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 U.S. Bond market seems to become more tenuous week by week. We have often discussed how the ten year interest rate on TBills and Bonds can be viewed as an economic bell weather.

The world is changing rapidly. The hegemonic nature of American Empire is being sabotaged by the refusal, by many other sovereigns, to continue subsidizing the U.S. Leviathan. When the bond market finally collapses, and the politicians can no longer buy a vote with a snap card, the "pretend" economy will cease to function. This should not be construed as an attack on the dollar, by many other countries, but rather as an "end run" around it.

Since we, as a nation, quit producing, the great production centers, like Detroit, quit functioning. A city does not die when its last resident moves away. Death happens when municipalities lose the industries and vital populations that made them important cities. Other cities that have lost their vitality include, Buffalo, New Orleans, Flint, Hartford, and Cleveland, This has happened, to a large degree, as a result of out sourcing and the migration of industrial production from the west to the east. How can a country, like the U.S., maintain such an incredibly high standard of living, without producing the goods and services that would substantiate such comforts? Well the answer is, it can't. The standard has been maintained, up to now, with the Federal Reserve's smoke and mirrors and counterfeit money. It would seem that the world no longer trusts the western banksters to work it out.

From Jim Willie CB:

The USTreasury Bond is the primary vehicle for the USDollar. Nations do not hold the USDollar in raw currency form, except for the crime syndicates. They hold them in USTBond form, in order to gather some interest income. In the last few years, not few months, but years, the interest has been next to nothing, and surely far less than what it should be, given the risk and the nasty undermine to value by the monetary action by the central bank itself. Paltry interest aside, with all its unfortunate deterrent toward investment in USGovt debt, the USFed has been kicking out the value pillars for a very long time, far longer than the limit imposed loosely by Sir Alan Greenspasm of six to eight months.

With the cost of money near zero, all markets are distorted, all assets improperly priced, and Gold marked for illicit ambush on a regular basis by the fascists. Major broad deep channels are being constructed to redeem and discharge USTreasury Bonds. They will be returned to sender. The USFed will be put under tremendous strain to absorb and soak up the supply being dumped around the world in all these major channels. The USFed balance sheet will expand, not contract, or else they will face a catastrophe in a USTBond explosion and Interest Rate Swap derivative nuclear event. The USFed has no exit available, as all doors are shut, none an option. In the process, the Gold price will rise relentlessly, while its nemesis the USTBond is dumped as a discredited bride, a vixen of unimaginable betrayal. The USGovt never had any intention of redeeming the bonded debt. Gold will prevail, as the channels fill. The Rubin Doctrine has run out of time.

On the Economic War Front

The following observation, by Dr. Ebeling, strikes a note with me which is both refreshing and gratifying, The consideration that those on the Federal teat should be restricted from participating in an election is a notion that I explored in my November, 2004 essay, The Great Silver Heist. Although, at the time, I was unaware that John Stuart Mill had espoused the idea in 1859, the logic of the idea is irrefutable.

Those who champion the welfare state do so either as parasites, or economic predators. Our current crop of so-called representatives falls squarely in the latter category.

As I concluded in my here-to-for mentioned essay, the right to vote must be limited to those who do not receive Federal subsidy. I took that concept to its extreme by including anyone that received money from the government for any reason.

I'm not simply talking about welfare recipients, although they make up a significant portion of those who should not be eligible. I'm talking anyone who is OTD (on the dole). Any receiver of any Federal support should not be eligible to vote. The Constitution provided no Federal support for anyone, period. This would include grant recipients, those who receive Federal entitlements, farmers receiving subsidies, employees of any Federally subsidized business, even employees of companies benefiting from trade sanctions. Taken to the extreme, we should un-entitle Federal employees including members of the Armed Forces, Congress, Federal Law Enforcement, Treasury Department, Justice department, and the Judicial Branch. You see, each one of these persons harbors a personal agenda and is apt to vote for whoever promises him/her more. When you're OTD, staying OTD is job one. Have you noticed the most important thing for a politician to accomplish while in office these days, is to get re-elected. That's the problem with the "Free Lunch" mind set. There is no such thing.

Until that situation is rectified, and other changes, like those I brought up in "Silver Heist", are implemented, we (those of us who, through the forced extraction of our wealth through taxation) will suffer the throes of a Fascist collective. It is always nice to have ones opinions shared by such an esteemed academic.

From Dr. Richard Ebeling:

One of the most sacred ideas in our democratic era is the belief in the universal and equal right of all citizens to have the voting franchise. Yet some have argued against this "right." But their challenge to an unlimited right to vote has not been based on grounds of gender, age, or property ownership.

One such critic was the famous British social philosopher and political economist, John Stuart Mill. In his 1859 book, Reflections on Representative Government, (Chapter 8, 'Of the Extension of the Suffrage'), Mill argued that those who received "public relief" (government welfare) should be denied the voting franchise for as long as they receive such tax-based financial support and livelihood.

