As the editor of the Silver Bear Cafe, I spend most of my time researching current events. I explore the markets, the economic war that is being waged on the middle class, precious metals, the Federal Reserve, energy, and how to go about surviving financially. In this weekly column I will attempt to condense the week's events and examine how the news might affect your pocketbook. JSB

Financial Markets

The markets, globally, are all on life support. The all pervasive debt, that has infected every sector of every marketplace on earth, has rendered the markets and all related institutions "zombiefied".

All markets are rigged, and, in many cases, the rigging has been exposed, time and time again, by irrefutable proof. For example, the interest rate markets, which big banks have conspired for years to rig, currently involves over $800 trillion in assets whose values are interest rate dependent. The London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at which banks borrow unsecured funds. This rate has been, and continues to be criminally manipulated, which recently became big news and was deemed "the LIBOR scandal". The criminal perps, exposed then, were not even procecuted, much less jailed, and are continuing to steal from you and me, all savers, most pension funds, as well as local, state, and national governments. They have not, in the slightest way, been curtailed, much less stopped.

The $1,200 Trillion Dollar derivatives market, a mind boggling number that defies comprehension, is a market that 100% of the big banks in the world have exposure to and that, 70% of which, are involved with interest rate swaps. In an attempt to simplify an explanation, if (when) interest rates rise (and that rise has started) all of these banks will overtly fail big time. Most are, already, covertly and irreparably insolvent. There is nothing holding them up except the criminal Federal Reserve buying U.S. Treasuries (which is, essentially money that the American tax payers are liable for) and loaning it to the banks and large corporations. I can't, and will never, repay that debt. You can't, and will never, repay that debt. The banks and corporations that are borrowing it can't, and will never, repay that debt. The Federal Reserve is currently paying that debt by issuing more debt. That last sentence reeks of insanity. The train wreck, albeit a slow motion one, happened in 2008 and has been kept out of the public eye by smoke and mirrors. Consequently, the world is waking up to these perverse and demented shenanigans.

From Deepcaster:

Another indication of impending Financial Collapse (indeed, probably The Primary Signal) would be a sudden Flight from, and dumping of, the World's Reserve Currency, the U.S. Dollar.

The Fed's Ongoing QE will generate such a Flight at some point – the only question is When? But we do not see such a Flight yet because many Major Fiat Currencies are simultaneously being debased by their Central Banks in the so-called Currency Wars. At some point these debasements will begin to be manifested in a spike up in commodity prices.

Indeed, we may already see the beginnings of that in the apparent bottoming of Commodities Prices. The CRB has moved up in the last two weeks. (See Deepcaster's latest Forecasts.) The $US is still the least dirty shirt in the Fiat Currency laundry because of the (falsely) perceived relative strength of the US Economy.

As to U.S. Treasuries, their strength/weakness will, short-term, continue to be determined by "tapering" talk. If/when The Fed talks tapering, Treasuries will weaken, because Fed buying has artificially supported the Bond Market. Yet, out of the other side of their mouth they signal "more QE," and that causes Treasuries to strengthen (yields fall).

N.B.: However, continuing Fed-generated QE will likely be useless at some point soon to support U.S. Treasuries. Non-U.S. Central Banks and Big Investors are already dumping U.S. Treasuries by the carload. Thus, at some point even The Fed will be unable to save U.S. Treasuries, which will than tank (Rates Spike).

In fact, they have no choice but to continue QE and that is what will actually happen until Hyperinflation collapses the $US… However, when continuing QE (i.e. Bond Buying) no longer serves to support Treasuries, i.e. to suppress Interest Rates, that will also be a signal that Financial collapse is impending, because that will signal The Fed has lost control of the Bond Market, and Interest Rates in the Broad Economy. That has not happened yet but will. (See our Forecasts.) (Some, including Rob Kirby, whom we respect, reportedly thinks The Fed can control the whole curve indefinitely through OTC Swaps and Forward Rate Agreements. But this omits Real World Developments, e.g. QE generated Price Inflation of Real Assets.) We already saw counterparty defaults on Paper Assets in the 2006-09 Crash, and we will see them again, as The Bond Market Crashes.

On the Economic War Front

It has been very difficult for me to sway most folks opinions concerning any governmental ploys to screw them. "They just hear what they want to hear and disregard the rest." I sometimes get so exasperated, I wonder if they are worth it. I often find myself in a state of resignation while considering the possibility that they enjoy being screwed. There's a word for that affliction, but I'm not quite ready to dive into the causes of mass mental psychosis at this juncture.To consider the possibility that there is some collusion between big business and the government that results, detrimentally, to the average citizen's well being, is so distasteful that most find it so uncomfortable to consider that they categorise it as "beyond the realm of possibility".

