Bullet Points and Thought Process
·
The US Dollar and Bonds may face devaluation
and/or a partial default.
§
Fact Sheet:
US National Debt 15, 9 Trillion (104% of GDP), that’s 50K per citizen to pay
now, or 140K per tax payer to pay now…. Albeit Interest rates are still running
at historic lows, when interest rates go back up, it will be unsustainable.
§
More importantly, unfunded liabilities are 119.8
Trillion equivalent of 1 million liability per tax payer…
> No
need to be a rocket scientist to figure out they cannot pay back the debt. They
are insolvent just as many European countries are it is only a matter of time.
There will positively be Municipal
defaults
… As a result, whatever exposure a business has in US Dollars will somehow be
impacted.Risk: right fat tail (major depreciation, asset inflation) followed by left fat tail (major depression, deflation…)
Solution:
Ø
Hedge or diversify FX exposure:
§
What others are doing is getting out of the USD
when possible.
§
There are signs that
macroeconomic policy insiders consider there is No need of USD to trade with
China. Japan, Brazil, Australia and Russia, and the list is growing…
-
China, Russia to dump US dollar for bilateral
trade: The International
Business Times - 24/11/2010
-
…etc…
1)
Countries trading with each other without the use of
USD
2)
Less Global exchanges of goods are made with the USD.
-
IMHO, I believe the US tried to prevent it with
embargoes i.e: Iraq wanting to trade Oil in EUR, not Dollars ; and now Iran
and others who want to trade in Gold vs. Petrol…
Thesis: There will be a gradual debasement1 or a sudden devaluation2 of the dollar or both1à2.
Before that, I believe there is 3 Signs to watch for:
1- Major Crack in the Derivatives Market (The
leverage will collapse)
-
Fact: Top 9 Banks Exposure $228.72 Trillion = Roughly 3
times the entire world economy (See:
Infographics)
-
I suspect at some point there will be a deleverage
process; the issue is to know when…
-
JPMorgan
May Lose $5 Billion on Derivatives, WSJ Reports: Bloomberg - 18/05/2012
àThis could be only the tip of the iceberg. There is way more
to come…
2- Currency Wars: US QE3 and China RMB
floating currency & Trade Wars
3-
When the Fed
Increase of 1% in interest rates: At that point it is too late.
-
The mechanisms would suddenly increase the notional
interest on the debt as well as strangle the economy basis economic players
(banks , businesses, student
loans…) who profited artificially
low interest rates could face some type of margin calls…
-
For the record:
In my humble opinion the solution could either be a collapse or renewal of the
US dollar perhaps merging Canadian, Mexican and Amercian reserves under an Amero. (particularly if the euro remains
particularly strong vs the US dollar i.e > 1. Showing a relative success.
But this
will not happen soon...
The Gold Trap: Get physical
Industry players which are somehow locked:
·
Mining
Producers use forward sales and have locked in their production.
·
As we have seen, financial
institutions leverage up to 100’s of times in the market vs. the physical
reality. They
do not have the collateral. Hence they sold futures 24th Sept. 2011.
·
Funds and ETF so called “physically backed”,
have clauses,
for which in case of default, they would settle in cash or nothing, in other
words they have no purpose at all. Note: GLD
is the largest gold trust in NAV. As
an example for gold:
à“Gold bars allocated to the Trust in
connection with the creation of a Basket may not meet the London Good Delivery
Standards and, if a Basket is issued against such gold, the Trust may suffer a
loss” – GLD
Prospectus, Page 11.àBecause neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may temporarily hold the Trust’s gold bars until transported to the Custodian’s London vault, failure by the subcustodians to exercise due care in the safekeeping of the Trust’s gold bars could result in a loss to the Trust. – GLD Prospectus, Page 11.
à“The ability of the Trustee and the Custodian to take legal action against subcustodians may be limited, which increases the possibility that the Trust may suffer a loss if a subcustodian does not use due care in the safekeeping of the Trust’s gold bars.” – GLD Prospectus, Page 12.
à“In addition, the Trustee has no right to visit the premises of any subcustodian for the purposes of examining the Trust’s gold or any records maintained by the subcustodian, and no subcustodian is obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such subcustodian.” – GLD 10-K Filing, Page 18
·
Nothing guarantees these trusts and vaults to
swap several times the Bullion in order to get additional income.
·
Who own the gold? I suspect it is eventually the
physical holder who will be in position of power.
Transforming Crisis into Opportunity
Now that you know, It is for you to find a way to profit from that.
http://youtu.be/pctO1iQUpeM
ReplyDeleteThe US agenda: Maintain monetary supremacy by the means of an IMF created SDR.
ReplyDeleteRead about SDR vs.Gold , the U.S Agenda and PetroGold out of an Unclassified internal memo to Secretary Kissinger and Under Secretary of the Treasury for Monetary Affairs Paul Volcker.
http://history.state.gov/historicaldocuments/frus1969-76v31/d61