Guest Post: Physical Gold Vs Paper Gold: Waiting For The Dam To Break

Tyler Durden's picture

Submitted by Alasdair Macleod, via GoldMoney.com,

Introduction

In this article I will argue that the recent slide in the gold price has generated substantial demand for bullion that will likely bring forward a financial and systemic disaster for both central and bullion banks that has been brewing for a long time. To understand why, we must examine their role and motivations in precious metals markets and assess current ownership of physical gold, while putting investor emotion into its proper context.

In the West (by which in this article I broadly mean North America and Europe) the financial community treats gold as an investment. However, of the global pool of gold, which GoldMoney estimates to be about 160,000 tonnes, the amount actually held by western investors in portfolios is a very small fraction of this amount. Furthermore investor behaviour, which in itself accounts for just part of the West’s bullion demand, is sharply at odds with the hoarders’ objectives, which is behind underlying tensions in bullion markets. To compound the problem, analysts, whose focus incorporates portfolio investment theories and assumptions, have very little understanding of the economic case for precious metals, being schooled in modern neo-classical economic theories.

These economic theories, coupled with modern investment analysis when applied to bullion pricing, have failed to understand the growing human desire for protection from monetary instability. The result has for a considerable time been the suppression of bullion prices in capital markets below their natural level of balance set by supply and demand. Furthermore, the value put on precious metals by hoarders in the West has been less than the value to hoarders in other countries, particularly the growing numbers of savers in Asia.

These tensions, if they persist, are bound to contribute to the eventual destruction of paper currencies.

The ownership of gold

The amount of gold bullion that backs investor-driven markets is not statistically recorded, but we can illustrate its significance relative to total stocks by referring back to the time of the oil crisis of the mid-1970s. In 1974 the global stock of gold was estimated to be half that of today, at about 80,000 tonnes. Monetary gold was about 37,000 tonnes, leaving 43,000 tonnes in the form of non-monetary bullion, coins and jewellery. Let us arbitrarily assume, on the basis of global wealth distribution, that two thirds of this was held by the minority population in the West, amounting to about 30,000 tonnes.

This figure probably grew somewhat before the early 1980s, spurred by the bull market and growing fear of inflation, which saw investors buy mainly coins and mining shares. Demand for gold bars was driven by the rapid accumulation of dollars in the oil-exporting nations, as well as some hoarding by wealthy investors from all over the world through Switzerland and London.

The sharp rise in global interest rates in the Volcker era, the subsequent decline of the inflation threat and the resulting bear market for gold inevitably led to a reduction of bullion holdings by wealthy investors in the West. Swiss and other private banks, employing a new generation of fund managers and investment advisors trained in modern portfolio theories, started selling their customers’ bullion positions in the 1980s, leaving very little by 2000. In the latter stages of the bear market, jewellery sales in the West became a replacement source of bullion supply, but this was insufficient to compensate for massive portfolio liquidation.

So by the year 2000, Western ownership of non-monetary gold suffered the severe attrition of a twenty-year bear market and the reduction of inflation expectations. Portfolios, which routinely had 10-15% exposure to gold 40 years ago even today have virtually no exposure at all. Given that jewellery consumption in Europe and North America was only 400-750 tonnes per annum over the period, by the year 2000 overall gold ownership in the West must have declined significantly from the 1974 guesstimate of 30,000 tonnes. While the total gold stock in 2000 stood at 128,000 tonnes, the virtual elimination of portfolio holdings will have left Western holders with little more than perhaps an accumulation of jewellery, coins and not much else: bar ownership would have been at a very low ebb.

Since 2000, demand from countries such as India and more recently China is known to have increased sharply, supporting the thesis that gold has continued to accumulate at an accelerating pace in non-Western hands.

Western bullion markets have therefore been on the edge of a physical stock crisis for some time. Much of the West’s physical gold ownership since 2000 has been satisfied by recycling scrap originating in the West, suggesting that total gold ownership in the West today barely rose before the banking crisis despite a tripling of prices. Meanwhile the disparity between demand for gold in the West compared with the rest of the world has continued, while the West’s investment management community has been actively discouraging investment.

