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Off the Cuff: Free Fallin'

Gold, silver, and Europe turn downwards
Thursday, April 25, 2013, 1:33 AM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • Gold: Falling Prices
    • Sparking in unprecedented global buying spree
  • Silver: Falling Inventory
    • Physical demand is overwhelming the system
  • Europe: Falling Everything
    • Bad news everywhere you look

AP Twitter Hack Reveals Just How Broken Our Markets Really Are

A brief glimpse of the future
Tuesday, April 23, 2013, 3:16 PM

Two themes that we've been consistently stressing over the past several years were beautifully illustrated today, courtesy of a hacked AP Twitter feed.

They are:

  • Our markets are broken (courtesy of High Frequency Trading, or HFT, computers), and
  • When things finally shift, they will do so at a speed that will shock us.

But first, the hacked AP Twitter feed... » Read more


Fixing the Mess We've Made

A better future is in our reach, if we act now
Monday, April 22, 2013, 10:18 PM

Executive Summary

  • The prevailing trends of the next several decades: contraction, down-scaling & re-localization
  • How these trends will manifest in commerce, politics, employment & infrastructure
  • Those who adapt now will be positioned to thrive
  • Act now - ask forgiveness, not permission

If you have not yet read Part I: We've Dug a Pretty Damn Big Hole for Ourselves, available free to all readers, please click here to read it first.

We may never again restore trust in giant institutions ranging from the U.S. government to Harvard University to The New York Times. They have probably squandered their credibility and their legitimacy.

Anyway, the trends now moving human affairs are taking us away from both gigantism and the growth imperative that these things represent. The trends of the present moment in history are contraction, down-scaling, and re-localization.

Managing contraction is the only safe reality-based political response to the situation, and there is no constituency for it – though contraction is emphatically underway whether we like it or not, and it would be advantageous if we could manage our way through it rather than let it become a disorderly rout in which people starve and the rule of law disintegrates altogether.

As for re-localization and downscaling, there is a highly visible, easily identifiable constituency... » Read more


For Those Looking to Purchase Bullion Now

A partner is extending a special offer
Friday, April 19, 2013, 2:13 PM

We've been closely following the tightness in supply in the physical bullion market this week. Premiums began spiking, and now it's becoming harder and harder to find metal in stock to purchase regardless of price. » Read more


Why There May Be a Lot Less Gold Than We Realize

One report suggests a shortfall of 50% of stated US reserves
Wednesday, April 17, 2013, 5:26 PM

Executive Summary

  • The U.S. may have a lot less gold than widely believed
  • Replacing these missing reserves would be extremely costly and disruptive
  • Understanding this, the recent market manipulation begins to make sense (in a tradable way)
  • Why physical ownership is of paramount importance now as supply is increasingly tenuous

If you have not yet read Part I: Unintended Consequences Are Increasing World Demand for Gold, available free to all readers, please click here to read it first.

Exactly How Much Gold Do We Have?

There's growing concern that a lot of official gold has been leased out into the market and that sooner or later, as happened back in the late 1990s, one or more parties, perhaps bullion banks or a metals exchange, would run into difficulty trying to meet a physical gold delivery commitment.  

For a short video on the mechanics of gold leasing, click here.

If a lot of gold has been leased out, someday it will have to be rebought, and difficulties may emerge if the gold cannot be rebought in sufficient quantities without creating mayhem within the financial system by causing a very large hike in the price of gold.

Important:  The amounts of gold leased by central banks is a very closely guarded secret, and we do not have direct information on them, which means we have to try and back-calculate these amounts by other means.

A recent and thought-provoking study regarding gold leasing was done by Sprott Asset Management in March. After accounting for all known flows of gold into and out of the U.S. over the past 22 years, the Sprott team arrived at a figure of nearly 4,500 tonnes of gold that cannot be accounted for.

Here's the summary flow chart... » Read more


Protecting Your Wealth from Deflation

And from a broken system run for the benefit of the banks
Monday, April 15, 2013, 5:18 PM

Executive Summary

  • The current gold slam has *nothing* to do with the fundamentals for precious metals, which are very favorable right now
  • How bad would deflation be?
  • Evidence that deflation is arriving
  • Why our current monetary system has become so compromised by the banks
  • How to best protect your wealth from both deflation and the banks

If you have not yet read Part I: This Gold Slam is a Massive Wealth Transfer from Our Pockets to the Banks, available free to all readers, please click here to read it first.

About Those Wealth Transfers

The biggest news of the recent past is the flow of gold from West to East. 


With China importing 835 tonnes of gold in 2012 that we know about (and they may well be doing more under the table for official purposes) and also standing as the number one producer of gold, with ~360 tonnes of domestic production, none of which is exported, China is consuming at least 44% of total yearly world gold production.

