The Butterfly effect
If you believe what is sold in the mainstream medias business of thought control, then you are following a program and are being used.
Dear reader, time has passed since I made my last post. Somehow I did not find the time to write the post because I was meeting with a lot of very interesting people or there were things that needed my attention or I did not feel like posting although there was a lot of important things happening and therefore a lot of important information to write and muse about. In this post I’d like to give you some of my thoughts about the following topics
- the butterfly effect, a butterfly flap in Japan having a devasting effect somewhere else on the world
- currency reform
- made in the USA
- economy
- gold and silver, what next?
- Gold, the physical London market of Gold is in fact a paper market leveraged 1 to 100
- House prices will go down further. If you can buy a house at 10% of the price before the crisis buy, if not wait
- Fixed income
- Banks and Banksters with a lot of interesting information
- equity
- The masses wake up, Iceland said no
- Natural disasters
The butterfly effect
You certainly have heard about the butterfly effect meaning; a sensitive dependence on initial conditions which in other words means that a tiny change in initial conditions can lead to big changes in a later outcome. Edward Lorenz who made the term popular used once the following title to open a presentation about the butterfly effect: Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas? (please read more about the butterfly effect on the following link http://en.wikipedia.org/wiki/Butterfly_effect or for Spanish http://es.wikipedia.org/wiki/Efecto_mariposa or German http://de.wikipedia.org/wiki/Schmetterlingseffekt)
Other writers used the term that a flap of a butterfly’s wings in Japan could cause a hurricane in Brasil. I would like to use the term of the butterfly flap for the actual debt situation.
The butterfly must have flapped its wings in Tokyo already a couple of months ago. The first storm, due to these flaps, was felt last year in Dubai and recently in Greece. Just moving west from Dubai to Greece the financial market weather conditions have already deteriorated considerably. I have no doubt at all that this storm will increase even more, will move further towards west and will hit not only other European countries (the PIIGS) but will have devastating financial effects, especially in Great Britain and later in the US.
What does that mean? It means that, as mentioned in my last two posts, we will be confronted with sovereign defaults soon, probably this year. The PIIGS countries and especially the USA and Great Britain are in my opinion amongst those countries that should be included in the list of high risk countries regarding sovereign defaults.
Sovereign defaults will not only affect the bondholders but as well Financial Institutions. Why? Because Financial Institutions and especially the big ones, have huge exposure to sovereign risks. A couple of weeks ago, German and Swiss newspaper mentioned the respective risks. The German newspaper “Handelsblatt” mentioned in an article from February 12, 2010 with the title “PIIGS crisis could cost the German insurer companies billions” the following:
Allianz does hold in its portafolio 3,6 billion Euros of Greek government bonds (which is 1% of its fixed income investments), 6,3 billion Euros of Spanish government bonds and 25,3 billion Euros of Italian government bonds.
Munich Re holds 1,1 billion Euros in Italian government bonds, 1,5 billion Euros in Greek government bonds and 2,1 billion Euros in Spanish government bonds.
The Frankfurter Allgemeine mentioned the same day, according to a BIS source that German Banks have invested 524 billions in PIIGS government bonds, thereof Greek government bond investments is said to be 43,2 billion Euros, Spain 240,2 billions, Ireland 193,4 billions, and Portugal 47,2 billion.
A Swiss newspaper reported at the same time (as well a BIS source) that the Swiss banks have exposure to more than 60 billions Swiss Francs towards Greece alone.
These numbers are mind-boggling numbers indeed. Just imagine what it will mean when you include Great Britain and the US which clearly have to be included in the risk category!
Although I mentioned before German and Swiss institutions, don’t make the mistake to believe that only those are exposed to these risks. In my opinion all the large international Financial Institutions (Banks and Insurance companies) hold huge exposure to these risks. Therefore I always preferred the smaller banks and insurances, especially those with state guarantees of states that are sound and without external debts, countries like Liechtenstein for example.
Currencies
Currency reform
There are more and more rumors/information popping up indicating that some Central Banks are in the preparation phase to introduce a new currency. Of course for the moment being there is no proof as we only hear about things happening that more or less clearly indicate that it is so. However it would make perfect sense if for example the Germans would prepare themselves for a possible coming disaster with the EU or the Euro, by printing already today a German Mark II. I do believe that they are in fact preparing themselves as it makes sense even if it is just to be ready in case. As the Greece/European or in other words the EURO crisis is not over yet, we should assume that a certain back up plan is already established or in preparation. In case a new currency or several new European currencies would be introduced, it would possibly be over a weekend where most European countries have a public holiday. Easter is already behind us. The next possible weekends are in May, either the weekend of May 14 or the weekend of May 22 when there is a public holiday in most European countries. As long as the Greece situation and the risk of the PIIGS following the Greek example is under control we will not see such a change. However that does not mean that it could not happen at all. Be prepared. Personally I always preferred investments in the following currencies, the Swiss Franc, Australian and New Zealand Dollar and the Norwegian Corona. Please keep in mind that introducing a new currency through a currency reform would need at least 4 to 5 days. Therefore a weekend with a public holiday would not be enough time to do so and therefore the introduction of a new currency would involve the declaration of banking holidays.
Regarding currencies I’d like to mention that one should never lose sight of the fact that all fiat currencies are not money, in reality they are debt since they represent a promise to pay backed by nothing. History teaches us that all fiat currencies end the same way, worthless, and the dollar is now headed down that road. The only real question is how long it will take it to get there.
Made in USA
The worldwide problems with overleveraging have a made in USA on it. The US has almost no manufacturing left anymore, apart from manufacturing some useless fancy financial products without value at all but with a huge potential to cause severe havoc.
The big problem in the US and the world today can be reduced to a single word -- DEBT. It's a world of debt and a decline in income and out-of-whack balance sheets. For years cities, counties, states and nations have been providing goodies and services that have been given to citizens using money that was created out of thin air.
