The End for Risky Assets and U.S. Government Finances

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Huge Paradigm Shift Marks the Beginning of the End for Risky Assets and U.S. Government Finances! – Will US Involvement in Syria Really Amount to No Big Deal or Is This the Next Catalyst for Silver and Gold Prices? – Could The Fed’s Threat of “Tapering” Actually Help Silver Prices? – Do Rising Interest Rates Spell the Beginning of the End for the U.S. Government’s Finances and A New Dawn for Silver Prices? – Was Anyone Really Fooled When S&P Finally Buckled To Pressure and Upgraded the US Credit Outlook?

The End for Risky Assets and U.S. Government FinancesThis past week, you saw several interesting developments impact the precious metals markets. As usual, the mainstream financial media and their cohorts of talking heads and smart money managers and analysts all worked together to keep you from understanding the writing that is on the proverbial wall.

Interest rates have consistently begun to rise in the U.S. This means that these same rates are also rising for the US government. As usual, this is a paradigm shift development in its far reaching impacts that mainstream financial media will try to hide from you.

Silver Holds Its Position

Silver pulled itself up by its bootstraps and rallied slightly in the week that ended Friday, June 14th. The white metal finished the prior week at a spot market close of $21.65. It gapped up to $21.95 in weekend spot market opening. Silver finally moved on up a few more cents to close spot markets on Friday, June 14th at $22.08.

The silver gain represented a nearly 2% gain over the spot market week to date prices. This week, the financial media tried to smoke screen you about the importance of the Syrian escalation, about the threat of Fed tapering and its effects on markets, about rising interest rates and the paradigm shift they represent for the U.S., and about the sell out of S&P regarding the U.S. credit outlook.

Will US Involvement in Syria Really Amount to No Big Deal or Is This the Next Catalyst for Silver and Gold Prices?

The terrible civil war in Syria may be old news. The U.S. declaration that it will suddenly get involved after the fighting has raged on unabated for two long years is new. The President will now arm the rebels because the Syrian regime has been using chemical weapons on them. He is also contemplating requests from Egypt and Jordan to enforce a no-fly zone over Syria.

This would mean air force sorties, maybe missile strikes, and certainly dogfights against the Syrian dictatorial regime. Mainstream financial media has glossed over the important topic as usual. They do not feel that the “little” problem in Syria is a real threat to world equity and commodities markets or a boon to precious metals either.

It’s About Oil – Again

The real situation is far different. Syria is a puppet state of Iran. Iran is one of the world’s largest oil producers. It is also a foresworn enemy of the U.S. and Israel. Now you are suddenly talking about the U.S. getting involved in a potentially sharper and more intense confrontation with the self proclaimed nuclear superpower of the Iranian Republic.

Their Iranian Revolutionary Guard Corps are a serious, powerful, and feared force that is perfectly capable of (and has a sordid and drawn out history of) serious international acts of terrorism and regional armed conflict. Not surprisingly, Silver (and gold) prices are higher on the news.

This situation bears watching. It could easily escalate into a full blown showdown between the regional allies of the U.S., Jordan, Saudi Arabia, Qatar, Kuwait, Bahrain, and Israel versus the Iranian block of Iran, Syria, Hamas, Hezbollah, and Lebanon.

Could The Fed’s Threat of “Tapering” Actually Help Silver Prices?

Everyone seems to be talking about the Federal Reserve and the end of quantitative easing nowadays. This is now cleverly referred to as “Tapering,” as the Fed will not simply stop their money printing program cold turkey.

Instead, they will gradually decrease the amount of it from $85 billion per month, or “taper” it down. The financial media have latched on to this and declared victory over silver and gold. After all, why should you buy and hold real, hard, tangible, and historically valuable assets if the government will simply stop printing money?

Do not be so easily fooled by the imperial machinery of the U.S. government and its cronies. The truth is that even if the Fed found some way to stop printing money that it needs to buy U.S. government debt (without the entire house of cards known as U.S. Treasury debt collapsing), it would not stop the demand for silver and gold. That may sound counter-intuitive to what you have been told. This is because it is!

The Complexity of Printing Money

The real world situation regarding the Federal Reserve money printing program is far more complex. The World Bank President Robert Zoellik began to shed light on the tapering scenario this past week in an interview he gave. He told you that the when the Fed rolls back its mega asset buying program (with printed money), it will have enormous ramifications for countries around the world.

Zoellick stated that this is a big issue for all the major economies of the globe. This includes the largest economic block of Europe, the U.S., China, and Southeast Asia. Another market observer, the CMC Markets Senior Market Analyst Colin Cieszynski reiterated the warning. He said that the markets are overextended, that they are now propped up by all the global central banks working together to print money. The Bank of Japan is as guilty as the U.S. Federal Reserve in this regard.

