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

In reviewing this week's financial news, we find the blogosphere filled with reports of criminal activity on the part of bankers, oil company executives, State Department personnel, our current Administration, law enactors, law enforcers, the Federal Reserve, and the the IRS.

I am becoming increasingly concerned with the probability that, due to a festering lack of the Rule of Law, middle class American's pension funds, retirement accounts, bank accounts, and other forms of private property are at risk of criminal confiscation.

Our elected congressional representatives no longer represent us. They represent the corporations that fill their re-election coffers. The FDA no longer works for the people, they work for the pharmaceutical companies that supplement their salaries.

The most prevalent and most insidious form of quasi government theft is through inflation, which is the contrived product of the Federal Reserve's counterfeiting. But the plague of greed and corruption has metastasized all over the world, and the problems have become much worse than simply theft through inflation. As Matt Taibbi reports, everything is rigged.

From Michael Kilbach:

Does the public and do you really understand how inflation can either destroy your financial health or make you rich?  If you understand inflation you can be more aware of its impact in the financial markets and use it to your advantage.

There is a lot of controversy about what inflation is; we happen to believe it is an expansion of the money supply.  However, in this article we will just focus on the effects of inflation and how to take advantage of it.

Please consider the following individual points to understand our perspective.

1)  The "price" of something is a measure of both the item and the currency.  It is a relative ratio.  The currency is measuring the item but the item is also measuring the currency.

Above we can see that the "value" of the dollar, the measuring stick, is just as important as the "value" of the item it is measuring.  But what if the unit of measure, the dollar, is constantly losing value?  Wouldn't the changing value in the currency make it harder to measure investment performance and difficult to compare investment opportunities?

2)  A chart of a currency can be deceiving because a currency chart is measured against other currencies.  If both currencies are losing value, then they will appear rather stable relative to one another.

In the above chart we can see a 43% loss in value of the US dollar but that is relative to other currencies that may also losing value.

3)  Over time, goods as well as most investments seem to go up in "price", suggesting the currency is constantly losing value and purchasing power.  This loss of value in the measuring stick can create all kinds of distortions and misleading signals in the markets.  Consider for a moment that assets are measuring the value of the dollar.  Now look at how many more dollars it takes to purchase the same investment.  That is a very real loss in purchasing power.

On the Economic War Front

The world is crumbling down around us. And not only economically. We have allowed the orchestrated demise of the world as we know it by a group of misguided, irresponsible power mongers.

Why are these guys bad? Why do I often refer to these banksters as "the Dark Side?" Is it simply due to the fact that they are driven solely by a lust for power? While lust, avarice and greed are indeed Basic Biblical Sins, many people lacking moral stamina fall prey to the various turpitudes of modern society. While failure to resist the temptations of the Basic Sins is a mark of diminished character, it is, in itself, not all-damning.

No, it is because of their lack of cohesive vision. They have attempted to install themselves as the sole shot callers, attempting to rule the world, with no other qualifications other than their membership in the various "lucky sperm clubs." The passed down institutional wealth that they have amassed, through generations of corruption and successful financial manipulation, has skewed their sensibilities. The ideals that may have seemed noble to their grandfathers have been set aside. Their sole motive for world domination has digressed to one of the lowest common denominator. Absolute greed, like absolute power, corrupts absolutely. With no benevolent vision for the future, they have systematically decimated the planet's resources. The resulting imbalance is one that can now only be righted by the severe suffering of all of humanity, including themselves. They are maniacs who have painted humanity in to a corner that is, for all intents and purposes, inescapable.

From Kevin D. Freeman:

Many are worried about the possibility that governments will confiscate wealth as they face a deepening financial crisis. This fear was heightened recently with the actions in Cyprus. Technically, the Cypriot banking grab was described as a means of bringing solvency to banks in trouble. This can be seen in the way things concluded, seemingly in line with what our own FDIC would do in the case of a failed bank.

Deposits up to a set threshold were protected and those above that level were forcibly exchanged into bank shares. The problem is that early discussions suggested a much more direct approach, simply taking a percentage of all deposits.

The Italians are also considering confiscation as suggested by the CEO of Italy’s largest bank. Portugal is considering paying workers in Treasury Bills rather than cash. On the heels of all of that, some of Germany’s top economists are boldly pushing for further wealth confiscation.