Now, with income and revenues falling everywhere, voters are demanding the same services. The politicians have obliged. The result is a mountain of debt and unfunded liabilities. The US alone has a national debt of over $12 trillion. But adding unfunded liabilities, the total US debt amounts to an impossible $54 trillion -- This is an amount so huge that it can never be paid off. The last three generations with the help of the Federal Reserve have mortgaged this great nation's future.
Don’t be surprised to have to face, within a relatively short time, restrictions regarding the transfer of funds. Especially countries that face severe economic problems, such as the PIIGS, England and the US might be those countries limiting the free flow of funds soon. With other word these countries are on top of my list of the countries that will restrict transfers out of the country and in some cases as well the inflows. Furthermore I would not be surprised to see countries that apparently are still fine, like Germany, implementing the same restrictions. In the case this scenario would really become reality, all those holding cash and precious metals or having direct access to food will do better than the rest.
Economy
Following a couple of comments about the Greek crisis. Although they were written a couple of weeks ago we should not forget that nothing really has changed. Greece is for the moment being not in the spotlight of the international press. However the Greek or PIIGS situation is still the same. Therefore I do think that it makes sense to read the articles.
A Greek crisis is coming to America
By Niall Ferguson
Published: February 10 2010
Picture 10
It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate.
There is of course a distinctive feature to the eurozone crisis. Because of the way the European Monetary Union was designed, there is in fact no mechanism for a bail-out of the Greek government by the European Union, other member states or the European Central Bank (articles 123 and 125 of the Lisbon treaty). True, Article 122 may be invoked by the European Council to assist a member state that is "seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control", but at this point nobody wants to pretend that Greece’s yawning deficit was an act of God. Nor is there a way for Greece to devalue its currency, as it would have done in the pre-EMU days of the drachma. There is not even a mechanism for Greece to leave the eurozone.
That leaves just three possibilities: one of the most excruciating fiscal squeezes in modern European history – reducing the deficit from 13 per cent to 3 per cent of gross domestic product within just three years; outright default on all or part of the Greek government’s debt; or (most likely, as signalled by German officials on Wednesday) some kind of bail-out led by Berlin. Because none of these options is very appealing, and because any decision about Greece will have implications for Portugal, Spain and possibly others, it may take much horse-trading before one can be reached.
Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes.
What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not "save" us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed "multiplier") has been much less than the proponents of stimulus hoped. Second, there is a good deal of "leakage" from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect.
For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the "safe haven" of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.
Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase "safe haven". US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.
Even according to the White House’s new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.
The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.
Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.
Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.
But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $1,500bn, that implies up to $300bn of extra interest payments – and you get up there pretty quickly with the average maturity of the debt now below 50 months.
The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter.
Last week Moody’s Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers’ killer question (posed before he returned to government): "How long can the world’s biggest borrower remain the world’s biggest power?"
On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.
The writer is a contributing editor of the FT and author of ‘The Ascent of Money: A Financial History of the World
Greece Distracting from Real Debt Crisis in U.S.
The current sovereign debt crisis in Greece and the potential for euro-zone countries to bailout the nation, has created a rush out of the Euro, which in October became the currency of choice for foreign central banks adding to their reserves. The declining Euro has added fuel to the strengthening U.S. dollar, and the ill-conceived notion that as bad as things are in the U.S., it's worse everywhere else and with the U.S. economy beginning to recover, Europe will be next to experience the financial crisis we experienced in 2008.
Unlike the U.S., the nation of Greece doesn't have their own printing press and the ability to create Euros out of thin air, in order to avoid default on their debt. While Greece's debt rating is currently an A2 with a negative outlook, the U.S.'s debt rating remains at AAA, despite the fact that the U.S.'s national debt (including unfunded liabilities) is currently 600% of GDP. If the U.S. was a corporation instead of a nation, its credit rating would be junk.
We hope that Greece doesn't get bailed out, because a bailout would cause foreign investors to become more irresponsible than ever and create even greater moral hazards. Unfortunately, not only is it likely that Greece will get bailed out, it's possible our own Federal Reserve will get involved. The U.S. Federal Reserve has the ability to make loans to foreign central banks without disclosure to the U.S. public. European banks have already benefited $50 billion from the U.S.'s bailouts of AIG, so it's not out of the realm of possibility that the Federal Reserve will intervene due to euro-zone countries being key U.S. trading partners.
Greece's budget deficit is currently 12.8% of their GDP, only slightly higher than the U.S.'s projected deficit as a percentage of GDP this year of 10.64%. Greece's economy is roughly 1/5 the size of California's economy and while Greece makes up just 3% of the total euro-zone GDP, California makes up 13.5% of the U.S. GDP. If the potential default of Greece is causing a flight from the Euro, imagine what is going to happen to the U.S. dollar later in 2010 if the state of California nears default. Just like Greece, California can't print money on their own.
We believe the U.S. dollar will ultimately win a race to the bottom with the Euro, but the only real winners (as far as retaining purchasing power) will be gold and silver. Although precious metals have declined during the recent weeks with a weakening Euro and strengthening U.S. dollar, gold and silver will soon benefit from a complete loss of confidence in western fiat currencies.
Many economists are beginning to call the Euro a failed experiment, because of the problems in Greece. A fiat U.S. dollar has only been around for 28 more years than the Euro. Fiat currencies are the root cause of all the economic problems in the U.S. and Europe. NIA believes all fiat currencies will be looked back at as failed experiments.
