SILVER BEARS: You Have Been Warned

Micheal Caine Silver Bears

What does a 1978 movie about “Silver Bears” have to do with the silver market today?  A great deal as you will find out.  Nothing today is as it seems anymore.  The present financial and economic system is so weak, it only survives by the wholesale packaging of lies.

The market has been so cleverly indoctrinated by these lies, it can no longer discern from right or wrong.  The truth or fundamentals have no place in a corrupt financial system that is so rigged, because if it did… there will be very little standing after the smoke cleared.

There is a huge disconnect today on the subject of real wealth.  Investors mistake the paper assets they have acquired and the digits in their accounts as real wealth.  Unfortunately, these supposed assets are mostly derivatives that derive their value from an underlying asset.  And these underlying assets are not really assets per say, but rather liabilities.

So, what we really have today is a market that is nothing more than layers upon layers of derivatives that obtain their value from a huge pile of liabilities masquerading as assets.  It is by far, the biggest Ponzi scheme in the history of mankind.

The funny thing is, no one seems to notice and no one seems to care.  So the charade continues as I wake up everyday to read the same mundane, boring, outdated and totally useless analysis from individuals who no longer are able to see the forest for the trees.  The real art and science of analyzing has died and along with it the ability to properly forecast the future and to assist investors for what is to come.

The 1978 Silver Bears

Silver Bears Best Pic2

In 1978 an interesting movie was released called the “Silver Bears.”  It starred Michael Caine as a financial wizard called “Doc” Fletcher who persuades his mobster boss to buy a small Swiss bank to help launder their ill-gotten gains.   Once they purchased the bank, they realize that it was nothing more than a small shabby office above a pizza restaurant with assets of only $900.

An impoverished Italian Prince who put the lousy deal together and acts as the chairman of the board at the bank makes up for this by suggesting that they invest in a silver mine located in Iran, owned by his distant cousins.  The mine contained hundreds of millions of dollars worth of untapped silver.  Doc (Michael Caine) is able to obtain $5 million from one of the cousins as a security for a larger $20 million loan so he can acquire much more lavish and professional banking premises that will attract wealthier clients.

Soon, silver from the Iranian mine is flooding the market which leads to a drop in its value on the London Metal Exchange.  A leading figure in the silver market and one of the richest men in the world, played by Charles Gray, believes the only way to stop the plunge in the metal is to buy the bank responsible for the mine.. and promptly shut it down.

The plot thickens including an affair and other tidbits, but the important outcome is what takes place concerning the mine.  Doc takes a trip with the Italian Prince (bank chairman) to meet his cousins, (owners of the mine) in Dubai where the silver is being stored in a warehouse.  Once they get to the warehouse they see that it is full to the brim with silver bars.

Silver Bears Best Pic

Doc wants the cousins to buy the bank (details why are found in the link below), but when they tell them that they can’t he threatens to call in the earlier $20 million loan and seize the mine.  It’s at this point the cousins drop the bombshell…. there is no mine.  The cousins are nothing more than smugglers who have obtained all their silver from India.   Basically, they used the silver mine as a cover for their smuggling operations.

The movie continues and you can read all about the details at the link below.

Silver Bears Movie Full Plot Summary

The reason why I bring up this movie is due to the amazing parallel for what is taking place today.  Coincidentally, the movie was a joint British and American produced comedy-thriller released at the very same time the price of silver moved from a high of $6.31 in 1978 to $34.45 in 1979.

In addition, silver supply was in a severe deficit during the 1970’s decade.

According to the Silver Institute:

Fabricating demand rose sharply in the early 1970s, from 414.4 million ounces in 1971 to 545.0 million ounces in 1973.  Demand fell to 497.9 million ounces in 1974 and 437.9 million ounces in 1975. Use rebounded the next year, to 511.0 million ounces, before stabilizing between 488.6 million ounces and 491.3 million ounces in 1977 and 1978.

Total new silver supplies fell far short of meeting these requirements. From 1971 through 1978 there was a cumulative deficit of new supply over demand of 415.8 million ounces. The silver that filled this gap came from the 620.5 million ounces of silver inventories – many held by investors – built up during the previous seven years. By becoming net sellers of silver, investors replaced the U.S. Treasury as the source of silver to make up for a major, ongoing shortage of silver.

