THIS JUST IN

I wish I had seen this before the close today.

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silverstockreport.com Newsletter
Silver ETF Approved!
April 27th, 2006
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Silver set to explode in price
-- SEC clears Barclays iShares Silver Trust
-- Launch of Barclays' Silver ETF Imminent
-- Hundred-Year Long Trend of Low Silver Prices is Ending

Valued Subcriber!

The SEC has Cleared the Barclays Silver ETF (Exchange Traded Fund). The ETF will allow investors to buy silver as easily as they buy stocks, and the trading symbol on the AMEX should be SLV, and could start trading as early as tomorrow, or by the end of next week.

Interestingly, Barclays has only deposited 1.5 million ounces of silver with their bullion custodian, not the 130 million ounces that was anticipated. Thus, the significant silver buying has not yet started, and is still to come, especially as the large pension funds with hundreds of billions of dollars start buying. Most of the large funds cannot buy silver unless it is in the form of an ETF, and the ETF was built to enable these funds to buy silver. If even 1% of just one of the largest funds is invested into the Silver ETF, it would be over $2 billion, which, at $13/oz., is over 153 million ounces of silver, which is far more silver than is available at the NYMEX, the large commodity exchange in New York.


SEC clears Barclays iShares Silver Trust
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WASHINGTON, April 27 (Reuters) - The U.S. Securities and Exchange Commission said on Thursday that the registration statement for Barclays Global Investors' iShares Silver Trust was declared effective, removing the final regulatory obstacle to trading in the innovative fund.
"The registration statement for the iShares Silver Trust was declared effective at 10 a.m.," SEC spokesman John Nester said.

News: SEC clears Barclays iShares Silver Trust


Launch of Barclays' Silver ETF Imminent
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By Jon A. Nones 25 Apr 2006 at 07:07 PM EDT St. LOUIS (ResourceInvestor.com) -- It’s been more than a month since Barclays’ silver ETF iShares Silver Trust “cleared the last regulatory hurdle” at the Securities and Exchange Commission (SEC) prior to final approval. But with yesterday’s public statement by the SEC, it now appears the announcement of a launch date is imminent. According to a regulatory filing yesterday, Barclays has deposited 1.5 million ounces of silver with JPMorgan Chase Bank in London to back 150,000 shares of its ETF with each representing 10 ounces of silver.
Barclays intends to offer to the public these 150,000 iShares at a per-iShare offering price that will vary depending on the price of silver and the trading price of the iShares on the AMEX at the time of the offer. The ETF is slated to trade on the American Stock Exchange under the ticker “SLV.” According to the SEC, the approximate date of the ETF’s “sale to the public” will be “as soon as practicable after this Registration Statement becomes effective.”

Article: Launch of Barclays' Silver ETF Imminent


Hundred-Year Long Trend of Low Silver Prices is Ending
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SilverStockReport.com says that the silver market is not driven by day to day news, but rather, by a trend that is over 100 years long, the trend of demonitization, which started with the introduction of the gold standard, and the end of the use of silver as money. With renewed investor demand through the ETF, silver is being saved as a store of wealth again.
The other long term trend is silver's use in the age of electronics, which is a 60 year long trend that started around the end of World War II. This trend, with the industrilization of China and India, is only accelerating. Silver has been consumed by industry, and there is very little silver left over for any investment demand. Silver prices are sure to go up, up and up some more, probably for decades to come.

Subscribe now to the Silver Stock Report!



Jason Hommel
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email: j@silverstockreport.com
web: http://silverstockreport.com
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Not Financial Advice

As you know, I do not give out financial advice as I am usually too early. So take the following as a starting point in your own research.


FMNN:The Silver User’s Association startled the investment community recently when it came out hard against Barclay’s Bank’s proposal to create a silver-backed Exchange Traded Fund. The Silver Users Association is a lobbyist group for industrial end-users of silver, including Kodak. While the Silver Users’ opposition to any new investment demand for silver was predictable, the reasoning behind that opposition stunned many. Here’s Free-Market News Network commentator Jason Hommel to explain. Jason?

JASON HOMMEL: Yes! Their reason for opposing the Silver ETF was that they said it would cause a shortage of silver, and rising silver prices!

This news is HUGE and EXTREMELY important for people to pay attention to.