The result has been that nearly all new mine production and Western central bank supply has been absorbed by non-Western hoarders and their central banks. While post-banking crisis there has presumably been a pick-up in Western hoarding, as evidenced by ETF and coin sales and some institutional involvement, it is dwarfed by demand from other countries. So it is reasonable to conclude that of the total stock of non-monetary gold, very little of it is left in Western hands. And so long as the pressure for migration out of the West’s ownership continues, there will come a point where there is so little gold left that futures and forwards markets cease to operate effectively. That point might have actually arrived, signalled by attempts to smash the price this month.

This admittedly broad-brush assessment has important implications for the price stability essential to bullion banks operating in paper markets as well as for central banks attempting to maintain confidence in their paper currencies.

Precious metals in capital markets

In the West itself, the attitudes of the investment community are fundamentally different from even those of the majority of Western hoarders, who are looking for protection from systemic and currency risks as opposed to investment returns. Western investors are generally oblivious to the implications, the most fundamental of which is that falling prices actually stimulate physical demand. Before the recent dramatic slide in prices the investment community undervalued precious metals compared with Western hoarders, let alone those in Asia, encouraging physical bullion to migrate from financial markets both to firmer hands in the West as well as the bulk of it to non-West ownership. There is now irrefutable evidence that these flows have accelerated significantly on lower prices in recent weeks, as rational price theory would lead one to expect.

Pricing bullion is therefore not as simple as the investment community generally believes. It is being put about, mostly on grounds of technical analysis, that the bull markets in gold and silver have ended, and precious metals have entered a new downtrend. The evidence cited is that medium and longer-term moving averages have been violated and are now falling; furthermore important support levels have been breached.

These developments, which arise out of the futures and forward markets, have rattled Western investors who thought they were in for an easy ride. However, a close examination of futures trading shows the bearish case even on investment grounds is flawed, as the following two charts of official statistics provided by weakly Commitment of Traders data clearly show.

Money managers - gold

Money managers - silver

 

The Money Managers category is the clearest reflection in the official data of investor portfolio positions, representing sizeable mutual and hedge funds. In both cases, the number of long contracts is at historically low levels, and shorts, arguably the better reflection of money-manager sentiment, remain close to high extremes. On this basis, investor sentiment is clearly very bearish already, with the investment management community already committed to falling prices. Put very simplistically there are now more buyers than sellers.

Money Managers are in stark opposition to the Commercials, who seek to transfer entrepreneurial risk to Money Managers and other investor and speculator categories. The official statistics break Commercials down into two categories: Producer/Merchant/Processor/User, and Swap Dealers. Both categories include the activities of bullion banks, which in practice supply liquidity to the market. Because investors and speculators tend to run bull positions, bullion banks acting as market-makers will in aggregate always be short. A successful bullion bank trader will seek to make trading profits large enough to compensate for any losses on his net short position that arise from rising prices.

A bullion bank trader must avoid carrying large short positions if in his judgement prices are likely to rise. He will be more relaxed about maintaining a bear position in falling markets. Crucially, he must keep these opinions private, and the release of market statistics are designed to accommodate these dealers’ need for secrecy.

Bullion banks’ position details are disclosed at the beginning of every month in the Bank Participation Reports, again official statistics. They are broken down into two categories, based on the individual bank’s self-description on the CFTC’s Form 40, into US and Non-US Banks. Their positions are shown in the next two charts (note the time scale is monthly).

Gold - bank net shorts

Silver - bank net shorts

 

In both gold and silver, the bullion banks have managed to reduce their exposure from extreme net short over the last four months. The reduction of their market exposure suggests that they have been deliberately transferring this risk to other parties, and is consistent with an anticipation that bullion prices will rise. It is the other side of the high level of bearishness reflected in the Money Manager category shown in the first two charts. The bullion banks control the market; the Money Managers are merely tools of their trade.

There has been little reduction in open interest in gold and it has remained strong in silver, because risk has been transferred rather than extinguished. Daily official statistics on open interest are provided by the exchange and summarised in the next two charts (note that data is daily).

Gold - open interest

Silver - open interest

 

From these charts it can be seen that recent declines in the gold price are failing to reduce open interest further, and in silver open interest remains stubbornly high. Therefore, attempts by bullion banks to reduce their net short exposure by marking prices down are showing signs of failure.