Another interesting fact about the 1978 Silver Bears movie, is the author who wrote the original novel.  It was written by American born Paul Erdman, who received his PhD in Basel, Switzerland and later became an economist in the states.

He then returned to Switzerland and became the founder and president of a Swiss bank that later collapsed due to huge losses speculating in the cocoa market.  Erdman and other board members were convicted of fraud and spent time in a Swiss jail.  This is when Erdman starting writing novels.  His novel the “Silver Bears” was written in 1974, but wasn’t made into a movie until 1978.

What is very fascinating about the historic value of this movie, is the parallel of the wealthy silver investor in the movie to that of none other than Bunker Hunt, one of the richest men in the world at the time who was supposedly trying to corner the silver market.  Actually Bunker’s intentions were not to corner the silver market, but rather to protect his Libyan oil profits from the ravishes of inflation by hedging with paper and physical silver.

I find it very ironic that the 1978 Silver Bears movie depicting a wealthy silver investor who was trying to KEEP THE VALUE OF SILVER FROM FALLING, due to this supposed huge inflow of silver from a fictitious mine.  Of course, it was a British & American joint production right at the very time the price of gold and silver was skyrocketing and threatening the safe-haven status of the U.S. Dollar.

As described above, there was a severe silver deficit taking place in the market at this time.  While it may just seem like a mere coincidence that a movie making a parody of about SILVER BEARS was released at the exact same time real events were getting very serious in the silver market, it certainly parallels nicely with the theatrics taking place today.

Modern Silver Bears Same Tactics Different Results

Modern Silver Bears

In the 1978 Silver Bears movie, the result was a dumping of a supposed silver supply from an Iranian mine that depressed the price, whereas today we have the dumping of naked short paper contracts on the market with the same intent — to smash the price of silver.

The two leading roles in the MODERN SILVER BEARS EPIC are a bank, JP MorganChase and an analyst who runs the CPM Group, Jeff Christian.  There are additional smaller players, but these are the two most well-known sources which everyone in the precious metal community are familiar.

JP Morgan is well known for its manipulation of the silver market via the excellent work done by Ted Butler.  By the way, I started investing in silver bullion back in 2002 due to reading Ted Butler’s analysis of the silver market.  Anyhow, Butler’s critique on JP Morgan silver manipulation can be summarized by passages from the following article:

Ted Butler: JP Morgan’s Silver Manipulation Cannot Last Forever:

In COMEX silver, JPMorgan has behaved differently. Instead of selling short silver at declining prices, as it did in the London Whale case, JPMorgan has only sold short additional quantities of silver on increasing prices. After these additional short sales have satiated all new buying interest, JPMorgan then causes prices to decline (through the manipulative device of HFT) and buys back its short sales at lower prices and great profit.

JPMorgan’s real crime resides in its ability to sell unlimited quantities of COMEX silver contracts short on the way up in price to the point of creating unprecedented levels of market share and concentration. In December 2009, JPMorgan held more than 40% of the entire short side of COMEX silver and close to that market share on other occasions. To my knowledge, there has never been a greater market share or corner in any major market in history. These unlimited short sales by JPM inevitably satisfy technical buying interest and then that technical buying turns to selling at some point, with JPMorgan then working to induce the tech funds into selling. The buying back by JPMorgan is the illegal ringing of the cash register and closing out of the manipulative silver short positions sold at higher prices.

If you have followed the JP Morgan manipulation story for years, you will realize that it is part and parcel of the overall market rigging by the Fed and member banks of the entire financial system.  Once the official authorities go down the path of market manipulation, they cannot stop or the system collapses.

Another important aspect of market rigging is the control of precious metal market sentiment.  This has been done by the banks themselves as well as a leading analyst in the metal community.  Jeff Christian who runs the CPM Group has been very outspoken against the notion of silver manipulation and has even tried to slander one of the very individuals who has been producing actual data and evidence to uncover it.

At the Silver Summit in October this year, Christian ended his presentation by releasing what he thought was damaging personal information that would discredit this “Silver Whistleblower” who is known as Andrew Maguire.  Not only did Christian share this with the audience, word spread to various financial and precious metal websites.