Please spread the word about NIA and have your friends and family subscribe for free at: http://inflation.us
Think the PIGS Are in Trouble? These 7 U.S. States Could Be Heading for Something Worse
http://seekingalpha.com/article/187051-think-the-pigs-are-in-trouble-these-7-u-s-states-could-be-heading-for-something-worse
Trouble ahead
Commentary:
Will Greece repeat Argentina's 2001 fiasco?
http://www.marketwatch.com/story/greece-could-repeat-argentinas-2001-fiasco-2010-02-20?siteid=nwhfriend
By 2014, International Monetary Fund official John Lipsky remarked March 21, the debt-to-gross domestic product (GDP) ratio of the Group of Seven countries will reach 100%, and the governments of the industrial world will carry the highest debt burden since shortly after the end of World War II.
http://www.atimes.com/atimes/Global_Economy/LC23Dj04.html
The fact is that there are cities, states, private and public pensions, the banking industry, the car industry, insurance, Social Security and Medicare, unemployment insurance, FDIC, the Fed and the U.S. Treasury all unfunded, all borrowing vast sums to continue breathing and all are broke, insolvent, and bankrupt. Although the paid and controlled media tells you everything is fine, you can either believe it or use your own senses, eyes, analysis and gut. Be it as it is, the system is no longer tenable and if you have your assets locked up within it you might very well lose a lot if it. What is the escape out of that? You guessed well, it is Gold and Silver. However it is important that you hold physical silver. How important? Please read carefully the information in this post regarding Gold and Silver following below.
Gold
Government Statistics www.shadowstats.com just put out this information. $7,500.
Gold and Silver Highs Adjusted for CPI-U/SGS Inflation. Even with the December 2, 2009 historic high gold price of $1,212.50 per troy ounce, the prior all-time high of $850.00 (London afternoon fix, per Kitco.com) of January 21, 1980 has not been hit in terms of inflation-adjusted dollars. Based on inflation through February 2010, the 1980 gold price peak would be $2,368 per troy ounce, based on not-seasonally-adjusted-CPI-U-adjusted dollars, and would be $7,494 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars.
The motley fool about paper gold, leverage
This is a must read!!
Is Your Safe Haven a House of Cards?
http://www.fool.com/investing/general/2010/04/05/is-your-safe-haven-a-house-of-cards.aspx
and another must read article
Silver Short Squeeze Could Be Imminent
On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn't a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position."
JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling", selling paper silver that is unbacked by physical silver.
On February 5th, we witnessed another sharp decline in silver prices, which NIA described on February 7th as being "just a temporary wash out, before a huge surge in silver prices later in 2010". Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who came out this week exposing the fraud that is taking place in the paper silver market.
http://inflation.us/silvershortsqueeze.html
and the detailed information that was the basis for the two above articles and another must read. Please read on
LBMA OTC Market – “Alchemists” Turn Paper into Gold
By Adrian Douglas
I have written several articles recently that have discussed how much “paper gold” has been sold, principally through the unallocated accounts of the LBMA although there are other vehicles that achieve the same end such as pool accounts, unbacked ETF’s, futures, and derivatives etc, but the LBMA dwarfs them all.
http://www.gata.org/node/7911
http://www.gata.org/node/7908
I estimate that as much as 50,000 tonnes of gold has been sold that does not exist. That is equivalent to all the gold reserves in the world that are yet to be mined, or put another way, 25 years of gold production. That is the grand-daddy of all short positions! The fractional reserve operation of the LBMA is likely to be the next Madoff scandal, except multiplied by 100…a 5 trillion dollar fraud as opposed to a 50 billion dollar fraud.
Like all financial scandals before it, this one will be exposed just as surely as night follows day. Gold is unique among all commodities. It is the only commodity that is not bought to be consumed. It is purchased as a store of wealth. Because it is not consumed the buyer does not need to take possession of his gold but can be persuaded to trust the seller to store his gold on his behalf. This unique wrinkle allows bullion bankers to sell gold that does not exist. This allows them to make huge profits as they have very little cost as they don’t have the inconvenience of actually having to purchase the gold they sell! The consequence of this illegal activity is that it suppresses the price of gold because the “paper gold” supply has the same effect on prices as if real gold had actually been supplied to the market. This means that this racketeering is extremely beneficial to the central banks, who are hostile to gold because a free market gold price would blow the whistle on their perpetual inflationary actions. A suppressed gold price makes fiat currencies appear to have an artificially higher purchasing power. The central banks do not just turn a blind eye, but actively aid the bullion banks; they lease them central bank gold at a pittance of a lease rate to make sure there is always enough liquidity such that the scam is not exposed due to the bullion banks being unable to deliver real metal when requested to do so.
There is nothing new about gold bankers selling gold that they don’t have. The goldsmiths invented the scheme in the 16th century. As recently as 2005 Morgan Stanley was sued for selling non-existent precious metals. Morgan Stanley even had the audacity to charge storage fees on the non-existent precious metals. The firm settled the class-action lawsuit out of court but no criminal charges were ever filed. Morgan Stanley maintained that they did nothing wrong because none of their clients had lost any money in the scam! That’s certainly innovative. I will try stealing a billion dollars from a bank and then I will pay it back the following day and see what the FBI thinks of that legal defense strategy!
The LBMA operates a fractional reserve system. They sell much more gold than they actually have. They keep on hand the amount of gold that they estimate, in the worst case scenario, they will be called upon to deliver.
In a recent article I analyzed data from the LBMA’s own website that shows that a net of approximately 20 million ounces of gold are traded each and every day.
http://www.gata.org/node/8248
This means that we are meant to believe that the equivalent of 25% of global annual gold production changes hands each day on the LBMA! On a gross trading basis it probably represents the entire global annual gold production traded each and every day! In dollar terms it represents 5.7 Trillion dollars of net trade annually. That is almost 60% of the entire US economy or 10% of the entire global economy being traded through a handful of gold bullion banks. It is simply mind boggling. You don’t have to be a rocket scientist or a market regulator to smell something fishy. To back that level of trading on a 100% reserve ratio the bullion banks would have to own almost 40% of all the gold ever mined in the world. There are simply not enough London Good Delivery bars in the world for that to be the case.