Connect that with India importing between 200 and 300 tons per quarter (2011 imports were 967 tonnes, and 2012 was 864 tonnes), and this represents another 33% of total world mine output.  Add in Russia buying more official gold, and you suddenly find that a commanding proportion of the newly mined gold in the world is headed East, where it used to stay largely in the West.

To be clear, I view gold as money and therefore wealth itself.  Everything else that can be manufactured out of thin air is merely a claim on wealth.  In these terms, the West is slowly but steadily bleeding control of wealth to the East, something I thought our leaders were both aware of and focused on.

Knowing the lower prices will only exacerbate this West-to-East flow, I therefore thought that the bullion banks and central banks would not have dared push that dynamic any further.   But apparently no, obviously I was wrong, which pains me on several levels.

Add to this the various things going on in the world today, and I honestly thought we were in the most gold-favorable landscape of my life.


  • Negative real interest rates (powerfully gold- and commodity-friendly throughout history)
  • North Korea threatening nuclear and conventional war
  • Open confiscation of wealth in Europe from bank accounts
  • Japan doubling their monetary base in a brazenly desperate bid to stoke inflation by attacking Japanese trust in their own currency
  • Extremely unfavorable bond yields up and down the yield ladder
  • Continued European stress and discord with the possibility of a Eurozone disintegration

Taken together, this level of system, sovereign, and institutional uncertainty is about as gold-friendly a situation one could concoct... » Read more


The Gold Slam

Engineered by and for banks
Friday, April 12, 2013, 4:11 PM

Yesterday I had the very rare and delightful opportunity to visit with market legend Richard Russell.  Now in his 80s, his mind is sharp, his hearing is excellent, and he writes daily for his thousands of subscribers.  As a longtime reader of his work, I respect him for neither being bullish nor bearish, preferring to let his market indicators tell him which way the wind is blowing.

He’s been writing his newsletter since 1958 and has not missed a single month.  His home is crammed with books and monitors as he constantly surveys the landscape for clues and guidance.  He’s been in the game for a long time, has paid attention every step of the way, and has seen all of the ups and downs, fads, and real wealth trends across all of those decades. » Read more


Off the Cuff: Faster & Furiouser

Dangerous exponentials everywhere
Thursday, April 11, 2013, 2:08 AM

In this week's Off the Cuff podcast, Chris and Jim discuss:

  • Bitcoin Bubble?
    • The price action looks like one
  • The Japan experiment
    • Look East to see our future
  • In Fraud We Trust
    • Our banking system is run on accounting fraud
  • Staying Sane
    • Focus on what’s under your control

Unsound Money

Japan is becoming increasingly unstable
Friday, April 5, 2013, 10:28 AM

The Bank of Japan threw a shock-and-awe bombshell into their markets, and world markets, by announcing a massive program of thin-air money printing designed to finally crush the dreaded deflationary monster that has been stalking the Land of the Rising Sun for two decades. » Read more


Positioning Yourself to Prosper in the Post-Capitalist Economy

The dawn of the 'self-reliant' worker
Thursday, April 4, 2013, 9:04 AM

Executive Summary

  • The importance of "ownership" of specialized & skills
  • Why decentralization of work (vs the traditional hierarchical organization) is the future
  • Why disruption and fluidity will be the norm for most sectors of the economy
  • Why flexibility, innovation and self-reliance will be the hallmarks of the successful post-capitlaist worker

If you have not yet read Part I: We're Living Through a Rare Economic Transformation, available free to all readers, please click here to read it first.

In Part I, we reviewed the basic structure of what author Peter Drucker termed the post-capitalist society, a knowledge economy based on a model of decentralized, perpetually innovating organizations.

In Part II, we ask: How do we turn these structural insights to our own advantage?

Structural Inequality

I want to start with the social-political-economic divide that is endemic to the knowledge economy: the widening gap between the class of knowledge workers, which Drucker understood would be the smaller of the two classes, and service workers.

In broad brush, those workers and enterprises engaged in sectors that generate most of the wealth creation will do much better financially than those engaged in low-margin sectors.  In the knowledge economy, those with high-level, specialized skills will create more value and thus be better compensated than those with generalized knowledge and/or lower-level skills.

A fast-food worker, for example, is the modern-day assembly-line worker.  The entire process of assembling and serving fast food is highly organized for speed and efficiency.  But since the product is not high-value, the workers cannot be highly compensated for this work.

As Drucker recognized, all work requires management, and all organizations need to learn to innovate.  This creates opportunities for highly trained, specialized workers and managers, but it doesn’t do away with service jobs, which will remain more numerous than knowledge-intensive jobs.

This leads to a sobering conclusion:  Just producing more highly educated workers does not create a demand for those workers’ skills... » Read more