Simply put, Mill reasoned that this creates an inescapable conflict of interest, in the ability of some to vote for the very government funds that are taxed away from others for their own benefit. Or as Mill expresses it:

"It is important, that the assembly which votes the taxes, either general or local, should be elected exclusively by those who pay something towards the taxes imposed. Those who pay no taxes, disposing by their votes of other people's money, have every motive to be lavish and none to economize.

"As far as money matters are concerned, any power of voting possessed by them is a violation of the fundamental principle of free government . . . It amounts to allowing them to put their hands into other people's pockets for any purpose which they think fit to call a public one."

 

Precious Metals

In 1792 the U. S. Coinage Act was passed by Congress. It invoked the death penalty for anyone debasing money and provided for a U.S. Mint where silver dollars were coined along with gold coins beginning in 1794. The text of Coinage Act of 1792 states: “The Dollar or Unit shall be of the value of a Spanish milled dollar as the same is now current,” that is, running in the market, “to wit, three hundred and seventy-one and one-quarter grains of silver.”

To repeat, A“dollar” is a silver coin containing three hundred and seventy-one and one-quarter grains of silver — and it cannot be changed by constitutional amendment, definitionally, any more than the term “year” can.

Even at the current suppressed value of silver, ($21.69/troy ounce), a "dollar is worth $19.50. The fact that a currently circulated Federal Reserve Note of a "One Dollar" denomination is not worth $19.50 is evidence that a radical debasing of money has occurred sometime in the past and begs the questions: Who was responsible for the debasement, why did "we the people" allow the debasement to occur, and why weren't those responsible prosecuted?

Fiat money, (money not backed by anything), was something so abhorrent to our Founding Fathers that they didn't even discuss it as an option. The Constitutional gold standard provided that the Country's citizens could not be robbed by means of inflation. An interesting original draft by the Founders would have allowed for "bills of credit", or paper money but that was struck out. It seems that during the Revolutionary War, when paper money had been issued, a promise to back the notes for gold or silver was a "no confidence" disaster, causing counterfeiting by the British and other forms of fraud.

The end result were notes of no value, plummeting to less than a penny per dollar. Sound familiar? This is why the Founding Fathers decided to mint only gold and silver coins as "money." They provided for a U.S. Mint where silver dollars were coined along with gold coins beginning in 1794. The mint was intended to provide a service for "We the People", a facility where we could bring our precious metals, acquired by panning or mining or barter, have the metals assayed, minted and returned to us.

From Bob Rinear:

I need you all to consider something for a minute. We can get into the whole scheme of the mechanics of things in a little while, but go with the flow here for a second. Depending on who you want to believe, if you add up the entire worlds above ground availability of silver, you come up with about 1 to 1.5 billion ounces. With the price at say 22 bucks a share, you could literally buy all the silver available for sale in the entire world for 25 billion dollars. Every last ounce. Granted the price would soar as someone/anyone tried to corner the market, but you get the point. There just isn't an unlimited amount of this stuff lying around any more. We'll come back to that point in a few minutes.

I'm not going to bore you all to tears talking about how all the currencies are fiat, they're printing us to hyper inflation, the debts are too large, economies in shambles, unemployment at depression levels, and all the normal economic gore we show you each week. What I want to focus on today is the 1) supply and 2) the reasons for ownership for metal.

Gold is pretty much "gold". By that I mean it literally. It doesn't have a ton of industrial or even medical use. It has one very main purpose that being pretty, and thus makes the most gorgeous of jewelry, and secondly it functions perfectly as money. Now the person that wrote me gave me the whole standard anti gold hate points such as "it doesn't grow interest", and it isn't used in transactions, and the supply limits expansion, and why should it be better than tree bark, or seashells, and it doesn't do this and doesn't that...to which I say "Good!". Because anything they can print and use as a derivative gets manipulated, rehypothecated, repo'd, and churned through so many financial blenders what is left is diabolical soup, not "money".

But "man" is an interesting creature and by either divine intervention, or just plain common sense, he has decided that Gold works just perfectly as money. For well over 5000 years of history man has been awful happy judging his wealth by the amount of gold and silver he owned. Sure, cattle and sheep helped, but the real "wealth" was usually boiled down to the metals. Likewise, it was uncannily universal. To this day you can go into the deepest jungle in Borneo, and find gold used for purchasing things. You can see it in the Amazon, you can see it in outback Australia. You can see it in Alaska, to Mexico. It is universally and historically accepted as "money". So, we know that "gold" has and always will be worth "something". The value might change depending on the times, but it will indeed always have value.