A few days later, Maguire responded to the false allegations by providing the following information via the TFmetalsReport:

Last week, an attempted attack on me was made based upon unreliable and misinformation. The most important question to ask from it is why? This is extremely easy to answer. I am exposing the imminent default of the LBMA unallocated bullion banking system. Ever since JC of CPM Group made the mistake of admitting that a 100/1 leverage was routinely employed by the LBMA Bullion banks, it would appear his credibility with regard to his industry peers, was brought into question by exposing a default vulnerability of the entire LMBA unallocated Bullion banking system. My work in telegraphing and publicising this information has put him on the defence to try put negative spin on my highly successful trading career.

It mystifies me as to why my 35+ years of trading and banking history is of such importance when I am recognised by my peers as an international and respected trade and investment advisor providing over 20 years of service to institutions and accredited investors.

FULL ARTICLE HERE

Maguire goes on to further provide personal information and data that totally destroys Christian’s allegations.  You see this is a typical tactic of the SILVER BEAR crowd as they try to go after the messenger instead of debating the message.

Silver Warehouse Stocks the Strange Disconnect

Another peculiar aspect of this modern Silver Bears story has to with the movement of silver warehouse stocks at the COMEX and Shanghai Futures Exchange.  Since the beginning of 2013, the COMEX has added approximately 22 million ounces of silver to its warehouse stocks shown in the chart below:

COMEX Silver Warehouse Stocks 2013

The overall gains at the COMEX in 2013 have been in the Eligible (customer) category as its inventory has grown from 107 million ounce in January to 125 million oz presently (18 mil oz), while the Registered (dealer) stocks have only added an additional 4 million oz in the same time period.

However, the Chinese Shanghai Silver Stocks have fallen precipitously while the COMEX added silver to their warehouses.  As we can see from the chart below, the Shanghai Silver Stocks have declined a whopping 65% since April 12th (silver take-down):

Shanghai Silver Stocks 2013

The Shanghai Future Exchange held 1,120 metric tons (mt) of silver in its warehouses on April 12th, but as the price of silver declined to a low in the $18 range at the end of June, the stocks declined 45% to reach 614 mt in the beginning of July.

At its last update, the Shanghai silver stocks have hit all-time new low of 391 mt.  It is very interesting that as the price of silver was smashed during the April-June raid, the Shanghai Exchange has lost nearly 730 metric tons of silver while the COMEX has seen a 5 million oz build.

Moreover, JP Morgan who is the banking institution that represents the overwhelming force in the manipulation of silver, holds less than 9 million ounces of silver in its Registered stocks while the remaining 30 million oz is in the hands of its clients (Eligible category).

As the situation in the silver market rigging scheme becomes more dire, the players have to resort to more devious tactics to keep the game going.  Jeff Christian’s attempt at discrediting Andrew Maquire (silver whistleblower) is only one method in his bag of tricks.

Christian also uses his company, the CPM Group to put out bearish forecasts for the price of silver.  According to CPM Group’s most recent forecast:

Silver To Consolidate Until 2016 and Move up to New Highs By the Latter Half of  The Next 10 Years:

After rising at a compounded annual average rate of 23.2% between 2002 and 2011, silver prices have declined since 2011. In 2012, prices fell 11.7% to average $31.17 an ounce. Through September, prices this year averaged 20% less than in the same period of 2012.

This declining trend is expected to persist in the medium term, with prices consolidating through 2016, CPM Group said in the study.

“After a couple of years of price consolidation, we do expect investors to come back into the market with renewed interest,” she said. “That is influenced in part by an (expected) acceleration of economic growth in the last half of the next 10 years. We do expect the economy to grow at a little bit quicker of a pace…and that will boost industrial demand, which will be positive for silver.”

Basically, CPM Group is betting that prices will recover at the latter half of their 10 year study due to “Accelerated economic growth” which will boost industrial demand.  While they touch on investment demand to appear politically correct, the CPM Group never discusses the BRONTOSAURUS IN THE LIVING ROOM… and that is the ongoing collapse of the world’s fiat monetary system.

To the CPM Group, everything is about providing analysis as it has been done for decades.  And that is the regurgitation of the typical supply and demand forces.  Unfortunately, for the CPM Group and the countless other bank and brokerage houses’ (over-priced) long-term forecasts, their days are numbered.

