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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Aubie Baltin
December 16, 2009
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When Greed and Theft Were Legalized

"The more laws, the more corrupt the Republic"
Corruptimus republica plurimae leges-- Tacitus 118-123 A.D.

The American people by and large and especially the Media don't have a clue as to what is really going on beneath the surface. The touted economic recovery and any comments there on, are pure fiction, wrapped in nonsense and false hope. Can I put it any plainer than that?

“Credit is a system whereby a person who can't pay, gets another person who can't pay, to guarantee that he can pay.” Charles Dickens
   
Our nation cannot accept the reality that we are no longer in control of our own destiny. FOREIGNERS really control our fate, and they are planning their revolt against the U.S. Dollar as the world’s global reserve currency. Our reaction thus far has been to rely more heavily on the printing press and the monetization of our debts, with the collusion of a few foreign central banks to help conceal our actions. But everybody knows, except the American people.

"DO THE MATH"

There is $2 trillion of SHORT TERM TREASURY DEBT coming due in 2010. That must be rolled over, in addition to our admitted busting budget deficit of $2 trillion. That’s $4 trillion or about 30% of our GDP in only one year. Where is this money going to come from? Certainly Not from foreigners any more: Leaving the printing press and monetization of our own debt as our only source of (out of thin air) money: Putting further upward pressure on GOLD. To make matters worse the average maturity of our DEBT is only 4.5 years.
Does anybody comprehend what printing $4 trillion means? The stockbrokers and analysts that I talk to have no comprehension as to what money is or how to preserve it.

 A TREASURY Auction cover ratio of 5.5:1 at zero percent interest was taken as being very favorable; but in reality it represents: PRESERVATION of wealth at all cost as the Gold market is much too small to handle all that money in one shot. One cannot have a viable credit market with zero interest rates

It’s not a matter of if, it’s only a matter of when someone realizes that the “Emperor Has No Clothes.” I am looking for a systemic failure. Its primary elements will be a failed U.S. banking system and a U.S. Treasury Bond Market crash. Martial law based on a declaration of an economic emergency will be Obama’s solution.  How do you handle the chaos from a disintegrating economy and an insolvent dysfunctional banking system? What is worse is that the U.S. system is CREDIT DEPENDENT and that credit is already shrinking as more and more banks fail. The printing press is only a temporary solution to a failed state.  And yet all the public does is follow the unbelievable propaganda of the Government and its controlled media.

The President stated in a recent speech that his administration has created 1.6 million new jobs. Is the public that gullible to believe such nonsense?  We also have dozens of CZARS who are implementing their own, non-voted on, Socialist agendas.  They are destroying the private sector in the process, which is their agenda in the first place while precipitating the final collapse of the only sectors of the economy which produce more than they consume.

Just show me one entitlement that did not produce 500%+ cost overruns.  Now think of the Healthcare Bill going through Congress.  It has 16 new taxes which start in 2010 and benefits that do not start until 2016. This Bill also does absolutely nothing to reform torts or make any attempt at cutting costs and thus is a total sham.

Let’s see if I got this straight: We are going to pass a healthcare plan written by a committee head who says he does not understand it, passed by a Congress that has not read it but nevertheless exempts them from it.  Then it will be signed by a President who also has not read it and who, by the way, smokes; with funding administered by a Treasury Chief who did not pay his taxes, overseen by a Surgeon General who is obese and financed by a country that is bankrupt. What could go wrong?

The greatest and worst Recession/Depression in the last 100 years is coming and is partly here already. Just anyone who is looking for a job over the last 2 years.

Secondly, the greatest transfer of wealth from those who have paper assets to those who own tangible assets, such as precious metals and the like, is already well under way. 

Thirdly, the Dollar as you know it will not regain its value or purchasing power. It will decline, at first slowly and then more rapidly, interrupted intermittently by fairy tale rallies, one of which we are in now.

Today’s accelerated anti-business rhetoric and laws combined with ever increasing pro-union legislation will accelerate the outsourcing of the U.S. manufacturing and research sector jobs to China, Israel and others and will be the final blow that guarantees the death of the U.S. economy. The industrial, retail, shipping, housing and banking sectors are all in decline. This momentum cannot be arrested by adding more funny money into the system increasing the Federal Debt. No new ideas have come forth and this guarantees economic disintegration and breakdown.

For the last three years or so, (check my past missives), I have been looking for an economic Recession followed shortly thereafter by a Depression brought on by a banking system insolvency, an endless housing recession, and a failed state in general. Sadly all my projections are coming together now in tragic order.

