Spring Madness

I want to know why anyone especially the market was shocked by lasts weeks move to monetize 300 Billion dollars of U.S. debt?

It’s not as if many people like me aren’t screaming “The End is Nigh” and yet the market and people in general seem ignorant of the simple reality that new money to cover these massive stimulus and bailout packages must be either borrowed or created from nothing. They also seem oblivious to the idea that there is not an endless market for U.S debt ignoring the warnings of people like ex Comptroller General David Walker who spend his entire term of office pointlessly trying to convince a nation it was broke.

Last weeks announcement should not have been a surprise to anyone and more importantly neither should the next wave or forty waves of monetized debt that is destined to hit the market. This trend will come not only from the Fed but most of the worlds major central banks who can neither find enough suckers for their debt issues nor want to have their currency appreciate out or a normal trading range with their biggest customers.

This a wake up call for the many people who did not believe this moment would actually arise; you have been given fair warning that monetization, currency devaluation and inflation, instead of austerity are the chosen course for western nations. Now is the time to take any money you don’t want destroyed and place it in gold, silver, food, productive land, or some other real tangible asset. This is the very scenario that brought me to asset based investing several years ago and with this confirmation being so open and so blatant we can only expect that further moves to monetize debt will be fast and furious. You’ve been warned, Act!

Other stuff

In the too stupid to believe category the FDIC saw fit to criticize a Massachusetts bank that has managed to get through the recent credit crisis with no bad loans.

The bank, East Bridgewater Savings Bank was chastised for neither "lending enough" nor "promoting its loan products" enough.

Great time line, East Bridgewater savings gets shit upon on Tuesday, and then on Friday afternoon 5 financial institutions, 3 Banks and 2 Credit Unions fail, (FDIC numbers do not include credit unions) The people who run this small but sound bank should be held up as examples of good management not badgered for refusing to take unmanaged risk.

When I wrote The Great 2009 Bank die off on Feb 16 I noted 13 failures so far this year.
Since that time, a scant 5 weeks the tally has grown from 13 to 20 failed banks, and it’s only March people! We could easily hit the 80 failures I surmised earlier in the year


There is also some definite clumping of these bank failures, 3 Georgia, 3 Illinois, 3 California, 2 Florida and 2 Oregon, 10 of 20 failures in 5 states, with all but Georgia being in the top 10 foreclosure states.

Spring time warning.

I don’t care how secure you are with your little pile of gold and silver or that sweet job with benefits but you have to face the reality that very soon the shit is going to hit the fan at a velocity just short of warp 9. Be it civil unrest, dollar destruction, 30 % unemployment or simply the bankruptcy of major shipping or food processing companies, there are going to be major disruptions in the status quo. Take a little money a little time and put aside a little extra food and necessities. If you have the land and physical ability plant yourself a garden this spring and buy a book and the equipment for canning. While Silver and Gold are financial insurance, you can’t eat them and you can’t medicate your sick kids with them, so you should look to other aspects of your personal emergency plans.

New Silver Bugs and other stuff.

It would seem that the fear generated by all the failures, bailouts, evictions and graft is a great motivator in driving people to finally purchase silver. I’ve blogged for several years about supply deficits, historical ratios, the destruction of fiat money, inflation and general financial chaos but at no time have I seen so many people jump on board in such a short period of time as I have seen recently.

In the last two weeks I’ve had three acquaintances and one reader make their first silver purchase. I’ve also had several personal inquires asking for more information (apparently some work place sleuth has connected the real me to the web me). I’m glad to see this trend because in all honesty I’m all tapped out and can’t see myself accumulation very much more in the near future unless I suddenly become the best and most famous blogger in cyberdom and the ad revenue begins to reflects this. (Not bloody likely)
I’d really like to see this market pop sooner than later so I can turn my silver into land and finding others to absorb supply and spread the legitimacy of silver investments was the key reason to start this blog in the first place and I’m glad to see the recent growth.

Something I’ve told my friends who have bought silver recently is something like this. Even if you only bought a meagre 10 ounces you’ve now become a very rich person. World production sits at about 670 million ounces a year and world population is just over 6.7 billion, or 1/10 of an ounce per person per year. Your purchase represents 100x your share of the worlds silver money created this year. Estimates of the total world silver stockpile ranges from 1 to 10 billion ounces once again proving you have more than you share of the world’s real money. Silver is real money, silver is rare, silver is industrially vital and you have it.. In the famous worlds of Daffy Duck "I'm a Happy Miser"



I don’t have a lot to say these days as other concerns are keeping me busy but it looks like we might have a couple of weeks of correction, at least that’s what a couple of chart fetishers tell me. They say we are well overbought and that a correction and consolidation need to take place for further gains, they also tell me as long as it’s not too deep or prolonged this is a dip we should be looking to buy on. Me I’m no longer sure the chart can predict everything, sure some guys trade the chart exclusively but panic and the small size of the metals market could lead to a nasty surprise. I’m holding my HBP gold bull ETF and may even add a bit (a very small bit) gold correct below $900, as for the actually metal “From My Cold Dead Hands” or a 20 fold increase in price. As for silver, unless I trip over some rounds or junk silver on a good day when I have cash I can’t see me buying much this year.