Silver Bears You Have Been Warned

The manipulation of the precious metal markets by the paper monetary authorities of the Fed & member banks will come to an end by a power much greater than thee.  Of course, the public has the ability to take away the market rigging capability of these monetary institutions, however Americans have no idea of what is going on.  Except for a small percentage of the educated gold and silver investors, the American public is sleep-walking off a cliff.

So what force is going to give the monetary authorities a RUN FOR THEIR MONEY… so to speak.  This force can be shown in the simple chart presented below:

U.S. Oil Production 3 Peaks

This chart shows the past and projected oil production by the United States.  The chart is measured by exajoules but can be easily converted to a million barrels a day of oil by dividing the numbers in half.  The United States first peaked in 1970 at about 10 million barrels a day, then had a second peak due to Alaska’s Prudhoe Bay and the Gulf of Mexico coming online.

Once these two additional sources peaked at the end of the 1980’s, U.S. oil production continued to decline until the wonders of shale oil came in the picture in 2007-8 time period.

This chart was done back in 2012, and has under-estimated the production coming from the shale oil fields of the Bakken and Eagle Ford.  Currently total U.S. crude & condensate production is running at about 7.8 million barrels a day (mbd).  Furthermore, production from these shale fields may (depending on the financial system) continue to increase pushing total U.S. production even higher in the next few years.

However, after that…. THERE’S NOTHING LEFT but a huge ride down.  And when I mean a ride down, it will be like a roller coaster.  As I have mentioned before, the FIAT-MONETARY-US TREASURY-PAPER-PONZI SCHEME gets its power from a rising energy supply.  It is this energy supply that has been able to allow them to kick the can down the road.

Not only will the United States peak in oil production, but so will the rest of the world.  The U.S. was able to allow its LEECH & SPEND SUBURBAN ECONOMY to prosper for several more decades because it exchanged worthless paper for oil-energy that it needed.  This cozy arrangement is coming to an end when the rest of the world realizes that it will need to acquire REAL THINGS for exchange for their goods and services to survive in a peak oil environment.

I had a great conversation with one of the best energy analysts, Bill Powers who wrote the book on the coming “Bursting of the Shale Gas Bubble.”  Bill believes natural gas production in the U.S. will decline shortly and many of the shale gas players will probably go bankrupt because their balance sheets are loaded with debt.

You wouldn’t know this was taking place by the skyrocketing rise in many of these energy companies’ share prices as well as the bullish analysis coming from MSM and some of the alternative media.  I am actually surprised that a few big names that are well-known in the precious metal community are they very ones putting out bullish forecasts on the shale oil & gas sector when the opposite is the case.

I gather most people reading this article have no idea that four of the U.S. shale gas fields are already in decline.  You can read more about this in my article, “MUST READ:  The Bursting of the Shale Gas Bubble.”

Below is just one of the four shale gas fields in decline.  It is the Barnett field located in Texas that peaked at 6.33 billion cubic feet a day of natural gas in Nov. 2011 and is now down to 4.6 billion cubic feet a day production at last count:

Barnett Shale Gas Peak2

While I realize the typical precious metal investors are not really interested in this energy data… THEY SURE AS HELL SHOULD BE.  Because it will impact everything going forward.  I will be discussing this in more detail in up coming articles on what I label as “COLLAPSE ECONOMICS.”

If the precious metals investors, public or BRIC countries don’t take away the gold and silver manipulation power from the Western monetary authorities, you can bet your bottom silver dollar that the MOTHER OF ALL OIL PEAKS will certainly do it.

I can honestly say that just about all long-term metal supply and demand forecasts including price projections will become totally meaningless within the next several years and by certain, at the end of this decade.

This may seem like a long time for the frustrated gold and silver investor, but I would kindly like to remind them that we humans live 70-80+ years.  So, in the whole scheme of things, it will occur in a very short period of time.

Once the MOTHER OF ALL PEAKS occurs, this will put severe stress on the nearly $100 trillion in global conventional paper assets under management.  As investors wake up to this reality, there will be a huge move into the physical assets such as gold and silver.  Which means… there is nothing the SILVER BEARS will be able to do about it at this time.

SILVER BEARS… you have been warned.

