Guest Post: The Return Of Precious Metals And Sound Money

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Submitted by Giordano Bruno of Neithercorp Press

The Return Of Precious Metals And Sound Money

Well, those devious gold bugs and sound money advocates are at it
again! They had the audacity to produce economic analysis that
consistently outshines and embarrasses mainstream Keynesian pundits.
They had the nerve to expose the seedy underpinnings of the private
Federal Reserve. They even had the gall to bring the long established
short manipulations of metals markets by global banks like JP Morgan and
HSBC into the light of day, where anyone whose head was not buried in
the dark recesses of their own colon could see and say “My god! There
really is an organized cabal against gold and silver!” But if you
thought all that was outrageous, these people, who promote the insane
notion that our currency should actually be backed by tangible wealth
and should be under the control of the voting public instead of some
unaccountable parasitic corporate central bank, have now brought state
legislators into the mix! The return to sound money has begun…

Thirteen states currently have proposed measures which would
reinstitute the long suppressed need for a precious metals standard.
Utah is the furthest ahead in this battle, its House just recently
passing a bill which would make gold and silver officially recognized as
legal tender within its borders. All that remains is a signature from
Utah’s governor:

Colorado, Georgia, Montana, Missouri, Indiana, Iowa, New Hampshire,
Oklahoma, South Carolina, Tennessee, Vermont and Washington all have
similar bills to that of Utah in different stages of development. Why,
after decades of treating gold and silver standards like a cocktail
party joke, have the states suddenly turned friendly towards the idea of
commodities as currency? It makes perfect sense when you examine what
is happening all around us in the world today…

Necessity Is The Mother Of Prevention

The states are broke. Not just broke, but destitute. If California
had a loan shark, its knee caps would have felt the splintery sting of a
Louisville Slugger years ago. Illinois would have turned to
prostitution (and maybe still will). All the clawing of eyes and
gnashing of teeth that went on in Wisconsin this past month over the
rather tame cuts to labor union wage bargaining power is nothing
compared to what many states have to look forward to when they decide to
confiscate employee pensions and cut major funding to basic services
like fire, and police. Some state governments know what is coming, and
they are wisely moving to cushion the fall.

Legislators recognize that if municipal bond investment continues on
its current downward spiral, there will be widespread defaults. These
city and state bankruptcies will almost assuredly be met with offers
from the Federal Reserve of a new bailout; QE3…..or QE20 (does it really
matter anymore?). This bailout would not be “substantial”, it would be
gargantuan! What do you get when states bring in increasingly
diminished revenues while constituents demand more and more money for
welfare and public services because of inflation and the subsequent rise
in poverty? You get a space-time-debt singularity so volatile it
stretches the very fabric of your local economy until it tears wide
open, unleashing a gravity well of capital destruction similar to a
double-ended tornado that snatches your money and hurls it into the
upper stratosphere never to be seen again. The point is, you get yet
another Fanny and Freddy; a self perpetuating never ending bailout
free-for-all that fizzles only when the dollar has been thoroughly
cremated, which shouldn’t be long from now.

Intelligent and fiscally conservative local representatives have seen
the obvious danger to the stability of the dollar in this equation, and
are moving to PREVENT total collapse of their states, rather than wait
until after the fact to initiate solutions. Sound money legislation and
the creation of localized markets and barter networks give states the
ability to function beyond the lifespan of the dollar and to ensure the
continuing personal prosperity of residents. Honestly, why should the
states allow their destinies to be bound forever to the longevity of the
ailing Greenback? If there is anything good to come out of our present
predicament, it is that Americans, from average citizens to elected
officials, are beginning to understand the reality of coming collapse
and are preempting it with measures designed to insulate their
communities from the inevitable firestorm.

Eventually, as this movement escalates, certain states will come out
ahead of the pack, gaining a kind of “safe haven” status, and attracting
liberty minded people from around the country to the protective shelter
of their borders.

The Stagflationary Stranglehold

Stagflation is truly the worst of both possible worlds. A
combination of deflation in employment, wages, and traditionally high
value assets like real estate similar to the Great Depression, combined
with skyrocketing prices in base goods and extreme currency devaluation
common to Weimar-style hyperinflation. I can’t think of anything in the
field of economics more terrifying than this outcome. Unfortunately,
the U.S. is well on its way down the stagflationary path.