For locals, Scotia Bank does have maples in stock, but I’m not sure what else. When you can find product right now there is little variety in manufacture or size, simply buy what you can find. First Majestic direct sales must be getting its act and supplies chain in order as the limits on some products have been increasing.

As I understand it, small gold is similarly scarce in the GTA.


Continued bloodshed is taking place in the markets with yet another bank, the Silver Falls Bank of Silverton, Oregon, failing last Friday and no doubt another or eight will be thrown on the bon fire tonight when the FDIC Ninjas descend.

The Big three story is getting just too stupid; there is too much supply, too much debt, and too few good products and much like the movie Highlander “There can be only one”, or at the very least one must be left to die so the others have a better chance.

Chrysler is private so let the fund that bought them bail them out, GM is hemorrhaging like an Ebola victim leaving Ford. As the only company not asking for money at this point Ford should be the victor. Their cars have got a lot better and if they started making or importing their European models for N.A. they could easily compete with the Japanese.

AIG, shudder I can’t even go there, what a mess

If that was not bad enough the IMF believes up to 16 countries face bankruptcy and has no funds to deal with the problem.

Lastly I’d like to remind you that financial troubles are not the only things that are endangering our way of life and invite you to peruse my post on the phenomena of Peak Oil Doomers

The Great 2009 Bank Die Off

I had to go back and check the date of my last post because I could not believe that the total bank failures for the year had jumped from 9 to 13 in a single week. This is quite an acceleration of the existing trend and definitely supports the view the U.S. is going to face a major bank die off this year.

The new banks failures reported on the FDIC site are the

Pinnacle Bank of Oregon, Beaverton, Oregon, with approximately $73.0 million in assets was closed. Washington Trust Bank, Spokane, Washington has agreed to assume all deposits (approximately $64.0 million).

Corn Belt Bank and Trust Company, Pittsfield, Illinois, with approximately $271.8 million in assets and approximately $234.4 million in deposits, was closed. The Carlinville National Bank, Carlinville, Illinois has agreed to assume all non-brokered deposits.

Riverside Bank of the Gulf Coast, Cape Coral, Florida, with approximately $539.0 million in assets and approximately $424.0 million in deposits, was closed. TIB Bank, Naples, Florida has agreed to assume all non-brokered deposits.

Sherman County Bank, Loup City, Nebraska, with approximately $129.8 million in assets was closed. Heritage Bank, Wood River, Nebraska has agreed to assume all deposits (approximately $85.1 million).

These new failures are expected cost the FDIC upwards of $330 million bringing the yearly total to about 1.5 billion, and its still February! How's that for a burn rate?

You have to remember that all the bail out money floating around has been going to the big banks that sold all the toxic products in the first place. While these little guys may have made some stupid mortgages to people they did not create the sea of derivatives that are bound to destroy the whole system, nor were they the ones advising their clients to buy the same products they were shorting. The system is corrupt and will let scores if not hundreds of these little banks fail.

How much more proof do we need to realize they don't give a crap about the little guys neither the small banks nor the public in general? This is all about saving the companies that politicians hope to work for some day, companies that politicians expect to get donations from or those companies already owed favours for past donations.

Most importantly these bailouts are designed to further the agenda of consolidating financial power to the detriment of the masses. These bailouts are corporate welfare of the worst kind because they are not even doing it fairly. The bigger, the guiltier and the more incestuous your relation to political power the more likely they will save your corporate ass.

"and the Guilty will inherit the Earth"

Dominos are falling

I just noticed that the several banks when under last Friday and I decided to go to the FDIC home page and get a total count for the year. While I was there I decided to look at other years failures to point out the trend and this is what I found

2007 1 lone failure
2008 24 failures
2009 9 already and its only Feb 9th



If this trend continues at only the average of 4.5 every month we could be heading for over twice last years failures, however if we go with the higher number of 1.5 banks a week so far this year we are looking at 78 failed banks.

From the existing 9 bank failures there is total cost to the FDIC of somewhere just over $1.2 Billion or $133 Million for each bank. Multiply that by 78 expected bank failures and the total losses for the FDIC would be about $10 billion which is actually not that high considering one of last years biggies like Indy Mac was estimated to cost the FDIC from between $4-8 billion alone.

Of course our 9 bank sample for this year is small and so far and does not reflect the presence of some of the larger banks that failed last year. My estimate for last year puts total cost to the FDIC at over 6.5 billion or 271 million per bank which extrapolated forward to our 78 bank target this year could put us at about $21 Billion.

NOTE, Last years numbers from the FDIC reports do not give an estimate FDIC cost for the WaMu failure, so real numbers could even be higher


So my quick and amateurish look at the FDIC liabilities for this year could range anywhere from about $10 billion to over $20 Billion.

I guess compared to TARP and the stimulus packages its pretty insignificant but it does show that FDIC will probably need a bailout next year if not later this year.


Just something else to consider.

Very few things are going right!