For absolute defense, you should buy physical Gold, take possession and hold on to it for dear life.

The debacle that I see coming has already started and our one and only chance is a complete house cleaning in the coming 2010 elections. Unless a dynamic new leader arises, but even that won’t do the trick as martial law quite possibly will take over and our American Empire will go the way of all previous empires; destroyed by the Fifth Column from within.

"Deficit spending is simply a scheme for the confiscation of wealth”. GOLD stands in the way of this insidious theft by the people we trust and who have sworn to protect us. It also stands as a protector of property rights .If one grasps this, one has no difficulty in understanding the statists antagonism towards the Gold Standard". (Greenspan)

The Dollar has declined 6% against the EURO, 9% vs. the Yen, 10% vs. the Australian dollar, 22% against the Canadian dollar, 23% against Gold, and 33% against Silver all since August  There is much more decline to come and then insolvency. How long the insolvency will take, I do not know.  It will come because the money printing and monetizing of debt is steadily increasing. Foreign nations and sovereign funds have not yet started dumping dollars, but they have certainly stopped their buying in any substantial quantities. To me, this signals the beginning of the end of the Dollar as the world's reserve currency .It does not mean that the Dollar will not be around for some years to come, it will just continue to decline in purchasing power (value). The Government cannot inflate its way out of its debt situation anymore than Zimbabwe could or the Weimar Republic.  The only trouble is that we are too big for the rest of the world to bail us out. We are witnessing the natural and inevitable result of a Socialistic collapse 100 years in the making. 

I also believe we will have a REAL shakeout coming in 2010. It will cost more and more dollars to buy any commodity as everyone will be looking for ways of getting out of dollars. We are heading for an economic collapse the likes of which no one has ever seen. My reasoning is based on understanding the unintended consequences of the economic policies that have and are now being put in place.

We also have the Commercial Real Estate collapse beginning just about now:
Malls, hotels, condos,--all overbuilt, unoccupied and dropping in value. Empty foreclosed homes, empty shopping malls and millions of jobless people discourage new business formations (jobs) and to top it all off, an increasing reduction of personal liberties, selective elite law enforcement, syndicate stronghold on the economy, a huge and growing prison population, controlled press networks, a huge distrust of leaders. This all leads to that Third World Status. Do not be fooled by the banter of propaganda.

The U.S. Treasury Auctions are the BIGGEST PONZI game of all time. In comparison, it makes Madoff look like a penny anti 3 card Monty game, even eclipsing the Weimar machine. Incidentally, those mortgage bond sales destroyed the global financial system - it means that there are trillions of these mortgage bonds hidden from the public view. PLEASE understand that most of our Treasuries are now being bought by the FED and that is monetization, pure and simple. They cannot print Gold. The U.S. will be the last to raise Interest Rates as we are STUCK without an EXIT STRATEGY. Any rise in Interest Rates, such as is now occurring in long term rates will add tremendous interest costs to the U.S. Government, who are producing $ trillions of deficits. It is also the the FED is losing control of interest rates. A measly one percent interest rate increase will now cost the TREASURY an additional $200 billion a year. To defend the dollar, you would have to raise interest rates as Volker did. But our economy is in much worse condition now than it was then. So spare me the BS. 

The countries of Spain, Ireland, Iceland, Ukraine, Latvia, Lithuania are bankrupt and on life (money) feeding tubes. Greece and the Czech Republic are next. Some other entities that are very close to insolvency are Argentina, Lebanon, Pakistan, Venezuela, California, Detroit, Houston and many more. Nothing is over, not the Recession, not any insolvency, but there are many more city, state and country defaults yet to come. 

The Golden Rule remains in force: "Them That Got The GOLD RULES.” Never forget that.

The U.S. banking system died in the autumn of 2008, and the U.S. economy has been stuck in a downward spiral of disintegration ever since.

To understand Demand and Supply, you must first understand the difference between Demand and Effective Demand. Everyone has demands, but Effective Demand is a demand that is backed up by enough money to make that Demand real. As more and more people lose their jobs, as real wages shrink and as the purchasing power of the US Dollar shrinks, so does Effective Demand. There is no huge, pent up Effective Demand out there: As more and more people get laid off, their spending habits change drastically. The need will be to survive.  The U.S. Governments are, so far, totally ineffective and off target, essentially only adding more debt to the system and doing nothing positive about creating jobs.