As many are probably already aware, the Federal Reserve has become
the largest holder of U.S. Treasury debt in the world, beating out even
China. Most analysts with any sense would agree that our central bank
generating trillions in future tax debt to temporarily stave off the
effects of present national debt is the perfect recipe for dollar
destruction. The problem is that this process of devaluation strikes
the economy from the bottom up, not the top down. Cities and states
will suffer first from inflationary pressures as well as municipal
liabilities because they do not have the capacity to fund their
operations through constant fiat printing. The Federal Government, on
the other hand, has the ability to create dollars unhindered to prop up
its functions. Therefore, as the Fed prints, it weakens state revenues
by destroying consumer buying power (and sales tax support) and
triggering price explosions, while at the same time maintaining
Washington D.C.’s administrative position and funding capability.
Ultimately, unless Congress finds a way to freeze the constant expansion
of the national debt ceiling, the Federal Government will be the last
entity damaged by the overflow of currency they set into motion.
Perhaps that has been the plan all along…

For those whose knowledge of the economy is limited to 30 second
sound bites from MSNBC, the idea of currency overflow and dollar
derailment sounds outlandish. What is a little old-school Keynesian
liquidity to the mighty American economy, right? $700 billion here,
$800 billion there, and presto, jobs fall from the sky and suburbanites
return to their iPod humvee heaven! I sob a little inside when I hear
people still using these mainstream bailout stats as if they mean

The truth is, it is nearly impossible to get an accurate calculation
of the exact amount of dollars created and dumped into our financial
system by the Fed without a full audit. We hear the same TARP numbers
repeated ad nauseam and begin to believe we have a sense of what is
happening. However, if you were ignoring TARP back in July of 2009, and
instead focused on the little know SIGTARP commission’s statistics on
the overall cost of bailouts INCLUDING those debt obligations the
government had established but were yet to pay, you would have
discovered that instead of a few hundred billion stretched out over
years, the U.S. is actually in the red for nearly $24 trillion:

This was two years ago. Not surprisingly, the far more in-depth
SIGTARP numbers on Fed quantitative easing and government costs have
been removed from subsequent reports. Apparently, they were not buried
well enough, and someone felt it would be better to pretend they never
existed instead. Some investment corporations are still keeping tabs,
though, like bond fund giant PIMCO, which has seen fit to dump the
entirety of its U.S. Treasury holdings in preparation for dollar

Yes, Bill Gross is a globalist insider, but beyond that, PIMCO’s
actions are incredibly prudent. It is quite possible we have not only
met the 2009 SIGTARP cost projections, but surpassed them in light of
the Federal Reserve’s new position as the global grand poobah of
T-bonds, as well as Timothy Geithner’s absurd insistence that being
required to go through Congress to raise the debt ceiling is like

Naturally, frustrated little Timmy would prefer if there was no debt
ceiling at all, and the government was given free reign to spend money
that doesn’t really exist, for Treasuries and toxic derivatives that
don’t exist, to support a recovery that doesn’t exist. I don’t know,
these globalist bureaucratic types are so friendly and knowledgeable and
they wear such nice suits. I’m sure they mean well. That said, the
only way the states can avoid any unpleasant consequences in the event
that globalists don’t “mean well” is to allow alternative markets and
currencies to take root, helping them to mature and slowly replace the
feudal establishment system. Only when states prepare to decouple from
the disintegrating mainstream economy will they become safe from the
shockwaves of collapse.

The Shorts Are Ripe For Squeezing

JP Morgan’s fraudulent naked short positions designed to artificially
hold down silver markets have been publicly exposed and well documented
for years by this site among many others. Their issuance of paper
ETF’s representing gold and silver they don’t actually have has also
been fully uncovered. Global bankers have been manipulating precious
metals markets down for decades. This is undeniable. Why would they do
this? To prevent exactly what is happening in Utah and a dozen other
states today; the rebirth of gold and silver as a competing currency
alternative to the fiat dollar.