Precious Metals

When was the last time that you acted in a manner that would help insure your personal liberties and freedoms? When have you acted in a manner that did not simply depend on the Government to protect and take care of you. The solution will come as a result of our individual actions. There are no groups on our side. The larger the group, the larger the problem.

I will be forever imploring you to own up to your individual patriotic responsibilities. One easy way is for you to do this is to purchase physical gold and silver bullion. In reality, compared to the amount of fiat currency in circulation, there is so little bullion available for purchase, that a concerted effort on your part could send the value of gold, and just as importantly silver, to the moon.

By participating in this simple, passive action, we can be part of the solution and avail ourselves a chance to survive the mind-boggling catastrophe that lies ahead. We are faced with an epic struggle against the tyranny of false money. Gold and silver are assets that are not borne out of someone else's debt or liability. Debt based money is abusable and will, therefore, always be abused. Like the children in a dysfunctional family, we have been severely abused. Denial is not a river in Africa.

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance. -- James Madison

Besides enriching ourselves through the exercise of buying and owning gold and silver, we can passively bring about some very important changes in one way that will really make a difference. As the price of bullion subsequently rises, more and more people will begin to see Federal Reserve Notes for what they really are; fake money, and recognize and appreciate precious metals for what the really are; real money.

If one half of one percent of Americans each went out and bought ten ounces of silver, that would amount to 14,000,000 ounces of silver. COMEX has much less than 100,000,000 ounces of silver available. That much buying pressure would have an explosive effect on the price. This could force the hand of the cartel and help change the world for the better.

Get the word out. A candle loses nothing by lighting another candle. Consider it your patriotic and moral imperative.

Buy gold and silver.

From Robert M. Williams:

"It's not the size of the dog in the fight, it's the size of the fight in the dog." - Mark Twain (1835-1910)

The more I look at gold the more I realize that very few people understand what’s going on with the yellow metal. In part this is do to the fact that gold brings emotions to the surface faster than any other investment I can think of, and emotions have little or no place in the markets. Bringing a varied group of investors together to discuss the yellow metal is like sticking Protestants and Catholics together in a room and telling them to discuss birth control. It may be entertaining, but the discussion goes nowhere. Right now the folks who like gold are complaining that the Fed and the bullion banks, financial institutions like Citibank and J P Morgan, are manipulating the price of gold. I believe there’s more than a grain of truth to that, but if I’m long gold it’s of no conciliation.

I believe that you can manipulate the price of gold until the cows come home and all you do is change the secondary and tertiary trends. If you’re really good, and these boys doing the manipulating are really good, you may even disrupt the primary trend, but you will not change it. A silk purse will never be a sow’s ear, and vice versa. 

There are no mysteries! The primary trend was established in 2001 and it has been and is upward sloping. I never concern myself with the “why” of a price movement, but I’ll make an exception just this one time. The primary trend of gold is upward sloping because the United States began to print fiat currency excessively almost two decades ago, and since then every other major power in the world began to do the same thing. Currencies are not a store of value; they are promises to pay and that’s just a fancy term for debt! So when everybody goes off the deep end accumulating debt, the smart money searches out the one true store of value, gold. That’s where we are right now, searching for a store of value.

What if anything could change the primary trend from up to down? The only thing that could change the primary trend is if every major economic power announced today that they would live within their means and stop printing fiat currency. If that happened the price of gold would fall US $500/ounce that same night and it would keep falling for quite some time. Of course the chances of that happening are zero, so the trend will remain upward sloping for the foreseeable future. Why then the manipulation? Right now central banks have loaded their balance sheets with, for the most part, worthless debt and precious little real money. The manipulation is a play for time so they can somehow unload their worthless debt and accumulate gold. In short they want to print fiat paper and accumulate gold. Normally excessive printing would inflate the price of gold, but this time is different.

Energy

In the end, I guess it all boils down to human nature. There are and always will be the haves and the have nots. In their insatiable quest for profits, "the Dark Side", using their agents in trans-national corporations, the World Trade Organization and the World Bank, have successfully brought us to the brink of the abyss.

Knowing full well the gravity of the situation and the only solution, they are now poised to solve the problem. There are far too many people on the planet. The time has come for contraction.

