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

How will the debt ceiling debate affect the markets? How will the possible downgrade of the United State's credit rating affect the economy. How will a growing reluctance, by foreigners, to invest in U.S. government debt affect the stock market. The answer to all three of these questions is the same. And that answer is: very negatively.

We find ourselves, once again, distracted. Distracted by the relief-driven stock market rally which, because of the government's kicking the can down the road, yet again, has provided investors with a questionably positive reason, for an already tenuous and over-bought market, to ascend to even greater heights. In my entire adult life I have never seen the influence of fear and greed reach such an irrational level. This makes the exuberance of the late 1920s seem justified.

We have also been distracted by the dog and pony show which is Janet Yellen's ascension to the position of Federal Reserve Chairman. Any positive reaction to this event is also preposterously unfounded. Janet Yellen will do her level best to continue to destroy our republic. After all, she will become the chief spokesman for the most evil cartel that has ever been conceived. How could we expect anything else?

Supporting Yellen has become a cause célèbre for naive market participants expecting some miraculous solution to "the impossible dream" which is our economic future. The reality of her past influence and involvement foretell a very different story from the one being purveyed by the propaganda machine. Yellen supported a host of economic policies during the Clinton administration that evidenced a complete and total lack of understanding of how to, or the possession of a will to, serve the people. She backed the repeal of the Glass-Steagall bank reform act which essentially gutted any regulation of the TBTF bank's financial shenanigans, letting the banksters unbridled greed run rampant, much to the country's detriment, destain and dismay. She supported the 1993 North American Free Trade Agreement (NAFTA) which was nothing more than a globalist ploy to destroy the middle class while enriching transnational corporations. But her pièce de résistance was to pressure the government into the adoption of a new means of determining COLA (cost of living adjustments) which was intended to lower payment increases to senior citizens on Social Security. She is, essentially, the "Wicked Witch of the East". And yet, somehow, the clueless population expects her to make things better? Actually it no longer matters what the clueless population thinks or wants. The bankster run self serving government will continue to serve itself...

From Ezra Klein:

It's easy to imagine how a politically induced financial crisis would seem inevitable in retrospect. Signs of distress abound. Look at VoteView, the highly respected measure of congressional polarization developed by political scientists Keith Poole and Howard Rosenthal. According to their analysis, the U.S.'s two major parties are more polarized now than at any point in history. A Gallup poll found that public confidence in Congress is at an all-time low. Congressional records show that the two most recent Congresses produced less legislation than any since Congress began keeping records in the 1940s.

Given such telltales, a prominent display of political dysfunction can't be dismissed as a one-off. Instead, it could be the trigger that leads global markets to construct a whole new narrative about the U.S. -- one that prices in the likelihood that Washington won't always get it right and may increasingly get things wrong.

The case for pessimism can be overstated, of course. "The last thing you want to do if you want to preserve credibility is to appear to be an optimist on the American political system," said Thomas Gallagher, a principal at Scowcroft Group Inc. "But so far the outcomes have been OK. We've been averting disaster."

Perhaps foreigners who don't follow every twist of congressional negotiations have an analytical advantage over Beltway denizens, who are surrounded by so much noise that they've lost track of the signal. "The process is ugly, and people in Washington are very focused on process," Gallagher said.

Process, however, matters. These last few years have normalized debt-ceiling brinkmanship. So let's assume that we have one or two debt-ceiling showdowns annually for the next decade. The chance that any particular conflict leads to a breach is quite low -- let's say a mere 5 percent. Yet despite the low probability of a debt-ceiling breach in any given showdown, repetition makes the odds extraordinarily good that we will, ultimately, breach the debt ceiling at some point over the next decade.

In that case, the U.S. will, solely because of political dysfunction, default on some of its debt. Perhaps we will pay off bondholders and only default on commitments to the elderly. Perhaps the default will only last a few days, or a week. No matter how it unfolds, the safest and most predictable investment in the world -- U.S. government debt -- will have proved itself unpredictable.

On the Economic War Front

During a meeting with a friend the other day, I was, once again, confronted with someone's apparent frustration over the government shutdown. He seemed to think "the Democrats" were only attempting to guide the country through the implementation a law that had been duly enacted by our conscientious elected representatives. His sanctimonious claptrap about Obamacare being "the law of the land" and that it therefore must not be obstructed, prompted, from your editor, a fairly egregious response.