He is certainly leveling with you. If the Fed stops flooding the world with cheap and magic (now you see it, now you don’t) money, it will cause equities markets to crash around the world. Instability and major currency market moves will become the norm for some time to come. This will be bullish for silver and gold prices after an initial volatile period.

Do Rising Interest Rates Spell the Beginning of the End for the U.S. Government’s Finances and A New Dawn for Silver Prices?

This is a story that the gulags in mainstream finance and financial media are deliberately and almost entirely ignoring. Yet, it is critically important to the future of precious metals prices, to the U.S. government finances, and to you too! One MSNBC headline reads, “In a Shift, Rates are Rising.” Even Jamie Dimon of the JP Morgan Chase Bank titan is quoted as saying:

“I think you should all be ready, because [interest] rates are going up.”

That does not at all do justice to the gravity of the situation!

This is the Pandora’s Box that Big Ben Bernanke and his band of merry men on the Federal Reserve Board opened years ago when they made the happy go lucky decision to print money without restraint. Three trillion and change U.S. dollars later, the time to pay the piper has arrived.

Interest rates are rising as the central banks of the U.S.’s creditor nations know the jig is up. We can not now or ever in the even distant future hope to repay sixteen trillion (soon to be seventeen trillion) dollars in debt. This is true even though the U.S. has cheerfully printed more money since just 2006/2007 than every other profligate money printing regime in the entire history of the world combined!

Between the limitless debt spending and uncontrolled money printing, investors and foreign U.S. debt holders now want more interest as a result of this six years of wild and reckless behavior. Why does this matter at all? It is because since the 1980’s real interest rates in the U.S. have been falling. Now they are rising again.

This marks a dramatic paradigm shift in the economic prospects for the country as a whole.

Translation: higher interest rates for you the consumer, for you the mortgage or car loan holder, and most devastatingly for the U.S. government (and other heavily indebted Western nations eventually). Already the U.S. Congressional Budget Office is projecting substantially higher interest payments on the massive U.S. debt. Other Western nations in similar positions include Japan, Germany, France, Spain, Great Britain, Greece, and Italy, to name a few of the better known ones.

Greece, Portugal, Spain, Ireland, and Cyprus are just the tip of the iceberg of countries that can not afford to pay their debt, much less the interest on this debt. You can bet that this is going to cause major instability and uncertainty as more and more of the so called First World nations default on their obligations over the next few years.

Do not let the mainstream media deceive you. This will not simply cause equities, bonds, and currency markets grief, pain, and extreme volatility. This will be extremely bullish for silver and gold prices in the future.

Was Anyone Really Fooled When S&P Finally Buckled To Pressure and Upgraded the US Credit Outlook?

The week of misdirection would not be complete without a review of the major deal that the media made of S&P upgrading its outlook on U.S. Credit prospects. You heard that right – S&P, the original whistleblower on the unsustainable American government debt, finally caved in this week.

Clearly, they need to join the class action lawsuits against the IRS alongside the targeted conservative and Tea Party groups. There is no way that S&P really believes the U.S. government financial picture is improving.

What they said was telling. They may have tried to make up with the government that has sicked the SEC watchdog on them as retaliation for daring to go after the U.S. credit rating. They claimed that the outlook for the U.S. sovereign credit is now stable instead of negative.

Try not to laugh as you read the clearly brownnosing job going on from their reasoning. They said that credit strengths for the United States public finances include (and I am not making this up!): the U.S.’ monetary credibility, the resilient American economy, and the dollar’s status as among the key reserve currencies of the world.

The horse dung is so thick in this statement you can cut it with a knife!

Then S&P told you what they really think about the U.S. economic prospects. The U.S. credit weakness as compared to the remaining AAA rated countries includes several key points. The problems are with America’s debt burden, its fiscal performance, and the fiscal policy-making effectiveness (or to put it bluntly, the lack thereof!).

With all the misdirection flying around this week, it is necessary to end with a well grounded quote. The Chief Investment Officer of Harris Private Bank Jack Albin put it best when he opined that investors now finally realize that we are all living on borrowed time regardless of what the Fed is doing or not doing. The stimulus can not go on forever, but must be pulled back.

Mr. Albin is on to something profound here. Be assured that when the stimulus is pulled back, the vacuum of economic chaos will replace the semblance of financial stability that now prevails in the world. Nature abhors a vacuum.

The precious metals will be a prime contender to fill that gaping void. This is because silver and gold continue to remain the only real currency that you can always take to the bank (even when the bank is no longer a safe enough place to keep your silver and gold!).

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