The silver shortage has been confirmed, publicly, by people who have a stated goal of keeping silver prices low. They do NOT want investors to buy silver, which is why they oppose the Silver ETF, but here they are, making the case for why investors should buy silver by confirming the silver shortage, and saying that silver prices will rise!

Why would they say that unless they are in a panic?When the silver shortage hits, industrial users will panic, and will buy up silver to crazy high prices, without regard to price--to prevent shutting down their factories!

And given the amounts involved, THAT the Silver ETF needs 130 million ounces that the world may not have… that means it is ALREADY TOO LATE FOR BILLIONAIRES TO JUMP ON BOARD AND BUY SILVER, BECAUSE THERE IS PROBABLY NOT A BILLION DOLLARS OF SILVER AVAILABLE IN THE WORLD TO BUY AT UNDER $10/OZ. SILVER PRICES WOULD PROBABLY HAVE TO RISE TO $25/OZ., JUST FOR THERE TO BE A BILLION DOLLARS WORTH OF SILVER AVAILABLE TO BUY!

Silver is so cheap today, even the silver miners can’t make money mining it at $7.50/oz.

So, if you care at all about the financial security of your loved ones (or readers), you should probably forward this email to them.I have long waited for the tipping point in the silver market, and there is no doubt in my mind that this is it.

For more information on this story, see my article:
Silver Users Fear Silver Shortage
Thursday October 27, 3:49 pm ET

For more information on silver, and especially silver stocks, see my web site, www.silverstockreport.com

or the latest silver stock report #57, from July at http://www.silverstockreport.com/reports/silverstockreport57.html

You can subscribe to this email list by sending a blank email to:subscribe@silverstockreport.com

Hold Off on Buying Silver

My guess is that this news will send the price of silver down - temporarily.

Warren Buffett Sells the Family Silver
By Jon A. Nones07 May 2006 at 12:57 PM EDT

St. LOUIS (ResourceInvestor.com) -- With the market abuzz with anticipation of what Wall Street legend Warren Buffett intends to do with Berkshire Hathaway’s $40 billion in cash, a small, but perhaps very significant little bit of news may have been overshadowed.
At the company’s shareholder meeting in Omaha, Nebraska on Saturday, Chairman Warren Buffett announced that the company has divested its silver holdings.

David Morgan, author of “The Morgan Report,” sent a note to clients quoting an anonymous source at the Berkshire meeting who confirmed the sale.

According to the source, no sell price, date or addition data were given other than the announcement that the company not longer owned any silver.

The source said Buffett didn't really talk about silver other than he sold it, but said he would rather hold businesses that have earnings.

According to news sources today, Buffett told shareholders, “We had a lot of silver at one time but we don't have it now.”

In 1997, Buffett purchased an estimated 130 million ounces for delivery in 1998. In February 1998, the silver price jumped to a high of $7.81/oz, rallying 50% since mid-1997.

The CPM Group estimated earlier this year that Buffett still held somewhere between 100 and 129 million ounces.

Buffett said that Berkshire had not benefited from the particularly steep rise in silver prices.
“I bought it very early, I sold it very early. Other than that it was perfect,” he joked.

Silver hit a 23-year peak of $14.68 two weeks ago. On Friday, July silver futures closed at $13.89 an ounce.

Buffett said he detected speculative participation in the recent run up in prices, particularly metals.

“What the wise man does at beginning, the fool does in the end... any asset that has a big move based on fundamentals will attract speculators...,” he said, according to sources.

“Something like copper is speculative on both sides of the market, and responding more to speculative than fundamental forces,” he added.

However, it might important to note the timing of Barclays’ silver ETF iShares Silver Trust [AMEX:SLV], which just launched on April 28.Jason Hommel, Editor of “Silver Stock Report” previously told Resource Investor that “we just don’t know” where the silver will come from to back the ETF, and it is possible that Warren Buffett could be the supplier, which isn’t causing a shortage in the market.

Furthermore, the SEC seemed to easily dismiss the opposition by the Silver Users Association and comments from sources about the illiquidity of the silver market in its 32-page order.

Many analysts estimated that the ETF would need perhaps as much as 130 million ounces of silver to cover investment demand - the same amount Buffet originally bought in 1997.

Barclays’ Christine Hudacko could not be reached for comment.