We can therefore conclude that investor sentiment is at bearish extremes and the bullion banks have reduced their net short exposure to levels where it risks rising again. Therefore the downside for precious metals prices appears to be severely limited, contrary to sentiments expressed by technical analysts and in the media.

This market position is against a background of a growing shortage of physical bullion, which is our next topic.

Physical markets

Casual observers of precious metal prices are generally unaware that the headline writers focus on activity in the futures markets and generally ignore developments in physical bullion. This is consistent with the fact that market data is available in the former, while dealing in the latter is secretive. However, as with icebergs, it is not what you see above the water that matters so much as that which is out of sight below.

It is not often understood in investment circles that gold and silver are commodities for which the laws of supply and demand are not overridden by investor psychology. Therefore, if the price falls, demand increases. Indeed, the increase in demand has far outweighed selling by nervous investors; even before the price-drop, demand for both silver and gold significantly exceeded supply. Evidence ranges from readily available statistics on record demand for newly-minted gold and silver coins and the net accumulation of gold by non-Western central banks, to trade-based information such as imports and exports of non-monetary gold as well as reports from trade associations reporting demand in diverse countries such as India, China, the UK, US, Japan and even Australia.

All this evidence points in the same direction: that physical demand is increasing on every price drop. There is therefore a growing pricing conflict between futures and forward markets, which do not generally involve settlement but the rolling-over of speculative positions, and of the underlying physical metal. Furthermore, analysts make the mistake of looking at gold purely in terms of mining and scrap supply, when nearly all gold ever mined is theoretically available to the market, in the right conditions and at the right price. The other side of this larger coin is that if the price of gold is suppressed by activity in paper markets to below what it would otherwise be, the stimulus for physical demand, being based on a 160,000 tonne market, is likely to be considerably greater on a given price drop than analysts who are myopic beyond 2,750 tonnes of annual mine production might expect. The numbers that are available confirm this to have been the case, particularly over the last few weeks, with reports from all over the world of an unprecedented surge in demand.

This is at the root of a developing crisis of which few commentators are as yet aware. Demand for physical has accelerated the transfer of bullion from capital markets to hoarders everywhere and from the West’s capital markets to other countries, which has been the trend since the oil crisis in the mid-Seventies. This is what’s behind an acute shortage of physical gold in capital markets, explaining perhaps why bullion banks feel the need to reduce their short positions.

While we can detail their exposure in futures markets, meaningful statistics are not available in over-the-counter forward markets, particularly for London, which dominates this form of trading. Forwards are considerably more flexible than futures as a trading medium, generating trading profits, commissions, fees and collateralised banking business. The ability to run unallocated client accounts, whereby a client’s gold is taken onto a bank’s balance sheet, is in stable market conditions an extremely profitable activity, made more profitable by high operational gearing. The result is that paper forward positions are many multiples of the physical bullion available. The extent of this relationship between physical bullion and paper is not recorded, but judging by the daily turnover in London there is an enormous synthetic short physical position. For this reason a sharply rising price would be catastrophic and any drain on bullion supplies rapidly escalates the risk.

Overseeing this market is the Bank of England co-operating with other Western central banks and the Bank for International Settlements, whose combined interest obviously favours price stability. They have been quick to supply the market if needed, confirmed by freely-admitted leasing operations in the past, and by secretive supply into the market, which has been detected by independent supply and demand analysis over the last 15 years. Furthermore, as currency-issuing banks, central banks are unlikely to take kindly to market signals that suggest gold is a better store of value than their own paper money.

We can only speculate about day-to-day interventions by Western central banks in gold markets. In this regard it seems that the slide in prices on the 12th and 15th April was triggered by a very large seller of paper gold; if this market story and the amount mentioned are correct, it can only be central bank intervention, acting to deliberately drive prices lower. Given the market position, with Money Managers in the futures markets already short and highly vulnerable to a bear squeeze, the story seems credible. The objective would be to persuade holders of physical ETFs and allocated gold accounts to sell and supply the market, on the assumption that they would behave as investors convinced the bull market is over.