I have posted several articles about Volkswagon models, made in the U.S. that get over 70 mpg, but, because of their milage, are not permitted to be sold in America. The following report, from Jim Stone, provides evidence that there are several large manufacturers that are producing automobile models that get fifty plus miles to the gallon.

What could possibly be going on? It turns out that there are two major issues at play here. First, obviously, any increase in milage would result in a decrease in the amount of fuel sold. Less fuel sold means less profits for the oil companies. That, in itself, is a super slimy reason to prohibit the sale of extremely efficient vehicles. It pre-supposes that there are law enactors who would vote to pass legislation that would, ultimately, diminish the standard of life for the majority of Americans in order to provide more profits for big oil. What, in the world, could have possibly motivated these law enactors to do such a thing?

There is a second issue going on that is equally as reprehensible as the greed factor illustrated above, and that is, the vilest reason of all... taxes. It turns out that federal excise taxes on gasoline and diesel sales raises about $50 billion a year. A total US average fuel tax of 49.5 cents per gallon for gas and 54.6 cents per gallon for diesel is currently levied. If the average efficiency of vehicles was doubled, that tax would be halved. The possibility that fuel related tax revenues could be reduced so drastically, provides a situation which is considered untenable by the mental midgets that run the country. The politicians say we can't afford tax cuts. I say we can't afford politicans...

From Jim Stone:

This is the 261 MPG volkswagen I mentioned a few months ago. Yeah, that station wagon delivering 65 U.S. MPG looks pretty good for an American family, but 261 mpg is pretty tempting. Perhaps I'd spring for it, and certainly if I managed to get one into Mexico it would not get crushed. But don't even think about approaching the U.S. border with this one, if 65 MPG from a large station wagon will get your car taken away by the FED, this bad boy would land you in prison.

It ended up getting ridiculed for only achieving a combined mileage of 160 MPG in U.S. gallons (192 combined in Imperial gallons), but come on now, at that point, WHO CARES. Even at 160 MPG combined, which means the highway mpg is well into the 200's, this particular car exposes the fuel mileage lie so harshly that there is absolutely no recovery or hiding from the truth, even Europeans are getting scammed at 65 mpg while Americans are getting more than raped.

How long are Americans going to continue to tolerate a government that can't even be honest about fuel economy, all the while that same government back stabs the American psyche with illusions of wastefulness? I now feel stupid about even mentioning that 64 U.S. mpg Seat Toledo I did a big write up about earlier. The only reason why I thought that car was remarkable is because I myself had been fooled, that station wagon mentioned above is a whole lot better. And that is not even the best there is. If you take the time to wade through all the censorship, you will eventually discover that there are over 20 full sized cars, including 10 SUV's that get combined mileage figures over 50 U.S. MPG, and that's not counting econoboxes.

Americans need to stand up and demand the government to stop censoring search results to prevent Americans from learning the truth elsewhere. Americans need to stand up and call the government on the carpet over the lies that "40 MPG can be achieved in the future" all the while even American car companies such as Ford are producing 65 plus MPG cars for sale on foreign markets right on American soil. It is time to end the lie, and tell these scamming frauds in our government to STICK IT.

If there is any "conspiracy" you could use to wake Americans up, it is this one, these cars are real and not just a bunch of blurry UFO photos. You cannot let the truth slip away on the basis of "the cars not being up to American standards", especially when those standards are forced to include having always on cell connections to every car that can be used to commit murder when the government deems fit as they did in the case of Hastings. There is nothing better about American "improvements" or "standards" that is in any way more beneficial to the people than the European counterparts, and forcing every car to give the government the option to murder via wire is an "improvement" every American can certainly live without. I'd take a fuel economy improvement over that ANY DAY.

Precious Metals

Confiscation, not unlike inflation, is theft. Whether it's your guns or your gold, it is theft. Those that implement it are thieves. Those that condone it are criminal predators. When they come, they will take everything you let them. Those that resist them are free men. Those that allow it are slaves. Don't associate with slaves. It won't wash off.

In our on-going attempt to "let you know, in our opinion, how current events will affect your pocketbook", I will continually bring to light legislation that is intended to feloniously steal your retirement. Obama is like a stock broker I knew many years ago. His motto was: "I can take your worthless equity and turn it into valuable commissions almost overnight". In my 2004 missive, Paradise Lost, I attempted to map the progression of our economic melt down. The following is an excerpt from that rant:

Right before the stock market melts down, the real estate bubble will go kabloowie, Fannie and Freddy will go up in a puff of smoke, and the domestic banking system will come to a screeching halt. The Fed will mindlessly continue to keep the presses running for as long as they can, (after all, that's all they know how to do). The erosion of the buying power of dollars will accelerate exponentially. From an American economic standpoint, we will have arrived at "end game".

From Simon Black:

Gold owners are almost universally familiar with the story of Franklin Roosevelt criminalizing the ownership of gold back in 1933.