You don’t have to rely on me to tell you the LBMA is running a fractional reserve gold racket. This is from their website:
http://www.lbma.org.uk/london/accounts
QUOTE
Unallocated Accounts
This is an account where specific bars are not set aside and the customer has a general entitlement to the metal. It is the most convenient, cheapest and most commonly used method of holding metal.
The units of these accounts are one fine ounce of gold and one ounce of silver based upon a 995 LGD (London Good Delivery) gold bar and a 999 fine LGD silver bar respectively. Transactions may be settled by credits or debits to the account while the balance represents the indebtedness between the two parties.
Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held. The client is an unsecured creditor.
Should the client wish to receive actual metal, this is done by ‘allocating’ specific bars or equivalent bullion product, the fine gold content of which is then debited from the allocated account.
END
There are some real peaches in this description. For example “Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held.”
They don’t say that the bullion dealer has to hold the amount of gold he has sold, just that these unallocated accounts are backed by the bullion dealer’s stock. His stock could be 1000 ozs or even zero. Note the statement “The client is an unsecured creditor”. So this really spells out what “unallocated” means. It means literally there is no gold allocated to the customer. The customer owns an I.O.U for gold.
If the LBMA were running a system where they had on hand 100% of all the gold they had sold but they just didn’t want to assign specific bars and serial numbers then all creditors would be secured. They spell out that all clients are unsecured creditors. They have no gold guaranteed against the I.O.U. from the bullion dealer!
Who exactly are the members of the LBMA? The clearing members are as follows:
HSBC Bank USA National Association
JP Morgan Chase Bank
The Bank of Nova Scotia
Barclays Bank
Deutsche Bank
UBS AG
HSBC and JPMorgan Chase are the biggest short sellers on the COMEX, they together own 95% of the OTC precious metals derivatives, they are custodians of the bullion supposedly held by GLD and SLV respectively and they are clearing agents for the LBMA. That is one fine set of credentials! These people are so arrogant and confident about their racketeering not being exposed that the quarterly publication of the LBMA is titled “The Alchemist”! Unlike the Alchemists of the middle ages who unsuccessfully attempted to turn lead into gold, the Alchemists at the LBMA turn paper into gold; well, “gold I.O.U’s” to be accurate.
In 2003 Graham Tucker, Chairman of Gold Bullion Securities, made a presentation to the annual LBMA Precious metals Conference about their newly launched gold backed ETF that today trades on the ASX under the ticker “GOLD”. The transcript of his speech can be found here:
http://www.lbma.org.uk/docs/conf2003/2e.tuckwellLBMAConf2003.pdf
In that speech he said:
QUOTE
There are three essential components of [a] listed security in our opinion. Firstly, ownership of the gold; investors want allocated gold, not a third party credit risk, which is what unallocated gold is. In fact, you could argue unallocated gold isn’t gold; it’s just a piece of paper issued by a bank, and in most cases, unsecured risk.
END
You have to remember that this is a speech being made in front of all the members of the LBMA. You simply can’t make those types of statements in front of such a crowd if they weren’t true. And we know it is true because the LBMA says the same thing on their website. They say their clients are “unsecured creditors”! The LBMA peddles gold promises to those gullible enough to trade off convenience against title.
Many people do not understand what fractional reserve accounting means. I will give you an example of a less important real life case. The airlines routinely sell more seats than exist on a plane. If the plane holds 200 passengers but from statistics the airline knows that on average only 50% of the passengers show up for check-in then they can sell 400 seats and be almost certain that the plane will fly full, which increases their profitability. If they were only to sell 200 tickets the plane would fly half empty. Occasionally the airline gets caught out when, say, 210 passengers check-in. In such circumstances the airline offers a free night in a hotel, a first class upgrade and some cash for any ten passengers volunteering to fly the following day. The passengers all purchased tickets believing they were buying actual available seats on an aircraft, not unallocated virtual seats.
This is exactly the same situation with the LBMA; they sell more gold than they have. They know from statistics on average how many clients will ask for delivery and that determines their minimum stock level.
However, just like in the case of the airlines this scheme is destined to be discovered. When more gold is demanded than the bullion banks can deliver they try to lease or buy gold from the Central Banks. If this can be done in a timely fashion the clients are none the wiser. If the Central Banks can not supply then the bullion banks are obliged to offer premiums over spot for clients to accept cash in lieu of the metal.
We are hearing anecdotal stories that recently there have been cases of up to 25% premium being offered for clients to settle in cash. It would seem the bullion banks have pushed the game too far and are on a collision course with default. In addition the Central Banks have dishoarded a large proportion of their gold and are not in a position to come to the rescue of the bullion banks as they have been in the past.
I recently made an analysis of the COMEX warehouse inventory of gold and silver in an article entitled “Alarming Trend in COMEX Gold and Silver Inventory Data”
http://www.gata.org/node/8373
One of the conclusions is that in the last 6 months there has been a dramatic decline in the inventory held by the dealers on the COMEX (the registered category), while over the same period of time the Open Interest has increased. This essentially means that each open contract has less warehouse gold or silver backing today than it did 6 months ago. This is a classic reduction in reserve ratio. It is a sign that the Gold cartel is running out of physical gold and silver. This observation is supported by other data. During the last two years the US mint has periodically suspended production of gold and silver eagles due to shortages of bullion, the COMEX futures have displayed contracting contango and/or mild backwardation, which is indicative of physical market stress. There is anecdotal evidence of the LBMA OTC market in London having difficulties in making deliveries and requiring central bank gold to do so. There are also rumors of large premiums being offered for cash settlement in lieu of the bullion.
Sources active in the London market tell us it is difficult to find bullion in size. The Central Banks have stopped selling and have become net buyers of gold. Furthermore, the highly politically connected Barrick Gold announced a panicked buying back of its hedges at the end of last year.