Conclusions

For the last 40 years gold bullion ownership has been migrating from West to elsewhere, mostly the Middle East and Asia, where it is more valued. The buyers are not investors, but hoarders less complacent about the future for paper currencies than the West’s banking and investment community. There was a shortage of physical metal in the major centres before the recent price fall, which has only become more acute, fully absorbing ETF and other liquidation, which is small in comparison to the demand created by lower prices. If the fall was engineered with the collusion of central banks it has backfired spectacularly.

The time when central banks will be unable to continue to manage bullion markets by intervention has probably been brought closer. They will face having to rescue the bullion banks from the crisis of rising gold and silver prices by other means, if only to maintain confidence in paper currencies. Any gold held by struggling eurozone nations, theoretically available to supply markets as a stop-gap, will not last long and may have been already sold.

This will likely develop into another financial crisis at the worst possible moment, when central banks are already being forced to flood markets with paper currency to keep interest rates down, banks solvent, and to finance governments’ day-to-day spending. Its importance is that it threatens more than any other of the various crises to destabilise confidence in government-backed currencies, bringing an early end to all attempts to manage the others systemic problems.

History might judge April 2013 as the month when through precipitate action in bullion markets Western central banks and the banking community finally began to lose control over all financial markets.

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LMAO's picture

The damn thing never breaks

Aeternus's picture

Alasdair MacLeod always writes the best articles in my opinion.

 

Just picked up some more Au and Ag yesterday at the LCS.

 

https://www.youtube.com/watch?v=fyklt01lN_I

DaveyJones's picture

Pride goeth before the fall - Herodotus

As Macleod points out so well, the more Western Ben and the Boyz try to control the market, the more it slips from their hands

Deo vindice's picture

If Herodotus is taking credit for that quote, he was a plagiarist.

The actual quote comes from king Solomon in the book of Proverbs and it says...

Pride goeth before destruction, and an haughty spirit before a fall. (Pro 16:18)

DaveyJones's picture

herodotus loved jazz (and was criticized for accuracy)

Thank God the Bible's factually accurate  

noless's picture

I was unaware that the Romans came before the Greeks...

Deo vindice's picture

I got a down vote for stating a verifiable fact. Wow!

(Now I know that just because folks read ZH it does not necessarily mean they love the truth.)  ;-)

akak's picture

Deo, I have gotten the same thing when pointing out the simple and abundantly documented FACT that, almost without exception, global icecaps and glaciers have been melting and retreating for the past century or more.  Somehow, this seems to threaten some posters' jealously-protected ideology or agenda, yet it is a fact as indisputable as the sky is blue.

El Oregonian's picture

Atmospheric collapse coupled with polar shift and solar activity pretty much controls whats happening with our climate. And believe me or not, the reality is it really isn't looking very good for us.

Oh well, prepare accordingly... Carry on.

grekko's picture

That is just dumb.  Climate change has been the constant throughout the history of this planet.  Oregonian, after reading your comment, I have to agree with a good friend who once said "Just look at the silly humans".

DaveyJones's picture

show me the ice core data shows a similar pattern in the last one hundred compared to the rest. Then we'll talk

It isn't the most bizzare scientific "theory" to suggest that if you take the densest form of energy ever compiled inside the earth over millions and millions of years, discover it, then burn half of it in an abstracted slave orgy over 100 years, something might happen to the "delicate balance of things"

No one should claim to have "all the answers" but summarily dismissing it is... the same behavior

and: just because scumbag politicians and bankers (same) are trying to scam off a "carbon tax" means little. That's what these people do, scam.

NidStyles's picture

Sure, densest pile of energy is true if you ignore Physics and the Laws of Thermodynamics.

MeelionDollerBogus's picture

Polar shift has had no effect on the weather. It is a mild directional change for incoming cosmic radiation, which isn’t causing heating, cooling or pollution on Earth. The radiation still not hitting us would cook us if it did hit us. It bends right around the Earth and the polar shift, which is slight, has not changed this. There flat out is no “atmospheric collapse”.

Deo vindice's picture

That is because some people cannot differentiate between a fact and the interpretation(s) of what that fact represents.

it shows a serious lack of comprehension and does nothing to contribute to healthy debate.

