Reading time: 6 – 10 minutes

The central banks of the world are engaged in financial repression and bloating their balance sheets through quantitative easing. This deranged monetary policy is resulting in negative effects of inflation on the economy, like pink slime, and showing just how poorly famed investors like Warren Buffett have performed by destroying billions of dollars of shareholder value. This has resulted in a manipulated boom that is starting to manifest itself. The result will be that price inflation will begin rearing its ugly head in a nasty way.

JIM GRANT ON FEDERAL RESERVE INSANITY

LEGAL VERSUS ECONOMIC MONEY AND CURRENCY

Individuals acting in their own self interest determine what goods and services are available in the market. Before consumption and savings must come production. Billions of lifetimes of savings has resulted in a tremendous accumulation of capital that has been allocated to generate productive capacity which has allowed humanity’s standard of living to be lifted from the swamp to the stars. But no matter how complicated a good the space shuttle is, and it is a highly complex good, it pales in comparison to the most complex of all goods humanity has produced: money.

The Federal Reserve is interfering with the pricing of money and by consequence all other prices in the economy. The State can do this because it is such a large economic actor but it is still constrained by economic law. As Ludwig Von Mises wrote in 1912:

As a buyer or seller the state has to conform to the conditions of the market. If it wishes to alter any of the exchange ratios established in the market, it can only do this through the market’s own mechanism. As a rule it will be able to act more effectively than anyone else, thanks to the resources at its command …

The fact that the law regards money only as a means of cancelling outstanding obligations has important consequences for the legal definition of money. What the law understands by money is in fact not the common medium of exchange but the legal medium of payment. It does not come within the scope of the legislator or jurist to define the economic concept of money. [emphasis added]

The Information Age is resulting in tremendous advances in monetary evolution with things like BitCoin which is much more efficient at transferring value than fiat currency, fractional reserve banking or credit cards. These increasingly useful monetary goods will enervate demand for sterile assets like FRN$s, Euros and Yen.

WARREN BUFFETT ON GOLD

In the 2011 Berkshire Hathaway letter to shareholders Warren Buffett opined on page 18:

Gold, however, has two significant shortcomings, being neither of much use nor procreative. … Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. … Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. … The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. … I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B (all 400 million acres of U.S. cropland, 16 Exxon Mobils and $1T).

The annual production of gold around $160 billion pales in comparison to the increase in worldwide debt in the last decade from $80 trillion to $200 trillion.

JAMES TURK ON GOLD

Buffett is correct that gold is a sterile asset that does not produce anything. In fact, it is even worse than sterile in that it has a negative interest rate due to storage and insurance costs. Fortunately that interest rate is less costly than alternatives.

In a 3 Feb 2012 interview on King World News James Turk explained gold’s role as a sterile asset:

Gold doesn’t really create wealth, it’s just a sterile asset.  It doesn’t have a cash flow and it doesn’t have a balance sheet or a P/E ratio.  When the gold price is rising, what you are doing is taking wealth that’s already been created and is in the hands of people who own a fiat currency and it’s taking the wealth away from the people who own that fiat currency and putting it into the hands of people who own gold.

 So you have this wealth transfer taking place.  My expectation is that this wealth transfer is going to be one of the most phenomenal ones in monetary history.  And to be part of it you have to own physical gold and silver, this is what you need to do to take advantage of it.

BUFFETT’S SCOREBOARD

IT’S HUMILIATING

As James Grant said in the interview at 7:39:

We went back and looked at the performance of gold and the humblest of things, a cup of sugar, and a share of common Coca Cola since 1996. …
It’s humiliating, its humiliating to people who own common.

Warren Buffett should be really embarrassed. As the charts show he should have retired around the time he hit his peak in 1999 and bought a cube of gold to fondle as its non-response would be better than the loss of shareholder value in Berkshire.

To put some figures to it on 4 Jan 1999 it took 226.4 ounces of gold to buy one share of BRK-A with the gold fix at $287.15 and BRK-A at $65,000 per share. Today it takes a mere 73.7 ounces of gold to buy one share of BRK-A with the gold fix at $1,658 and BRK-A at $122,190; a 67% loss.

Before Warren Buffett denigrates gold again he should either put up or shut up because the charts show just how much shareholder wealth he is destroying. Perhaps Buffett should take a look at Anthony Weiner’s scoreboard since they both perform about the same.

But perhaps I should give Buffett thanks because the loss of wealth from his scoreboard has showed up on mine!

CONCLUSION

The Federal Reserve’s attempt to interfere with the pricing mechanism of money and currency is doomed to fail. Their suppressive manipulation of the precious metals markets in an attempt to maintain their fiat currency monopolies will only result in the transfer of physical bullion and a weakening of the central bank balance sheets. Monetary evolution is in full advance in the Information Age which is causing a loss of demand for little colored coupons. The State must conform to the dictates of the market with regard to monetary goods.

The performance of bonds, equities and real estate have all been greatly overstated as a result of this financial repression. The greatest wealth transfer in the history of the world is ongoing. One consequence over the near term will be some nasty price inflation of 5-15% which will lower standards of living due to a destruction in productive capacity of the economy. Beware of the Pink Slime which has been substituted into the CPI!

Reading time: 2 – 2 minutes

The 200 day moving average acts like the pull of gravity on prices. The FRN$ is currently very expensive while gold, silver, platinum and palladium have presented great buying opportunities. As the fiat currency and precious metals reassert their positions based on the 200 day moving average it will power the next gold upleg higher.

The USD is posed for the next downleg which will help power gold’s explosive upleg dragging silver and platinum with it. FACTA will drive more demand for BitCoins. Those who took my advice to buy bitcoins last month are sitting on a 56% gain. For those who want to spend some bitcoins you can buy RunToGold and HowToVanish products with bitcoins. Good job!

Hopefully we will do as well with the precious metals in this next upleg.

Reading time: 6 – 9 minutes

Few assets are as volatile as BitCoins have been. Over the past 365 days they have ranged from about $0.05 to over $30. After a solid consolidation BitCoins have now broken out and the next upleg appears to have appeared with a 35% rise in the past 10 days.

Back in June 2011 I wrote about how I supposedly missed the trade of the year where I could have “with a completely non-levered investment that would have turned [$5,000] into slightly over $550,000 in 8 months. $550,000 in a completely anonymous account with neither a paper or audit trail nor a 1099 and the asset would have been purchased with $5,000 of physical cash.”

Some say hindsight is 20/20, but I do not think so, because it still takes the gathering, analyzing and understanding of the data before one can get a picture and sense of what has happened. Before there were no data points to use in predicting the sustainability of the unsustainable BitCoin upleg. But this time around we can make slightly more grounded prognostications.

Filtering out the daily noise of the markets is essential if one is going to hone in on the signal. One of my favorite tools to accomplish this is the simple 200 day moving average. Taking into account almost seven months of data it is long enough to filter out daily noise, like the MF-Global or MyBitCoin fiascoes, but still close enough to capture the general trend of long-term secular markets, whether bullish or bearish. To derive a relative price I take the current price divided by the 200 day moving average.

In BitCoins case we now have a tremendous upleg and crash in the history books. An analysis of the data reveals the low end of the relative price is around 0.35x (cheap) while the high end was about 12x (expensive).

BitCoins are a decentralized peer to peer digital currency. They are the most efficient and safest form of currency I am aware of. Sure, they have neither the intrinsic value nor depth of volume like gold but they are still harmonious with the regression theorem. To create the organized cryptographic hash required energy which had value in the market just like gold had value in the market for jewelery before it acquired additional value from its utility from moneyness and currency applications.

For example, I was reading a blog which recommended the application Total Finder. Total Finder allows one to open multiple tabs in the Mac Finder which makes dragging, dropping or locating folders and files much easier. It is a feature that should be built into the OS but is not so a creative entrepreneur saw a market need and filled it.

I immediately recognized that this application would save me time and decided to purchase it. The price was $18 and it is available in the Apple store. Then I did a Google search for “Total Finder bitcoin” and found the author’s article Trade Total Finder for BitCoins. As expected there was a discount, 50%. Why is that?

Because the current payment systems are too expensive. Apple takes 30%, the credit cards and processors take 1-7% and require the identity of both the buyer and seller along with sales and income taxes which are much easier to enforce plus your accounts can be arbitrarily frozen like with the Wikileaks banking blockade. By removing all these middlemen moochers and looters from the transaction both parties are better off with a 50% discount in price.

BitCoin makes this payment efficiency possible because it is based on cryptographic protocol where its security is grounded in the laws of mathematics not laws of men which may or may not be enforced profitably.

The rise in BitCoin’s exchange rate has surprised me. First, BitCoins are currently being inflated at approximately 42% per year. That is quite the increase in the currency supply. Second, early adopters are sure to control tremendous amounts of BitCoins and I would think they would be divesting themselves as the market would bear without sinking the price too drastically and third the BitCoin economy is still in its infancy.

Over the last six months I have watched the average transactions in the public block explorer grow to about $1 million per day. The exchanges have increased their trading volume from about 40,000 coins per day to approximately 200,000 on 19 Dec 2011. With about 8 million BitCoins in circulation there is plenty of volume to provide a bid for any early adopters who decided to disgorge large amounts of coins.

BitCoin is an illusion like the FRN$, Euro or Yen. The market is deep enough that I would place it in the cash portion of your balance sheet. Additionally, if you take the proper steps it is the most portable currency ever. For that element of safety and liquidity therefore I think everyone should hold some BitCoins, perhaps at least 0.1% of their net worth, in their portfolio.

CONCLUSION

Watching this breakout and ensuing upleg in BitCoins is going to be exciting. Since the last rally in June there have been real life applications developed from mobile payments to massive online stores with hundreds of thousands of items, entrepreneurs have stepped in to accept BitCoins as payment, the client has been greatly improved, exchange security has been enhanced, with proper privacy hygiene your cryptographic hash is more secure than even a gold coin and more people understand what BitCoins are, how they work and why they want some.

Taking the current price of $4.00, the 200 day moving average of about $8.50 and extrapolating this upleg with a 12x 200dma top we could see a price of around $80.00 per BitCoin. Is this speculative? Yes. Would I bet on seeing $80 per BitCoin by around June or July? Maybe if the odds are around 5%. But I would take a bet for BitCoins to hit $7.50 by June or July at around a 50-70% probability.

So, if you want to buy any Run To Gold products using BitCoins just contact me and we can make a deal with a substantial discount. If you need a place to get any BitCoins then I recommend the Tradehill exchange.

Reading time: 6 – 10 minutes

The demand for gold is vastly underestimated. About 18 months ago I wrote about Euro Gold and the Euro Zone and Euro Evaporation Leading To Credit Default Swaps and IMF Gold. One key excerpt was:

The Euro is broken. This was its destiny. This is the destiny of all fiat currencies. These bureau-rats cannot stop this anymore than Cnut the Great could command the tide to halt.

And here we are.

THE GREAT CREDIT CONTRACTION

The Great Credit Contraction has been in relentless advance for years. This is a massively deflationary period as capital, both real and fictitious, burrows down the liquidity pyramid into safer and more liquid assets. The fictitious capital that does not move fast enough evaporates. Poof goes trillions of wealth!

Fractional Reserve Banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder while maintaining the simultaneous obligation to redeem all these deposits upon demand.

Fractional reserve banking occurs when banks lend out any fraction of the funds received from demand deposits. Despite being a form of embezzlement and fraud this practice is universal in modern banking.

This mismatch between time, borrowing short-term and lending long-term, is what creates the potential for a bank run. But an even larger looming problem lurks in ‘cash and cash equivalents’. Yes, those pesky Tier I, II and III distinctions.

As a bank’s assets evaporate their ability to make new loans, even extremely short-term loans like overnight, becomes impaired. When an entire banking system knows that all the major players have assets on their balance sheets, assets which are not accurately priced or accounted for, then there is an extreme reluctance to lend.

This is what happened when Lehman Brothers evaporated. The credit markets seized up. People acting in their own self-interest according to principles of praxeology moved into safe and liquid assets and refused to lend.

Liquidity dried up overnight. Mortgage backed securities, auction rate securities and plenty of other assets which had for decades been treated as ‘cash equivalents’ were suddenly shunned. The bid evaporated from a loss of confidence, the prices plunged, investors were snookered and bank balance sheets were massively damaged.

The European banks have balance sheets with trillions of Euros in value recorded but assets which every rational non-ignorant person knows are severely impaired. The credit markets are freezing, trust is evaporating and as a result liquidity is drying up.

Sure, the central banks of the world have joined in a massive illegal effort to lubricate the system but it will fail. Years ago when QE1 was announced I wrote The Federal Reserve Will Fail With Quantitative Easing. They are still failing just on a grander scale.

