Gold Is Money, and Nothing Else.
– JP Morgan, testifying under oath to Congress before the Pujo Commission, 1913
The Selling Out of Germany
I feel very bad for the German people. Not only do I feel bad for them but I can empathize. I too am being forced to sit back and watch this comedy of errors as a corrupt, inept and increasingly dangerous class of elitist political and financial oligarchs destroys my nation. On Sunday night an ex-client that I have remained in contact with since my days at Bernstein sent me an email with a simple question: “What do you think of the bailout.” I didn’t have time to answer it during trading Monday but when I finally sat down I wrote the following.
Basically, it’s a total joke as is everything else the politicians have done. No one and nothing is allowed to fail and this relates to the fact that the global monetary and financial system is a complete house of cards. It’s insanely bullish for gold. If Germans rioted they would be in the streets today. They totally got sold out beyond belief. But it doesn’t seem to be in their nature to riot so rather I think they will dump their Euros and buy gold. That’s how Germans riot. With every passing day and every new bailout of the global banks (which is all this is, all TARP was, and all everything has been) more and more people awaken to the fact it’s all a total scam. This will just accelerate the process of dumping the paper currencies we use today in favor of hard assets as this system is obviously coming down. A lot of people keep asking, is this the same as post Bear Stearns? I mean here is the biggest difference in my mind. Back then people believed in the system, the market and what we have going generally. Not now. Not anymore. Thousands more people every day figure out it’s rigged and it’s a ponzi scheme.
Now remember I wrote this on Monday night after having just witnessed a 400 point surge in the Dow that was also accompanied by a $5 drop in the price of gold. Such action must have made the control freak bureaucrats the world over self assured of their brilliance and more importantly their “boldness,” the latter a term that Obama likes to use as he is pushing forward some financial nuclear bomb pipedream welfare state policy that is extremely unpopular with the citizenry. Nevertheless, that one day of weakness in gold was followed by a surge to new highs in U.S. dollar terms as the selling out of Germany led to a major rush to buy physical gold. The Germans remember history and they did not disappoint. Just think about this fact. Muenze Oesterreich AG, the Austrian mint that makes the best-selling gold coin in Europe and Japan reported that buyers had purchased 243,500 ounces of gold since April 26, compared with 205,300 ounces in the entire first quarter! Wow. Make no mistake about it what has happened in Germany in the last week (the elections in North Rhine-Westphalia and the rush to convert colored pieces of paper to gold) is the financial equivalent of the shots at Lexington and Concord in 1775. I give the German people a lot of credit for what they have done as this is not just a battle inside America. This battle is global and the German people just launched an impressive counter-attack on the control freak bureaucrats.
At this point I would like to examine the quote at the top by German Chancellor Angela Merkel. “In some ways it’s a battle of the politicians against the markets. That’s how I do see it. But I’m determined to win this battle.” What an incredibly sad woman she is. Now of course she believes every word of this as do her fellow political-class colleagues; however, to anyone that has worked and succeeded in the real world the statement sounds as if it is from an indignant infant. So here we have it folks. In a seemingly simple statement, Angela Merkel said what every control freak bureaucrat that wants to run your life the world over thinks. They ARE the market. They decide who fails and when. They decide who is to succeed. This is prevalent across the entire developed world right now. They decided to bring down Germany and its currency because they want to save face and because the banks basically are forcing them to save them again (as if this will ever end).
The larger point which I have mentioned repeatedly in these emails is that the market always wins. The scary thing is that when the market does win within the context of a political class with excess power the political class turns on its people and attacks them, shuts down the market and then there is the potential for serious tyranny. Every country in the OECD faces this now and we must be prepared financially and emotionally so that we do not allow the political class with their corporate oligarch allies to turn what’s left of the middle class (and a lot of what now can be considered the upper class) into a bunch of serfs in this nightmarish neo-feudalism we seem to be progressing toward. The more gold, silver and platinum in the hands of the people when the house of cards comes down the better. This way not everyone will be destitute and we can start over on our own without having more insane ideas shoved down our throats by our “kings and queens”.