In my opinion, anyone so inclined to such a gross misunderstanding of the corrupt motives of our present administration and all their partisan lackeys, and cannot see through the hype and confront the real intentions of Obamacare, does not deserve an opinion, much less a voice. I'm all for free speech, just not so close that I have to hear it.

There is something terribly wrong with the system when legislation, as absurd as the Affordable Care Act is, can be obtained by the subornation of Congress in the first place. It is, after all, simply legislation to mandate insurance, legislation that was bought and paid for by the insurance industry, which has little or nothing at all to do with health care, and everything to do with wealth redistribution.

The fact that we find ourselves in an increasingly dysfunctional republic is a result of a collectivist conspiracyand on the part of the puppet masters. They own the insurance industry as well as big-agri, and big-pharma, and are hell bent on global rule. Our country has been taken over by a group of political cockroaches. The decimation of our fair country is an intentional, maniacal unadulterated assault on our liberty which will, if left unabated, consume us all.

This week we initiated a "Best of the Bear" feature, through which I will revisit the most prescient and insightful contributions that we have been fortunate enough to receive over the years.

From G. Edward Griffin:

How can anyone make the War on Terrorism easy to understand? There are so many issues and so much confusion. I feel like the proverbial mosquito in a nudist camp. I know what I have to do. I just don't know where to begin. There is a well-known rule in public speaking that applies to complex topics. It is: First, tell them what you're going to tell them. Then tell them. And, finally, tell them what you told them. I'm going to follow that rule today, and I will begin by making a statement that I have carefully crafted to be as shocking as possible. That's primarily because I want you to remember it. When I tell you what I'm going to tell you, I know that, for many of you, it will sound absurd, and you'll think I have gone completely out of my mind. Then, for the main body of my presentation, I will tell you what I told you by presenting facts to prove that everything I said actually is true. And, finally, at the end, I will tell you what I told you by repeating my opening statement; and, by then, hopefully, it will no longer seem absurd. What I am going to tell you is this: Although it is commonly believed that the War on Terrorism is a noble effort to defend freedom, in reality, it has little to do with terrorism and even less to do with the defense of freedom.

There are other agendas at work; agendas that are far less praiseworthy; agendas that, in fact, are just the opposite of what we are told. The purpose of this presentation is to prove that, what is unfolding today is, not a war on terrorism to defend freedom, but a war on freedom that requires the defense of terrorism. That is what I'm going to tell you today, and you are probably wondering how anyone in his right mind could think he could prove such a statement as that. So let's get right to it; and the first thing we must do is confront the word proof. What is proof? There is no such thing as absolute proof. There is only evidence. Proof may be defined as sufficient evidence to convince the observer that a particular hypothesis is true. The same evidence that is convincing to one person may not convince another. In that event, the case is proved to the first person but not to the second one who still needs more evidence. So, when we speak of proof, we are really talking about evidence.

It's my intent to tell you what I told you by developing the case slowly and methodically; to show motive and opportunity; to introduce eyewitnesses and the testimony of experts. In other words, I will provide evidence – upon evidence – upon evidence until the mountain is so high that even the most reluctant skeptic must conclude that the case has been proved.

Where do we find this evidence? The first place to look is in history. The past is the key to the present, and we can never fully understand where we are today unless we know what path we traveled to get here. It was Will Durant who said: "Those who know nothing about history are doomed forever to repeat it."

Precious Metals

The Silver Bear Cafe has continually championed the possession of precious metals as one of the only true hedges against the violating nature of inflation. We all realize (at least those of us who have not lost the ability to think) that inflation is theft. We understand that those that seek to cause inflation are thieves. And I suspect that we all agree that the world would be a much better place if we could, somehow, eliminate thieves and thievery.

Although my habitual attention to the metals markets has provided insights into a corrupt and feloniously manipulated racket, I believe that I understand the motives of the big time players that actually "move" the markets, albeit by means that preclude the opportunity of any free market function. I have been prophesying, for years, that market energies would, eventually, overcome the criminals who have caused it to imbalance.

I have made many predictions over the years. Most have come true, although almost all took much longer to play out than I originally anticipated. I, like most of my fellow PM permabulls, still foresee an explosion in the prices of gold, silver, platinum and palladium in the very near future. Please remember though, "if you don't hold it, you don't own it."

From Mike Burnick:

Emerging markets investors, in particular, are losing confidence in dollar-denominated assets, especially bonds, as a direct result of Washington's dysfunction. While some are sanguine about the debt-ceiling standoff, saying it won't have a lasting impact, one of the largest holders of dollar-denominated assets, China, disagrees.