 

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21 Comments on "SILVER BEARS: You Have Been Warned"

  1. Great article SRS. I share your sentiments. Energy will definitely be a factor as cheap energy makes much economic activity possible. Please visit Global Monetary Reset HQ on YouTube.

    • Bob,

      As I have stated several times, the massive QE and increase in debts has allowed us to consume a percentage of oil-energy that we cannot afford.

      steve

  2. It’s still worrying that silver stocks are increasing, not dropping. We are supposed to have solid consumption by developed and developing nations. We have record ASE sales. We have record indian demand. We are below production price for many primary silver miners. And there is no shortage to be seen!

    Where is the silver coming from? I’ve recently listened to an interview where some metals analyst stated that a lot of copper projects are coming online. Which probably means more by-product gold and silver. But still – primary miners make up 30% of supply, and there should have been a serious slowdown of production taking place.

    • Markus,

      I am not worried about any short-term supposed surplus of silver. Again, I look at things in a little longer time-frame than most people…. especially those in the west. We could learn a few things if we borrowed this Eastern philosophy.

      Depending on the copper project, we will see how much more silver will come online. Chile is the number one copper producer in the world by far and its production has been basically flat for the past 4-5 years. Sure, there has been an uptick here or there, but overall, Chile’s by-product silver production has declined:

      Chilean Copper & Silver Production

      2008 Copper = 5.33 million tonnes
      2008 Silver = 45.1 million oz

      2009 Copper = 5.39 million tonnes
      2009 Silver = 41.8 million oz

      2010 Copper = 5.42 million tonnes
      2010 Silver = 41.0 million oz

      2011 Copper = 5.26 million tonnes
      2011 Silver = 40.9 million oz

      2012 Copper = 5.43 million tonnes
      2012 Silver = 37 million oz
      —————-

      Markus, there is no slowdown in silver production coming from the primary miners except maybe one company — Alexco Resources. They stated that if prices did not recover by the end of the year, they would put their one and only silver mine on care & maintenance. They don’t produce all that much a year.

      However, Tahoe Resources, should be bringing its Escobal mine in Guatemala online here and they are forecasted to produce upwards of 20 million oz a year. I hope Tahoe works out the problems they are having down there with some of their contracted help. I have been reading of violence and murder of some of the local protesters and even bullying a priest.

      This is the world we live today…. and some of it goes to show how pathetic humans can be.

      steve

      • If the primary miners don’t cut back production here, then they just don’t get it. They are digging real wealth out of the ground, and will go to any length to offer massive quantities of it on a silver platter (literally) to the manipulatiors, who use it to drive the price down. This is 1984 style obedience.

        That’s just another reason I don’t like miners. They don’t get it. They are not gold bugs, they are not silver bugs, they are just paper money capitalists at their worst. They believe in nothing except their fiat bottom lines, and their fiat salaries. And as you’ve just alluded to, the are no moral concerns with getting the metal out of the ground to quickly convert to fiat for cheap. They will poison the environment, ruin the laborers…

        Thank god I have only turned 30 a while ago. I have plenty of time left to see this scum suffer.

  3. For those Silver and Gold investors out there this is accumulation time. According to my highly solid forecast models S&G will not start really taking off until 2016. Incidentally this is what evil Jeff Christian and Martin Armstrong are calling for. Hate them all you want but they must have great models too and they have been in this business for decades. Silver will rise modestly in 14 and 15 but no fireworks alla 2010 (80% return) until 16. Always hedge your positions please.

    • Bobby,

      Yes, the price of silver and gold may not rise substantially until 2016, and maybe they will. I don’t have a crystal ball. However, CPM Group is basing their HIGHER MOVE up in silver at the latter end of their “10 Year Silver Study”, due to increased INDUSTRIAL DEMAND.

      Actually, I don’t believe we will see an increase of industrial demand in say 4-8 years as global oil production declines. That is why I believe the real move in gold and silver will be from INVESTMENT DEMAND as they have already been the overwhelming driver of much higher prices for the past 5-7 years.

      steve

    • That’s what I’m beginning to think – that the rise off this solid base will be slow. Obviously producing silver at these prices is not a problem. I suppose they cut back on exploration, but the bad effects from that will only kick in in a couple of years time.

