Meltdown

What you are all witnessing is the meltdown of the United States financial markets. The situation is going to get a lot worse before it gets better for the general markets. At first, as I started to closely examine the situation, I was utterly amazed that more high-profile analysts didn’t see what was going to have to happen as the credit markets started to implode and the Federal Reserve, once again, attempted to come to the rescue of the markets with its standard remedies of money supply and interest rate manipulation. Even now, as it is going on right in front of their eyes, they still don't see it. But I am no longer amazed. These people have programmed themselves for blindness over a period of two generations, they and their followers. They have not believed the common sense of those who have made the same mistakes and suffered before them, and they are now in the process in making those exact same mistakes again. As United States equity markets are imploding, I don't think that one in one hundred thousand people understands what is happening. Everyone is selling everything, running around like rats on a burning ship, panicking out and back into things for reasons they know not.

Massive Misallocations of Capital

The United States banking system, built up on years of negligent practices is collapsing under the weight of its own mismanagement. An entire generation of misallocated capital has gone into not just houses, business and goods, but almost unimaginable amounts of derivatives, i.e. bets on things to happen or not to happen in the financial markets (tiny insurance policies) disguised as legitimate financial instruments. All of this was facilitated by government-sponsored policies focused on money supply manipulation. Never once, it appears, however, did anyone involved question how the whole thing would look when it started moving in reverse, when the limits of the system were reached and the pendulum, by necessity, started swinging back in the direction from whence it came, when the debt taken out to support creations of massive new amounts of capital and service-oriented labor would, by necessity, start having to be liquidated.

And now that debt is being liquidated. In other words, all the money that has been sent out, lent out, borrowed and used for things is working its way back to its points of origin, unwinding all the derivative baggage it has accumulated along the way, making many people much poorer in the process.

Why is this happening? Understand this... It really does not matter. Fear that growth cannot be sustained...panic... concern about the ability of the system to sustain itself...sunspots...or simply in some cases, the whims of the lenders. The why of what is happening matters little in relation to the realization of the happening itself.

Without access to credit, lenders are in some cases no longer able and in all cases much less enthusiastic about making loans. For a society that runs on ever-expanding credit, this is essentially a death sentence that will by necessity have to spiral into the next step in the sequence, a significant slowdown in all things economic in the United States. The answer appears to be, once again, increasing credit, making more loans and putting more money out there to keep the whole thing going in a never-ending, self-perpetuating non-cyclical event of wealth creation. There is one problem. Such a system is not sustainable forever. It, by measures, needs external economic stimuli (financial help of one type of another) in order to keep it alive. And for the first time in a long time, people in other parts of the world who basically have always put money into it or accepted as payment money coming out of it in order to keep it alive, are starting to wonder about the wisdom of their various involvements. They are looking at possible outcomes, and, to put it nicely, are none too optimistic about the parts they will be playing in those outcomes.

You see, the whole zany, madcap scheme has been built up, at least for the past 45 years or so on the "kindness of strangers" or the great majority of them overseas lenders and U.S. dollar users. And bad things can happen to the whole system when these lenders start to fear for the safety of their capital or doubt the coin of the realm that they have been doing business in. They need not call in their loans to bring the whole program to a screeching halt, but merely refuse to loan at the rate they have been or even refuse to loan any more money at all to perpetuate the process. They simply might only demand a different form of payment when they do financial transactions. When a system requires increasing amounts of capital and loans and dollars to just keep it going, this type of action by foreign lenders and businesspeople would essentially pull the plug on the whole mechanism. The Federal Reserve in conjunction with the U.S. Government can do its best to keep the whole thing going by continuing to artificially increase the money supply. This, however, only provides greater reasons for foreign neighbor-lenders to want to involve themselves with U.S. business dealings and the dollar as little as possible. Ultimately, what will happen is what has always happened during such times in human history, foreign lenders will start wanting to use their own money and not the U.S.’s magic out-of-thin-air dollar bills to do transactions. And this will draw to a close the age of the dollar as king. I put it to you that that the end of that age has already arrived. The dollar’s demise is essentially here.

Poodle Groomers Beware!