Executive Order 6102 was signed on April 5, 1933, and it forbade the "Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States."

Roosevelt further ordered that citizens in the Land of the Free surrender their gold to the Federal Reserve in exchange for $20.67 per troy ounce in Federal Reserve notes.

The term gold 'nationalization' is often thrown around. But remember, with nationalization, it's the state that takes control of an asset.

Executive Order 6012 took assets from private individuals, and then gave those assets to a private company– the Federal Reserve. This isn't nationalization. It's just theft.

You'd think that the entire nation would have been in an uproar. But surprisingly, this wasn't the case.

In fact, the Executive Order didn't even make the front page of the New York Times, whose main headline the day after was "BEER LEGAL AT MIDNIGHT".

It just so happened that prohibition was starting to be repealed right when Roosevelt's order was going into effect. So people were too distracted with their pent-up, alcohol-induced euphoria to really notice. Very clever timing.

Energy

The energy market are currently embroiled in a condition known as backwardation. That is a result of the future's market "out months" being priced lower than the "near month." The speculators believe that the price of energy will be less in the future than it is now. This could be a result of several factors.

One factor might be the onset of a global industrial slowdown, during which, understandably, less energy would be used everywhere. Less demand, lower prices.

Another reason might be the substantial increase in reserves brought on-line by North American shale plays. In my mind, this condition is made even more acute when considering the effects of inflation and the fact prices are expected to fall in spite of the diminished purchasing power of the not-so-almighty dollar.

None of these reasons portends positively on the economy here in the U.S. or anywhere else in the world for that matter.

Mr. McClellan takes the projection one step further and considers the correlation between energy usage and the effect a global economic slowdown might have on the markets. His prescience projects the possibility of a noteworthy DOW pull back. This coincides with the Baltic Dry Index which just saw the biggest weekly decline since December 2012. Get ready 'cause here it comes...

From Tom McClellan:

Crude oil production in the U.S. is now at its highest level in years. And American motorists are using less fuel per capita than at any time in the past 30 years. So why the heck are oil prices zooming up so high right now?

Actually, not all oil prices are zooming. The near month futures contract for light sweet crude oil right now is the August 2013 contract, which settled on July 18 at $108.22 per barrel. But looking out 11 months into the future to the July 2014 contract, we find that it closed at just $95.56. That is a huge difference, and it says that oil futures traders are not willing to bet on the current month's high price continuing into the future. In other words, it is a temporary anomaly.

Such anomalies can contain important information. When the near month contract is priced lower than the out months, that condition is known as "contango".

In commodities like gold and silver, contango is the norm since the available supply consists of not just the mining production but also all of the bullion sitting in warehouses and safes around the world.

But because oil is so much more expensive to store than gold is, there is not the same sort of standing inventory available to remediate temporary supply-demand disruptions. So oil prices can move to very large conditions of contango, or to the opposite condition known as "backwardation" like we are seeing right now.

The normal market-based remedy for a large contango condition is for speculators to buy the cheaper commodity in the spot market and put it into storage, then sell a distant month futures contract to take advantage of the price difference between near month and out month pricing. That can be a profitable game if the amount of that price spread is sufficient to pay for both the storage costs and the cost of capital. So there is a natural limit to how big a contango can get, assuming that there are storage facilities available.

The way that a backwardation condition gets resolved is either for consumers to use less of the high priced commodity now, or for producers to accelerated production to meet the higher current spot price rather than saving that production for later when prices are not as attractive There are limits on how quickly such production increases can be implemented, but a $12/barrel difference between the current price and that of 11 months out can pay for a lot of improvements to production capacity. There are also limitations on how much demand can be reduced due to higher prices. People still have to drive to work, and they still want to take the Winnebago to Yellowstone.

The Fed

What we all need to understand is that inflation is not a natural economic occurrence. There are those, i.e. Keynesians, that would tell you different. They are lying to you. They are the bad guys. They are on the criminal side of the biggest rip-off ever perpetrated, and you are the victims.

Central Bankers everywhere are crooks. They are counterfeiters, and through their actions our lives are slighted, and their's, along with the lives of the slimeballs they work for, enriched. Vast amounts of value has been transferred from the middle class (the only group that produces value), to the parasitic banksters. We work, we save, we build. They don't work. They don't save. They don't build anything. They just steal.

In the U.S. our currency has been debased by 97% since 1913. That means that the Federal Reserve, working hand in hand with the government and Wall Street, has stolen 97% of all the value that that the citizens of the United States have created in the past 100 years. Quantitive Easing is nothing more than a ruse whereby the Dark Side creates vast amounts of money out of thin air, spreads it around amongst themselves through bailouts, excessive salaries and bonuses, and spends it buying up corporations, businesses, commodities, and real estate the world over.

