Chris Martenson talks about Japan

Chris Martenson talks about Japan:

Marc Faber with Chris Martenson

Don't miss this interview with Marc Faber.

Marc Faber tells us that government bonds are the most risky assets in the world. He advises you to own gold and silver, just to protect yourself against a black swan event, where the financial system collapses.

Capacity Utilization makes me Bearish on Gold

In my previous post about capacity utilization rates (which can be found here), I warned about a peak in capacity utilization. On 16 March 2012, the capacity utilization was released to be 78.7%, down from 78.8%. Although a minor decrease, it is the first time in two years that the capacity utilization drops (Chart 1). This has an impact on gold, see the analysis of the technicals here: February capacity utilization indicating a drop in gold prices

Dissecting the US deficit

When we talk about deficits, we need to differentiate between current account deficits and budget deficits. 

Current account deficits comprise following balances of payments between foreign countries and has been pretty steady in negative territory for the United States (around $US 500 billion deficit):

• Net Trade in Goods 
• Net Trade in Services 
• Net Income from overseas assets 
• Net Transfers 

The budget deficit on the other hand is the difference between government tax revenues and government spending (social security, pensions, medicare,...) and has been exploding since 2008.

Here lies the real problem: The government deficit, which was released to be a record $US 220 billion in February 2012 alone.

=> Let's take a closer look at its subparts: federal, local, state deficits (link to data), in this analysis: Dissecting the US deficit.

Total government budget (Local, State, Federal):

Total Government Spending - Revenues

Peter Schiff on Capitalism between China and America

I like debates and what's better than to see Peter Schiff debate about China VS America. Enjoy!

Watch the last part and see how Peter promotes his new book.

"The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country"


China Does Capitalism Better Than America from Intelligence Squared U.S. Debates on FORA.tv

Gold technicals not looking good

If we look at the 8-Year gold chart, we can see that the blue line 60-day moving average is crossing the green line 200-day moving average.

If we take into account history (2008), we can conclude that the correction in gold could still last a few months, which is in line with the prediction of Marc Faber on the gold price.

Jim Rogers told us recently, he would buy gold under $US 1600/ounce. I concur with that view. So I wouldn't buy gold right away at this time. I would wait till gold goes under $US 1600/ounce.

Gold 8 Year chart

A look at the balance sheet of the big 4

Let's take a look at the balance sheets of the four biggest economies of this world (Europe, USA, China, Japan) and discuss their effect on stocks and precious metals. Although the USA and Europe have the biggest GDP of the four economies of this world, surprisingly, China has the biggest balance sheet of them all, with a whopping $US 4.5 trillion balance sheet. Second comes Europe with a balance sheet of $US 4 trillion. Then comes the USA with a balance sheet of $US 2.9 trillion. And last but not least, Japan with a balance sheet of $US 2 trillion.

To read the analysis, go to: A look at the balance sheet of the big 4 economies

Bretton Woods Sytem: Gold should be at $US 203000/ounce

If we would be going back to the Bretton Woods System of 1944, Mike Maloney calculated that the gold price should be at $US 20000/ounce based on foreign central banks only. To calculate this, you divide total amounts of dollars at central banks by the total ounces of gold at the treasury.

James Turk uses a similar Gold Money Index:
Central Bank Foreign Exchange Reserves/Central Bank Gold Reserves = Fair Price of Gold

And his calculations go to a price of gold of $US 11000/ounce.

But we do not live in a world of solely central banks. If we now take into account not only central banks, but also government debt, personal household debt, corporate debt, financials, etc..., we get a very different picture.

Let's calculate what the gold price should have been in 2008:

Total credit: 14.4 government debt + 11.9 household debt + 8.8 Corporate debt + 8.5 financial debt = $US 43.6 trillion in 2008. (See chart 1)

Total ounces of gold in US treasury (2008): 261.5 million ounces of gold

Total credit divided by ounces of gold at the treasury (2008) = 43.6 trillion/261.5 million = $US 167000/ounce

Chart 1: US Total Credit Market Debt as % of GDP

So basically  the gold price should have been $US 167000/ounce if we went back to the Bretton Woods System in 2008. Since 2008, the gold reserves at the US treasury haven't increased one bit. But today Mike Maloney calculated his version of the gold price.

Mike Maloney calculated everything in it (all dollars convertible into gold), then the gold price should be at $US 203000/ounce (see second video). Which is total credit divided by the number of ounces of gold at the treasury.

So basically we went from $US 167000/ounce to $US 203000/ounce from 2008 to 2012. That's a huge amount of money printing, while the gold at the US treasury hasn't increased one bit.

Conclusion: there is still a boatload of upside in the gold price (GLD) (PHYS) and the silver price (SLV) (PSLV).


Here is the interview of GBI (Gold Bullion International) on 5 March 2012.

Shadowstats: Hyperinflation in 2014

It's important to watch Shadowstats.com to get the real picture of the economy. 

This interview with John Williams from 20 January 2012 tells us that 2014 is the year for hyperinflation.

Unemployment rates are not getting better as the federal reserve says (8% unemployment), but it's getting worse (23% unemployment)

Unemployment Rate

Inflation is much worse than the federal reserve is saying. It isn't 3% (which is already bad), but it is 10%. Notable here is that inflation isn't as bad yet as in the 1980's where inflation was 15%. So there is still room for gold to explode to higher levels.

Consumer Inflation

As you can see on this GDP chart we didn't have any real growth since a decade, which means zero hour has already started.

GDP growth inflation adjusted