 

All Risk No Reward's picture

For anyone interested, I have some thoughts on the metals thrashings relative to the stock market that I haven't heard expressed in the MSM or the major alternate media.

I think a major contributor to the metals decline are as follows:

1. Everyone assumed straight to serious inflation was the "solution" and Cyprus showed that, when the looting goes dry for the dElites, they will not print, they will simply default on the loans made by citizens to banks (deposits are actually loans made to the bank).

2. Part of that defaulting process likely includes forcing nations to divest of their gold holdings.

Over the medium to longer term, this means less many chasing more gold relative to today.  That usually means the price will drop - and it has.

I'm a little baffled why the markets haven't followed suit, though.  Sucking the money out of the economy would shrink the economy and stock multiples.  Apparently, those two synapses haven't rubbed together for the "smartest people in the room" yet.

Either that or they are proping this pig up with mad tax payer money so society will really be broke when this pig stops flying.

Anyone who thought that the people who own trillions in cash, trillions more in debt and are lending 30 year money at 3.5% were going to hyperinflate the currency in short order need to reassess their thought process.

The government is not sovereign.  The international banking cartel is sovereign over the politicians and, therefore, over the nation state. 

Napoleon put it better than I could, so I'll share Napoleon's insight:

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
? Napoleon Bonaparte

A truly sovereign nation would tell the international banking cartel to kiss off.  They don't, so they aren't.  By definition. The mega bank Federal Reserve front is financing the police state and the military (you don't pay enough taxes for it!) and they surely aren't doing so unless they are very comfortable those entities will work on their behalf against everyone else.  DHS has "no more hesitation" targets of pregnant women and children, not banker style executives.

 

NidStyles's picture

Actually the problem is that you are assuming that governments and stat actors are rational. This is not the case, so your premises are off a bit.

All Risk No Reward's picture

Actually, I'm observing them to be very rational - just not at what they say they are doing.

A thief who tells you he's a stove repairman is not irrational when he makes excuses as to why he can't fix your stove, he just appears so until you figure out his real agenda.

By then it will be too late.

The international banking cartel is mopping up the Muppet filled chumptocracy in a route that is absolutely epic...  and that, my friend, is one of their goals.

If they weren't rational, you'd be able to come up with a plan to stop them.

But you can't.  They took the rational steps to render you, the citizen, completely powerless while the oligarchs rob you blind, in multiple ways, without ever getting charged.

Corzine steals billions, Congress passes a law that allows them to trade on insider Federal Reserve information, JP Morgan ran Madoff's Ponzi, Morgan also bribed Jefferson County officials to steal a billion (and they kept it after getting caught, too), the mega banks launder trillions in drug money (and nobody gets charges) and I could go on and on and on and on..

grekko's picture

Climate change is the one true constant throughout history.

DaveyJones's picture

like inflation, it's not the existence, it's the rate (and the timing)

Ps. we're supposed to be entering a cooling period.

NidStyles's picture

Herodotus came before the bible.

grekko's picture

Dang!  That clip was the first thing that came to my mind as I was reading along here.  Good call!

DaveyJones's picture

Unfair! Herodotus had humble parents 

Supernova Born's picture

"Hoarders"? Why use that word repeatedly throughout the article?

They are clearly better know as savers or investors.

Labels matter.

"Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin...within the continental United States".

bonin006's picture

Thanks, I was going to say the same thing.

Supernova Born's picture

I was not the first either in this thread.

"Hoarders": crazy cat ladies, POW camp quartermasters, hurricane profiteers, corpses found mummified amidst stacks of old newspapers and garbage.

What's not to love?

Kirk2NCC1701's picture

The answer is/should be obvious:  The monetary and fiscal battle is foremost a battle of minds & will, and must use propaganda in its arsenal of weapons. 

It is Propaganda-101 to swap out value-words with junk-words and weasel-words.  E.g. replace "Inflation-proof Savings" with "Hoarders".  Expect more junk-words and weasel words from the ultimate perpetrators of Fraud & Theft, the ultimate perpetrators of the Monetary Ponzi.  Because...