The clients of the LBMA are not speculators or gamblers. They have bought gold which they believe, in good faith, is being held in a vault for them by the LBMA members. As the suspicions about the LBMA rise, more and more clients will ask for delivery which will expose this fraudulent operation. As stated at the beginning of the article I estimate that as much as 50,000 tonnes of gold has been sold that does not exist. That is equivalent to all the gold reserves in the world that are yet to be mined, or put another way, 25 years of gold production. That is the grand-daddy of all short positions! The fractional reserve operation of the LBMA is likely to be the next Madoff scandal, except multiplied by 100…a 5 trillion dollar fraud as opposed to a 50 billion dollar fraud. Those holding real bullion will see the price multiply many fold as the price adjusts to the real supply and demand fundamentals of real physical metal.
There is only one way to protect yourself and to profit. You should own physical bullion. Simply don’t trust intermediaries like the LBMA who purportedly sell you gold but label you an “unsecured creditor”. Anyone who thinks they hold gold on the LBMA should demand delivery. The major desirable and unique characteristic of gold is that it is no one else’s liability, unlike almost every other financial asset. If you own a credit risk, an I.O.U. gold, you have not achieved the principle objective of owning gold. Are you a “gold owner” or an “unsecured creditor”?…you can not be both!
Adrian Douglas March 1, 2010
www.marketforceanalysis.com
Russell Comment -- The Fed is bullish about the economy -- but NOT THAT BULLISH.
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The great bull market in gold has been in force for almost a decade. I've shown where gold, since 2000, has closed higher for nine consecutive years. During that time gold has advanced from prices in the 200s to its current price of approximately 1124.
Now suppose the stock market had done the same thing. Can you imagine the frenzy that would be greeting stocks today? Yet, incredibly, the fantastic bull market in gold has elicited little or no excitement from the US public. Go to your favorite local store, buy a few items and try to pay for those items with an American gold eagle coin. The clerk will stare at the coin and likely say, "Sorry I can't accept that for payment, we only accept dollars. By the way, what is that pretty coin?"
It's truly remarkable. Within the space of three or four generations Americans no longer even recognize Constitutional money! I've said before that gold is imbedded in the DNA of mankind. We're closing in on the time when, like a light bulb turning on, Americans will finally realize that they've been hoodwinked by one of the greatest swindles in the history of civilized man. They've been working and saving printed paper with the firm conviction that the paper they worked so hard for was money. Wait, why is that printed paper worth anything at all? It's worth something simply because the government has pronounced by fiat that dollars are "legal tender for all debts, public and private." So the "dollars" that we work our whole lives for, is backed by nothing but the "full faith and credit of the United States." And how good is that credit? Two credit agencies are now threatening to lower the rating of US bonds. If that happens, it will be a monumental shocker? And yes, all sovereign money is now being judged and classified as to its worth. Did anyone ever gauge or debate the value of gold? As I see it, we're watching the very beginning of the end of fiat money.
As we approach the era of suspicion about fiat money, knowledgeable investors will increasingly seek the safety of real, intrinsic Constitutional money -- gold.
And the great irony is that highly-placed but ignorant "experts" continue to denounce gold as a "useless relic." In the face of this pathetic propaganda, the price of gold continues to rise in terms of fiat money. Actually, the price of gold doesn't change. It simply takes more dollars, more reals, more rubles, more bahts to buy one ounce of gold. What this really means is that fiat money in all its varieties is being devalued in terms of real, intrinsic money -- gold.
I've said all along that the primary trend of the market cannot be halted or reversed. However, the Fed, Ben Bernanke and the Administration believe that with enough quantitative easing and enough stimuli the bear market can be halted and even reversed. Ah, but there's the matter of "unintended consequences." What are those unintended consequences? In their frantic efforts to avoid a painful and politically-unacceptable depression, the Fed and the Treasury and the administration have placed the very credit of the United States in jeopardy. They have loaded the US with the greatest mountain of debt the world has ever seen. Ultimately, this will lead to a different monetary system. And ultimately, the US public will be enlightened about the fraud of fiat money. And lastly, it will lead to a frenzy to own gold. Those of my subscribers who were with me during the 1970s probably remember this phase, "There's no fever like gold fever." Before this bull market in gold is over, I believe you'll be hearing that phrase again.
Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi
http://www.zerohedge.com/article/former-goldman-commodities-research-analyst-confirms-lmba-otc-gold-market-paper-gold-ponzi
http://tinyurl.com/ycghfq4
Silver at 400 USD per ounce?
John Williams of Shadowstats
In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce (London afternoon fix, per silverinstitute.org) has not been hit since, including in terms of inflation-adjusted dollars. Based on inflation through February 2010, the 1980 silver price peak would be $138 per troy ounce, based on not-seasonally-adjusted-CPI-U-adjusted dollars, and would be $436 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars.
Housing
Sir Templeton in an interview made in 2003
Sir John also had a few words about debt -- a four-letter word that folks seem not to care about: "Emphasize in your magazine how big the debt is. . . . The total debt of America is now $31 trillion. That is three times the GNP of the U.S. That is unprecedented in a major nation. No nation has ever had such a big debt as America has, and it's bigger than it was at the peak of the stock market boom. Think of the dangers involved. Almost everyone has a home mortgage, and some are 89% of the value of the home (and yes, some are more). If home prices start down, there will be bankruptcies, and in bankruptcy, houses are sold at lower prices, pushing home prices down further." On that note, he has a word of advice: "After home prices go down to one-tenth of the highest price homeowners paid, then buy."
http://moneycentral.msn.com/content/P52744.asp
Up to 7 million homes are potentially eligible but haven’t been repossessed
By Renae Merle The Washington Post updated 4:52 a.m. CT, Fri., March. 12, 2010
WASHINGTON - The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize. About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can't obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete. As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market. The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.
Fixed income
Following a comment of one of the regular contributors to www.lemetropolecafe.com
Quote
The line in the sand!
To all; the 10 year Treasury is trading at the 4% level which is roughly an 18 month high. Of course Wall Street and Washington will tell you that rates are rising because the economy is improving. They cannot tell you the truth however, that being the Treasury is flooding the market at the same time foreigners are backing away from new purchases. ...And oh yes, the Fed "ended" their purchases last week and supposedly the bond market is flying solo now.