To recapitalize and lubricate the European banking and financial system would take at least €25 trillion and maybe upwards of €100 trillion. The failure is a mathematical certainty. The gears of industry are seizing up.

The Greek and Italian democracies were assassinated by banksters Lucas Papademos, Mario Monti and Mario Draghi who will attempt to prolong the failed banking and financial system by privatizing the gains and socializing the losses with inflationary tactics and bailouts in a vain attempt to prevent the credit liquidation. They will only succeed in prolonging and exacerbating the necessary correction.

What holders of capital should understand is that European bank balance sheets are caught in an unrecoverable credit contraction spin, the appropriate emergency maneuver is to Run To Gold and only a few will make it with their purchasing power intact.

The vast majority of assets will become charred wreckage as their purchasing power evaporates into worthlessness. Sure, there may be a few near miss recoveries between now and the ultimate failure but why take the risk?

LATENT GOLD DEMAND

There is massive latent gold demand as a ‘cash or cash equivalent’ asset. Why should a holder of capital store their wealth in bank deposits with counter-party risk when they can completely eliminate it by moving into unencumbered physical gold bullion?

Plus, by moving into physical gold bullion they eliminate the risk associated with fiat currency becoming worthless through the deflationary event called hyperinflation. Really, hyperinflation is just the next step in The Great Credit Contraction after capital has moved almost entirely down the liquidity pyramid.

The money managers allocating trillions of FRNs, Euros, Yen, etc. have not even begun moving into the monetary metals. In most cases it is only beginning to become acceptable to speak of them. Some fallaciously argue there is not enough gold to go around.

Sure, there is enough gold for it to be used as the world reserve currency but it is only a matter of price. A price that Jim Rickards argues the case for in Currency Wars of being between $8,000 and $54,000+ per ounce.

CONCLUSION

The European banking and financial system is imploding before our eyes in a massive credit contraction which is just the latest wave in The Great Credit Contraction. The European banks are in an unrecoverable deflationary spin. There is only one acceptable emergency recovery procedure and that is to Run To Gold.

Because so few have, therefore, the real gold demand is completely hidden and obscured from view. It will come when people lose confidence in the current banking and financial system by turning to and using alternatives that do not possess the same kinds of risks. In the Information Age bank runs happen with the click of a mouse and not lines outside the physical branches.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

Reading time: 4 – 7 minutes

THE 200 DAY MOVING AVERAGE

On 19 Sep 2011 I wrote about gold and silver consolidating, “The real value seems to be in palladium which is trading at an extreme discount of 0.9224x its 200 day moving average.” This was because statistically speaking palladium was extremely outside the standard deviations of its usual trading ranges relative to its 200 day moving average. The 200 day moving averages acts like gravity to filter out the daily machinations of the market.

In a secular bull market, like the precious metals are currently in, when silver moves below 0.95x the 200 day moving average then a buying opportunity presents itself where the probability of a gain on the position relative to the numeraire is much more likely. On 23 Sep 2011 the price of silver is $30.45 and the 200 day moving average is $35.76 which yields a relative price between the two of 0.8516x.

THE LEHMAN BROTHERS COLLAPSE

This ratio has never been lower in the past decade except shortly after Lehman brothers collapsed. Within a year the price had doubled. Within three years the price had gone up five-fold. The current correction and ensuing consolidation is setting the stage for a triple digit FRN$ silver price.

THE PROPER NUMERAIRE

But the savvy investor may ask, “But is not gold the proper numeraire?” Yes. Sure, this chart is showing silver through the FRN$ lens. The gold to silver ratio, currently around 48 ounces of silver per ounce of gold, does tell a different story. Silver is not nearly as cheap today as it was in the early part of the decade when the ratio was over 100. But as this secular bull market progresses the ratio should continue declining.

It will likely reach 16:1 and may even overshoot to 8:1 or as some rather bombastic commentators have made the case it may even go to parity, 1:1, or it may actually take more than one ounce of gold to purchase one ounce of silver. While it may seem unbelievable and in my opinion a low probability I do not think it is a completely unrealistic scenario.

Currently it takes less than one ounce of gold to buy one ounce of platinum. Platinum is much scarcer than gold, there is less platinum produced per year.

Since the Lehman Brothers collapse the gold to silver ratio has moved from about 80 to 40-45. While gold is the better numeraire; silver has been the superior speculative currency. Remember, you make money when you buy not when you sell.

GOLD PRICE SUPPRESSION SCHEME

Six years ago South African gold market analyst Peter George said at GATA’s Gold Rush 21 conference in Dawson City, ”In the last 10 years the central banks have effectively shown that when there’s a real crisis, gold actually goes down, and it’s so blatant, it’s a joke.” The central bank script has not changed.

But we do know that price controls lead to shortages. Last time silver got this cheap there was silver backwardation for weeks while the price clawed higher to clear the market.

Following provident living principles I like to accumulate the precious metals on a regular basis usually in proportion to excess free cash flow. Like Rick Rule I am a fear investor regarding them and rarely do I move into them based on the greedy speculative component. There are other less manipulated assets for that purpose.

But in this case the markets have been in major liquidation mode and silver has not been spared. This has opened up a tremendous buying opportunity. But due to the large amounts of manipulation in these markets I would caution against the use of leverage. This is just the latest step in a long staircase of The Great Credit Contraction.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

Reading time: 5 – 8 minutes

The next round of The Great Credit Contraction has started in Europe with Greece in the target sight. While the world scrambles for liquidity capital is burrowing into and oscillating between FRN$ and gold. This consolidation in the gold price and silver price is laying the foundation for the next major up leg.

200 DAY MOVING AVERAGES ARE RISING

The 200 DMA acts like gravity on the price of assets allowing for the relative comparison over time which helps to filter out the daily trading noise. The recent melt-up in the gold price since July has added nearly FRN$300 or  €300 that needs to be digested into the 200 day moving average. Keep in mind that 200 days ago was the beginning of March and the gold price was a mere $1,420 per ounce. The 200 day moving average for gold is now at FRN$1,511.69 and increasing at approximately FRN$1.85 per day.

The silver price is also consolidating its recent gains. With a current silver price around FRN$40 and a 200 day moving average around FRN$35.76 and adding about four cents per day. So, two more months of consolidation and then the next move up.

Gold is currently consolidating its price 10% faster than silver and is confirmed with the relative price at 1.1133 for silver as compared to gold’s relative price of 1.1771. Of all the precious metals gold appears to be the most expensive. The real value seems to be in palladium which is trading at an extreme discount of 0.9224x its 200 day moving average.

Gold has likely seen a great increase in monetary demand from Europeans who do not want exposure to counter-party risk from bankrupt and insolvent. The banking crisis is far from over and for holders of capital that is at risk it must be extremely scary. Sitting in allocated gold or other precious metals held in segregated, audited, secure and insured storage, like with GoldMoney, would be a much more comforting position than in Societe Generala, UBS, Unicredit, etc. As Bloomberg reported on 19 Sep 2011, “A gauge of banks’ reluctance to lend to each other in Europe rose for the first time in a week amid renewed concern Greece is headed for a default.”

This is likely one of the reasons platinum and palladium are priced so cheaply. Monetary demand has flowed into gold and somewhat into silver. Forecasted industrial demand is anemic. Less cars and other goods will be demanded and produced. So the price of inputs, like platinum and palladium, fall. Or so the argument goes.

Platinum and palladium are a great deal right now. Like gold and silver they can never become worthless and, if held correctly, are not subject to counter-party risk. The supply is much smaller and if there is a significant increase in demand, perhaps from investors looking to preserve capital, then their price can increase significantly. Additionally, although platinum is significantly more rare than gold it is, unusually, cheaper in FRN$ terms and palladium is currently an even better deal!

The platinum to gold 200 day moving is currently 1.19 compared to the current price of 1.00. The price of platinum in terms of gold has not been this cheap since shortly after the first round of the credit crisis when Lehman Brothers collapsed.

Palladium is a little more difficult to discern through the golden lens. Like platinum it has not been cheaper since the Lehman collapse. Currently its 200 day moving average is 0.51 compared to the current palladium price in gold of 0.40. This makes palladium slightly cheaper than platinum with the current price in gold about 78% its 200 day moving average compared to platinum’s 84%. Palladium also has a significantly cheaper relative price in FRN$.

THE SPECTRE OF PRICE INFLATION

Central banks the world over have followed the Federal Reserve and created tremendous amounts of liquidity in an attempt to stave off the first round of The Great Credit Contraction. Round two is beginning to materialize and they are continuing.

In an 18 Sep 2011 NYT editorial Paul Volcker sent a warning shot to Ben Bernanke about inflation and how once inflation becomes anticipated and ingrained its stimulating effects are lost. Consider that over the past three months the Federal Reserve has increased M1 by 36.7% and M2 by 23.3%. The specter of price inflation should begin an increasingly aggressive haunting of savers and holders of capital. One place they can seek refuge is gold and silver. Another place to go is platinum, palladium or oil.

CONCLUSION

The Great Credit Contraction is destroying wealth, both real and illusory, at a tremendous rate. The balance sheets of banks have derivative singularities sucking in any equity that passes near the event horizon. This should be the real driver for precious metal demand like gold, silver, platinum and palladium; the lack of counter-party risk.

To make matters worse the stewards of fiat currencies have infected the printing presses with their incontinence. When it comes to safeguarding price stability of fiat currencies those like Ben Bernanke who have succeeded bulldogs like Paul Volcker are lesser men of greater sires.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

Reading time: 5 – 8 minutes

I recently finished two weeks in London which ended with the GATA Gold Rush 2011 conference. I was in the room during the taping of the Jim Sinclair interview. How right has he been all along!

The flat I rented in London was about two tube stops from the Tottenham riots. Now I am in Athens headed to the islands for an enjoyable two weeks. With all the turmoil I often wonder: Do the riots follow me or do I follow the riots?

One common theme on RunToGold is to assess the probability and gravity risks, analyze potential solutions or plans and then take action with provident living principles which may lead to survivalism in the suburbs or some other form of life hedge.

UNITED STATES LOSES TRIPLE A RATING

In April Treasury Secretary Timothy Geithner was asked concerning the risk of the U.S. losing its triple-A credit rating: Secretary Geithner replied, “No risk of that.”

Then the politicians bickered about the debt ceiling and came to a faux resolution. On 5 August 2011 the Wall Street Journal reported:

S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn’t do enough to address the gloomy outlook for America’s finances. It downgraded long-term U.S. debt to AA+, a score that ranks below more than a dozen governments’

Boom, Boom, Pow!

In 2009 Mr. Sinclair said of my liquidity pyramid: “A very good, simple and clear representation of the problem lacking a practical solution.” Before his interview at the GATA conference I wanted to thank him for his gracious compliment. Regarding the liquidity pyramid Mr. Sinclair remarked, “Perfect.”

PREPARATION, CONFIDENCE AND CALM

I have received a tremendous increase in comments and emails from readers and friends. They all seem to want expert advice from someone who knows what is going on. Why do you think I wrote hundreds of articles on Run To Gold? When the time for performance comes the time for preparation has passed.

I really wish I could provide some advice for those ‘caught between a rock and a hard place’ who are watching their pensions and retirement accounts evaporate. But I am off swimming in the beautiful islands of the Mediterranean Sea and do not have ready access to the phone.

Those darn crazy gold bugs do not look so crazy now. How right was Mr. Sinclair when he called $1,650 gold a decade ago when it was around $265? Good thing his thin skin is gold-plated.

But I have already written about the evaporating Euro, how retirement accounts could boost Treasuries and as I wrote in 18 January 2009 why and how the Treasury bubble will burst:

As the yields on Treasury Bills approach 0% they have the return of cash but do not have the benefits of cash as they may be impregnated with counter-party risk or have decreased liquidity.  In other words, Treasury Bills and cash have the same benefit profile but not the same safety and liquidity profile.

The Wall Street Journal reported 4 August 2011 that “Bank of New York Mellon Corp. on Thursday took the extraordinary step of telling large clients it will charge them [0.13%] to hold cash.”

Now the FRN$ moves one step closer to evaporating. Why pay 0.13% to hold FRN$ when you can pay a 0.18% storage fee to hold unencumbered allocated insured gold? Is it really wise or prudent to save five basis points to be in a potentially worthless fiat currency while being an unsecured creditor of an institution(s) that has needed trillions in bailouts? Treasuries are not looking so risk-free are they?

CONCLUSION

What is happening is no real surprise to those who understand monetary science and basic economic law. I laid out the case years ago in my book The Great Credit Contraction. Those persuaded have likely ensconced themselves within a financial forcefield of silver and gold.