Dollar bills, Yen, Krona, Yuans, peso's, and all the other replica's of money are NOT money. They are currency. They're the stuff we use to transact business because they're supposed to represent real "money" held in reserve. Well, Dollars don't represent anything any more. Read the darned Federal Reserve Note you have in your pocket. What does it say it is backed by? Gold? Nope. Silver? Nope. Diamonds, rubies, sapphires? Nope. Moose horns? Nope. It doesn't say it is backed by a single thing, nor can you "trade it in" for an equal value of anything. In years gone by we lived by the adage that it is backed by the "full faith and credit" of the United States, but they don't even put that on them. Nope, just a little blurb saying that it's "legal tender". Big deal.

Energy

The climate seems to be changing. I have always doubted that the change was caused by greenhouse gasses. But lately I have started to suspect that it could be the result of organizations like HAARP messing with microwave energy in the upper reaches of the atmosphere. And it's not just the U.S. Government that is "playing with fire". The Chinese and the Russians are also trying to play God with with the brute force of zillions of watts of electricity. If fact, I suspect that the current drought in Texas is a result of an attempt to keep hurricanes out of the gulf, in order to keep the millions of gallons of corexit and benzene, that the National Guard continues, to this day, to spray, from raining down on the gulf coast states and poisoning millions of people... Or not.

The Algoreites would have us believe that we are in a state of global warming. From Mr. Nyquist's contribution we learn that we may be entering a period of global cooling. I think the sun probably has more to do with the temperature of our planet than greenhouse gasses. But that is just a hunch...

From Jeffrey R. Nyquist:

During the last six months many places around the world have experienced record low temperatures. Already grain crops have suffered. There is speculation by some scientists that we are entering a cooling period. Russian researchers at Pulkovo Observatory, St. Petersburg, are flatly saying that the Sun is putting out less heat. Approximately every 200 years the sun goes into a "solar hibernation." This signifies a period of lower global temperatures which have historically reduced crop yields, resulting in higher food prices and famine.

The last "solar minimum" affecting planet Earth ended in the second decade of the 19th century, about 200 years ago. Some readers may recall the fate of Napoleon's army in Russia, with record low temperatures that killed French troops and horses. Cold periods have occurred repeatedly over the last two thousand years resulting in famine and death by freezing, as well as droughts. With lower temperatures come less water evaporation and cloud formation (i.e., lower average rainfall). Already we are seeing higher grain prices from last year's drought. If this is a trend, we are certain to see even higher food and energy prices next year.

Crops are sensitive to colder weather at all latitudes. Freezing weather in Florida means lost citrus crops. In the Midwest, colder and longer winters signify shorter growing seasons with reduced wheat and corn production. Countries with significant food production located at far north latitudes, like Russia and Canada, could experience a severe reduction in food output, with global consequences.

Greater insecurity about the food supply would also stimulate purchases by those who want to hold food in the event of future shortages. Upward pressure on global food prices could accelerate on the mere expectation of colder weather (even if warm weather returns). Food importing countries could be placed in difficult financial circumstances, requiring substantially increased payments to maintain food supplies at current levels. This, in turn, could trigger financial problems in many countries – like the countries of Africa and the Middle East.

The Fed

I receive emails regularly suggesting that everything that is occurring in the world is a result of a well knit group of evil doers who have, somehow, harnessed the super-human ability to orchestrate the horrible demise of our country for their personal benefit. Oh, if it were that simple. Ben Shalom Bernanke is a product of the same misinformation campaign that has mislead the rest of the country. He was allowed to ascend to the level he now occupies because he is such a bozo. A self absorbed pseudo academic, he has yet to do anything that has not exacerbated our already crippled economic condition. Most of what he is absolutely positive about is erroneous B.S. that he learned in college. Although he received a Ph.D. in economics from MIT, he is an ardent adherent of the teachings of John Maynard Keynes, who was also a complete and total bozo. How the teachings of Keynes can be taken seriously by what is supposedly a most prestigious institution of higher learning (MIT) is way beyond me. It is crap science and provides the same type of allure that was once provided by eugenics. Bernanke lives in a make believe world where folks are sure Lincoln was a good guy, Woodrow Wilson was smart, and F.D.R. was a saint and savior. What tripe. The problem lies in the greed provoked ineptitude that our body politic has descended into. Bernanke panders to congress so congress can pander to each other. So long as the citizenry continue to allow politicians to enact one set of laws for the people and another set of laws for themselves, we have nothing to look forward to except the continued destruction of America. Coming soon to a country near you.

From Andy Sutton:

Lest I be accused of picking on US-centered media outlets, we're going to spend a bit of time this week dissecting a Eurozone Reuters article which puts on full display the completely absurd rationale of the Keynesian economic model. This folks is truly the stinker of the year (so far) right here. Unfortunately, it also lays bare the dogmatic nature of economic thinking. It should be no surprise really; the same dogmatism exists in the political and religious arenas as well. Dogmatism was once explained to me as 'clinging to a particular belief or beliefs in spite of overwhelming evidence to the contrary'. While this is not the 'official' Webster's definition, it makes the most sense to the average person and is very fitting for this discussion.