  4. So, if I am a married 32 year old, with $100,000 of student loans between my wife and myself (we both went to graduate school for career changes), currently no children, but we would like to try to have one or two over the next couple of years, and limited discretionary income, what are we supposed to do?

    Stock market valuation is a joke due to QE, but our 401(k)/Roth IRAs are just a small part of our retirement portfolio. Bonds are out of the question due to the lack of yield and a fiat crash would take the bond market with it.

    How do I invest for my family’s future given this future crisis? We just want to be able to put our kids through college, be able to retire at a reasonable age, and leave some money behind (NOT DEBT) for our children and grandchildren (given that they’ll be paying into Social Security forever….).

    Real estate protects me from inflation, but is pricey. Gold and silver coins? I guess I can invest in some weaponry and a safe and horde…… What’s a middle-aged man who needs to pay off student loans, start a family, and plan for retirement to do?

    • Hector,

      You bring up a lot of good questions and concerns. I don’t like to give out investment advice, but I can give you an idea on how I see things unfolding here in the states:

      1) as oil production peaks, there will be less energy to run all the stuff we have overbuilt including a lot of real estate. The values of these assets will continue to decline and I imagine a lot of buildings of all kinds will become vacant.

      2) the future in the USA will no longer resemble the past. I believe college will become something only the wealthy will afford once again… as it was in the past. This is not something I wish for, but it makes perfect sense when you look at all the data.

      3) occupations and lifestyles will change to more to a local economy. That is the most efficient use of energy and EROI – Energy Returned on Invested. I see a lot of younger people working in local farms in the future rather than working at either McFats, StarBucks or in some sort of occupation where they get paid handsomely to tap keys on a computer.

      4) I do see the United States breaking up into several regions as the energy becomes too expensive for the Federal Govt to run the show. I am not against a central government per say, however cheap energy brought the country together… and expensive energy will break it apart.

      Again… these are not wishes, but rather probable outcomes if we look at the data and make some good common sense predictions.

      Lastly, the peak of global oil production could always be pushed back a bit further, however in the whole scheme of things, the points I made above will become increasingly likely as time goes by.

      Folks, we all need to look at the future in a much different way. This may be painful, but at least it’s better than sleepwalking into a disaster.

      steve

      • Hi Steve,

        I appreciate your response, and I can definitely see your rationale in regards to your outlook.

        But what if somebody in their garage figures out a renewable energy source and innovates some sort of condensed battery that can harness enough energy to power major equipment like jets and cars, etc. (maybe I’ve watched too much Star Trek…?)

        So oil becomes irrelevant in the equation (totally hypothetical), but Adam Smith’s Invisible Hand no longer allows world economies to kick the can and monetize their debt, and also sets straight the laws of supply and demand.

        I guess it would be the possible downfall of fiat currency. Do you see a return to a gold and/or silver standard??

        Thank you again for your response and PLEASE continue to write excellent informative articles for those who don’t like sleepwalking!!! 🙂

  5. Stop funding those TaxTraps for starters. Invest outside those vehicles. Buying stock in a regular brokerage account,where taxes on capital gains are much lower.Take physical possessions of your metals,buying bullion coins only. You can easily check spot prices on line.Usually a 3-5% spread is charged.

    • bjs,

      Good points. Furthermore, if one is to gamble in the stock market, it’s best to acquire physical stock certificates as recommended by Jim Sinclair at his website JSmineset.com.

      They give pretty good details at his site on how to get physical stock certificates. We must remember, if the banks and financial system goes down, so will the DTCC that clears trillions of stocks a day.

      steve

  6. I consider the oft referred to “derivatives” as the catchall explanation for all of the financial woes that people have made an industry out of writing about.

    “The sky is going to fall because of those $trillions of evil derivatives…”

    To date, I have never seen a clear, concise explanation of how “derivatives” work. How does one purchase a derivative? Who sells them? If they are listed, where? What is the clearing and settling mechanism? Etc., etc.

    • 8Ball,

      You bring up the Quadrillion dollar question — the dead Brontosaurus in the living room no one wants to talk about. Derivatives are not my specialty, but they are nothing more than bets on an underlying asset(s).

      Again, they are financial products that derive their value from an underlying asset. Actually a mortgage qualifies as a derivative. It is based on the underlying value of a house.