As the storm rages and intensifies they feel no particular urgency or panic. They are prepared for Winter and can remain solvent much longer than the market can remain chaotic. After all, the melting point for gold is 1,947.52 °F which may be its FRN$ after this latest up leg.

For those who are new, I recommend Apmex for coins because of their A+ BBB rating and low premiums and GoldMoney if you want a third-party to store your metals.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

Reading time: 1 – 2 minutes

This has to be one of the most ironic and ignorant statement I have heard come out of Washington. The tail risk is with people like Bernanke running the Federal Reserve, Trichet running the ECB, the eurocrats trying to run the rating agencies and politicians trying to design everyone else’s lifestyle.

It appears that despite a fairly short consolidation that the next gold upleg has started. The gold 50dma is $1,522.03 and the 200dma is $1,423.69. The silver 50dma is $36.06 and the 200dma is $32.24.

During this upleg that will likely last until November before a correction or consolidation may see gold run to $1,800 and silver to the $55-60 range. It will be important to see the activity over the next week or so to determine whether the strength will stay. If the monetary metals pull back slightly and continue their usual summer consolidation then it will help the 200dma continue to rise which will lay a stronger base for the autumn and winter rally.

Reading time: 6 – 9 minutes

BitCoin. I first learned about it in October and wrote about it 17 January 2011 in BitCoin – The Best Financial Privacy Is Here … Probably. The article was theoretical not practical. I missed the trade of the year. This was a serious woulda, coulda, shoulda but didn’t moment. I even told a few friends I was going to put in about $5,000. Today with a completely non-levered investment that would have turned into slightly over $550,000 in 8 months. $550,000 in a completely anonymous account with neither a paper or audit trail nor a 1099 and the asset would have been purchased with $5,000 of physical cash. That is one way to vanish some equity.

But there was a lot of risk to be taken in making that initial investment. The risk has since decreased but I still think there is a tremendous amount of upside potential. Perhaps even a thousand percent gain between now and the end of the year. Regardless of what ultimately happens with BitCoin I think you will want to know what BitCoin is and the potential for this new type of technology and its application to monetary science in the Information Age.

WHAT IS BITCOIN?

WHAT ARE BITCOIN’S ADVANTAGES

BitCoins are merely some computer bits that are limited in amount. The network for their generation is decentralized and bitcoins are transferred between individual’s via the Internet with extremely low fees, they can be used anytime or anywhere, the account cannot be frozen and there are no silly or arbitrary rules such as Know Your Customer, source of funds, limits on amounts that can be transferred or stored, currency controls, etc.

The entire software is open-source. That means anyone can read the code, publish opinions and engage in review within the full view of the marketplace of ideas. There is no centralized individual, entity or organization that pressure can be applied towards to force the disclosure of customer records, freezing of funds, transaction history or any number of other private and sensitive information. This is a serious attack on the fiat currency and fractional reserve banking conspiracy.

WHAT ARE BITCOIN’S DISADVANTAGES

The main disadvantage of bitcoins is their being an illusion. In chapter 1 of The Great Credit Contraction I distinguish between money, money substitutes and illusions which can all function as currency. An illusion is a negotiable that promises nothing and has no intrinsic value.  It is like a silver certificate that promises the bearer no silver.  It has value only because individuals are willing to bear the payment risk and other risks of the illusion.  The bearer usually tolerates the risks because their cost is lower than the value placed on the utility derived from the service the currency provides to the market participants.

Consequently, bitcoins have a value history in The Regression Theorem like the evaporating Euro. Bitcoins have no intrinsic value and unlike Euros or FRN$ cannot even be used for their combustible or defecation cleaning properties. But despite this serious disadvantage, which GoldMoney solves, I think because of the decentralized aspect BitCoin may actually be a superior form of transaction currency to GoldMoney. Together and combined with hawala techniques these two currencies almost perfectly compliment each other.

REASON MAGAZINE’S Q&A ABOUT BITCOIN

HELPFUL BITCOIN RELATED SITES

How To Store BitCoins – You can store the bitcoins in your own wallet or with a third party.

If you store in your own wallet then I would recommend Dropbox and TrueCrypt. If you keep your BitCoin wallet on your computer or in the cloud then you may lose the file, have a TrueCrypt file header get corrupted, etc. and the bitcoins would be unrecoverable. Remember, they are like digital cash.

If you store with a third party then an easy way I would recommend is Trade Hill which is free and much easier to figure out than trying to setup your own wallet and then using tools like TrueCrypt and Dropbox to protect it but I suppose the risk is that they could abscond with your bitcoins.  So all things considered for now I think TradeHill poses a small risk of loss.

How To Get BitCoins – A few ideas are that you can use an exchanger, a broker, trade with someone via the Internet or in person or engage in bitcoin mining.

The largest exchanger is MtGox. They exchange hundreds of thousands of FRN$ value of bitcoins for cash and vice versa per day.

If you are interested in using cash then I might be willing to help out with smaller transactions but I am not really that interested. I suppose you will find a way to contact me if you really want to. I would prefer to refer you to someone who I have had a positive experience with but there is always risk. I just know how cautious I am and imagine many of you are likewise very cautious.

CONCLUSION

BitCoins have sustained a tremendous rally from about $0.25 to over $30.00 in less than 8 months. I missed this perceived risky trade because I was too cautious. After a thorough study I think there is tremendous merit to the BitCoin project and think it deserves some serious due diligence by holders of capital and speculators. I would not be surprised to see a triple or quadruple digit BitCoin price by the end of year. There is some serious speculative potential here. Also, at RunToGold and HowToVanish are willing to take bitcoins as payment for any products we offer.

Please let me know in the comments what you think of this new BitCoin project. Thanks!

DISCLOSURES: Long physical gold, silver, platinum, palladium and bitcoins.

Reading time: 9 – 14 minutes

The precious metals have been on a tremendous upleg as I predicted. But for the past few years I have maintained that gold and silver are about average value and sometimes a little expensive. In other words, they are no where near as cheap as they were at the beginning of this secular bull market in 1999.

Then my ears perked up when I heard Marc Faber on CNBC say, “I think maybe gold is cheaper today than it was in 1999 when it was $252.”

Is Mr. Faber’s subjective valuation of gold rationally optimistic, delusional or just plain insane?

When I am looking to buy or sell an asset, whether real estate, stock, bonds or precious metals, I generally use the 200 day moving average to determine its relative price and give a quick determination of whether it is cheap, average or expensive. On RunToGold I even have key ratios where one can easily view the DOW:gold or DOW:silver ratios based on the spot price or 200 day moving averages. I find these extremely helpful to get a quick assessment of current market ratios.

Despite being extremely bullish about silver and understanding the silver backwardation implications on the silver price I have nevertheless been extremely cautious because of the overstretched 200 day moving average; based purely on technicals silver looks very expensive and due for a correction to around $30. But these are just techniques and do not get to the fundamental issues. They are only as good as their underlying premises.

Many financial professionals struggle with valuing gold. This is because traditional valuation techniques and strategies focus on discounted future cash flows, discount rates, interest rates, risk-free rates, real returns, ROI, IRR, WACCs, etc. Distilled simply they base all of their premises and conclusions on a faulty premise: The 10 year US Treasury is the risk-free rate.

As a result, most people including almost all the gold bugs I know keep their balance sheets, income statements and cash flow statements using the FRN$ or Euro as the numeraire. Even among gold bugs I know it is only myself and Anthem Blanchard who seem to keep regular financial statements denominated in gold as the numeraire.

The truth of the matter is that the benchmark for ‘risk-free’ is subjective and a decision every investor should make for themselves. What one uses for a numeraire is a completely different issue from what one should buy, sell or hold, etc. Plus, one should be acutely aware of return-free risk. Here are a few of the factors that persuaded me to use gold as my prime numeraire:

1. Gold, an element in the periodic table, is a tangible physical asset with a constant definition.

2. There are large above ground stockpiles of gold which results in low relative changes in size and those changes are largely predictable.

3. Gold is a current asset with significant financial liquidity properties. It belongs in the cash portion of the balance sheet.

4. Gold has value in itself, is not subject to counter-party risk and can never become worthless.

5. Gold has a long-term relationship with other commodities. Professor Jastram in The Golden Constant explained on page 130,

As we have said, the purchasing power of gold depends on the relation of commodity prices to gold prices. A close scrutiny of this relationship over time discloses an affinity of a curiously responsive character. It could be called the ‘Retrieval Phenomenon’, meaning that the commodity price level may move away higher or lower, but it tends to return repeatedly to the level of gold.

6. When feeling insecure about the financial and economic conditions one can always pet their gold. Go ahead, pet your platypus.

Viewing the financial and economic world through the prism of the FRN$, Euro, Yen, Pound, etc. leads to gross distortions. Due to the gold price suppression scheme one’s vision is only slightly improved, and definitely not to 20/20, by viewing through the lens of gold as numeraire. But the one-eyed man is the dodgeball God when playing among the blind.

To be honest, I do not really care if people disagree with how I assess value; I just kick their bum in the market and am rewarded with the purchasing power. It reminds me of what one of my banker’s said about 10 months after we had closed on an acquisition, “You sure underpaid for that business.” My response was, “We were buying, right?” Duh. Plus, the seller named his price so he got exactly what he wanted!

In nature, atrophy is the natural order of things. The fiat currency and fractional reserve banking system has resulted in a concave financial prism that results in a financial inversion. The natural order of things would have a negative, not positive, interest rate. Perhaps most shocking when one begins to perform this initial paradigm change is to see what I like to call the inversion of interest income; store of capital expense.

For example, if you have a batch of bananas or wheat you would not expect there to be more of higher quality tomorrow merely by the fact of putting them in a pile. In most cases, wealth does not just magically create and organize itself. In fact, most rational people would assume there would be less wealth because the bananas or wheat would spoil. So likewise with gold; there is a storage expense and insurance instead of earning interest. Most people forget that interest is supposed to compensate for risk which has largely been cartelized and resulted in tremendous moral hazard that will be meted out under economic law with systemic collapse.

If you had 3,800 gold ounces, about $1,000,000 of value, in 2001 and wanted to store the capital until 2007 you could choose among many different tools. Let’s assume you chose an interest bearing checking account and GoldMoney. The monthly store of capital expense for the bank account is about $1,500 while about $500 using GoldMoney. I should probably run the numbers to see if the fiat currency and fractional reserve banking system has gotten more expensive since 2007 but this is what Mr. Faber is asserting.

CONFISCATING CERTIFICATES OF CONFISCATION

THE CURRENT VALUE OF GOLD

Over the past 40 years, the world economy has attempted to leave gold’s orbit through the world reserve currency rocket of the FRN$ but it has ran out of fuel before reaching escape velocity and therefore been unsuccessful which has resulted in The Great Credit Contraction that has only just begun a few years ago with capital burrowing down the liquidity pyramid. The regression theorem reversed.

A tremendous portion of the liquidity pyramid, particularly with derivatives, has been created since 1999. Looking just at high-powered currency, the adjusted monetary base, relative to gold gives an interesting valuation metric. Supposedly the United States government has 261.5 million ounces of gold in Fort Knox. Despite the gold having not been audited in over 50 years and rampant corruption, inefficiency, misstatements, lies and omissions by the United States and other governments on countless topics we will assume for the sake of argument that they really do have the approximately 8,000 tons of gold.

This chart from the Federal Reserve Bank of Saint Louis shows there was approximately $500B of adjusted monetary base in 1999 and about $2.5T in March 2011 with a corresponding 5.8x increase in the price of gold relative to FRN$. This places a ratio of adjusted monetary base to gold in 1999 of $1,912 and in 2011 of $9,478.

Reasoned analysis for Mr. Faber’s valuation comes into focus. As Mr. Robert Landis asserted at GATA’s 2005 event, “Any rational person who continues to dispute the existence of the rig after exposure to the evidence is either in denial or is complicit.” GATA asserts that central banks have only 1/2 to 1/3 of the gold they claim which would yield a ratio of $28,434.

After all of the worldwide quantitative easing and competitive devaluation of the last few years what are the adjusted monetary base ratios of the ECB, Bank of England, Korea, China, Japan, etc. relative to their minuscule gold holdings? As Alan Greenspan said to the Council of Foreign Relations, “Fiat money has no place to go but gold.”