Obama is so illiterate, ignorant and malleable when it comes to understanding money, money supply, and money suppliers.  He's surrounded by ex-GS guys and is their total sock-puppet.  He lets them have free reign -- as long as he & Michelle get their social and environmental issues implemented.  Obviously these social "progressives" are equally ignorant of monetary issues, policies and games by TPTB.

Like a journey of a thousand miles, we must move forward one step at a time, by first educating the ignorant, malleable and shearable masses of sheep-like people.  There can be no monetary Freedom, until the monetary Truth rings throughout the fiat-indebted Land.

charliehbryan's picture

I am a social progressive who minored in Econ (majored in History and English). I consider myself very well informed on matters economic and monetary. First of all, Obama is hardly 'progressive.' He is a true-blue centrist, cut from the same cloth as Clinton and, to a lesser extent, Carter. (A progressive like Liz Warren or Bernie Sanders would push to nationalize the TBTF banks, as only one example.)

And exactly what 'monetary Truth' do you hope to hear ring out? One can only imagine . . .

abettertomorrow's picture

"Obama is so illiterate, ignorant and malleable when it comes  to understanding money, money supply, and money suppliers. He's surrounded by ex-GS guys and is their total sock-puppet."

 

Yeah, the Goldmanchurian candidate

grekko's picture

That 1000 mile journey, one step at a time is going to take way too long.  It'll crash and burn long before you get 1/4 the way there.

Manthong's picture

"Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin"

..and in December they repealed Prohibition.

Coincidence, of course.

grekko's picture

Boy, I'm sure glad that I can't afford much gold.  My stash is in silver.  They haven't got around to confiscating that.

WhiteNight123129's picture

Here is an article explaining how the US buying Silver in 1933 bankrupted the Chinese banks. Now it looks like we have the opposite! Tables have turned.

http://gentlemaneconomics.wordpress.com/2013/04/28/how-the-silver-buying...

 

WhiteNight123129's picture

There is nothing wrong with hoarding. And neither Gold nor silver are an investment, which does not mean that you should not own it, or that there are no good reasons for owning it.

 

Manthong's picture

"Bullion banks’ position details are disclosed at the beginning of every month "

..in the same manner LIBOR is disclosed?

MeelionDollerBogus's picture

OK, now who was born first? Herodotus or Solomon? The entire bible is a work of fiction and plagiarism.

DosZap's picture

Pride goeth before the fall - Herodotus

-GOD, there fixed it for ya.

Cacete de Ouro's picture

No one has to my knowledge posed the possibility that the futures price of gold was taken down delibrately so as to fuel physical demand, so as to accelerate the upward slingshot in the gold price, so as to dislocate the behind the scenes gold-to-oil trading deals with the Saudis so as to destabilize Saudi Arabia and then invade the Saudi peninsula and take the oil and all the huge gold reserves they've been given for the last 30 years....

Hacked Economy's picture

This is a bit off-topic, but I was working in my yard this morning (Sat) and felt the need to post my thoughts:

Last week, when the initial rumors began about the Boston PD going around in SWAT-style teams through their residential neighborhoods, kicking in doors and pulling people out of their homes at gunpoint as they searched for the 19-year-old remaining terrorist...I requested links from those people so I could see for myself.

Well, I was provided a couple of links and viewed the videos.  Then I saw more videos (i.e., YouTube) posted soon afterward by private individuals who filmed through their own living room windows as the BPD "rescued" their neighbors by ordering them out of their homes with their hands clasped on their heads, and then FRISKING them (including elderly women and kids) as if that had anything at all to do with finding the terrorist.  Finally, a local Boston news team posted their segment in which they interviewed several of the families who were removed and frisked at gunpoint.  All of them(!) said they were scared, but they were okay because the police later verbally apologized for the inconvenience as they gave the "all clear" to go back into their home one by one.  Those stupid Boston sheeple said they were okay with the procedure, given the fact that a criminal was believed to be in their neighborhood.

