'threat' a lot, but it seems appropriate in the circumstance!) of interest rates being driven higher. The MSM reports give little or no consideration to the fact that interest rates are not being set by the 'invisible hand'-they are being manipulated by our own Federal Reserve.

Bottom line, as I see it-and thanks to anyone who can/will comment on this-is that these two bits of information are being obscured or distorted for the purposes of continuing the current game-a game in which only one side sets the rules and they are free to change those rules as they see fit. However, if this Internet Revolution thing really takes hold-there is some hope for change-change in the direction of a more fair system-which would be an improvement, even if the transition itself will be rough.

If we use the analogy of someone 'taking their marbles and going home', the central bankers will run with everything that they can get their hands on. They WILL SURVIVE to play another day-they always protect their wealth.

John and injun1, I have enjoyed your exchange. Your input, injun1, and your further analysis, John, are very helpful to me in trying to figure out where this world is headed.

Thanks, guys!

I get your concern about "deflation", but I didn't read that in Mr. Gorman's article. As to the likelihood of inflation, I think it is much less likely from a political standpoint than continued inflation. Yes, there is a natural tendency for air come out of the balloon, but governments will always redouble the size of the pump. I can show you hundreds of hyper inflations, and you can show me on or two deflations....and those were both policy "mistakes" that Bernanke will never allow to happen again.

Remember, what I'm suggesting is that you use some future fiat dollars (in the bush) to go out and buy a bird in the hand today!

Thank you for sharing your insightful wisdom and experience!

If those in power wanted to stampede the people like a herd of farm animals, a disruption in energy supplies for a week or two would do it. That's something that's hard to plan ahead for.

Interesting.

I was in Europe when Nixon got off the gold standard. I recall overnight that my rent quadrupled because of the devaluation. It didn't take long to realize what one needed to do in order to survive and the underground black market was created overnight. Ha! We never had it so good. We made more money than we knew what to do with.

Having seen first hand what devaluation does to offshore markets and the different types of "markets " that are created to survive, was quite an experience as a young man. I never forgot it. No class room can teach that to an investor. I suppose that is one reason I believe it takes time to destruct because people are just too inventive when it comes to survival.

Financial markets move on, perhaps in different forms, legal and illegal but they do move and someone has to act as the clearinghouse. We simply became our own clearinghouse (self central bank) in the foreign exchange market for bartered hard products.(Booze and commodities) it was all pretty simple and effective. As they say, it made me what I am today, a financial trader.

The bond market however is a different animal. It can create hot money that can be very destructive when agitated. If there is a concern and one that I keep an eye on its the bond money markets. I don't invest in them but I sure keep an eye on them. Sovereign funds are a unique creature also. One that moves slower but can also be devastating when agitated.

I invest in a lot of sovereign class commodities. It is a rather simple investment method and successful because an investor normally has plenty of time to see the direction of a sovereign fund. I believe that sovereign funds will have the final say. Bond markets will create chaos. Currency traders will compound it, but the sovereign funds are not so eager to move as chaotic because of their sovereign debt holdings and hard assets. That debt and hard asset will eventually stabilize the important markets while the bond market will clean out the roadkill economies and the currency trader like me will simply play along.

And then the game starts over!(lol)

Speaking of the Gutenberg Press, a knowledge-bank cartel has decided to take it upon itself to monetizing public domain and fair-use waiver material ... all knowledge regardless of when it was written... Locked up, accessible by paywall only, in many cases the only source of certain documents, which made them very valuable indeed. And they owned the only key.

The cartel started in 1995 with seven libraries. Sixteen years later, 7000 libraries find themselves members.Aaron Swartz protested a unilateral decision made by those who now financially benefit from the brains, sweat, and tears of the most intelligent authors on the planet, Mr. Swartz is considered worse than a violent criminal because he thwarted the intellectual establishment. JSTOR and MIT disingenuously claim they consider the matter closed- except it isn't closed for Mr. Swartz. The prosecutor can't figure out which legal theory applies, but they jail him anyway.In protest of Swartz's arrest, academic activist Greg Maxwell published an archive of 18,592 public domain articles from JSTOR's Royal Society collection on the file-sharing site Pirate Bay.

Click to view link

Click to view link the files

Click to view link

I think you'll find the article interesting.

It explains the fake gold standards that preceded the pure fiat we enjoy so much now.

Confiscation seems unlikely to me. Trust in government is low, and pot prohibition has resulted in a populace that is quite happy to possess contraband if they disagree with the law. They risk a huge blowback if they overplay their hand at the wrong time, and I think they know it. I think they know most people are not pulling their money out of banks and buying up coins and other assets, so they are not too worried about it. I think they figure they can inflate until it's time for new money with more zeroes on it, then another round with fewer zeroes, etc. All backed (but not really) by gold.