For the last several years I have thought that gold and silver were about average valued based on the current market conditions and their liquidity. But after hearing Mr. Faber’s assertions that gold may be cheaper now than in 1999 and analyzing the changed market conditions such as the rise of the digital gold currency GoldMoney, increased gold hypothecation via JP Morgan, tremendous increase in the adjusted monetary bases of central banks around the world, failed quantitative easing policies, the exacerbation of the Greater Depression , lack of access to knowledge and facts concerning the true state of affairs which is exemplified by Bloomberg taking the Federal Reserve to the Supreme Court and negative business and entrepreneurial environment due to increased government regulation and taxation therefore I may be changing my view on the underlying valuation of the precious metals. Despite the massive secular bull market they may actually be getting cheaper!

The current metals prices may seem high in nominal terms but what is unseen is the change in fundamental value of the FRN$. I hate owning the precious metals because of the store of capital expense. I would much prefer to own a wealth generating business or real estate. But for now I will continue to buy gold, silver, platinum and palladium only because I do not see any other better alternatives and the difficulty in discerning the financial and economic landscape because of the twilight zone induced effects from quantitative easing. In other words, when the crystal ball is clouded just hunker down at the liquidity pyramid’s tip.

DISCLOSURES: Long physical gold, silver, platinum and palladium.

Reading time: 7 – 11 minutes

In Chapter 6 of The Great Credit Contraction I discuss the importance of the Five Flag Theory and a life hedge is an essential competent of this concept. A life hedge is a backup location where you can relocate yourself to maintain the lifestyle you have designed. Implementing provident living principles requires one to put in place a contingency plan for their personal location.

When one is unprepared for and effected by those events which are possible, although not probable, then one’s lifestyle gets designed for them and in many cases they do not like it. Just ask the cold, starving masses in Japan, Haiti, Chile, Thailand, etc. who failed to adequately hedge against natural disasters. A life hedge is a form of insurance for yourself and your family against the flock of black swans. While charity is nice I guarantee you that no one cares more about whether you are fed and comfortable than you do. With the current system unraveling it is important to prepare for survivalism in the suburbs as the veneer of order is extremely thin.

For example, if you had to take the last plane out of your city then (1) where would you go and (2) how would you maintain your standard of living?

In the Information Age the ability to have a ‘location independent’ lifestyle has becoming increasingly available to more people. By designing your lifestyle to be location independent and having multiple locations you frequent then you will be able to have continuity of lifestyle despite the tumultuous and unpredictable events, from natural disasters to political unrest from supply chain disruptions to currency collapse, that can and will occur during this transition from the Industrial to the Information Age.

When considering a life hedge there are a few elements to consider such as plentiful water, good sun exposure for gardening or photovoltaics, not on a flood plain, panoramic views, minimal noxious weeds, away from potential real estate developers, low housing costs, access to and ability to produce food, low population density, compatible neighbors, and many more.

Doug Casey has been preaching the end of the world for 30 years and with La Estancia being his pet project and personal life hedge he has made sure that La Estancia De Cafayate is an excellent well-rounded choice when it comes to its survival characteristics.

INTERVIEW WITH DOUG CASEY, JUAN CARLOS ROMERO AND JUAN ESTEBAN ROMERO

Even if you never use La Estancia De Cafayate for its retreat value it will still add considerable utility via the golf, polo, wine and networking opportunities. At every event I have attended I have learned a tremendous amount from the others there. With so many successful, creative and productive people with a similar philosophical and practical outlook the environment is ripe for business opportunities. Since one has to be somewhere why not be around other successful, creative and productive people with whom you can plan and plot great business ideas and opportunities to accomplish?

The first time I visited La Estancia De Cafayate was in 2008. At the time I thought the probability of success was about 15%. Doug’s idea was rather crazy; raise a first class country club from the desert sand in the middle of nowhere and a thousand miles from the closest large city.

But after three years I would say the probability of success is now 100% because enough lots have been sold that the development has no debt and enough cash in the bank to finish all major projects. Additionally, this is the crown jewel of Salta and its success or failure reflects tremendously on Mr. Romero’s reputation. The clubhouse, many vineyards, roads, polo field and utilities are finished. The Health Club and Spa are under construction along with the incoming Grace Hotel and a regular flight from Salta to Cafayate.

So much of the initial risk with the development is gone. World conditions have continued to deteriorate which increases the attractiveness of this type of life hedge. Information technology makes it easier than ever to be in the middle of nowhere yet in the thick of it all when it comes to business or trading. The lots are selling at a quicker pace.

I think the probability of it selling out and becoming a very exclusive community which high powered individuals frequent on a regular basis has greatly increased which adds additional utility for those who may be seeking the opportunity for networking for business opportunities, etc. Plus, how does one put a value on having cool like-minded neighbors?

FAILED WORLDWIDE FINANCIAL SYSTEM

The fractional reserve banking and fiat currency conspiracy system failed in 2008. Only inertia coupled with quantitative easing is keeping the system from unraveling faster. But the effects of massive inflation are well known to result in shortages and rationing. World political and monetary authorities can print little colored coupons but that creates neither wealth nor food. Why are gold, silver, oil, and food rising so quickly?

The Federal Reserve’s insane monetary policies sustaining the unsustainable are going to cause tremendous problems. Food is going to become a lot more expensive and this will continue to feed political instability. The chaotic fingers of instability are getting even more unpredictable.

The financial crisis will lead to economic, social, political and geo-political crises of increasing intensity. The FRN$, the world reserve currency, will be the last layer to evaporate in the great credit contraction. So far the United States has largely been insulated from the effects of the financial crisis on daily life. But when the FRN$ currency crisis comes, hyperinflation being a form of deflation, the United States will be ground zero. Then things will get dicey real quick. You may want to know how to vanish.

Are you going to watch this mess on the Internet or out your front porch? La Estancia De Cafayate is well positioned should the more dire forecasts about Peak Oil or this worldwide financial crisis come to fruition. Even if the end of world does not happen it will still be a fun place to spend time and have a great batch of people to spend it with. After all, it is not so much where you go but who you go with.

CONCLUSION

How many more wake up calls does one need before they take action and secure a life hedge? Bear Stearns, Lehman Brothers, Iceland, Greece, Portugal, Haiti, Japan, the FRN$ and so many others. When the time for performance has come the time for preparation has passed. I think La Estancia De Cafayate deserves serious consideration if you are looking for a life hedge and we would appreciate the opportunity to help you in that regard so feel free to contact us. For example, Bill Rounds is fluent in Spanish and can help with any legal documents.

Reading time: 8 – 12 minutes

[Disclaimer: The follow article is a fictional account of a persuasive argument and should not be construed as an assertion of facts although written in the first person.]

My nuke pills, commonly known as potassium iodide, have been languishing unloved in my emergency supplies for years since I bought them for about $5.99 each. They expire next month. I would like to have donated them to a charity that would get them to people in Japan who so badly need them.

But potassium iodide is only available by prescription in Japan and I am not interested in engaging in the international smuggling of controlled substances. So I did the next best thing: I just sold them for $99.99 apiece representing a net realized gain of approximately 1,500%. One of my best investments yet. But with the nuke pill market’s backwardation more severe than the silver backwardation why would I sell them?

Price gouging has a nasty connotation. This is mostly due to the true cause of shortages, governments, attempting to spread disinformation about how markets work. For example, the Florida Division of Consumer Services asserts:

In the wake of natural disaster, essentials — such as food, ice generators, lanterns, lumber, etc. — may be in short supply. Charging exorbitant or excessive prices for these and other necessities following a disaster is not only unethical, it’s illegal.

Under Sections 501.160 and 501.205 Florida Statutes, it is illegal to charge unconscionable prices for goods or services following a declared state of emergency.

Individuals or businesses found guilty of price-gouging could face fines up to $1,000 per violation.

HOW AND WHY VOLUNTARY TRADE WORKS

If I own potassium iodide pills there are two mutually exclusive ways for you to acquire them. One option is for me to voluntarily sell or gift you the pills. The other option is for you to steal or rob the pills from me.

Trade works because everyone has different preferences, talents, abilities, competitive advantages, knowledge and desires. For example, Mozart had different talents than Einstein. The baker and the painter are each able to perform work the other values and when they engage in a voluntary trade then it implies that the baker derives more value from what the painter offers than from his bread. Because the baker is better at baking than the painter and because the painter is better at painting than the baker therefore when a trade is voluntarily concluded then both the painter and baker are better off which raises the standard of living for both. Even nations have comparative advantages.

However, when property is either stolen or robbed then only one party benefits to the detriment of another party. This type of parasitic behavior does not encourage additional productive activities. In fact, it decreases wealth by requiring the aggrieved party to expend additional resources on protection which ultimately gets passed on to legitimate moral consumers in the form of higher prices.

It should be noted that since governments are force and force is violence they are by nature parasitic in this stealing and robbing way. And they have the nerve to call a party to a purely voluntary transaction unethical. Thus, the Florida division should probably be named something a little more accurate like the Florida Division of Victimizer Services.

THE VALUABLE NATURE OF THE PRICE

The price, where a producer and consumer meet in negotiations, is an extremely valuable, even vital, tool. It helps the baker know whether he should produce 5 loaves or 500. Because the baker is also a consumer therefore a price is communicated by the baker to the farmer about whether he should plant one acre or 100 acres of wheat.

And so on through the increasingly complex economy with people being able to build up considerable comparative advantages by learning such disciplines as xenotransplantation, mechanical engineering, robotics, proctology, hematology or biomedical gerontology. It is through the price that individuals, all acting according to their own dictates, decide how to allocate their time, talents and capital to meet the needs and desires of each other.

When the pricing mechanism is immorally interfered with by the use of aggression then individuals are hindered in their ability to know how much demand exists for a particular good or service. Misallocation of wealth happens which results in its destruction and a lowering of living standards for society. When a price control is implemented through the use of force then it leads to shortages which are often used as an excuse to implement rationing. In the modern world with such technological advances there is a sole cause for all the starvation and shortages: governments.

For example, there always seems to be a shortage of blood, particularly the rarer kinds, for transfusions. But there are billions of able-bodied adults who could voluntarily agree to sell their blood. Theoretically there should never be a shortage of blood as it should merely be a function of price. But instead many governments have implemented price controls. In exchange for about an hour of one’s time and getting stuck with a needle, sometimes multiple times, the most you can receive is a cookie. Sometimes a T-shirt and some warm fuzzies are thrown in.

The reasoning is that if people were able to legally sell their own blood, oh the irony to think one is free, then there would be a higher probability of contaimination in the blood supply. But that does not make any sense because the medical companies already perform extensive screenings of the blood supply. The real issue is that a pint of blood goes for a couple hundred dollars. The government imposed price control serves at least two functions for those who make a profit selling blood: (1) reduction of raw material costs to zero and (2) decrease in supply.

But these types of violent interferences are not limited to necessities like food, water, potassium iodide or blood but are extended through licenses for hair cuts to medical services, are found in regulations limiting the type of light bulb or toilet you can buy and of particular interest to the bureaucrats is healthy food and why raw food recipes are going underground.

With potassium iodide pills available in Japan by prescription only; thus, even though many may have rationally prepared for this emergency the costumed criminal gangs made it illegal and threatened to violate offenders with fines or jail. As Rand Paul teased out during his Senatorial questioning; these bureaucrats found throughout the world are not pro-choice or pro-consumer but violent aggressors against freedom of choice and a primary cause for lower standards of living.

PRICE GOUGING ECONOMICS

How are producers supposed to know what consumers demand? Without the ability to charge what the market will bear it is impossible to find out. When that knowledge is buried or price discovery prevented then entreprnuers are unable to make calculated risks in hopes of profit. When entreprenuers fail to perform thier vital service of bringing goods and services to market then price gouging is not an issue. As the old saying from communist Russia goes, “Sausage is one ruble per link. But there is no sausage.” Pretty soon the only noble profession left will be that of a smuggler.

As David Brown observed in Price Gouging Saves Lives:

“Price gouging” is nothing more than charging what the market will bear. If that’s immoral, then all market adjustment to changing circumstances is “immoral,” and markets per se are immoral. But that is not the case. And I don’t think a store owner who makes money by satisfying the urgent needs of his customers is immoral either. It is called making a living. And, in the wake of Hurricane Charley, surviving.

The jet streams show it is possible that the Japanese nuclear meltdowns could deliver nuclear fallout to California, Oregon, Washington and other states. At the end of the day, governments and bureaucrats do not care about your personal safety. They will lie, deceive, cover-up and exacerbate problems if they find it politically expedient. No one cares as much about your health and well-being as you do. Therefore, you must take whatever precautions and actions you deem necessary and prudent.

CONCLUSION

So why did I sell my nuke pills? Sure, the 1500% gain was nice. But the real reason was because I wanted to make sure that particular good went to its highest and best use at this particular moment in time. How else would I know what that use was without a price signal? In my opinion the probability of someone in California or Oregon needing the nuke pills within a month for a life saving purpose is extremely low; less than 1%.