I was appalled upon learning the truth, as all of you were.  But here's my point:

Yesterday, in just so happened that the Boston bombing came up in several conversations with some of my co-workers as well as some friends with whom we went out to dinner last night.  Each time someone brought it up, I mentioned the video evidence of the BPD blatantly trampling their neighbors' 4th Amendment rights for the whole world to see (and without an uproar from those people), and EVERY ONE OF MY FRIENDS - even the pro-2nd Amendment conservative ones - said they understood the BPD's position, and they wouldn't have a problem with SWAT going through their own homes in a "rare" situation of looking for a terrorist.  After all, they said, would you rather argue with a team of professionals aiming guns at you, while the terrorist gets away?

I felt sick by the end of the evening.  Maybe TPTB don't need to assault our Constitutional rights.  We seem to be giving them up on our own.  "Those that surrender liberty to obtain a little security, deserve neither".

DaveyJones's picture

was thinking about similar stuff. In a "constitutional" world, the entry is one (arguable) thing, the frisk is another. But we no longer live there. As many have said, they are preparing us for the new rules 

if you think about it, these acts are much more effective than a 911 every decade. More sinister too. Much easier to pull off, less gravity, chemistry and NORAD to deal with. Very believable - angry kids, hell that's expected. In fact, many folks I talk to think these kind of things will happen more often as things degrade. Its the pefect front. It can take a lot of forms and scales with much more frequency. As demonstrated by the debates last week, the "simplicity" makes it harder to consider an inside job.  Each time, a little pull back on the rules. Each time, a little more fear, a little more national control, a little more economic sacrifice - for the kids

Pharming's picture

My God...what is it going to take for the masses to awaken.

debtandtaxes's picture

But they aren't asleep! The comment demonstrates the masses *know* the homes were illegally entered and bodies illegally searched. They are not asleep and unaware of these acts.

They are in denial of the meaning of those acts. Because admitting the significance of those acts will destroy their worldview.

They are truly slaves.

grekko's picture

You cannot reach most people.  Their ability to perform critical thinking does not exist.  Thank the public school system for that.  I went to public school, but have always been a radical who never believed in the system, so I guess I was one of the lucky ones.  As for reaching those who couldn't think for themselves, when the big reset comes, they'll panic, and it'll be up to us to guide them to sanity.  They'll listen then. 

People, when that time comes, it'll be up to us to help those who are so dumbed down they'll be a danger to all those around them.  Don't give up on them.  There are a lot more of us than you think.  I believe our numbers are more than double.  Many are preparing and just not telling anyone so the diots of the world won't call them crazy.

Socratic Dog's picture

If that's what you think, then you aren't the analytical thinker you think you are.  There's too damn many people for a world without the ready flow of petrochemicals.  It's that simple.  It equates to mass starvation.  Are you ready to share your stash with 100 others, who had the same information opportunity but chose to ignore it?

MeelionDollerBogus's picture

They won’t. They ate hopium by the ton and they will not start breathing again. They’re done like dinner. Get the fork.

SubjectivObject's picture

We need to propagate a new meme:  Let all the terrorists get away before the power of the state is increased one iota.  Terrorist effects are "localized", and as such limited, while state power is pan-pervasive, and effectively unlimited. There is NO reason to give such power to wouldbe (hell, wannabe) state terrorists.

Feeling lucky .... punk?

ParkAveFlasher's picture

Statistically speaking, you are at a far greater risk of being killed by a police officer than by terrorist, in the USA.

grekko's picture

When the paper PMs crash and burn, the entire system will follow.  Do you really believe that the local SWAT team is going to kick in your door then?  They'll all be home trying to protect their families and just find something to eat.  Same with the military.  If the citizenry is smart, they will band together with their neighbors and help each other.  This includes keeping the unwanted out of the neighborhood.  Just accumulate PMs, extra food and water, and don't forget lead, the other PM, then sit back and bide your time.

MeelionDollerBogus's picture

Like Katrina? No, they will go house to house to take anything of value and shoot everyone who disobeys, burning the bodies as they go.

outofideas's picture

Turns the Bill pf Rights is not actually perfect. 4A actually says " against unreasonable searches and seizures". That "unreasonable" is a very big word, and I think a hell of a lot of people would think what the police did was a reasonable search.

Personally, I don't like what happened, but if I was sitting my house with a terrorist in my house holding knife to my wife's throat, I'm pretty sure I would think would think it my neighbor unreasonable if he had a mini-standoff with police over the meaning of the 4A.