I hope you are right in your assessment that the house of cards is unlikely to collapse overnight. On the other hand, it seems there might be a risk of a bond market collapse. What we are witnessing with the unprecedented monetization of debt and the fear on the faces of central bankers worldwide tells me they are worried about the herd stampeding out of bonds, causing a cascade of failures throughout the banking system. The frantic nature of the theatrics going on over this debt limit deal are a big 'tell'. The main players themselves are plenty worried. Because the entire system is insolvent, hopelessly insolvent, and they are desperate to keep everyone stupefied and placid. If the booboisie or sovereign funds lose faith in this last 'safe haven', the results could be huge, because this is the lifeblood of the central banks and the governments they own.

I cannot conceive that there are not contingency plans laid for this eventuality. Probably all set up and ready to go. And establishment economists are out there in the influential papers laying the groundwork so it won't seem so radical if it must be deployed. The Bell has speculated that the crisis is being caused intentionally, to get people to demand a fix, ready to accept a worldwide fiat currency.

Hi John,

Although I haven't read your link there seems to be a simple revolving door we are willing to go round and round with. I am not a gold bug but I do purchase the physical asset. I trade mostly financials and commodities but always stay liquid just in case.

The point being, I invest according to the psychological revolving door that GOV creates to provide the effect that they need to slosh their worthless paper around. Before we got off the gold standard, would one not say that was a fake gold standard?

The elite managed to a have a successful run of 40 years based on nothing. I would say it has simply run its usefulness and now it is simply time to go back to a fake gold standard that will provide the psychological cover they need to extend their game.

People tend to believe we are in crisis. They perhaps are right. However even if we are, our financial house, even though built of cards, is simply not going to collapse tomorrow.

In this game it takes time to destruct and we may, but the psychological game of creating public confidence seems to be heading back to confiscation in order to create the psychological coup they need to revert back to the fake gold standard.

What say you?

Catching up on some reading, I came across this article by Gary North:

Click to view link

Seems he agrees with my suspicion that the Next Level currency will be a fake gold standard. (It's backed by gold, but you can't have any.)

Be careful on that prediction.

There is only one thing that is going to paper over the Quadrillions of bank insolvency, and the banks are the only thing that matters.

That one thing is -- more fiat currency! (And more, and more.) And more, being celebrated tonight in Washington.

One more thing .... exactly which fiat currency economies failed with deflation? I can think of quite a few that crashed from inflation. Are there any that deflated into oblivion?

Sure, we are causing the downfall of the fiat/debt banking economy by not borrowing. But we have a lender of last resort, and a spender of last resort, and they are both working overtime according to the Keynesian formula.

There were plenty of fiat currencies floating around at the time the Constitution was written. Each state was printing its own. Inflation was ruining the country and a rebellion was brewing over it. It's one of the main reasons the states decided to form a union.

You'll notice the coining part is included along with weights and measures. The idea was to stick to coins (and paper backed by coins), with standard weights and purity (regulating the value) to prevent inflation the way the Roman Empire did it.

The intent was to render this service to prevent cheating. And to prevent states from printing fiat currency.

More and more writers are coming around to the conclusion that we are going in to a deflationary depression. One should definitely consider this in any kind of investing. John Maudlin has an excellent paper talking about the end of the debt super-cycle.
Click to view link
He shows good cause, with the GDP shrinking even with all the pumping that the FED and GOV is doing.
Shadowstats says that GDP is actually negative 2 %.

One has to consider the inflation rate; 10 %
One has to consider the $ 16 trillion pumped into the system by the FED.
If 10% inflation is the best that can be done, we MUST be in deflation.

GEAB says that an additional $ 15 trillion will evaporate between now and January.
I seriously doubt that Big, Bad, Bald, Ban Bernanke can keep up with these numbers.

I don't see the implementation of mandatory wage increases. Without these, the economy will stagger from one price increase to the next,,,, a body-blow every time. GOV can't very well get high inflation without a wage-price spiral. Imagine what price inflation will do to the consumer economy when wages are shrinking. It will shrink the economy and the velocity of money.

GOV spends 44% of the GDP,,, much of it with borrowed money. QE III will flow into commodities and emerging markets, NOT to the consumer. Commodities and equities may inflate but, the consumer will disappear from the market. First, bi-flation,,, then, deflation.

"The natural progression of idleness, is debate turning into action."

Exactly. That is one of the fundamental reasons I post. To influence the debate and attemopt to insure the inevitable consequence of action is "sane" (maximal survival for the civilized, triage for the barbarians whom have certainly "asked for it").