Thus, I derive more value with the FRN$s than the counter-party to the trade. Plus, if needed I will just get on a plane and head down to La Estancia de Cafayate, which has a very favorable geographic location for nuclear fallout concerns, for their two events this month. I sure hope the counter-party to my nuke pill trade derives sufficient value from being prepared and I hope even more they never have to actually use the potassium iodide.

But even if they never do use them I bet having them in the hand relieves a lot of anxiety that comes from being unprepared! And if you are ever in a situation where there is a shortage of something know who to blame: governments.

DISCLOSURES: Long physical gold, silver, platinum, palladium and potassium iodide.

Reading time: 8 – 12 minutes

In the monetary metals there has been sustained gold backwardation and silver backwardation. This esoteric subject distills into two main elements: (1) interest rates and (2) risk management. The backwardation implies abnormalities in the interest rate structure and/or heavy demand for physical bullion driven by either averseness to counter-party risk or exchange rate risk that could result in the currency event of hyperinflation or the paranoid gold and silver bugs have recently mutated into much larger organisms.

READER QUESTION – WHERE ARE YOU?

I have not written for a few weeks and received a rather funny email from a reader: “Did you call this about 15 months ago? POT  NYSE You sly Mofo. Where are you? Did someone threaten you like Lindsay Williams was?”

I figure the response may be helpful to all. Yes, about 18 months ago on Business News Network in Canada I did make a buy call on Potash Co. (POT). It has since rocketed higher. I have been bouncing around in the clouds flying around tiny islands, including Saint Kitts and Dominica, with Bill Rounds, my co-author of How To Vanish.

I was only threatened by one person, an attractive female Customers and Border Patrol agent in Puerto Rico. Because ATC diverted us around a military exercise we were late arriving and I did not call. Then on the way back through Puerto Rico I failed to call again and while searching our plane she actually got out a Geiger counter, seriously! What is it with women always wanting you to call them back? So, next time I am headed through Puerto Rico and since my smile did not work to appease her if anyone knows where I can get a cell phone like Gordon Gekko so that I can call CBP next time I would be extremely grateful.

SILVER BACKWARDATION AND INTEREST RATES

The monetary metals have an interest rate which is the percentage difference between the future price and spot price. Currently the market treats only gold as a primarily monetary commodity. Silver, platinum and palladium are treated as quasi-monetary commodities. Gold is produced primarily to be hoarded while most silver, platinum and palladium demand is for a wide variety of industrial uses like a Gordon Gekko cell phone.

In early 2009 I wrote about the silver backwardation. James Turk, Chairman of GoldMoney, made several insightful observations about silver’s backwardation in his 4 December 2010 article about the Scramble For Physical Metal.

These supply and demand differences is a primary reason why I am extremely bullish on platinum and recommended accumulating it in July 2009 around $1,118 per ounce. My opinion is that during The Great Credit Contraction the monetary demand for silver, platinum and palladium will increase for all the same reasons why gold functions as money. It will no longer be fiat currency, such as FRN$, Euros, Yen, British Pounds, etc. versus only gold but instead versus gold and every other commodity.

This paradigm shift from a debt-based consumption cycle to an equity based savings cycle will be a sea change like an upside down house to many. The real interest rates of the commodities are a function of their storage and attrition costs. Thus, silver, platinum and palladium will have tremendous advantages over alternative commodities like rice, corn, oil, etc.

The New York Sun reported Alan Greenspan’s 15 September 2010 remarks to the Council on Foreign Relations:

If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it. … Fiat money has no place to go but gold.

Like Mr. Greenspan I favor using gold as one’s numeraire but my prognostication is a little broader. Not only does fiat currency have gold to move into but also silver, platinum and palladium unless he knows something about future worldwide monetary policy that has not been publicly released.

With quantitative easing and the zero interest rate environment the fiat currency interest rate structure is extremely distorted. This increases demand for silver in the immediate term because the cost of fiat currency is so low while demand is waning and storage fees are perceived to be less expensive than the estimated counter-party risk cost. It takes a bailed out zombie to know a bailed out zombie!

The net effect are negative real interest rates. So long as negative real interest rates are persistent the gold bull market, with silver and platinum having an R-squared correlation coefficient of about 98%, will remain intact. But as Adrain Douglas has astutely observed if there is increased monetary demand for silver then this correlation can be disrupted or change completely.

INCREASED SILVER MONETARY DEMAND

So an important issue becomes has there been a material increase in silver’s worldwide monetary demand?

The United States Mint recorded January 2011 sales of American Silver Eagles to be 6.42 million which easily surpassed the previous monthly record of 4.26 million in November 2010. This increase in demand was in spite of the price of silver increasing by about $2 per ounce in November while it declined about $3 per ounce in January. Increased demand for silver in India was about 70 million ounces in 2010 while China went from exporting about 40 million ounces in 2009 to importing 40 million ounces in 2010. Then there is John Embry’s revelation that it took about two months to stock the Sprott silver trust. Additionally, there appears to be shortages developing for 100 ounce silver bars.

Because of the increased demand for silver as a monetary instrument by Americans in the form of legal tender coins and 100 ounce bars, the incredible increase in demand from India and China of about 150 million ounce difference between 2009 and 2010, about 25-30% of worldwide production, and the creation of the Sprott silver trust (PHYS) therefore it appears that there is a material and consistent increase in the worldwide demand for silver as a monetary instrument. Because of the deficiencies of the GLD ETF and similar unusual activity with the SLV ETF it is interesting to note that significant redemptions are being made which implies the ETFs are being tapped as a source of physical bullion to meet immediate delivery demands.

The aboveground stockpiles of silver are tiny compared to gold. On the other hand, central banks around the world have created $20-50 trillion of new currency digits over the past few years. To remain liquid and risk-free in terms of either (1) counter-party or (2) hyperinflation, the value represented by these imaginary units sometimes printed on colored coupons have primarily nowhere to go in regards to monetary commodities but gold, silver, platinum and palladium.

CONCLUSION

Monetary demand for silver is primarily from savers who consume less than they produce and want a liquid and safe store of value while they are engaged in other activities, like flying around in the clouds. The current interest rate structure is likely causing headaches for the arbitrageurs dealing in large amounts who are attempting to squeeze profits off a penny or two per ounce because of the tremendous amount of risk they expose themselves to as savers demand delivery physical metal.

With the worldwide bailout of the financial system, the Irish central bank printing billions of Euros, the Federal Reserve engaged in quantitative easing and general competitive currency devaluations worldwide it appears the current fiat currency and fractional reserve banking system has been duck taped together and is not at significant risk of imminent failure; largely because there is no significant alternative.

With demand from the American and European public, India, China and the Sprott silver trust therefore it appears that the gold and silver bugs have mutated into much larger organisms and are preparing for currency upheaval and perhaps even a new worldwide currency system. There is a high probability that gold, silver, platinum and palladium will continue to increase in price relative to fiat currencies.

After all, fiat currencies are merely a confidence game and it is hard to have confidence in a figment of the imagination that is being rapidly increased in amount. Thus, a prudent saver should continue accumulating the monetary metals on a regular and consistent basis from reputable firms like Apmex or GoldMoney as gold, silver, platinum and palladium have become performing insurance against fiat currency failure.

Reading time: 5 – 8 minutes

I would like to thank everyone for using the survey letting me know what your favorite posts of 2010 were along with suggestions about how to improve RunToGold. While I expected some posts to do well I was completely surprised with the results in general. As we move into 2011 this feedback will be extremely helpful when crafting additional musings for your assistance and enjoyment.

FAVORITE POST

How To Attack The Fiat Currency Fractional Reserve Banking Conspiracy – The fiat currency and fractional reserve banking conspiracy has tremendously lowered humanity’s standard of living. But there is a peaceful counterattack. This did not really surprise me as when I was researching and writing it I knew it was going to be really good.

SECOND FAVORITE POST

Learn How To Use A Numeraire – Learn how to use a numeraire for your personal financial statements. I was surprised this received so many votes and comments in the suggestions because it was the first post in 2010. The concept is extremely useful and practical. Based on its popularity, along with the related interview with Anthem Blanchard, I am moving ahead with a large project which will cost a few thousand dollars. It will make applying this concept much easier and less time consuming. Look forward to this advancement as it will be extremely helpful and completely altar your investment perspective.

INTERVIEWS

Surprisingly it appears the interviews I conducted were extremely popular. In order of votes:

David Morgan - Silver Manipulation – An exclusive interview with David Morgan of Silver-Investor.com about the silver manipulation, differences of paper silver and what we are thankful for.

Thomas DiLorenzo – Abraham Lincoln Facts – America’s Reverenced & Bloodstained Sociopath – Like victims with Stockholm Syndrome the most culpable genociders, like Abraham Lincoln, become the most reverenced sociopaths in revisionist history.

Anthem Blanchard - Gold As The Truest Measure Of Value – Anthem Blanchard, son of James U. Blanchard, speaks of gold as the truest measure of value. Comparatively, prices of national currency become irrelevant.

Aaron Krowne – How The Securitization Of Mortgages Impacts The Average Citizen – Interview with Aaron Krowne discussing how the securitization of mortgages impacts the average citizen and the current state of the real estate market.

OTHER FAVORITE POSTS

Fake Tungsten Gold Found – Gold bars with tungsten have been found so for those seeking to preserve capital may consider using alternatives like silver and platinum.

California IOUs – One Step Closer To The Brink And About To Break – California IOUs under AB 1506 must be accepted by state agencies for taxes and fees. This minor development poses a threat to the world reserve currency.

Is Goldman Sachs Thinking Of Buying Silver – Someone at Goldman Sachs searched Google for buying silver. What is their intention?

HR 4248 Free Competition In Currency Act Of 2009 – Dr. Ron Paul has introduced H.R. 4248 the Free Competition in Currency Act of 2009 and for these reasons I support it.

SUGGESTIONS

There were some great suggestions submitted such as having call-in questions for the podcast, travel tips, tax, asset or estate planning and the most popular of more interviews.

CONCLUSION

Thank you for completing the survey. As we move into 2011 I will likely be conducting more interviews since that is what so many people liked. 2010 was a rather dull year compared to 2009 but I expect 2011 to be more exciting than 2010.

I am encouraged so many people were willing to buy a product if one was offered they needed. I do not even have any potential products in the pipeline and intend for the numeraire project to be a free resource. Because RunToGold is a hobby and because costs can spiral out of control like with this numeraire project therefore I require RunToGold to be self-sufficient. So far that is possible mainly through sales of The Great Credit Contraction or donations.

On another note and because there were several requests for what products I do offer I would like to let everyone know about the other site I operate called HowToVanish and we do have several products which are extremely helpful and practical like the Tax Domicile or Bank Privacy reports. Given the probability that states and municipalities will have budget and debt issues it appears that having tax flexibility will be increasingly important.

My outlook for 2011 is largely a wait and see. By analogy the football has been kicked but is still in the air. We need to wait and see whether someone catches it or if it bounces and where, etc. There are a lot of known unknowns.

Hopefully your personal and financial castle has been constructed on rock and now is the time to upkeep and refine. Because of the interference and noise emanating from policies like quantitative easing the pricing signals are going to be increasingly hard to correctly interpret. So be sure to keep coming around to get a unique perspective of monetary science applied to current events. Thanks for your help and I hope you make 2011 a great year!

If you have any relavant comments please leave them. Thanks!

Reading time: < 1 minute

I hope RuntoGold has proven to be a very useful and helpful resource in helping you apply monetary science to current events. To help us make it even better in 2011 I have created this survey.

Reading time: 10 – 16 minutes

Regarding the regression theorem, can the grandson also be the great-grand father? Ideas can only be overcome by other ideas and words proffer the instruments to meaning. The ability to wield words concisely, accurately and orderly is essential for communication and persuasion. Much of discourse, particularly from court economists, has devolved into sophistry and incomprehensible babbling.

In an extremely verbose and conflated article the pseudo-anonymous FOFOA asks, “Does anyone have any evidence that silver is still money today?”

I find a few of FOFOA’s assertions fairly odd, especially for a voice in the gold niche. For example,

Money is debt, by its very nature, whether it is gold, paper, sea shells, tally sticks or lines drawn in the sand. (Another shocking statement?) Yes, even gold used as money represents debt. More on this in a moment. …

First, money. Money is always an overvalued something. Usually a commodity of some sort. But it can be as simple as an overvalued line in the sand, or a digital entry in a computer database. But the key is, it is always overvalued relative to its industrial uses! That’s what makes it money! …

Did you hear him at 6:35? “Only one metal in the world that fits the bill for money, and that’s gold!” That’s right Joe! Good job from the “Silverfuturist”. There can be only one!