I'm a 'show me' kind of guy. I should have been from Missouri I guess since it is the 'show me' state. Maybe that's my problem. I'm going somewhere with this. Like most economists of varying stripes, I spent a good deal of time studying the subject at both the undergraduate and graduate levels. The school I went to employed what I would consider to be a very Keynesian leaning group of faculty. The biggest problem was they could never show me how Keynesianism worked or that it even worked at all. Actually, the harder they tried, the more I became convinced that Keynesianism in fact doesn't work. Their theories in the classroom failed to match up with or even explain the observations made in the real world.

At the time, I incorrectly attributed the disconnect to the fact that these guys had been in the classroom too long. A few had never worked what most would consider a 'real job'. And maybe that conclusion was true for some, but what it really comes down to is dogmatism. They are clinging to Keynesianism in spite of overwhelming evidence to the contrary. Now remember, I finished graduate school before the term 'housing bubble' had even been thought of. The government had, in fact, just borrowed a bunch of money to send out 'stimulus checks' to the population.

Financial Survival

Back in 1923, the Carnegie Foundation conducted a contest. The prize was a scholarship to Oxford, in England for a PhD. The Foundation placed advertisements in magazines and on the radio seeking history teachers with Advanced Degrees to compete for the prize. The contest amounted to writing an essay about the current state of America. The judges of the contest declared that twenty young history teachers had won and then swept them off to London. There, they were lined up and each bestowed with PhDs from Oxford as well a Fellowship with the Guggenheim Foundation. They received no further education (just the honorifics) but, instead, were brought back the the USA and became the core of the American Historical Association.

In 1928, the American Historical Association was granted $400,000 by the Carnegie Endowment to write a seven volume study on the direction the nation was to take. The thrust of these books was that "the future of this country belongs to collectivism and humanism.", The AHA has since then, determined what history books will be used in all public schools. If your school district receives any Federal funds, then they are mandated, by Congress, to teach history from these revisionist volumes. The Carnegie Foundation (in collusion with the Ford Foundation and the Rockefeller Foundation) has been rewriting history for the last eighty-five years. Their goal was to create a passive, dumbed down society that would not oppose their vision for the future. Pretty much everything you think you know is made up.

It's not what you don't know that will screw you up, it's what you are absolutely sure of that is absolutely wrong." - Mark Twain

We have been intentionally misled by revisionist crap. Our parents and teachers were intentionally misled by revisionist crap. Their parents and teachers were intentionally misled by revisionist crap. We have now been collectively dumbed down for over eighty-five years. It's astounding, to me, that the youth of America have retained any cerebral grey matter that has not been intentionally transformed into jello.

From J.S. Kim:

Today, there is almost zero truth in mainstream media. Just as global financial firms like Goldman Sachs have repeatedly been exposed for issuing conflicting advice to different tier clients depending upon how much money the client has with the firm, mainstream media has constantly been exposed for issuing different stories as well, depending upon the propaganda they wish to disseminate.

Why is this important? Because this same ridiculous propaganda applies to nearly 100% of financial "journalism" distributed by the mainstream media as well. For example, the G8 economic summit will be held in three weeks in Fermanagh county in Northern Ireland. Because many businesses have been hit hard by banker policy in Ireland and have long since been shuttered, the county spent over 100,000 pounds to tidy up and make more than 100 properties within the vicinity of the Lough Erne resort that will host the G8 meeting so our dear global leaders will not have to stare poverty in the face.

This type of pandering to a false reality is happening in every aspect of the financial market, and recognition of this propaganda will be crucial to people's survival in the future. For example, HSBC just issued guidance last week to sell gold because, in their own words, the risk of inflation will "recede". The Wall Street Journal demonstrated that they too, were all too happy to hop onto the disinformation bandwagon and declared: "Gold Slumps Further into a Bear Market". Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, declared, "The dollar is strong, so that's pushing down gold again." Really? When the dollar is measured against the yen and the Euro, if all are falling and losing purchasing power but the dollar is losing purchasing power less rapidly than the euro and the yen, this does NOT MEAN THE USD IS STRONG. This only means that the USD, temporarily, is less worse than the yen and the Euro. But according to Mr. McGhee, the reason behind gold's recent fall was not the selling of hundreds of tonnes of paper gold that does not exist, as we explained here, but rather because the whole world is gaining confidence in the US dollar. Because I am certain that massive inflation will eventually be ushered in on the back of a global loss of confidence in the USD, I'd like to see Mr. McGhee interviewed again in a couple of years about his call of "strength" in the USD.

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.