We have Goldman (Government) Sachs in charge of financial rescue programs, benefitting themselves first and leaving TABLE SCRAPS for everyone else. DRACULA is now in charge of the blood bank. They are so blinded by greed they forgot that if no one has anything, what good does all the money in the world do when all that’s left is to play with oneself.

 No economy can achieve self-sustaining growth until the private sector’s balance sheets are repaired. That is not happening at all. As long as that does not happen, the banks are still bankrupt and no accounting gimmicks can change that.  Rescues are no longer possible. The only objective left in place now is to cover up any gigantic fraud until hopefully conditions improve, but by that time, prevention of complete collapse will become the only priority.

The desperate actions by this Government will result in turning the corner on the so called deflation toward hyper-inflation. The result will be that Gold and Silver prices will break away from the dollar and trade on their own. These two metals serve as panic and systemic breakdown as well as official desperation meters. The U.S. economy is about to enter the acceleration phase in its breakdown. Gold and Silver will soon be making new highs with 10% or so profit taking corrections and then no looking back. They are responding to what I see as growing monetary disasters. There may be corrections, but they will only be temporary as all corrections have been during the past 8 years.

Nothing has changed over the last 8 years except more nonsense: Nothing goes straight up or down and corrections from time to time are part of the natural order of Markets. The higher the price of Gold goes, the larger the swings in absolute price either up or down. Get use to it or go to sleep like I suggested. Every downward drop is a buying opportunity. I do not care what Gold does in the short term, and I do not care about the reasons. The Government will try to knock you off the GOLDEN BULL as best they can. So hold on for dear life. I can promise you the ride will be bumpy, but if you hang on the reward will be more satisfying than riding that bull named FU MANCHU for 2.7 seconds and one hell of a lot more profitable. As a matter of fact, it could save your financial life and more importantly, your personal freedom.

The job report was also nonsense; pure unadulterated B.S. Part time workers are always hired this time of year so why is that of any consequence? They are laid off right after Christmas and so will the 80,000 consensus workers be fired.

GOLD

Those who come out of the woodwork to call a top in the Gold price have little experience in what a top looks like in Gold. As far as I am concerned, I have seen no action that would be even be close to designating a top. What I do see is many financial problems hidden in plain sight. All of the 2009 financial entity earnings are cashless. They are more than 75% due to the FASB (Financial Standard Accounting Board) who have sold their souls to the financial sectors giving them permission to once again mark up TOXIC paper (worthless) to values self-determined by the financial institution. The profits of their trading is also toxic paper, mark up accounting. In other words, if they marked all their assets to a true value, all the banks would be broke. 
 
Paying Back the TARP money is also a fraud; they are using using government money to pay back itself. Borrowing money from the FED at 0% interest and instead of lending out their now increased excess reserves they buy Government Guaranteed FHA paper paying 5% that require no reserves be held - that is the Government paying themselves back with their own money to monetize the Government’s Debt.  You call that profit because of their superior business model - give me a break. Yet Fast Money keeps touting the Banks.

 Asset backed economies that inflate assets in excess of understated inflation always create an illusion of growth with the unintended consequences of creating increasingly MAL INVESTMENTS which, in a normal interest rate environment, are doomed to fail from the start.  Interest rates in the United States, United Kingdom, Japan and the Euro Zone are now at virtually zero interest rates, robbing savers of their due returns that they have earned for deferring consumption. In other words, you not only make nothing, but you lock in 10% guaranteed losses when looking at the loss in purchasing power of over 15% since August 2009 alone, as measured in Gold. Look at the reality: If you buy bonds as an investment (especially US Treasuries), bonds that are IOU's denominated in IOU's or even other countries IOU's - your investment is hardly risk free or safe at all. In fact, they are riskier than any other investment on the face of the earth since all they offer is a guaranteed loss.

The G-7 Governments (that's the Fed) and the other central banks are going to STEAL every bit of purchasing power in those savings or paper investments while they sit in your bank or brokerage account, and then transfer it to their "something for nothing" constituents and banking masters.

You have now a social welfare state in the U.S. which is going to increase the destruction of the private sector by the never ending expansion of regulations, entitlements, taxation and fees to support those "something for nothing people”. It now has come to the point where the United States has NO ABILITY to create new income. DEBT is spiraling out of control and the budget deficits of all of the G-7 members are averaging nearly 10% of GDP. Any reduction of the public sector is not being considered at all, only the EXPANSION of it, ALL IN THE NAME TO SAVE YOU. Who are they kidding? 