Mish has chimed in on many of FOFOA’s fallacies.

There is a reason Chapter One of my book The Great Credit Contraction is titled Word Games. In that chapter, I present the two competing theories of money, market versus Chartalism, along with an example of the regression theorem and then distinguish money, money substitutes and illusions which can all function as either currency or legal tender or both. What is so odd about FOFOA’s fallacious assertions is that they contradict basic principles of monetary science.

SCALPEL PLEASE – DISTINGUISHING TERMS

The conflation of the terms money, money substitutes, illusions, currency and legal tender is one of the greatest problems in understanding monetary science. Let’s examine each.

Legal tender by government decree must be accepted if offered in payment of a debt. Currency can be examined either broadly or narrowly and in its narrow examination it is the medium of exchange most commonly used in ordinary daily transactions.

Illusions are figments of people’s imagination and for our discussion we will consider them negotiable instruments that promise nothing. Staying within this same discussion, money substitutes are negotiable instruments that promise the payment of money.

This exchange between Dr. Ron Paul and Dr. Alan Greenspan centered the issue on the definition of money.

Congressman Ron Paul: So it is hard to manage something you cannot define.

Dr. Greenspan: It is not possible to manage something you cannot define.

First, it should be noted that Greenspan implicitly admits the faulty argument behind Chartalism. Second, a fairly basic theory of monetary science is the regression theorem, one of many contributions by Ludwig von Mises, and answers the question why do illusions, money substitutes or money have purchasing power? For those unfamiliar with the regression theorem, before continuing, you may want to read Bob Murphy’s short article.

What is Mish’s response? “Like FOFOA I believe gold is money. However, unlike FOFOA I think money is whatever the free market says it is. The problem is, we do not have a free market we only have government decree mandating the use of dollars, Pounds, Yen, Renmimbi, Euros, and Francs as money.”

This answer from Mish regarding the competing theories of money is the only reasonable and rational response.

But I disagree with Mish’s assertion that a free market does not exist. Individuals are sovereign and ‘endowed by their Creator’ with rights. The free market existed first and then the State was created. This is the same reason Chartalism is philosophically flawed.

Sure, the Statetrix is extremely strong today but most individuals still have freedom of movement which allows people to vote with their feet. Until the free will of mankind is completely violated worldwide through the establishment of a new world order or one world government then a free market will exist. A new world order is not likely because of the failed fiat currency fractional reserve banking conspiracy. The Great Credit Contraction has begun and there is no stopping it.

Despite what most people think or feel; the State is dead, intellectually, morally, spiritually, financially and economically. Sure, some individuals in certain geographic areas, like North Korea or the United States of America, will face threats of collateral damage as the gigantic rotting corpses tumble to the ground causing great destruction.

But for a sovereign individual in a free market  the management of political risk is just like managing any other risk; weather, contract, counter-party, performance, etc. I devote Chapter Six to Personal Practical Implementation like the five flag theory for managing political risk, geographic diversification and even second passports.

MISH’S MASSIVE MISAPPLICATION

But the regression theorem answers the question on how a medium of exchange can come into existence; it explains the origin of money.

Here Mish makes a critical misapplication of monetary theory. “While theoretically possible, in today’s world silver has one huge drawback that gold does not have: Silver is used up. Gold is not. Silver is widely use in industrial applications”

This is the exact opposite of why the market has chosen gold and silver as money. The theory is already being applied. The reason gold is money and currency, a medium of exchange, is because people first valued gold for its commodity uses because they attached increased value to gold based on its expected purchasing power and the reason they were willing to hold cash balances in gold.

Under the theory of market determined money astute traders in a barter environment settle on a particular commodity or commodities that are currently trading in the marketplace as money because of their increased degree of saleableness, saleability, liquidity or marketability.

SILVER PRICE IMPLICATIONS

But silver is also valued for its industrial applications. The market searches for a cash balance medium with the lowest transaction and storage costs. As the silver price discovery occurs there are two large demand drivers: (1) industrial and (2) monetary.

In this case, silver is widely used in industrial applications. Many of these are essential for the current standard of living for humanity such as medical, automation, high tech and etc. while small amounts of silver are actually used in each application so this results in the inelasticity of demand being fairly low.

Additionally, silver is valued for these reasons and is fungible, divisible, scarce, non-corrosive, portable and definable. A problem is the high ratio of about 50 ounces of silver per ounce of gold which along with the lower density results in higher storage costs for silver relative to a substitute good, gold.

Taken in totality these properties make silver extremely efficient economically to be used as a medium of exchange.

As The Great Credit Contraction continues holders of capital will continue seeking safety and liquidity. As the monetary demand for silver increases then industrial and consumer prices will likewise have to increase or firms will face bankruptcy because they cannot sell for less than their costs and remain profitable. This can be particularly helpful in figuring out the implications between inflation or deflation.

But these individual preferences expressed through human action and being revealed through the current silver price does not constitute evidence of silver being overvalued as FOFOA asserts. That assertion rests on there being a proper valuation for silver. A proper valuation set by whom, the State? Chartalist! Plus, I would love for FOFOA to explain what types of industrial applications a digital entry in a computer database has.

Being able to predict future market innovations from entrepreneurs is the work of often wrong science fiction authors. Could anyone predict a Ferrari in 1880? No, they thought about ‘horseless carriages’. Could anyone have predicted the Internet fifty years ago? Fifteen years ago Google did not exist. YouTube and Facebook are barely over five years old.

The fiat currency fractional reserve banking system that has evolved out of a five hundred year old money substitute system is fundamentally unstable and everyone knows it. The lifeblood of the State is dead and decaying through failing quantitative easing. The 2008 financial crisis shook the financial community and worldwide population to the core. The search for a viable replacement is on like Donkey Kong.

Applying monetary science to Internet technology is not a simple task. The first ‘horseless carriages’, like GoldMoney, have begun to develop. Remember, what the telegraph company and IBM told Alexander Graham Bell and Bill Gates. GoldMoney allows gold, silver, platinum and palladium to circulate as currency in ordinary daily transactions while immunizing the holder of capital from both counter-party risk and illusion risk, the risk that the illusion currency unit will become worthless because of loss of confidence by market participants (hyperinflation).

CONCLUSION

Just like it is logically inconsistent for the grandson to also be the great grandfather so likewise it is logically consistent for the FRN$ to be currency with purchasing power only because gold or silver are money with industrial demand. When you apply the regression theorem it reveals that silver and gold were valued as commodities in the state of barter as a result of sovereign individuals making choices based on human action.

Therefore, it follows that gold cannot be debt and is obviously a form of currency that is no-one’s liability. Sure, a money substitute like a gold certificate is debt but a money substitute is not money anymore than the GLD ETF is gold just like a FRN$ is not a US$ and a dollar is defined as 371.25 grains of fine silver. Silver and gold already possess currency market share though far inferior to the FRN$, Yen or Euro.

Evolutions in currency like the FRN$, credit cards, GoldMoney, frequent flyer points, gift cards, Yen, bitcoin, etc. will continue and hasten as we further transition to the Information Age. To stimulate innovation and increase the standard of living through a more efficient currency market we should support Dr. Ron Paul’s H.R. 4248 – Free Competititon In Currency Act of 2009.

The Internet is a relentless process of decentralization and like a rising sun the inefficiencies in the worldwide free market are being dispelled with the collapse of massive currencies like the broken Euro or FRN$ and their issuers which speaks to the currency market opportunity for entrepreneurs and resulting transition to a new world. There will no more be one currency to settle them all than there will be one world government to rule them all.

DISCLOSURES: Long physical gold, silver and platinum.

Reading time: 12 – 20 minutes

Trace: Welcome back to the Runtogold.com Podcast. I have with us Aaron Krowne, who operates ML-implode.com, the Mortgage-Lender-Implode-o’ Meter. Welcome, Aaron!

Aaron: Hey Trace, good to talk to you again.

Trace: Live from DC, it sounds like. So, we were talking about a little bit before the show about this foreclosure gig and robo-signing, about how it erodes the foundation for the entire securitisation market. I have actually got a friend who’s a commercial appraiser and he says that that market is pretty much completely frozen; securitising these large mortgage-backed securities, things of that nature. Can you talk a little about this foreclosure gig and about this robo-signing has affected the securitisation of mortgages, and how that is going to impact the average citizen.

Aaron: Well, there’s two parts. There’s the on-going part, and then there’s what has already been securitised. I’ll mostly talk about what has already been securitised. It can be compared to when the sub-prime crisis was blowing up big. Six months or so after I started ML-impolde.com and the media started catching on, and the basic theme was that you had these bad loans, and these pools of loans, that were packaged and re-packaged sometimes and sliced and diced and distributed around the world.

In many cases, these banks buying from the pool of other banks. So they were all over the place, and it was discovered that some of the loans were originally with such low standards that they started going bad in huge numbers, rapidly and they were popping up all over the place. It was like whack-a-mole, or an Easter egg hunt with rotten Easter eggs. And they were popping up later –especially the ones that hadn’t been found originally.

So it caused people to flee from the market, wholesale, and it destroyed the market in terms of issuance because no one wanted to issue, and no one wanted to fund the loans and it destroyed the bonds that had been issued and it really spread a contagion all over the bond market because nobody knew what these things were. So, that’s been in a sense sorted out, you have the fed and the other financial authorities buying out these pools and taking them onto their books, and spending whatever money needs to be spent to bail out the banks that own them. In that sense they have smoothed that part of the crisis over. But what robo-signing, and what’s underneath it, foreclosure gate, shows is that there’s other sorts of rot in the system that spread far and wide and have not been accounted for.

This is more than just whether the T’s have been crossed and the I’s are dotted in doing the paper work. This is actually whether the loans were transferred properly into trusts, because when you securitize loans they are put into a trust entity, which is a semi-separate entity and if that’s not done right, then you lose the authority to foreclose, you lose tax privilege status, potential investors lose recourse, and by some accounts by some very intelligent people, you have this as the rule, not the exception.

Trace: Yeah and when we’re talking about this, due process, one of the fundamental tenants in real estate property law is you have to have stuff properly recorded. You have the properly record the deeds, you have to properly record the mortgages, and the way the real estate law has evolved, because it’s tied to the land, it’s very much a county by county…it falls under the umbrella of state law, property contract court law, those are state functions. So, the judge in the county where I grew up in Florida, he’s the Duvall County judge who said they’d committed fraud on the court with this robo-signing in the foreclosure that you’re talking about. Now, what exactly did they do with MERS because they didn’t want to pay the local recording and filing fees, right?

Aaron: Right. That’s maybe the core reason or the genesis of this, is they wanted a more efficient system so that they could securitize the loans and move them around and resell them and things like that. I think it might go a little deeper, that it actually become easier to sell the loans multiple times in what they call hypothecate and re-hypothecate them, which is basically another form of money-printing. But even if you accept that it was just for the efficiency reasons, basically they didn’t do their legal homework on how they would need to set this up, to make it legally viable, and they just went ahead with it anyways. Even Fanny and Freddy endorsed it and bought into the system and are a core part of this and as we are finding out, judges in courts around the country are waking up.

Trace: And this might have been that they made a calculated choice based on the moral hazard that, well we can just override the state law, or we can jus not pay attention to it, and privatise the gains so that people who securitised all these things are getting paid to create them, they are getting paid their bonuses for selling them, and then when the proverbial crap hits the fan, because of the moral hazard they say, “oh, well we’ll just retroactively go back with federal pre-emption and federal law and try to fix this”.

And that was the bill they tried to pass retroactively deal with all these fake notarised documents, but then that got struck down because of popular outcry.

Aaron: Well, that’s part of it. I don’t think that that bill would have done much because it wasn’t just the notarisation; it was also the nature of the assignments and transfers. So, that would have been step 1 for retroactively legitimising this. But even if they got a slew of the retroactive fixes passed, those would still be ex post facto laws which would still be subject to widespread court challenge.

Trace: And it would still be unconstitutional.

Aaron: It would still be unconstitutional. So it wouldn’t make this huge legal firestorm go away, and even though they have halted foreclosures and they have fired certain law firms and they have stopped using MERS, and are going back and trying to do the recording locally like they are supposed to. That’s doesn’t retroactively fix the problem.

All these loan pools are now tainted. Just like with sub prime, you don’t know really what the value is in them because you can’t recover value on a loan like you used to be able to when you were able to foreclose. And in addition to the lack of ability to be able to sell that property and pocket what you can, you have the legal fees for fighting battles on these. Anybody can challenge their foreclosure, and if they find that there’s not an authority to foreclose, if the assignments weren’t done correctly, then you are stuck, as an investor note holder. So we really don’t know the scope of that at this point.