As long as PM’s were seen as poor market performers or relics of a
bygone era, no state would ever consider them as a viable substitute for
the thoroughly controlled Greenback. Globalization operates on the
principles of centralization, and the purpose of centralization is to
take options away from the citizenry until they have no other choice but
to use your system. Gold and silver represent a powerful option that
cannot be duplicated out of thin air to infinity, and cannot be easily
dominated by a central bank. COMEX manipulation is an inherent
extension of the centralization process. But, as communities and states
begin the acceptance of metals based trade and the issuance of gold and
silver currency, you will see the manipulations by big banks begin to

Already, JP Morgan is beginning to take gold as collateral for
certain investment transactions, which means, first, that JP Morgan is
now treating gold not as a commodity, but as a kind of currency, and
second, that JP Morgan is in the process of shoring up its physical
metals position to prevent a “squeeze” on their naked shorts (massive
fraudulent bets that silver or gold will fall, often causing regular
investors to believe there is far more physical metal on the market than
there actually is):

It is highly unlikely, though, that the international banking cartels
will be able to generate enough excess gold and silver stock to meet
the rising demand for physical delivery, considering they have issued
far more paper securities for gold and silver than they could possibly
acquire. As physical metals go into wider use, especially through state
legislation, and spot prices keep increasing despite manipulation,
global banks with large short positions will be crushed by the ever
increasing need to cover their fake bets. This is sometimes called a
“short squeeze”, which results in history making spikes in spot price
over a very compressed period of time.

Signs of a possible short squeeze include shortages of blanks at the U.S. mint due to high demand:

Or, the decoupling of silver or gold from dollar activity, which
signals that metals are being treated as a competing currency. Silver
and gold movements outside of the dollar are now a common weekly
occurrence, and some metals suppliers, like Pan American Silver, are
shifting away from the dollar entirely and trading their supply in other

International demand for gold and silver also puts heavy pressure on
shorts. For instance, gold demand in India was up 66% in 2010:

Gold demand in China was up 70% in 2010:

Couple this kind of demand with consistently falling production
output, and you have the ingredients for a precious metals price
eruption. Gold production in major producing country South Africa was
down 6.4% in 2010, and down 17.4% in Peru:

The sooner regular Americans and state governments invest in precious
metals, the greater their head start will be when chaos unfolds in ETF
markets. There is no doubt that global banks will respond to this event
by refusing to meet physical delivery demands on paper securities they
have already issued, and millions of ETF investors are left with nothing
but worthless stock documents. States with mining operations inside
their borders will be in a prime position to become real suppliers, to
facilitate ample revenue, and to help rebuild the American economy from
the ground up, but only if they prepare now. Otherwise, the banks will
take the stage again, undisputed and ready to offer more “solutions” to
the problems that they themselves created in an incessant cycle of
deceit; the longest running con game in history.

Catastrophe Demands Concrete Solutions

Things are getting real ugly out there. The tension in the air is
dense and sweaty. Everyone feels it, but not enough people proactively
discuss it. The economy has already imploded, and is now reinflated
with volatile hydrogen like fiat, just waiting for the right spark to
bring the whole zeppelin crashing down in flames. Japan’s situation is a
prime example of the incredible sensitivity now present in the so
called global economy. One earthquake has sent world markets reeling,
and the Nikkei index into free fall, losing over 10% in one day.
Imagine the results of a massive earthquake in the U.S., or a nuclear
event like that which is unfolding north of Tokyo. What about an
escalation of Middle East political trauma or American involvement in
another war? Circumstances which could have been absorbed and dealt
with by the U.S. three years ago are now amplified by our financial

After dozens of months filled with lost jobs, lost infrastructure,
and lost buying power, even the shock of $100 plus oil is like a sledge
hammer to the solar plexus today when it was a only a moderate nuisance
back in 2008. We cannot continue on our present path, or we WILL suffer
unthinkable cultural digression and social defeat. A declaration of
independence from the faulty structure is in order, and this begins with
individuals as well as states acting to become more self sufficient.
Sound money legislation is an important foundation of such development,
and private trade in commodities will reinforce state action. The
problem must be confronted on the personal level, the local level, and
the state level. This means alternative economies based on stable trade
and tangible currencies have to become a priority for your community
and for legislators equally. Neither one should wait around for the
other to make this happen. I think if anything is quite clear, it is
that there is no more time to guess and second guess the need for
financial flexibility and self-reliance for the states. It is time to
act. The decisive will survive and thrive, the apathetic will take
repeated blunt force fiscal trauma to their collective groins until they
learn their lesson. This is simply the way of things…