Government is making the unfolding inflationary depression UNAVOIDABLE and inescapable as incomes continue to collapse and they substitute the printing press and indirect taxation in its place. (Gold will be your only real protection.) On top of all this, they are going to layer dozens of new DIRECT taxes, such as the VAT tax, the Cap and Trade and Healthcare, which is also a tax bill and nothing else. It is a list of NEW revenue sources for the boys in Congress to REDISTRIBUTE to their special interest supporters. In addition, raise the top Income Tax rates on the top 10% of income earners who already pay 90% of all taxes. Tell me, do you really think that these top people are going to invest when the returns on their risky investments all go to the Congress in Washington. Then, limit the itemized deductions for individuals and small business, increase capital gains and dividend taxes and destroy capitalism once and for all as it no longer pays to invest. Once again, who is kidding whom? Even KEYNES ended up warning against such actions. But nobody listened then and nobody is listening now. There is zero new net private investment from 1933 until 1946. Why would any SANE person use their own money to invest under this climate?

But they are not finished. They will then restore the estate inheritance taxes to 45% or higher for those evil wealthy people (mostly small business and farmers) who wish to pass on the family business to the next generation. The really wealthy like the Kennedy’s, Gates, Buffett and Kerry’s etc  pay little or no income tax at all, since all their money is locked away in Charitable Trusts of some kind or another. They will raise social security taxes ($2.5 trillion in social security taxes have already been stolen and spent for general government expenses) and then tax your employer-provided health care benefits, which will be passed through to the public in one way or another.  Next, they will raise taxes on beer, wine, liquor and soda. It's going to be endless in our new welfare state. ENDLESS TAXES - that is all Congress knows.

And so dear friends, you will face an Economic and Financial System eventual great collapse.  The present Government AND FED ACTIONS HAVE REDUCED THE TIME LINE OF THE HYPER-INFLATIONARY GREAT DEPRESSION TIMING TO ABOUT THE NEXT THREE YEARS. There is a high risk of a major dollar crisis unfolding in the year ahead.  Never in my memory has a government leadership been so disrespected. Never has Wall Street been so culpable for the financial ruin of this great country and yet they are still in power running the government finance ministries. The global revolt against the United States has many facets to it, but the financial aspect is the most profound and is hardly even covered by the U.S. press. The U.S. citizens have little comprehension of the enormity of a lost global reserve currency, with all its privileges.

The dollar is not going to reverse itself out of the Bear Market that it is in, nor is Gold going to top out here. The BEAR market is in the U.S. Dollar and the Bull Market is in Gold. It is not only alive and well, but in terms of Gold, the Bull Market is still YOUNG.

 

The Banking System

There are now 416 banks on the FDIC watch list. There are also at least 1000 more banks due to fail all over the country. They will have to be absorbed by the FDIC, which will cause the DEBT ceiling to be raised soon and again. After all, we have $10 trillion more debt coming on stream already admitted to by the Government.

The Wells Fargo Bank and their mortgage portfolio is a ticking time bomb. This is the Commercial Mortgage Arena kill zone that will make headlines soon. Their portfolio is laced with toxic leveraged contracts obtained from Wachovia (all of which is hidden from the public). The number of lending institutions unable to collect on at least 20% of their outstanding loans has hit an 18 year high.   

To say that Wachovia lost control of its commercial property portfolio is a gross understatement. They routinely underwrote ridiculously cheap Credit Default Swaps against the same securitized bonds they sold to clients. In doing so, they accepted risks beyond the word, HUGE, and these risks were transferred to Wells Fargo when it absorbed Wachovia. Now these Credit Default Swaps sit in the Wells Fargo off balance sheets ready to explode (default). This bank induced the new bond holders to leverage their brains out, since the yield on bond was roughly equal to the cost of the CD swap. (I may be losing the understanding of the reader here, but I will have to risk it.) This hedging has gone haywire. Wells Fargo still owns a large collection of these commercial loans within this acquired portfolio.

Instead of selling these loans or taking write downs against them, they altered the interest rate on modified loans without loan balance reduction and without lengthened maturity dates. This practice is widely called "extend and pretend" so as to avoid standard accounting losses. This game is done both with Wachovia and Wells Fargo portfolios. Why mention this? Because they virtually guarantee substantial future losses. As the commercial mortgages begin to fail, Wells Fargo will realize staggering additional losses - all hidden from public view.