One of the few high points in the last couple of weeks is the strength in metals and especially Silvers out performance of gold. I’m also happy to see a great bit of volatility in the silver Nymex stocks as well as what appears to a constant draw down. I think it’s going to take a few months to see if how supply/demand destruction is going to play out for the year but with recent deposits not keeping up with deliveries I think it’s looking good for silver holders and certainly offer incentives to make that one last big purchase while you can to both secure your own future but to crush the Nymex.

I did finally receive my First Majestic silver rounds and I was pleased with the rounds themselves and the packaging and shipping. Of course my pleasure was tempered by the difficulty I had with my first lost order and the subsequent snooty response when I wrote asking for confirmation immediately after placing the second order. The business rounds and the various small bars have sold out and been restocked several times now so it looks like they are getting their act in gear and moving a fair bit of bullion. I’d really like to know how much they’ve delivered.


The only smart thing I’ve seen recently is a program by Freddie Mac that will allow foreclosed home owners and existing renters in foreclosed properties to stay in their homes and rent. While I’ve not seen full details the plans numbers seem awfully low which would indicate that they either have far too stringent criteria for remaining in the houses or a far too optimistic estimate of how many houses will be in default this year, I suspect both!

I certainly home other lenders make similar plans to keep people in houses. I’ve been harping on this issue for 2 year at least and it makes sense to keep people in their houses for a number of reasons. It stops communities from becoming dysfunctional ghost towns, it keeps people off the street or from living in their cars, it is good for the banks to generate some cash flow rather than sit on an empty house for who knows how long, and finally it allows the house to retain more value than if it was left empty, unmaintained and potentially squatted in or vandalized.

Unemployment contiunes to excellerate in the U.S. while Canada took a sharp kick to the groin with 126,000 job loses in January, taking the market by surprise. So much for the claims of strong fundamentals and no threat to Canada. It's obvious we cant trust these shitheads who lead our country. Tweedledum 1 and Tweedledumer 2

There are a couple of must read articles from last week I would ask you to glance at that deal with the coming crisis rather than just reporting the current symptoms, Ambrose Evans-Prichard’s piece WILL CHINA LEAD THE WORLD INTO DEPRESSION Is quite an eye opener as was a SPIEGEL ONLINE article Can countries really go bankrupt


It seems pretty obvious to me that nearly every major country will be floating a stimulus package or 8 in the next year and with the exception of China they will need to do it on credit. China will be hoarding their reserves to either maintain their own stimulus plans or to buy up bargain basement resource assets. They will not have the desire, ability, nor the suicidal tendency to buy up all the western debt that will soon be offered on the market. The Gulf states income is down on soft oil prices and they've already been abused on their banking investments, so it's doubtful they will come riding to the rescue this time either.

Also, look at those yields! Why the hell would anybody buy debt at today’s interest rates? The U.S. having such low rates will have stiff competition from the Europeans, Canada, Australia, and a host of corporate paper that is offer extremely attractive yields in comparison. Also at such low yields you may as well buy metals since gov bonds will give you next to nothing and be backed by nothing. Metals offer no yield but are real and undilutable , I know which I would buy.

If Government debt cannot be sold the central banks will just deposit T-bills and issue money as pure monetized debt. This is scenario we’ve been dreading for years but knew would ultimately happen, straightforward devaluation of most major currencies and inflation. I think these bond offerings and their failure to be fully subscribed will be one of the most important issue this year. Watch the MSM ignore it totally!!!!!!

Can the U.S. dollar collapse? Some seem to think so .

As does Willem Buiter,

Marc Faber is also in the collapse camp as is Peter Schiff who in defending himself from recent criticisms reiterates his position that a USD index of 40 is likely which would be a 50% hair cut for the dollar


The important question is, how do you measure the value of your currency if all your major trading partners are following the same dangerous path of monetization and devaluation?

The Zimbabwe dollar looks like a piece of crap these days but if you compared it to the Hungarian pengő of 1946 you’d consider yourself lucky to be holding it. If all currencies monetize debt and print money the only firm measure of value has to be something you cannot forge or create more of at reckless rates such as gold, silver , less liquid assets like land, art, machines, or very hard to store assets like tons of grain or a million barrels of oil.

There is a lot of shit coming down the pipe these days and despite our financial preparations we cannot know exactly how things will unfurl or whether they will spurn civil unrest, revolution or wars.

When it comes down to it the things that are most important are shelter, food and personal safety of you and your family and in case you wish to broaden your horizons to another issue that may leave you hurting, have a look here
and if that tweaks your interest, there is also my take on personal food security.

I know I've been slow posting of late I seem to be having a crisis of faith. Its not that I don't believe what I'm saying but I am starting to believe that most people are not worthy of the warning or it's simply too late to save them. The Crisis is no longer off in the distance but right at our feet. I don't know exactly when the financial crisis,the food crisis or the energy crisis crests over us washing away the status quo but the time to warn and prepare people is surely fading.

I thank you for staying tuned and I hope you will make one last attempt to convince those around you to prepare, even if its just getting them to buy a little extra food for an "emergency". You don't need to frame it like the end of the world, rather simply remind them that Governments and FEMA suggest you do these things and considering what a crappy job FEMA does you should really take responsibility for your own security, food and otherwise.