Not possible as far as I can see. The Fed MUST purchase debt to SLOW the rise in rates, they cannot keep rates down especially since the rest of the world's rate curves are increasing. Higher rates will definitely affect housing and consumer loans, commercial loans etc. etc.. In short, the economy will feel higher rates now faster than at any point in U.S. history because of the horrendous debt/equity ratios, the fact that more debt is now adjustable (rates) than ever before and the sheer massive size of debt outstanding.
This is not just a U.S. problem as there are many sovereigns that are in over their heads but the U.K. and U.S. are obviously "poster boys" of the current debt orgy. These higher rates are nothing more than Mother Nature beginning her "rationing process". It is still difficult for small business to access the credit markets. Treasury rates moving higher are nothing more than the market place beginning to withdraw credit from the Treasury. Rates have been moving up for a while, in particular since the health care vote.
This will be spun until the spinsters are blue in the face, don't be fooled into believing rates are moving up because the economy is improving. Rates are moving up because the market place is saying "the U.S. is not the "AAA" credit it once was" (many moons ago). This is a natural result of a government going way too far and imitating drunken sailors. Both fiscally and monetarily the U.S. has had "the pedal to the metal" for closing in on 2 years, a lower currency value and higher interest rates always are and will be the result.
I believe that this 4% area is roughly a line in the sand that once crossed will trigger many "non pleasant" results. The only options left for the Fed and Treasury have been to borrow more and print more, higher interest rates are the market's way of communicating a negative opinion. The risk of a currency and bond panic ratchets up considerably as rates go above where we are now. The obvious risk is that the U.S. cannot even open it's doors tomorrow morning if freely flowing credit is not provided. Time will tell but I think this is a huge billboard telling investors to get out of the water. You will not need to ask "is this it?"because when "it" happens because the panic will be "in your face" obvious! Regards, Bill H.
unquote
March 17, 2010 -- March 16 (Bloomberg) -- Federal Reserve officials repeated their pledge to keep the main interest rate near zero for an "extended period" and confirmed that emergency measures to prop up the housing market will end as planned this month. While the economy has "continued to strengthen," policy makers noted that "housing starts have been flat at depressed levels" and "employers remain reluctant to add to payrolls."
Interesting article
http://www.stockopedia.co.uk/content/gold-could-the-last-person-to-get-their-coat-please-turn-the-lights-off/39203
From www.jsmineset.com
I got a call this morning from a bank bond trader who alerted me to the following story in Bloomberg, telling us that Fannie and Freddie are buying up all mortgages currently in their pools 120 or more days past-due. The process and the math involved will probably bore the general public and so they will probably never get the true story, but here is the bottom line…
–The government’s balance sheet (through these two GSEs) is about to balloon even more, and my trader friend tells me the number of mortgages is significantly higher than most observers thought.
–If it is true that the Chinese are dumping their MBS, they just saw the bid drop another point or more.
–Fannie and Freddie will tout this as a way to not have to tap into the Treasury, but these loans were and still are headed for foreclosure.
The only advantage here is that they are more efficiently calling these in, eliminating the extra interest rate expense they had (which was guaranteed to the now-in-even-more-pain securities holders) on these non-performing loans. The result? They will now be financing a much, much larger inventory of delinquent mortgages at sub 1% rates.
And the MOPE is: Don’t worry be happy. All is well. Don’t you know? That’s why we pay those Fannie and Freddie executives the BIG bucks!
The Bloomberg article title gives a hint at more MOPE: "Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’," suggesting that the money taken from these pools will go back into the market and off-set the Feds end of MBS purchases. Uh humm. So I called a few portfolio managers. No, they are not planning on reinvesting into the mortgage market. As I suspected, they’re pissed off at just another erratic act of the government and its bankster henchmen.
CIGA Nick
Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’ (Update2) By Jody Shenn
Feb. 11 (Bloomberg) — Fannie Mae and Freddie Mac’s plan to step up purchases of delinquent loans may boost prepayments on their securities to rates that in some cases would erase all of the debt within a year. Yields over government notes on some of their bonds fell to 17-year lows on speculation the move would lead to reinvestments in the mortgage market.
The constant prepayment rate, or CPR, for Freddie Mac’s 30- year fixed-rate securities with 6.5 percent coupons will likely surge by 70 this month under the plan released yesterday by the McLean, Virginia-based company, based on Bloomberg calculations. The measure, which was 17.2 last month, represents the share of the debt that would be retired in a year at the current pace.
Freddie Mac said yesterday that it would buy “substantially all” loans with payments late by 120 days or more from its securities in the next month. Fannie Mae said later that it will “increase significantly” its buyouts, setting a less aggressive timeline. The value of Freddie Mac’s delinquent loans is $70 billion, while Fannie Mae has $130 billion of the debt, according to Citigroup Inc. data.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ayIAUXAE1jug
Banks and banksters
If you hear about the biggies making now huge profits look into the details and find out why they make these profits. Looking into the details you will find out that basically the fixed income department is the department making the profits. Is that a fine job done? Did they really do such a wonderful job? Yes and no. Yes for them because they will get again lots of money as bonuses but at the same time it is a clear no. Why? Because getting money from the Central Banks at 0% interest and using this same money to buy treasury bonds that pay you a decent return and thus earning the differential is not really such difficult job to do. Once again, who is paying the bill? Yes you are correct if you thought it is the taxpayer.
With some leverage, once again on the back of the taxpayer, the profits even look better. However that means that we are in the same old story (in fact even through the crisis nothing really changed) of overleveraged banks that will fail sooner or later. Don’t believe them when they say everything is fine now. They do know damn well that the situation is dire.
does it really?
Lehman account frauds (is it industry practice?)