Trace: And it can be huge.

Aaron: And I think it is. We’re talking trillions of dollars of essentially new bad loans that we thought were ok, or that were popularly thought to be ok. So, in absence of a massive rescue program, where say they get Fanny and Freddy to buy up massive amounts of troubled loans, essentially printing the money to do it, I don’t see how they are going to fix this.

Trace: But even if they do print that money up… you’re familiar with the liquidity pyramid, what’s happening is that people are selling their mortgage backed securities or whatever and buying something further down on the pyramid. So all that that’s going to do is print more of the fiat currency illusions that go up the pyramid and evaporate in their purchasing power anyway, so it’s not like that’s going to be able to fix the problem and restore the illusory wealth that had existed because of this fiction that the banks have perpetrated, probably to get their short term bonuses and things of that nature. Right?

Aaron: Well, yeah, there’s many trillions of dollars of what we call value of what was assumed to be in the housing stock when they ran up the bubble, and the banks ran up the bubble and they are really at the core of this; the feds and the banks. And they are never going to get that back.

Trace: Because it never existed.

Aaron: Exactly. They never existed. People are never going to get that back, but that doesn’t stop politicians from printing money…

Trace: …from trying.

Aaron: Yeah. And making promises, and basically shifting the damage off of themselves and shifting the blame off of themselves and that’s exactly what these bank bailouts mean, they mean executives, and to some extent share holders of these companies, get bailed out while the public more directly takes the brunt.

Trace: So, privatising the gain, socialising the losses. Which is the same thing that has eroded the solidarity of European banks also, isn’t it?

Aaron: Right. Exactly. It’s going on everywhere and it’s a global phenomena, absolutely. I think that were going to see more waves of this where there’s just massive problems with the loans, how they were done, or the valuation or they will find that massive fraud was embedded and it happened during the bubble and it happened, like you said, it’s going to cause this irreversible trend of people over time, not necessarily month by month but year by year moving out of paper assets that are very hypothetical in value and moving into more concrete assets because those are the only places where they can be sure to preserve what’s left of their wealth.

Trace: Right. You know, you want to saw you’re a saver, you consume less than you make or produce, and so you have this excess capital, what do you do? We used to loan it to people, so they could build suburbia. But now, we aren’t necessarily…

Aaron: Yeah I mean, what do you do with it? People ask me, “what should I invest in? Where should I put my money to be safe?”. And usually they don’t want to hear “put it in gold, or put it in silver”, because that’s what loony people do, right? But I don’t have much else to tell them.

Trace: You don’t want a mortgage where you don’t have the right to necessarily foreclose?

Aaron: I mean, unless you are really going to do a lot of work, I wouldn’t even buy real estate. You really need to do your homework to know where it’s actually likely to go up on its merits, as opposed to just getting into a huge Ponzi scheme, so there’s no easy answer and I don’t see many refuges for wealth in the land of paper.

Trace: About 5 years ago I had a friend who I had lunch with, and he said “hey, I’m thinking of buying a condo” and I said “no, don’t buy a condo right now! They’re expensive.” And he said “well, what should I do?” and I said “Well, buy silver or gold.” Well, he did not buy the condo. He’s one of the people who actually took my advice – who would have thought?- and we had lunch about a year ago and we were talking about these things and he said “Yeah, I am still buying my gold and silver, so when should I buy my condo?” and I was like “well, probably not yet. But where exactly are you, because you didn’t buy the condo.”

Based on the market that he was going to buy the condo, we will assume it was a $420,000 condo, and we’ll assume that we would have put 10% down, and then we’ll assume the difference that he would have paid between the mortgage and rent he just would have bought silver every month. Well, in those 3 years and a half, between when we had the conversations, if he had bought the condo, he would have had a mortgage of about $360 000 and the condo would have been worth conservatively about $350,000, probably less. If he had bought the silver, he would have had enough silver to buy about a third of the condo at its current price. Just in three years, by being on the right side of the trend.

Aaron: There are even more extreme examples out there in a number of episodes with my family where I gave similar advice and some people took it, and some people –usually most people- didn’t , and there are many cases 4 times worse off, or more.

Trace: Yeah, so I think that I can agree with you that I don’t necessarily like the metals, particularly at these all time highs, where they are getting quasi-expensive. But the other side of the coin is i don’t want little fiat illusions that are just figments of people’s imaginations that are just represented by some digit on a webpage, I don’t want that.

Aaron: Well, my point is that we are really not even at the half way point is in discovering where all the rot is in the paper investments, which is the majority of the financial world. I see that process is really getting into its high-momentum phase of breakdown and turning a point in sediment where it actually becomes popular knowledge that you want to have a lot of precious metals and not just be in paper, and not just be trusting the government and their bonds.

Trace: And of course you have got the other component, you know there’s a reason why tax codes encourage people to go into debt and get real estate as opposed to buying the metals and that’s because when people “own” their houses, they have a lot more at stake in social peace and tranquility. I mean obviously you don’t want to riot and burn down your own house. But now we are seeing that being completely eroded and I mean look at what’s happening over there in Europe; you had Paris, and you had Ireland and you got Greece and so these things could also be coming here and that’s another reason not to own real estate, it’s because of that potential risk.

Aaron: Right, you really see this sediment turning, where I can see that some places prices are fair, especially if you are buying distressed real estate, the sediment is the beginning point where people are just beginning to rule out real estate completely, it’s almost like a generational thing but it’s in response to just how far the other direction went as a society and there’s always an over correction in the other direction with any bubble.

Trace: And we’re just getting started, huh?

Aaron: I think we are. I know you say that the metals are expensive, but you know I think the increase has been modest especially compared to making up lost ground for the many years that were likely manipulated to the downside, so you know I think there is quite a ways to go.

Trace: I agree, this is going to be a long generational bull market. It might take another 25-30 years before we see the turn happen and a lot of it depends on how quickly we do it politically. Anyways, I think we are out of time so thank you very much for coming on the podcast today!

Reading time: 3 – 5 minutes

I know many of you were greatly disappointed after the Pieces Of Eight reprinting failed to garner enough support last year. The GoldMoney Foundation has stepped in to fund the printing of Dr. Vieira’s seminal work and it should be available for deliver in January. I highly recommend getting a copy. My check is already in the mail for multiple copies. We are grateful to Dr. Vieira for his tireless work as a Quixote of the world, GoldMoney for the funding and GoldMoney customer’s for directing their capital away from starving vampire squids and towards a freedom centric organization.

While I have my own young padowans I teach and train in economic law and monetary jurisprudence; Dr. Edwin Vieira, Jr. is my intellectual mentor.  Dr Edwin Vieira Jr, Pieces of Eight author, is the premier expert in this topic.  He holds four degrees from Harvard, has argued several cases before the United States Supreme Court and is a prolific author.  Dr. Edwin Vieira, Jr’s seminal work is the two volume series Pieces Of Eight.

Dr. Edwin Vieira’s Pieces of Eight is a two volume, 1,700+ page, meticulously footnoted treatment of the monetary powers and disabilities of the United States Constitution.  I have never come across a scholarly work of comparable quality in any topic. This book is a must have for any serious person’s library. The demand is evidenced by either being hundreds of dollars per volume at Amazon or being sold out (like it currently is).

VIDEO OF OUR NATIONAL TREASURE

CATHERINE AUSTIN FITTS REPORTS OF BOOK RELEASE

Thanks to the generous support of James Turk and the GoldMoney Foundation, Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution is now in the process of being reprinted by R R Donnelley, one of the premier printers in the United States. This is a special run of the 2002 revised edition of the two-volume, 1,700+ page study of American monetary law and history which has been out of print and virtually unavailable (except at scalpers’ prices) since 2006.

Those who have had an opportunity to peruse this book know that there is nothing equivalent on the market, and likely never will be again. And those who have not seen it will find it to be as comprehensive and complete a study of money and banking in the United States as could be desired by anyone who wants to inform himself as to how sound money and honest banking were subverted and then largely eliminated in this country, where this process of planned degeneration has led us, and what might be done to return America to her constitutional roots.

I expect that books will be ready for delivery by mid-January, 2011, and will be available only from me.

•The price per two-volume set, delivered by USPS media mail to any address within the continental United States, will be $149.95 plus $10.00 shipping and handling, for a total of $159.95.

•For orders shipped by media mail to an address within Virginia, add 5% sales tax ($7.50), for a total (including shipping and handling) of $167.45.

•For orders shipped to Alaska or Hawaii, outside of the United States, or within the continental United States by other than USPS media mail, arrangements can be made for delivery by FedEx, UPS, or other means, as the customer desires.

Please write “special shipping” on your order, and supply a telephone number and/or e-mail address, so that you can be supplied with the available options and their costs.

•To secure your pre-publication order, send a personal check or money order, dated no earlier than 2 January 2011, to:

Edwin Vieira, Jr.
52 Stonegate Court
Front Royal, Virginia 22630

Reading time: 14 – 23 minutes

In this exclusive interview with David Morgan topics discussed include the silver manipulation, concentration of derivatives, differences between paper silver products and what thankfulness. A few of the articles referenced are high frequency fake trading, Reg Howe’s discussion of gold derivatives contracting and concentrating, the GLD and SLV ETFs, Ted Butler and GATA.

Please keep in mind that as the 200 day moving average shows on the price chart that silver is currently very expensive and it appears that silver and gold are consolidating for the next upleg in the new year. However, silver is the restless metal and about 90% of its price movement happens in 10% of the time. Consequently, it can make a particularly exciting speculation at the present moment.

But keep in mind that you are playing against some of the largest money in the world who have, it appears, the regulators and court system on their payroll. The safest way to play is to buy silver and take physical possession. Then you can remain solvent longer than the market can remain irrational. If you apply leverage in any way then you can either be forced out of your position or the exchanges or regulators can simply change the rules without notice like they recently did with margin requirement increases or to the Hunt’s.

NEW BOOK FOR SALE

For those who have not heard a new book went on sale last week called How To Vanish. This is co-authored by Trace Mayer and Bill Rounds. It is an extremely helpful tool for protecting your personal and financial privacy. You may want to check it out. Please stay safe during this holiday season and enjoy your family and friends!

EXCLUSIVE INTERVIEW WITH DAVID MORGAN (14:46) (YouTube version)

As mentioned in the interview, the GVZ has declined precipitously in after hours trading on 26 November 2010 despite the massive volume of about $272M of gold for February 2011 delivery.

Trace: Welcome back to RunToGold, I was just wishing one of my friends a happy Turkey Day, David Morgan from silver-investor.com. Welcome David!

David: Well, thank you Trace.

Trace: We decided to why not do a quick interview for the listeners over at RunToGold, and David’s one of the premier experts in the silver market, and so we wanted to talk a little about the Big Happenings that have been going on with the silver manipulation, mainly between HSBC and JP Morgan.

So David, can you give us a little of an overview of what has happened just over the last month or so on the silver market?

David: Well absolutely and before I start I think I really ought to give credit to Ted Butler because Ted was instrumental in leading this campaign and has been for years. Ted and I actually met very early on as he will attest to, I am sure. And I was taking up the gauntlet with him, so to speak, very early, but I saw that it was basically Ted’s passion, and mine was more directed to the overall silver market, so Ted has definitely led the charts there and his monumental efforts have really paid off here in recent times.
So, there are several lawsuits pending. I’ll just go briefly over a few of them. One is a spoof trading, this is where the bids are pulled so you have a lot of people out there that are purporting to make a trade at a higher price, then all of a sudden they pull off their bids, and in other words there are no bids left, and the market falls down. This isn’t taking place as much as it was in the past. And the reason for that — it’s my belief but not proof yet- that the authorities are watching the trading in silver more intently than they ever have in the past. And so the big banks that are used to doing these manoeuvres are reluctant, I think, to pull them off as much as they have. Now, certainly there has been a sell-off commitment or trader-wise recently, yet it isn’t to the huge degree that we saw, that was reported at the CFTC hearing where basically 25% of the world’s silver supply was sold in one trade, which obviously took the price of silver down massively.

Another one is what happens with an auction’s expiration. this is when an I’ve taken out fairly often that it’s impossible for the price of silver and gold to go down every single time o an auction’s expiration, and it hasn’t the last few months, but up until that point you could almost set your watch on the fact that you were going to get a sell-off in the auctions market. Now I know that there are reasons for that, I know how Delta Hedging works and how these banks go in and continue to load the boat on one side until they make it happen, but regardless there’s a lawsuit about that as well.