SLV, GLD, CEF or Physical Possession

Ok, you have finally started paying attention to the rising price of gold and silver. You didn’t listen (or if you did, please leave me a comment) a year ago when I was gently suggesting that you might consider these archaic metals as investment opportunities. Now your TV is telling you that gold and silver are hot. You are wondering if you have missed the boat.

My answer: No, not yet. You missed the first boat, but more are leaving daily. There is still time. But what should you do?

Before I get to that, let me make my usual disclaimer: I am not a financial advisor. I have no special expertise. But I have spent the last two years reading what the experts were saying and researching investment opportunities they have suggested. You can search this site for references to gold and silver to review what I’ve reported. And, most importantly, I have followed my own advice and made money. You, of course, should do your own research and due diligence before you make any investment. I’m just reporting what I’ve found and what I’ve done. Perhaps you can benefit from reviewing this information.

I am not going to document everything I say in these articles. You know how to use Google.

First, understand the difference between money and currency. Gold and silver have served as real money for thousands of years. Currency is the paper we currently use. In the past, our currency has been based on gold and/or silver (as mandated in our Consitution). That is no longer true. Our paper is “fiat” currency, based on nothing more than belief. Its value is determined by 1) how many dollars are in existence, and 2) how much the world believes that the US of A is the best place to invest.

Currently, #1 is going way up, and #2 is going way down. The result is that the value of the dollar is decreasing, and we call this inflation.

Second, you should understand that all of the government data; CPI, inflation rate, employment rate, jobless claims, etc. is juiced data. All of the formulae from which these numbers are derived have been tinkered with by the government to the point that their relationship to reality is severely strained. We are currently being told that the inflation rate is around 3%. Real-world estimates are closer to 10%.

Sooo…the price of everything isn’t really going up as it seems, your dollars are just getting littler. Gold, silver, copper, platinum, palladium, and all other commodities seem to be going up in price because of these little dollars. To counter this effect, you must buy something that it not losing its value with your shrinking dollars. Real estate used to be a hedge against inflation, but it has been jacked too high at this point to be of use right now. (Unless you can sell it and convert the dollars.)

Another choice is to buy gold and/or silver. This is fairly easy to do these days. The popular choices are electronic trading funds (ETF), gold mining shares, CEF (a Canadian gold and silver holding company), or actual bullion (coins or bars).

Two ETFs are GLD (share price fixed at 1/10 an ounce of gold) and the newly-minted SLV (share price fixed at 10 ouces of silver). I've owned neither. I've heard it said that they are "not for the little investor". I don't see why.

I do not buy gold or silver mining company shares because there are too many confounding variables; are they hedged, do they have good management, are they located in dangerous countries, subject to dangerous environmental concerns, etc. You can make a lot of money here when junior companies are bought up by larger companies, but you have to be very knowledgeable, which I am not.

CEF is a Canadian company that baby-sits gold and silver. They seem tightly regulated. Sometimes you can see that the price of CEF lags the action in GLD and SLV.

Open yourself an online stock trading account (I use eTrade), transfer some money from your home bank account, and buy some shares. You’ll learn how to keep track of things, so you can buy and sell when it is advantageous to you. Or just leave it there, and don’t worry about it for a while.

Unfortunately you can't just forget about it, because if the dollar really crashes, as many predict it will, you will want to cash out of your stock account and convert to physical gold or silver. If you wait too long there may not be much available at a reasonable price.

Which brings us to the end game, physical gold or silver. There are many considerations but here are a few.

Gold coins (Eagles, Krugerrands, and Maple Leafs) are called bullion. The difference in price disappears when you sell as does the condition (mint or not), so buy the cheapest. Gold coins are a very compact medium for value, easily stored and protected. Today 14 one ounce coins are worth about $10,000.

In silver this would be about 577 coins, much bulkier and harder to store. But silver is up 61% this year compared to gold’s increase of 36%. Some of both?

There are other forms of physical to be considered: junk silver (1964 and older silver US coins), rounds (like coins but not stamped), and bars.

They are all really cool. The form they are in might become important if you were to actually use them as a medium of exchange.

Next article: How High Will They Go?

I Strongly Recommend That You Listen Up!

The new "normal" rush of Bush Bad News is hard to keep up with. The guy is stumbling badly. Did you see his Alito intro? Harhar. He can't even repeat what's sent into his ear!