The world is no longer capable of economic expansion. We are entering a period of civilization where the keyword is sustainability, not growth.

Sustainability is job one. In order to incite the massive contraction that is desperately needed, economics will be used as a weapon. It is the weapon of choice when it comes to survival. The possession of Hard Assets, Energy and Fresh Water will rule the day.

What purpose would a revolution serve. Who among us has a solution?

In a world of $100/barrel oil, the weak die and the strong survive. In a world of $100/barrel water, there will not be 6.5 billion people on the earth. Actually I expect the number to be more in the 500 million range.

From Robert O'Neill:

John Hofmeister doesn't call it 'peak oil,' instead he calls it the 'energy abyss,' the point at which the global economy ceases to grow because the oil industry can no longer meet demand.

Hofmeister is the former president of Shell Oil, the same Shell Oil that is preparing to drill the deepest hole yet drilled to reach oil and gas 200 miles out in the Gulf of Mexico in 9,500 feet (2,900m) of water, surpassing the working depth of Shell's Perdido rig, also located out in the Gulf and producing around 100,000 barrels a day. The cost of that rig: $3 billion.

In his 2010 book, Why We Hate The Oil Companies, Straight talk from an energy insider, he wrote the following:

"It's inevitable. The industry that produces oil can't produce enough, unless the world doesn't grow. It's possible that we will have such expensive oil that we will stymie growth. How many people will suffer? How many poor will become poorer, while rich become richer because we have failed rational tests of creating alternative competitive fuels? We have a choice to condemn ourselves to an energy abyss in the name of the status quo and lack of enlightened leadership, or we can choose to develop alternatives.

Why aren't we more thoughtful about the future? Why don't we begin the journey towards a range of alternatives that delivers increased national security, increased economic security, and multiple choice for consumers?

I think in this regard, we are missing in the whole construct, a meaningful voice of government as an intermediary and an enabler to a better future when it comes to fuel choice. The US has been crippled for 7 years by high-priced fuel; the government has done nothing to speak of to address the issue.

The Fed

In 1913 the most powerful banking group in Europe bribed Woodrow Wilson, who was running for president, with enough money for him to be elected president. They also bribed congress and all of this was with the understanding that if Wilson won he would sign into law two things. First the (unconstitutional) Federal Reserve Banking Act which would create the Federal Reserve Banking System which would control the money of the U.S. Treasury. Second was the (never ratified) Income Tax Act. The IRS was set up as the collection agency to insure that the American people would pay the bogus interest on the bogus loans that the Federal Reserve would then make to the government. Previously, the treasury would simply print the money that the government needed at no interest. Everyone involved in this scam, Wilson, the congress, the banksters, were all criminals, and those that have taken their places today are criminals as well.

Central banking is the vehicle through which the most heinous rip off ever conceived in the history of the world has been perpetrated. The U.S. Federal Reserve is the most successful of all central banks in history. Since 1971 it's unfettered issuance of money has continued to debase our currency and as a result adulterated our living standard at an ever increasing rate.

"The Dark Side" has successfully placed their agents in positions as politicians ranging from school board members to U. S. presidents, newspaper publishers, columnists, church ministers, university presidents, professors, textbook writers, labor union leaders, filmmakers, radio and television commentators and many others.

These agents control the information available to our people. They manipulate public opinion, elect whomever they want locally and nationally, and never expose the crooked money system. They promote school bonds, expensive and detrimental farm programs, "urban renewal," foreign aid, and many other schemes which place the people more deeply in debt to the bankers. Thoughtful citizens wonder why billions are spent on one program and billions on another which may duplicate it or even nullify it, such as paying some farmers not to raise crops, while at the same time building dams or canals to irrigate more farm land. Crazy or stupid?

Neither. The goal is more debt. Thousands of government-sponsored methods of wasting money go on continually. Most make no sense, but they are never exposed for what they really are: siphons sucking our Nation's economic lifeblood.

Until everyone (who is capable) wises up to the scam, and realizes that the IRS is simply a collection agency for the Federal Reserve, that both are criminal, unconstitutional organizations and that the American people will never be free until both are abolished, the state of the union will continue to slide down the hill towards the cliff at an ever increasing rate.