According to a report on findings of the Lehman collapse, Lehman was already broke weeks before they went out of business. The report says that Lehman used accounting tricks to hide the real situation and instead of showing the real picture made it look much better. For example with one of these accounting tricks the showed a reduction of their debt ratio which in reality was not the case. Using these trick they moved risky items off the balance. Be assured that the same is true for many financial institutions, especially the big banks. Therefore I do reiterate my warning regarding the risk of holding investments with the big financial institutions.
Information about Lehman and their accounting fraud
http://www.nakedcapitalism.com/2010/03/ny-fed-under-geithner-implicated-in-lehman-accounting-fraud.html
Citi
Citi just recently sent out a notice to account holders informing them that they may unilaterally demand 7 days notice before withdrawals. Other institutions are doing similar steps. This could mean that they are preparing themselves for another bank crisis of a greater magnitude than what we already have seen, or how else would you interpret this?
That means we soon might see forced mergers of all kinds as the governments desperately attempt to fend off bankruptcy. I do expect that these mass mergers will not be successful as the medicine of mergers will not cure the patient. Just look at the forced mergers over the past 2 years. All these mergers in fact failed although the media and these companies tell you otherwise. If one looks at their balance sheet and reads the details one can find out that they are far away from being healthy now. The mass mergers will only serve to muddy the situation so that most people will not understand immediately what has hit them. The patient is already in a hopeless situation. Neither merger nor more cash infusions will really help. The speculation of the past years simply has gone too far and going back to normal is at such a cost that the population will awake brutally and will rise against its governments.
Looting Main Street
How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece
http://www.rollingstone.com/politics/story/32906678/looting_main_street/1
more information about Greece
I guess you saw the information piece regarding the involvement of GS helping Greece to get into trouble. Apart from GS there were the big hedge funds speculating on the Greece debt. These guys met for a dinner in NY and decided to go against Greece. Yup, a handful of speculators moved the strings. Of course you can say that they just did what had to be done because it was obvious that Greece had a problem. That is fine with me as I am an advocate for free markets. However ethically and maybe legally it might not be OK. If one decides to take the risk fine but if there is a powerful group getting together to do so it is a different story.
GEAB Report about Greece and Goldman Sachs
quote
In the Greek case what the investment bank proposed was very simple: raise a loan which didn’t appear in the budget (a swap agreement) which enabled a fictitious reduction in the size of the Greek public deficit. The Greek leaders at the time were, of course, 100% liable and should, in LEAP/E2020’s opinion, be subjected to Greek and European political and legal process for having cheated the EU and their own citizens within the framework of a major historic event, the creation of the single European currency. But, let’s be clear, the liability of the New York investment bank (as an accomplice) is just as great, especially when one is aware of the fact that Goldman Sachs’ vice president for Europe was, at the time, a certain Mario Draghi, currently President of the Italian Central Bank and a candidate to succeed
Jean-Claude Trichet at the head of the European Central Bank. Without wishing to pre-judge Mr. Draghi’s role in the affair of the loan manipulating Greece’s statistics, one should ask oneself if it wouldn’t be worthwhile to question his involvement in the affair. In a democracy, the press, like parliaments (in this case Greek and European), are expected to take on this task themselves. Considering the importance of GS in world financial affairs these last few years, nothing that this bank does should leave governments and legislators indifferent. With this same logic, on the issue of transparency in financial activities and state budgets and using the ill-fated role of Goldman Sachs and of the large investment banks in general as an illustration, LEAP/E2020 takes the view that it would be beneficial for the European Union and its five hundred million citizens, to exclude former managers of these investment banks from any post of financial, budgetary and economic control (ECB, European Commission, National Central Banks). The mixing of these relationships can only lead to even greater confusion between public and private interests, which can only be to the detriment of European public interests. To begin with, the Eurozone should immediately require
the Greek government to stop calling on the services of Goldman Sachs which, according to the Financial Times of 01/28/2010, it still uses.
If the head of Goldman Sachs believes he is « God » as he described himself in a recent interview28, it
would be prudent to consider that his bank, and its lookalikes, can seriously behave like devils, and it is
therefore wise to draw all the consequences. This piece of advice, according to our team, is valid for the whole of Europe, as well as every other continent. There are « private services » which clash with « public interests »: just ask Greek citizens and American real estate owners whose houses have been repossessed by the banks!
To conclude, our team suggests a game to convince those who seek where the next sovereign debt crisis will surface: simply look for those states which have called upon Goldman Sachs’ services in the last few years and you will have a serious lead!
unquote
The following article is very interesting. It shows how arrogant some people are. Unbelievable.
Former Lehman Executives ‘Giggle’ at ‘Nonprofessionals’ Who Think Losing Billions of Dollars Is a Big Deal
Only a few people are smart enough to understand *the truth* of the matter, which is that ultimately bankers are smarter and better than everyone else, always have been always will be. Not that it's fun to have this knowledge! Quite frankly, it is a terrible burden, because no matter how much you say it and how true it is, no one wants to believe you.
Wow, didn’t know that. These guys were so smart that they even achieved running their company into bankruptcy. Really smart they are. Aren’t they?
http://nymag.com/daily/intel/2010/03/lehman_executives_nonchalant_a.html
Fannie Taps Treasury for $15.3 Billion More After a 10th Loss
Feb. 27 (Bloomberg) -- Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss.
The mortgage-finance company posted a fourth-quarter net loss of $16.3 billion, or $2.87 a share, Washington-based Fannie Mae said in a filing yesterday with the Securities and Exchange Commission…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ7Vw70CckxU&pos=2
Equity
From Orlandini from the stock market barometer
quote
Somewhere along the line the word debt became synonymous with the word asset, and as a result of the confusion value disappeared from the radar scope. That’s why the S & P 500 currently sports an average miniscule yield of 1.9% and a PE ratio that can’t be calculated because too many companies failed to show a profit. Of course Bloomberg will give you a PE ratio of 15, based on some future earnings black magic analysis that no one understands, but that’s just a small part of the valueless world we live in.