You, Joe Francisco, who went into business to groom poodles are about to realize that the world does not need another poodle-grooming business. In fact it never needed one poodle grooming business in the first place. You figured that since someone else started one, and someone was willing to lend you the money to start your own that there was a need for it. The problem is that there never was a real need for it. There was a perceived need because there was so much extra money floating around in the system. Because of this, people like Ray Santana, who before the Fed's loose monetary policy would have never have had a job working for the local municipal sun-flower seed chewer census board (somebody has to do it, right?) decided that if they had enough income from their very important government job to buy a show poodle and subscribe to Show Poodle magazine, then by God they should get that show poodle professionally groomed. Therefore you are in business, my friend... Joe's Poodle Grooming Service, Inc.

Now that game is coming to an end. Money is not created by magic. It is created by work. And the Chinese who have been working their butts off for a long time have basically had it with people on the other side of the world grooming poodles with money borrowed from them. They're ready to start living a little high on the hog themselves, and guess what? They are going to start wanting their money back to start doing it. Even if they don't get their money (loans) back, which they never will, at the very least, they will stop loaning money to people like Ray, and you, Joe, and to the government that supports such ridiculous spending patterns.

The Dow at 2350, Gold at $6000

Banking is a very successful business as long as you have money to lend and people who borrow from you make enough money to pay you back. You can even make money for awhile even if those people just borrow the money to pay you back. The problem is that the system relies on money flows and when too many people start borrowing from one bank to pay off another bank, money flows, by necessity, as trust in the system fades, must slow and eventually stop. And right now, they are coming to a screeching halt. Banking has grown so powerful over the past few generations that it has fashioned itself to be a entity unto itself, or so it thinks, independent of such laws of supply and demand, of Universal Law. It is not, however, and the excesses created, as are always created when any entity is granted absolute power, have turned back on the banking system itself, making it not just illiquid, but insolvent. It is not just weakening. It is dying. Like a diseased heart, it is infarcting massively as everyone in the government is gathered around in the E.R., running a code to try and save it. The code will not succeed. The Banking System as we know it, is going to die, and when it dies, it is going to take anyone who depends on the credit it creates and uses to function with it. It is actually collapsing as I write, and nothing anyone in the U.S. Government can do will stop it.

I believe that the Dow will bottom out at around 2350 within the next seven years. I also can see gold closing above $6000 within thesame time frame. And these estimates are probably not low or high enough. Here's the kicker, however. Examine what I am about to write very carefully. Within the next fifteen years, a major world reserve currency that is gold backed will, by needs, emerge. All international trade will return to a gold standard, at least for a time. Perhaps a long time. That currency will most likely not be U.S. based. You may or may not understand this yet, but that means everything, not made entirely here in the United States will go up almost astronomically in price. Gasoline, regardless of so called "demand destruction," could rise to $15 a gallon in a week’s time.

Right now everyone is panicking out of everything, because they just don’t realize what is happening. You need to realize exactly what is happening. It has been made plain. Just as in Weimar Germany in the early 20's, loyal citizens clung to their marks, people are clinging to their dollars as a safe haven. They could not be making a bigger mistake. (Well, I guess a person could if he stuck a lighted firecracker up one of his nostrils.) The dollar is collapsing in value as you read this, and nothing can stop that until it hits bottom. In other words, the dollar has already taken the leap off the top of the building. The energy needed to stop it in mid air is essentially impossible to call up. What will stop it is the ground below.

The Lizard Under My Shoe

People are making the classic mistake the tiny lizard I found inside on the main floor in my warehouse the other night made. He had nowhere to run as I chased him around on the floor. Finally, seeing no other place to go to, he ran under my shoe and hid beneath the arch, curling up as tightly as he could, not realizing that the arch of that shoe was connected to the foot connected to the leg connected to the very person that was after him. Fortunately for the lizard, I picked him up and put him outside. The shoe connected to the dollar is going to squash flat anyone hiding under it, however. The only escape "outside" is outside the system. And the only paths to that are those that lead to gold and silver.

Kimber

So Kimber is falling. So what! It must rise, because it is the only thing left with any value. The trick isn’t to buy what everyone else wants to buy. The trick is to buy what everyone else will have to buy. You are about to witness the greatest destruction of illusory wealth in recorded history. Nothing, and I mean nothing, can stop it! Most of you do not see this. It is enough that you will be saved the suffering of most of those you know. I do mean suffering. I am glad I know each and every one of you who is reading this. I am glad you have believed in me and believed in your own understanding. I am glad for you all and glad for your children. You own a piece of ground with gold and silver underneath it. You own something real. You will do fine. Sleep soundly at night. Take care. Bull