Just days ago, China's official Xinhua News Agency said the threat of default is putting China's dollar assets in "jeopardy" and called for a new international reserve currency to replace the dollar so international investors could avoid "intensifying domestic political turmoil" from the U.S.

China held $1.3 trillion worth of U.S. Treasury bonds at the end of July, so they're right to be concerned about a potential default, or even deferred interest payments from the Treasury.

Who can blame them for diversifying their massive $3.5 trillion in foreign exchange reserves away from the dollar and into alternative assets? And China's alternative of choice is gold.

The nation is already on pace this year to import a record amount of the yellow metal, partly due to increased consumer demand. But another reason is central bank buying. China imported 861.4 metric tons of gold through August 2013. That's more than double the 361 tons it imported at the same time last year.

Jewelry demand in China remains strong, as is the case throughout Asia. But with the price of gold reaching a three-year low in June, the People's Bank of China is also likely taking advantage of lower prices to exchange U.S. dollar debt for gold. And it's not just China.

Energy

It would seem that a renascence, of sorts, is occurring in Texas. The Barnett Shale has served as one of the primary sources of tax based revenue, in North Texas, for several years. As a result, signs of an economic slowdown are far less apparent in North Texas than in other areas of the country,, such as Detroit. Because of the economic stability that the oil business fosters, thousands of folks from all over the place, are arriving on a weekly basis. This has been good for business, which is, in turn, good for the housing market.

As recently as two years ago, another shale play was discovered in Central Texas. This formation stretches all the way across the middle of the state, from Laredo to Palestine, and has been dubbed the Eagle Ford Formation.

An now, this year, we are made aware of a third and potentially the largest of the three formations. It is called the Cline Shale, and is many times larger that all the other shale plays in the country, combined.

Because of the resource rich nature of Texas, I doubt that even the most despicable of "one worlders" will be able to derail the Lone Star State's economy, as they have successfully accomplished in the rest of the U.S., try as they might.

Successful industrial development serves the middle class in America. A strong middle class is the bane of the globalists. Many people will be enriched as a result of investing in the development of infrastructure to serve this booming energy play. Fortune favors the informed.

From Matt Insley:

America’s railways are bustling with oil and liquid products traffic.

The rail system is the “brand new logistic opening for moving energy supply around North America” says our man on the scene Byron King.

In fact Byron was recently onsite in Western Maryland, muddying his boots at a local rail yard. [To get caught up on this story take a look at Byron's short, 3-minute video about America's booming railways -- by clicking the image below:]

Indeed, America’s railways, the same thoroughfare that got this country bustling at the turn of the century, are back in the foreground of America’s energy comeback.

More oil and liquids production will continue to pack the rails as the US boom chugs along.

Frankly, the question isn’t if rail traffic can keep growing. To be honest growth can only continue so much. Heck, we’ve already seen a massive influx of crude by rail traffic — shipments are up some 41% since this time last year.

No, I don’t think our opportunity sits in expectations for explosive rail growth, but rather that the current level of crude by rail shipments will endure over time even in the face of pipeline efficiencies. Truly, the rail boom is here to stay. And you should count on steady profits from well-run rail companies.

The Fed

Prior to 1913, America was a prosperous, powerful, and growing nation, at peace with its neighbors and the envy of the world. The Federal Reserve was chartered by an act of deceit, through a vote taken in congress when most had gone home for Christmas holiday on December 23rd, 1913. Three senators, who had been persuaded to postpone their departure for the holidays, passed the act .

This simple, but terrible, law completely removed from Congress the right to "create" money or to have any control over its "creation", and gave that function to The Federal Reserve Corporation. This was nothing more than "a license to steal".

The Bankers (most of them European) assured Congress that they would happily loan the government as much money as they wanted, in exchange for the government's agreement to pay it back, with interest. The obligation to pay back the principle and interest was to be shouldered by the tax payers and collected by the Fed's collection agency, the IRS. The collection is mandated under penalty of law. Up until this legislative abomination, the U.S. Treasury loaned money to the government at no interest. Which system favors the citizens? Duh. What could have motivated any Senators to enter into such an evil pact? Duh.

Lets say the Fed loans the government $1 billion. The government then uses the money to pay its obligations. What are the results of this fantastic transaction? Well, $1 billion in government bills are paid all right, but the Government has now indebted the people to the bankers for $1 billion on which the people must pay interest! Tens of thousands of such transactions have taken place since 1913 so that as of July, 2013,, the U.S. Government was indebted to the Bankers for almost $17,000,000,000,000 (trillion). Most of the income taxes that we pay as individuals now goes straight into the hands of the bankers, just to pay off the interest alone, with no hope of ever paying off the principle. Our children, and their children have already been forced into servitude.