With respect to the United States, we can see that the Dow is trying its best to worm its way higher regardless of the conditions. When in doubt the Fed pumps more fiat currency into the market boiler and up we go. This week was no exception as bad employment news was overcome by good manufacturing news in China and Europe. Any port in the storm! On Thursday the Dow made a new closing high of 10,927, as well as a new intraday high of 10,956. There were several attempts to sell the Dow off during the day but they met with willing buyers as the Index approached the unchanged level. What spurs the Index higher? In a word liquidity! Money is not being loaned, and it is not being invested for productive purposes. Every dollar printed by the Fed is producing less than seventy cents in return, so money flows into the Dow looking for a quick return. In and out, and that is reflected in the poor volume, less than five billion shares on Wednesday.
Unquote
The masses are waking up
Well it really looks like the masses slowly are waking up. They found out that they have been screwed (sorry for the word) so far and still are on the list of being screwed again. Iceland voted at the beginning of March NO to plans to repay some 5.4 billion dollars to the British and the Dutch after the collapse of the Icesave bank. Well dear reader although that might mean that Great Britain and the Netherlands will veto in the future any attempt by Iceland to either enter the EU (although with the EU braking soon anyway a EU membership might soon not be on the wish list of the Icelanders anymore) and although both countries will veto any financial deals in favor of Iceland, I truly believe that the Icelanders did extremely well by voting NO. Why? Because why should the taxpayer always pay for reckless behavior of some bankers? Why should the taxpayer pay those who lost money investing in those banks? If one invests in banks paying such high interests as for example the Icesave Bank did, one does so because of greed and nothing else. It is known in the market that there are no free lunches. It is known that banks with high risks have to pay more than save banks. So who ever goes for the 1 to 4% more interest knows, unless that individium is really a fool, that receiving a higher interest means a higher risk. So why should the taxpayer really bailout the greedy ones? I do hope that soon more people will stop accepting been robbed over and over again.
As mentioned the masses are waking up. Although the US press, which is controlled by a small group of very influential people does not really report about it, the Tea Parties, a way to protest against the bailouts, government etc. is growing. My guess is that soon thousand will be on the streets. Possibly these Tea Parties that until now were not violent, will become violent and end up in riots. Be prepared. This movements could very well start to pop up everywhere in the world.
Picture of a baseball cap for tea parties
Natural disasters
Well dear reader you have already been informed that we had 3 major earthquakes in the magnitude of above 7 on the open Richter scale this year. One in Haiti another one in Chile and now one in Mexico. Some forecast predict at least 3 other major earthquakes in the Pacific ring of fire (http://en.wikipedia.org/wiki/Pacific_Rim_of_Fire).
Although Quantum physics has proven clearly in a scientific way the we, the humans, can change things by intention and therefore all of us can contribute to avoid the earthquakes, by positive thinking and imaging that it will not happen, I would recommend to take the precautions. Do we need to do so if we can change it by intention and positive thinking? I think it makes sense to take these precautions. Is my recommendation rather a contradiction? I don’t think so.
That we can change things/our future in a positive way by positive thinking is already clear. Recommending to take precautions does not really go against positive thinking at all or does anybody taking a fire insurance for his house really hope that his/her house will burn down? Of course not. So taking precautions does not mean at all that we are negative or that we wish it to happen, we simply, as the word says, take precautions.
What are the precautions and who should take these precautions?
Well everybody should take them but I really do urge everybody living in an area of seismic activity to take these precautions seriously. Have ready enough food, water, batteries, matches, candles, medicine, paper and other stuff that will be difficult to get once the distribution network is seriously interrupted (if you need a detailed list, let me know). I would say holding a one months stock at home makes sense. Maybe even more, because your neighbors might not be prepared as you are. Therefore being able to share with them might help you and certainly them.
Sun activity:
Over the past weeks the sun was in an unusual way without activity at all. On Monday this week a major explosion happened. Major explosions happen from time to time and therefore it is normal. However due to some facts that cannot be explained fully yet, the handful of informed authorities do expect in the coming weeks or months an explosion on the sun in a magnitude unknown in modern history. Such an explosion could cause electrostatic discharges (http://en.wikipedia.org/wiki/Electrostatic_discharge)
to an extend that it could destroy all electronic parts and the energy distribution network on earth. That would mean that your phone, computer, your car, your fridge and many other things you use daily will not work anymore. Can it happen? Yes it can. Can we avoid it? With intention we could but I am not sure if enough people know that fact and use their positive intention to avoid such an impact. What can we do? We can take, as mentioned above, certain precautions. For example holding a one months stock (some might want to hold a stock for more months) would be a good idea. Furthermore you could protect your electric items by using a Faraday cage (http://en.wikipedia.org/wiki/Faraday_cage). Maybe buying a Faraday cage is not for everybody. However if you deal with important and sensitive information it might make sense. If buying a Faraday cage is not an option make printouts of all important information. Paper will not be affected by the electrostatic discharge. Have your bank statements or any documents proving your legal ownership of what ever is important to you in a printed form in a place that you have access to at any time.
Final word:
Sorry for being again the messenger of information that might not be to your liking. However I thought it is important to give you these pieces of information. Please take note that some of the possible outcomes mentioned above could mean some temporal hardships as we will be forced to make some changes. As mentioned in a previous post, not all that seems bad is really as bad as it seems. Humankind has grown whenever there were difficult situations and I do expect that we will see it happen again. For many, moving from a superficial way of life with a lot of consumption, greed, envy (because the neighbor or colleague or whoever has a faster, bigger car or a more expensive watch or a more expansive house), a life with a lot of stress, vanity and selfishness into a new life where, for some people lost characteristics, such like honesty, ethics, true love, happiness, generosity by helping others, become important and normal again, might not be that bad once those that have forgotten all these attributes, get used to the changes.
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