Lastly, there’s a class-action lawsuit and the law-firm that has taken this one has actually had a very good track record going into these kinds of suits with the future industry.

And so I am, very cautiously, optimistic that all three or one or more of these suits will come to fruition in the side of the plaintiffs, but to be cautious I’m going to state that it’s extremely difficult to prove intent, which is what you do when you in a manipulation case. It’s very difficult when you are before a judge to say well, why did you sell off such a massive amount of silver, and the point is, well to move the market down and to make a profit. And they could actually make this statement in court, and I’m not sure if the judge would rule that that’s manipulation. Now, obviously to me it is. But it is very difficult to prove. Trace, you probably could comment on that because of your legal background, so I’ll pause here and let you give our viewers what your thoughts are on being able to absolutely prove manipulation. I think it’s going to be extremely difficult.

Trace: Yeah, the standards that you have to reach in these types of cases are much higher but another problem is who you have sitting as judges. One of the judges was put in by a republican congressman and he told the congressman that he wasn’t going to let any suits go through, and in the entire tenure of that judge, any of the small investor lawsuits pretty much always got kicked out. You look at the rule of law that has been eroded in the United States. We might have these standards, but how do we know or how can we even trust that the CFTC or the SCC is properly enforcing them? They probably are just watching porn on their computer, like they were instead of prosecuting Madoff.

I mean, we really can’t trust these people anyways, which I think is what you see happening in the end collapse of an empire or other large system, is the official and recognised trust institutions and things like that begin to lose their credibility and their authority and then private markets begin to step in and fill the void. We’re seeing that with the silver derivatives, we mentioned it just briefly, this greater concentration among the less parties and another effect that’s coming out of that is — you know we’ve talked about the ETS before- well, the paper of somewhat dubious quality; its beginning to trade in what you could say is somewhat of a backwardation type event.

And so, you’ve got the paper of lesser quality, and you have got the bullion that’s in a better legal structure and more trust, it’s trading with greater premiums like Sprott’s ETF, for example or gold money. James Turk, he just filled an 8 million dollar order for physical silver for one of his clients. That’s kind of fun, isn’t it?! We’re talking about standing for physical delivery because people don’t trust the courts, you know, because when you buy gold you’re fighting every central bank and government in the world. You don’t trust the courts… I mean, you’re like “here, stick it in my truck so I can drive it away to my own vault”. I mean, that’s what you do when you don’t tryst the legal standards, when you don’t trust the judicial system because they are operating like banana republics. Well, the gold bids on Friday had a massive selloff of 15, and what that seems to imply is that there’s going to be a large hedge fund standing for physical delivery on the gold contracts, so that’s kind of exciting.

But getting back to these 2 –before the call, we talked about the Comex contracts and then the banks silver certificate contracts that you have with various banks. Can you give us a little bit of an overview about what that is, the contracts behind them and why they are such a big issue with these silver certificate programs?

David: Absolutely, and before I do that I just wanted to digress slightly. On the manipulation issue, as important as it is, I have always maintained that regardless of what happens in the court systems or eventually, this thing is going to unravel on its own merit because the demand for silver, physically, is going to be so great that it will overpower all these paper plays. So I wanted to get that statement out there.

On the concentration I agree, the more concentrated this becomes, the more the bad guys are stuck in a corner. But lastly, the point that you bring up is that on the Comex it’s very clear that if you read the contract, and unfortunately most people don’t because it’s very cumbersome in legalese, they have several ways out. The bottom line is the worst case scenario, if they can close the exchange; I mean that is written in black and white.

Trace: Oh, but that’s not a problem because we can always settle on cash!

David: That’s right! You can always settle on cash, just like the SLV. I mean, the SLV is the vehicle that settles on cash 100% of the time. So, what are these vehicles? Well, they are derivatives. And they are derivative is based on, as you call, paper bugs. The paper bugs can produce the paper to settle! And that’s what the contract says. So, you know if there’s a problem with you entering into a contract with the SLV or the Comex, then the problem is basically yours, meaning that you have the obligation to adhere to the contract.

Now, I want to be specific here because it is important, especially when you are dealing with legal terms, but if you have a warehouse receipt and it has your bar numbers on that certificate, then you are fine legally, as far as I am concerned. I mean, basically your silver is paid for, or gold and it is resting in a vault that is in an approved Comex warehouse, which is really a bank. Now, in those cases you are fine, so I don’t want to startle anyone, and I don’t want to be anything but totally ethical and have full integrity on what that means, but if you are in the future’s market itself and you don’t have those bars fully paid for, you’re in a different scenario and you could be settling in cash.

Ok, now moving on to a point that really isn’t brought up that much are these direct certificates that are on deposit with various banks, usually bullion banks. And this is a piece of paper that have in that bank, or its some facility maybe issued by a different bank, silver and/or gold that is being held for you and with this certificate you can exchange those pieces of paper for physical gold or physical silver in 30 days. Well, the problem is that there a lot more of those pieces of paper flying around then there are silver and gold to back it up. And that’s an issue that really I think is at the heart of the matter, because there is no settlement in cash on those. They must be settled for the physical metal.

Now I realise that his must be cumbersome for some people because the people that have some of that paper all have massive quantities of that, and I certainly am not going to bring up any of my clients names but one of them, one with one of the most successful websites on the internet sold it for a very, very large sum of money and he is a silver bug, and has been so for at least the decade that I have known him and he has an account with a very large brokerage house and certainly the amount of silver he has would fill my office from floor to ceiling. So, he doesn’t have it all. Some he holds physically, but a lot of it is with this brokerage firm on deposit and he’s got a piece of paper verifying that.

Now, I’m not saying that this particular case is not going to be fulfilled, what I’m suggesting is that not all of them can be. And this is something where the rubber meets the road, and this is something that is not often brought up because that’s a different contract. A contract that says that this, sir, is good for silver is different than a contract on the future’s market that says it can be settled in cash. Son once some people with a massive amount of silver or gold, and I say silver particularly, decide to cash in and move it to a different facility, which really isn’t that difficult to do, we might see a further price appreciation for the physical realm for silver.

Again, what’s going to happen is what you have already witnessed. You’re going to see a very big spread between real silver and paper silver. Again this happened in the financial crisis of 2008, and as you pointed out Trace, and I’ll reiterate it. What you see for the silver trust by Sprott where you can actually take your silver off of the trust and actually put it in your own vault, has a higher premium than the SLV, why is that? Well, because everyone that pays attention knows that that’s a different contract. You actually have physical in one case and the other one you settle on a paper price.

Trace: Yeah, and this kind of reminds me of an interview I did back in early 2008 I said, you know there’s about a 100 to 140 of paper ounces for every 1 ounce of physical that people have claim on. It’s the oldest trick in the book; you got to sell the same thing 100 to 140 times.

And then hitting on what to be thankful for during this season, I’m thankful for Ted Butler and the work that he’s done. I noticed the GATA thing in your background for the great work that they have done over this last decade. We’ve got lots of paper bugs, and you’re going to have lots of paper, you know. Or, you can take physical delivery of your silver coins. So I’m just grateful that I have got physical delivery of lots of different coins and things, because in this turmoil that we’ve have got there’s a lot of uncertainty, people don’t necessarily know what’s going to happen, and we have such a complex world economy, we really can’t have this central planning on this with such a complex economy. We’ve got to be able to provide food for people and during the Lehman Brothers’ collapse you had CFO’s of Fortune 500 companies calling treasuries saying that they wouldn’t be able to make payroll because of the money market funds going down. You know, what happens when the Walmarts or Exxons don’t make payroll, we’ve got 45 million people on food stamps, how do they get their calories everyday? So I am very grateful that at least I am in a position where I’m not as anxious about these sides of things because I’m prepared and I’m sure that you are also in a similar position.

You have got your physical silver, you’ve been warning on these things for a long time and you know that’s a somewhat tireless and thankless job to do, because it’s something that nobody wants to hear but at the same time it’s, I think, important when you are prepared you’re not as worried about these things that can play out, because as you said, it’s going to play out. The silver market manipulation, the gold market manipulation, it’s going to play out. It will fail to market forces, and we don’t necessarily want to be collateral damage when that happens.

So is there anything else that you would like to add, in the last 30 seconds about what you are thankful for this holiday season?

David: Well, I am thankful for my wife and my family and of course all the blessings that we have in a free market which is less free than it used to be, but I still believe in the power of free speech and internet is going to take back our freedoms a little at a time and over the long run it’s going to come back to basically the principles that have made this country so great.

But I have to one-up-man-ship on you on the paper thing, these are the trillion, and I have a new video coming out very soon. It’s aimed more at the young people that are looking at the difference between this kind of stuff and this kind of stuff. So thank you for the interview, Trace, blessings to you and yours. And we’ll do another video soon.

Reading time: 4 – 7 minutes

A Merrill Lynch banker has been indicted on charges of helping clients move undeclared money abroad. By using a few simple and free hawala privacy tips he could have drastically strengthened his criminal defense and perhaps even avoid arousing suspicion in the first place.

Bloomberg reported:

Just before dawn on a cool June morning, six submachine-gun-wielding federal agents charged into Alexandre Caiado’s Sao Paulo apartment. After arresting him, they hustled Caiado into a pickup truck for a 30-block drive to Merrill Lynch & Co.’s office, where he had been working as a private banker for two years.

As the agents scoured Caiado’s desktop computer, Mary Livingston, a lawyer for Merrill, sat down alone with Caiado. “She gave me very specific instructions,” says Caiado, recalling the scene in 2006. “I wasn’t supposed to say what I really did.”

Prosecutors charged Caiado with arranging illegal fund transfers for Merrill clients — part of what has become a four- year investigation into bankers helping clients secretly move undeclared money abroad to evade Brazilian income taxes. …

“I kept trying to figure out what I did wrong,” says Caiado, in his first interview ever with journalists. “It was Merrill Lynch, one of the most respected places to work on the planet. They were emphatic about the fact that it was OK to transfer money abroad.”

Caiado, who wears jeans and a sports shirt with the sleeves rolled up, says he’s a scapegoat.

In this interview with Bill Rounds of How To Vanish we discuss the Merrill Lynch banker’s case and provide three powerful tips on how to protect your privacy when engaging in legal hawala transactions. Bill has contributed before with Hawala Banking And Currency Controls Part I and Part II. These privacy tips would also be helpful for those who are implementing the strategies found in the Tax Domicile Report.

1. Advantageously use the $10,000 reporting limit. When you cross borders there is often a safe haven of having to declare only amounts of cash or monetary instruments in excess of $10,000 per person per crossing. If you, family and friends travel frequently then availing yourself of this limit can quickly add up to material amounts.

2. Use encryption. Encrypt email. Encrypt files. I find using TrueCrypt and Dropbox to be a potent duo for encrypting and transferring files.

3. Jurisdictional arbitrage. Different jurisdictions have different privacy laws and free speech protections. You can use the differences, multiple jurisdictions and information technology to leverage your defensive position and make it exponentially costly for nefarious individuals to breach your privacy in the first place.

For example, England may throw you in the pokey if you do not disclose an encryption key in contrast to the United States where you often do not have to disclose an encryption key. Iceland recently enacted extremely strong legislation to protect free speech that was almost entirely written by the team at Wikileaks. By encrypting and bouncing data around the globe which resides in the cloud you can make the acquisition of your personal information without your consent extremely costly in terms of time, money and legal process.

The goal is to protect your data and have it reside safely and out of reach in the cloud. If costumed thugs break into your office wielding submachine guns then they will find nothing useful. By using anonymous web surfing techniques such as VPNs or proxy servers you can obfuscate the path to your data.

CONCLUSION

A bedrock legal principle is that the accused stands innocent until proven guilty. While it is possible that Mr. Caiado did engage in illegal conduct we should keep in mind that the case has not been proven beyond a reasonable doubt and therefore Mr. Caiado is presumptively innocent. Additionally, unlike real criminals who lie, steal, murder and intimidate, even costumed ones wielding submachine guns, even if Mr. Caiado engaged in the alleged illegal conduct there is no victim. None of the allegations are for charges of using violence or intimidation against innocent people or their legitimately acquired property.

But as quantitative easing increases, the State becomes hungrier and currency controls are ratcheted up there will be increasingly large amounts of innocent behavior that is criminalized by various costumed criminal gangs to extort holders of capital. But the cost of protection has dramatically fallen and jurisdictions like Iceland and Montenegro are arising and catering to the productive members of society. By starting early and taking proactive steps to engrain these privacy tips into your habitual activities you will be in a better position to avoid arousing suspicion and if in the unfortunate and unlikely event there is a criminal case brought your defense will be that much stronger. An ounce of prevention is worth a pound of cure.