From Steve Saville:

The Fed's mode of operation has drastically changed over the past 12 years. Prior to 2002 the Fed would tighten monetary policy in reaction to outward signs of rising "price inflation" and loosen monetary policy in reaction to outward signs of falling "price inflation", but beginning in 2002 the Fed became far more biased towards loose monetary policy. This bias is now so great that we are starting to wonder whether the Fed has become permanently loose.

The following chart comparing the Fed Funds Rate (FFR) target set by the Fed with the Future Inflation Gauge (FIG) clearly illustrates how the Fed has changed over the past two decades.

Note that the Future Inflation Gauge is calculated monthly by the Economic Cycle Research Institute (ECRI) and should really be called the Future CPI Gauge, because it is designed to lead the CPI by about 11 months.

The chart shows that prior to 2002 the FFR tended to follow the FIG. After the FIG warned of rising "price pressures" the Fed would start hiking the FFR, and after the FIG started signaling reduced upward pressure on the CPI the Fed would start cutting the FFR. During 2002-2004, however, the Fed not only didn't hike its targeted interest rate in response to a sharp increase in the FIG, it continued to cut the FFR.

The Fed's decision to maintain an ultra-loose stance during 2002-2004 was the fuel for the real estate investment bubble and set the stage for the collapse of 2007-2009.

There was a lesson to be learned from what happened during 2002-2007, but the Fed apparently learned the wrong lesson. The lesson that should have been learned was: Don't provide monetary fuel for bubble activities, because the eventual economic fallout will be devastating. Unfortunately, the lesson that was actually learned by the Fed was: An economic bust can be avoided forever by keeping monetary policy loose forever. The result is that the divergence between the FFR and the FIG that arose during the first half of the last decade is nothing compared to the divergence that is now in progress. Moreover, the near-zero FFR doesn't do justice to the 'looseness' of the Fed's current stance, in that 4+ years after the end of the last official recession the Fed is still pumping money as if the US were in the midst of a financial crisis.

Financial Survival

The Financial Survival Forum is a section of "the Bear" that allows me to suggest investment strategies, ways to defend the assets you have already amassed, but, most importantly, to apprise you of the various threats your life and liberty that are currently being posed by our enemies. I don't think that anyone could argue that those who willfully attempt to do you harm are certainly not your friends, and as such, must be continually monitored and defended against.

These "enemies" that I speak of can be individuals, or even groups of individuals, but are also institutions, like the ones I mention so often: big- insurance, big-agri, big-pharma and even big-healthcare. I increasingly find myself wondering if the age old tenet of the medical profession's hippocratic oath (do no harm) as been altered to become the hypocritic oath (cover my butt). It seems like that sentiment has become predominant case with many of those that we are compelled to deal with on a daily basis.

The government is no longer on our side. The rich are no longer on our side. The poor have never been on our side. As members of an ever-dwindling middle class, we have been left to fend for ourselves. We have been "hung out to dry", so to speak.

The means and methods of defence in these situations are diverse. I try to touch on, and highlight any and all approaches and solutions that I become aware of. One must, obviously, recognize, and be fully aware of the existance of a problem before any viable solution can be effectively applied.

From Mike Whitney:

Cars on the Obamacare Express jumped the track and began piling up as soon as the Healthcare.gov website went live on Oct. 1, and the expected Obamacare train wreck continues to create its carnage.

Of course, the carnage is just beginning. Obamacare is a socialist death trap of graft and corruption. It was created by lobbyists for the medical industrial complex as a way of growing its consumer base with the guarantee of benefit payments from the Federal Treasury. It's a redistributive system that steals from the producers in order to feed the corporatocracy.

Nothing about Obamacare is healthcare. It is simply medical tyranny created under the guise of political doublespeak. It sounds great to promise free or low-cost health insurance for everyone until people begin to learn the true cost of "free" government programs.

America's healthcare system is a profit-driven, disease-oriented death system. It is a system of conflict of interest, tainted research, greed for money, deceived and pretentious doctors and scientists, lying, cheating, invasion by the morally bankrupt marketing automatons of the drug industry, greedy power-hungry politicians, and Federal and State regulators. It is all about money generated on the sick and the dying

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 think 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.