Why bring this up? Because the majority of all the banks are engaged in the same practice of holding reams of Credit Default Swaps off their balance sheets and/or extending loans destined to default in the near future. The Wells Fargo defaults are perhaps the most visible, which then can be extrapolated to the entire banking industry. The commercial shoe has yet to fall - Wells Fargo has buried this toxic waste, but it is beginning to SEEP to the surface. The volume of defaults in Southeast Florida and Tampa is very serious. The FDIC, as I read it, is doing the same thing as Wells Fargo and hiding what is going on. There are so many delinquent loans coming to the surface that the FDIC staff cannot handle it.

The banks are hemorrhaging $300 billion in losses a quarter and then covering them up with accounting fabrication, all with the intentional help of the FDIC, the Treasury, and the regulators at the Federal Reserve. In 2010, I am looking for the BAILOUT BUBBLE to bust. The Dollar Bubble has already burst, next comes the Treasury Bubble and then the Bailout Bubble. It does not matter to me what the propaganda says about buying bonds, they will be hazardous to your investing health. But as we go into 2010, all hell is coming. Or 2011 at the latest.

There is something peculiar about the play in commercial mortgages and loans. Even if the majority of payments are current, even if most tenants pay their rent on time, the current loans will tend not to be viable for refinance and thus no rollover. The Loan to Value ratios are a disaster as all the properties have declined in value by 30% to 40%. The banks will require a lot more equity. Who is going to come up with that extra money?

On the residential side, many property owners face a 100% to 200% increase in their option arms. Thus the perpetuation of loss is ensured by property foreclosures and coming liquidation. Nothing is over. The DEBT to GDP ratio is over 300% and if you take the unfunded liabilities and add them into the mix, the figure becomes 1,000%. 10,000 baby boomers are retiring every month. Thus, incomes and defaults have only one way to go and your government’s only answer seems to be the printing press.

What is coming is a big vote of no confidence in the U.S. political leadership by international investors, and then by the people of this country. The object now is to preserve the assets that you have. I do not care what your paper assets are, if they are concentrated in the dollars they are denominated in, they will go down in value. (Add to your Gold on dips.) You are going to see everything cost more, especially food, utilities and health care and the jumps in these expenses will be large. The whole economy for the last 20 years has been funded by DEBT expansion. Unless personal income rebounds (which is highly unlikely), there cannot be any recovery.

                                              Some final comments

Collapse is now inevitable. 
America's top 1% own more than 90% of America's wealth. This is exactly what GOD meant to avoid when he advised the creation of the Jubilee Year. 

The (unconstitutional) Federal Reserve is now the fourth branch of government that operates autonomously, secretly, and prints money at will. The Constitution says that the coining of money is expressly relegated to the House of Representatives.

401K's, according to Shadow Statistics, have lost 26.7% of their value in the past decade. Most pensions have lost even more and college endowments even more.

New financial regulations and reforms will do nothing to prevent the next meltdown.

Contrary to the unending propaganda from the media, the retail sector is due for a monumental collapse. You are going to see stores going out of business after Christmas with ghost malls and ghost condo buildings.  People are still living way beyond their means and many are one pay check away from losing everything. If you think I am being alarmist, just look at the unfunded entitlements in the future that guarantee us a bankruptcy. I can look at the 77 million baby boomers who are now retiring at the rate of 10,000 a day, with no money put aside by any of them. These baby boomers are deaf, dumb, and blind as to what is taking place.

"Commercial real estate is in the beginning of a huge crash"  Wilber Ross
All the components of real estate value are going in the wrong direction (down). Occupancy rates are going down, rent rates are going down, and the capitalization rate that is the return that investors are DEMANDING to buy a property is going up."

"Middle America is about to experience a total collapse." Carl Ican 
 
We are going to have levels of crime and violence never seen before. People are going to do whatever is necessary to survive.  I am looking for a full blown tax revolt by 2012 as people will just not be able to keep up with the Government taxes nor the myriads of taxes that will be enacted by State, and Local Governments. The Governments are taking in 25% less in taxes than they used to because of unemployment, property revaluations and reduced sales taxes.   Most Congressmen, in my opinion, are DEVOID of reality as to what is going on with the average man. 

And lastly, about 26 states are broke and many more are near that level.  In order to pay for the unemployment benefits, many are borrowing from the Federal Government which, of course, prints the money. For instance, Virginia had to borrow $1.26 billion to pay these unemployment benefits because their fund is dry. In 2010, the borrowing estimates for unemployment, which keeps on getting extended, ranges from $100 to $250 billion. California is the most broke of all.  They have already borrowed more than $12 billion from the Feds. The states cannot possibly pay for the new FED Medicaid mandates. Meanwhile the MEDIA says nothing.