As you read through the table below, please realize that in each and every instance, some criminal banksters invented vast amounts of money for their personal benefit, to the detriment of the respective middle class of each country. And you wonder why you have to work so much harder just to stay afloat.

From Irwin Kellner:

If you look at the price indexes on a year-over-year basis, most measures of inflation seem to be subdued. This is even more so when you examine the so-called "core" rate of inflation, which excludes food and energy.

But we all have to consume food and energy, and as far as most people are concerned, it's what's happening now that matters more than what took place this time last year.

That said, an examination of the latest readings of two widely watched indexes, the producer price index and the consumer price index, reveal a rather disturbing trend. Inflation is slowly but surely returning.

Wholesale prices in June surged for the second straight month, rising a whopping 0.8%, the fastest rate since last September. For their part, consumer prices jumped 0.5% in June, the most since February, and matching the monthly gains posted last August and September.

Looking back, this should be no surprise. The degree of monetary ease emanating from the Federal Reserve these past few years has been nothing short of astounding. As the great economist and Nobel laureate Milton Friedman famously said: "Inflation is always and everywhere a monetary phenomenon." Simply put, what we're seeing are the consequences of too much money chasing too few goods.

The U.S. has emerged from the dark tunnel of financial distress in a better position to shoot forward than many believe, if it figures out how to do a few things to take advantage. This surfeit of liquidity had to go somewhere. First it went into the financial markets. Stocks and bonds soared to record highs.

Now it is showing up in the real economy. Gasoline and food, two items routinely excluded from discussions regarding the underlying rate of inflation, are spiking, thereby pushing the price indexes higher.

Gasoline in particular is bubbling up. Pump prices have soared more than 20 cents from their lows of early May, 15 cents of which came last week, with more hikes expected.

Of all the prices to exclude from the consumer and wholesale price indexes, this is the silliest. Gas and oil are vital to our economy, powering farms, factories, office buildings and, of course, providing the fuel to transport goods and people from one place to another.

Whenever the price of energy rises, fuel surcharges spring up until they become ubiquitous. This will occur in weak economies as well as in strong ones.

Financial Survival

This week, Mr. Leopold explores the changes that have occured, concerning the way that the American middle class fares when compared to the rest of the world.

After having occupied the numero uno spot for close to fifty years, we have now fallen back to number twenty-seven. Financialization is preported to be the culprit.

Financialization is the a state where making money from money becomes more important than providing real goods and services. Financialization is only more important to those in society that don't produce, construct, or create anything.

Production, construction, and creation are each indispensible functions of a healthy economy. Ours is not a healthy economy. Those that have taken the reins of this disfunctional runaway are not healthy individuals. They are sick puppies.

They have abandoned any moral compass that they might have once been somewhat familiar with and have, instead, embraced the God of Pure Greed as their savior.

From Les Leopold:

 

America is the richest country on Earth. We have the most millionaires, the most billionaires and our wealthiest citizens have garnered more of the planet's riches than any other group in the world. We even have hedge fund managers who make in one hour as much as the average family makes in 21 years!

This opulence is supposed to trickle down to the rest of us, improving the lives of everyday Americans. At least that's what free-market cheerleaders repeatedly promise us.

Unfortunately, it's a lie, one of the biggest ever perpetrated on the American people.

Our middle class is falling further and further behind in comparison to the rest of the world. We keep hearing that America is number one. Well, when it comes to middle-class wealth, we're number 27.

The most telling comparative measurement is median wealth (per adult). It describes the amount of wealth accumulated by the person precisely in the middle of the wealth distribution -- fifty percent of the adult population has more wealth, while fifty percent has less. You can't get more middle than that.

 

You must first realize that there are, present in our lives, enemies. You must then know who those enemies are and act accordingly.

Eliminate as much debt as possible, especially “variable rate” debt, such as credit cards and lines of credit. Interest rates will be rising, so the elimination of debt offers a “real return” of escaping rising rates by creditors.

Get some control over some fresh water.

If you are depending on Social Security, stop.

Follow the course opposite to custom and you will almost always do well...

Its not what you don't know that will screw you up, it's what you know that is wrong. The spin you hear from the mainstream media is intended to mislead you. Open your eyes and face the future. If you leave your head in the sand and ignore it, you are only leaving your butt exposed for the world to kick. This all may sound like gloom and doom, but when you get a handle on what is going to happen, you will have a future filled with opportunity. Fortune favors the Informed.

More next week...

May the Great Spirit be with you always,

Johnny Silver Bear
Chief cook and bottle washer, The Silver Bear Cafe

Disclaimer

All statements and expressions are the sole opinions of the editor and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The staff of Silver Bear Cafe are not registered investment advisors and do not purport to offer personalized investment related advice. The publisher, editor, staff, or anyone associated with, or associated to the Silver Bear Cafe may own securities mentioned in this newsletter and may buy or sell securities without notice.