There are imbalances in the supply and demand of precious metals, particularly silver, could lead to a shortage of physical product in the future should not come as a surprise to many – it is a topic covered extensively here in the past. Nonetheless, as a useful reminder of the big picture in the silver market, Future Money Trends has released another update video, reminding viewers that if traded purely on fundamentals, there is a high likelihood of increases in the price of silver, and other precious metals. As the authors put it, ” There simply isn’t enough physical silver to deal with the demand of a fiat currency crisis. As the paper silver market pushes prices down, all hell will break loose in the physical market.” While that conclusion may or may not be applicable just yet, when coupled with recent revelations of potential double counting of precious metals at the warehouse level (see HSBC-MF Global story), the situation will certainly get only more exacerbated. Furthermore, should silver miners take Eric Sprott’s advice to heart and decide to convert some or all of their product into physical, the market will suddenly recall that in addition to liquidity, prices are also determined by something called fundamentals. And fundamentals, especially in combination with a market risk spike, confirm a price jump may be imminent.
This is your pension money . . . .think about it
A Very Subtle Form Of Theft
Say what you want about him, but Bernie Madoff was a guy who knew how to keep the party going. For years, he ran one of the largest private-sector Ponzi schemes in history and always heeded the golden rule of financial scams: make sure your inflows are greater than your outflows.
He was finally done in when redemptions exceeded new investments. He didn’t have enough cash to pay out investors, and he wasn’t able to scam more people into paying in to the scheme. As a result, Madoff finally had to admit that the whole thing was a total fraud.
Governments around the world are in similar situations right now with their own public sector Ponzi schemes. Faced with failed auctions, declining demand, and rising yields, politicians are having to resort to desperate measures.
Like any good scam artist, they’re appealing to the masses first; all over Europe, governments are sponsoring new marketing campaigns suggesting that it’s people’s patriotic duty to buy government debt.
In Spain, they’re actually issuing instruments called ‘Bonos Patrioticos,’ or ‘patriotic bonds’. Ad campaigns say that the bonds are “good for you, good for the future.”
In Ireland, they’ve issued “Prize Bonds” which carry a 0% interest rate; instead of receiving interest, bondholders are entered into a weekly lottery contest. Naturally, lottery winnings are only possible as long as people keep buying the bonds… pretty much the definition of a Ponzi scheme!
In Italy, they’re rolling out the country’s sports celebrities to encourage everyone to buy Italian sovereign debt.
What’s ironic is that Italy’s dismal balance sheet is almost universally acknowledged. It’s as if everyone knows the country has almost no chance of making good on its obligations, but they still feel the need to willingly throw away their hard earned savings for the greater good of political incompetence.
Thing is, it’s not the millionaire sports stars, wealthy business leaders, or political elite who are buying these bonds… at least, not in anything beyond a token, symbolic amount. It’s the average guy on the street who really stands to get hurt when the government finally capitulates.
This is a truly despicable act and amounts to theft, plain and simple.
The United Kingdom, which is rapidly reaching this banana republic sovereign debt status itself, has unveiled a plan to issue roughly $50 billion in infrastructure bonds. This would be the equivalent of issuing $300 billion in the US– not exactly chump change.
Given Britain’s already colossal debt level, private investors aren’t exact diving in head first to loan the government even more money.
Undeterred, British Chancellor George Osborne plans to ‘highly encourage’ UK pension funds to mop up about 60% of the total amount. “We have got to make sure that British savings in things like pension funds are employed here and British taxpayers’ money is well used,” he said.
In other words, ‘we are going to make sure that British people buy our junk, one way or another.’
The last year has seen numerous pension funds around the world, from the United States to Argentina to Hungary, be raided for the sake of keeping these Ponzi scheme going. The UK is already lining up to be the next.
It’s one of the last acts of a truly desperate government to begin directing public and private savings into their Ponzi schemes.
Fast-forward a few downgrades and you can plan on seeing the exact same thing in the United States– appealing to people’s patriotism to loan their hard-earned savings (if they even have any) to the Federal government at a rate of interest that fails to keep up with inflation.
It’s nothing more than a very clever (and subtle) form of theft.
From Simon Black of Sovereign Man
Market Watch