From Simon Black:

Some days one can't help but look at the headlines and think of Ayn Rand.

With all the destructive measures by desperate governments from Cyprus to Argentina, it seems sometimes like we're reading from the pages of her seminal work, Atlas Shrugged.

But what we're seeing now seems to have far surpassed Atlas Shrugged. We're definitely into 1984 territory.

We've recently learned that the US federal government has (a) secretly tapped the Associated Press's phone records, and (b) used the nation's tax authorities to target opposition political groups.

This is the same sort of thing one would expect from Belarus or Azerbaijan. But these sad events are, unfortunately, no longer surprising in the Land of the Free. Nor are they isolated.

The easy course of action is to live in denial– "It can't happen here, it won't happen to me." Everyone wants to think this. But it does happen. And given the trend, it's going to happen much more.

This isn't intended to be gloomy, rather a sobering wakeup call. Sometimes the hardest thing to do is step back, look at the big picture, and realize that these tactics are no longer fiction. This is now reality in the Land of the Free. Welcome to 1984.

Financial Survival

Our current system is broken. It is broken beyond repair. I had once thought that through my energies, and those of many others, who saw the writing on the wall, that I/we could help wake up the general population to the stark reality of the cancer of tyranny, and that, united in the cause to fight tyranny, we could do something about it. This is a tyranny that has infected every aspect of our lives, It threatens our very survival. Unfortunately, we have failed to wake up a sufficient number of those who care enough to act. There are, perhaps, only 10,000,000 citizens in this county that care enough to be willing to see what's going on. That 10,000,000 is out of a population of 330,000,000. We don't seem to be getting very much help from the bulk of the populace. Consequently, we are all going down. Their unpreparedness will simply exacerbate the situation. We must now "be the ants" and prepare to witness the end of the current paradigm and be ready for whatever is to replace it. They will continue to "be the grasshopper" and worship at the altar of American Idol and Jersey Shores.

From The Daily Bell:

In the United States, company pensions have given way to "directed contributions" that in turn gave way to empty air when the stock market dropped by half in 2008-2009. While no doubt some portfolios have recovered, many others were probably reconfigured once the financial crisis hit – ensuring that people first received the body blow of a huge equity haircut and then sat out the subsequent recovery.

It is asking most people to do the impossible when one demands that they refrain from acting after seeing their precious nests eggs halved in a matter of weeks or months. Human nature demands that people remove themselves from pain; it's a natural reaction.

Also, people don't understand the nature of equity investing in the 21st century. It is very much responsive to monetary stimulation courtesy of central banking.

Logically speaking, people are being asked – at least in the US – to hold their assets in the fire while the value drops by as much as half and then trust people like Ben Bernanke and other "wise men" to generate enough monetary stimulation to raise markets back to where they were.

Of course, in doing so, currency is degraded and the larger valuation of the stock market is deflated. Between taxes and price inflation, the real value of stocks, even after a "recovery," is a good deal less than what came before.

This is not the way retirement used to work.

Before central banking and wholesale government manipulation of society, people were more agrarian-based and trades were passed down from father to son. Unemployment would not likely have been an issue because people had to work to live.

Subsistence agriculture, of course, was a mainstay of such a world. Perhaps it sounds grim, but it was probably better than living on welfare and the generosity of one's parents, as so many youngsters in the US and Europe do today.

The modern wage-slave paradigm is a fairly new development and as it has already fallen apart it is probably unsustainable. The future is one of gated corporate cities in which people will be totally dependent on the multinational company for every part of their existence, from food, to shelter, to transportation to the salary itself – and the penalty for losing one's job will be the despoliation of an entire life.

Ironically, we are not supposed to contemplate anything but the evolution of this dysfunctional system. The idea that whole societies managed to live and work together without undue poverty from childhood to old age now escapes us. The modern state defiantly separates parents from children and is now working busily at separating mothers from fathers. The nuclear family is thus atomized.

Today's retirement consists of a forced engagement with a euphemistically-named "retirement home," after which many may face increasingly ubiquitous "death panels." Parents, deprived of generational, extended families, turn to the state for aid – and the state in return places such pressure on this fragile unit that divorce is inevitable. And thus, the atomization occurs

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.