      The majority of derivatives in the world are in the form of INTEREST RATE SWAPS. Basically, a bank will swap a variable interest rate financial product from an outside institution and etc with a fixed one that they create. Jim Willie writes and talks about this a great deal.

      Because there have been so many interest rate swaps and they are now sitting on the balance sheets of these financial insitutions, the Banks and holding onto a TIME-BOMB if interest rates rise. That’s why the FED will never taper until the U.S.A Titanic sinks.

      steve

  7. This is the best commentary on the subject to date: http://www.pbs.org/wgbh/pages/frontline/warning/view/ and http://www.pbs.org/moyers/journal/04162010/transcript1.html

    It doesn’t explain what they actually are and how they work but it does show that when Brooksley Born brought up the subject of regulating them they marched her behind out of there, quick time…

    “The Wicked Flee when no one pursues…”

  8. Funny no one would ask Janet to comment on the below…

    •Mrs. Yellen, debt held by the public (nearly entirely by Foreigners and the Fed now) has increased by @ 400% since ’00, yet the economic engine to pay for the interest on this debt has “grown” by @ 75%…Funny to imagine the Fed “tapering” or “exiting” (ha)…what % rate would foreign holding of total non-Bill Treasury’s need to rise to (60%?, 80%?) What exactly would happen to the economy if the interest primarily paid to foreigners rose to 5%??? 10%??? What exactly would happen to the economy if all this interest paid to foreigners were to be exiting the domestic economy (no multiplier, no velocity)??? Mr. Yellen, How exactly do you still intend on tapering or exiting???

    ’00
    •GDP $9.5 T
    •Marketable debt = $3.3 T (blended interest rate of 6.4%)
    •Non-marketable debt = $2.3 T
    ◦Fed 2% of Notes/Bonds/TIPS ($50 B)
    ◦Foreigner 30% of Notes/Bonds/TIPS (890 B)

    ’08
    •GDP $13.7 T
    •Marketable debt = $5.1 T (blended interest rate of 5%)
    •Non-marketable debt $4.1 T
    ◦Fed 4% of Notes/Bonds/TIPS ($200 B)
    ◦Foreigner 42% of Notes/Bonds/TIPS ($2.2 T)

    ’13
    •GDP $16 T
    •Marketable debt = $12.2 T (blended interest rate of 2.3%)
    •Non-marketable debt = $4.9 T
    ◦Fed 22% of Notes/Bonds/TIPS ($2.2 T)
    ◦Foreigner 50% of Notes/Bonds/TIPS ($5 T)

  9. Superb analysis, SRS. I’d never heard of that film before, but I do definitely see the ironic parallels we face today. Thank you again!

  10. Might help to have graphs in the same units of measurement. Oz/metric tonnes.

  11. Hi Steve, I recently found your blog and I have really enjoyed reading your articles. I am an oil and gas independent in Midland Texas and can tell you that I and my geoscience peers absolutely agree with Art Berman. Many of my contacts in the larger companies privately voice skepticism regarding the profitability of these companies.There are very significant geological province differences between the Permian vis-a-vis the Bakken, Eagle Ford, Utica, and Marcellus that can ultimately determine if the Permian succeeds; BUT, there have already been a couple of spectacular failures in the That few talk about. Everyone is working off of debt. One private equity fund recently replace all of the management in a company because of its failure to meet expectations. It kind of tells you who the real bosses are.

    Regards

    John

    • John,

      I really appreciate you comment and insight. It is always a pleasure to get someone from the industry to shed some actual on-hand experience-knowledge. I actually believe a portion of this energy we are producing today is not affordable.

      The Grand Fed Operation of propping up the entire global economy with its huge QE policy, allows a certain amount of this energy to be extracted that would not be possible if we had some sort of real-physical economy… and not the huge Derivatives Monster that is running the show presently.

      If we think about all the financial inflows that comes into the market from retirees, pensioners, mutual fund holders, annuity holders, bond holders’ yields and etc.. a collapse of the fiat monetary system would impode this amount driving down global GDP into the toilet. Thus, peak oil would more than likely occur much sooner than later as a lot of this unconventional stuff becomes less affordable.

      Thanks again for your reply.

      steve

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