Like It Is

"America's long slide towards authoritarianism has greatly accelerated since our version of the Reichstag fire on 9/11, and I see no prospect of it even slowing, much less reversing. It makes me nostalgic for the days of Reagan; even if the reality was two steps backward for one step forward, he at least seemed good-hearted. The Baby Bush, on the other hand, appears to be stupid, ignorant, stubborn, and mean-spirited. I don't know whether or not to credit the reports that he's hitting the bottle again and flies into fits of rage when his will is challenged. Is it possible Bush is also psychologically imbalanced? That is certainly possible, given his stated views on torture. But, looking to the bright side, at least he's not Dick Cheney, who appears to be a genuinely degraded being."
- Doug Casey, today's Daily Reckoning

Scandal creeps like a New Orleans mold through the corrupt walls of a befouled Republican house.

Still to come. the "Cunningham" stuff, fake defense-industry companies sucking off of black budgets and distributing monthly payments to our Representatives. Direct in your face Agnew type really stupid graft (Many of the fake companies had the same address.)

But in the meantime, don't forget the really freaky, once in a life time, big blow to the head which is about to hit you from your blind side, the upcoming degradation of the US dollar. Read back 3 or 4 posts if you want the gory details, but buddy, this is coming up soon.

Some of my friends, including the guy who said this blog was "nothing but bad news that I can't do anything about”, are now asking, "Okay, suppose you are right, what am I supposed to do?"

1. Start reading. Educate yourself with Google. Subscribe to newsletters and news feeds. I strongly recommend that you get “The Daily Reckoning”. I’ve been reading it for years and I think the contributors are very perceptive. I fact, I just signed up for Doug Casey’s newsletter on gold and silver investing.

2. Buy some CEF stock. This Canadian company does nothing but hold gold and silver. You own the stock, not the metal. Check its trend and buy if it dips.

3. Buy GLD stock. This is a fund that tracks the exact price of gold.

(Digression) Unfortunately, there is as yet no similar silver fund. The mention of it sent the Silver Users Association into shock. They screamed that this “hoarding” would drive the price up! Duh! There is more silver being consumed yearly than is being produced. Silver could easily quadruple, even without a dollar meltdown. But buying silver producers means relying on good management.

4. Buy some gold or silver Eagles – 1 oz coins produced by our Mint. Very beautiful. Go to http://www.kitco.com/. Put them in a safe, or safe deposit box.

5. Sell any real estate you own, including your house, and rent something nicer, preferrable something off the grid, with its own water supply. Okay, this an extreme move, and you may not be ready for it yet, but my house is on the market right now.

I could go on about laying in supplies, planning your vegetable garden, defending yourself, and so on, but I’ll leave that to you.

Countdown
49 days until the Iranian Oil Bourse is set to open. Will Bush be able to run to the U.N. for sanctions and still have time to start the bombing? Stay tuned.

And if You Still Need Convincing ...

From Yahoo!: Finance

Investing: Go for Gold and Silver, Not Green
by Robert Kiyosaki

March 21, 2006
....

Impending Financial Disaster

My concern is that very soon, citizens of the world will tire of America's gross fiscal mismanagement and hesitate to take U.S. dollars. In order to keep the world interested in the greenback, interest rates must rise. When that happens, U.S. assets, especially paper assets such as U.S. stocks, bonds, mutual funds, and savings will drop in value. Some real estate prices will increase because replacement costs are high, but overvalued real estate will drop.

At the risk of sounding like a politician who flip-flops, there will still be paper assets and real estate that will rise in value. The secret to surviving in paper assets and real estate is to be very careful and very selective. People who diversify will lose. People who focus will win.

Americans Are Still Asleep

The secret to surviving the next few years is keeping your wealth in real money, not in the U.S. dollar. Buy things that hold their value and are exchangeable all over the world. Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone else's religion, but he'll accept his gold.

One of the reasons why I'm bullish on gold and silver is because the American public is still sound asleep to this asset class. Most Americans have no idea how or where to buy physical gold and silver. The outlets that sell gold and silver I have visited are already low on inventory.

If and when the American public wakes up to the reality that their dollars are not money, but a currency, the panic and stampede will begin. Should that happen, today's prices for gold and silver will look like bargains.

Read the entire article...

Back in Time

Sometimes you have to repeat yourself.

Some of my friends, including the guy who said this blog was "nothing but bad news that I can't do anything about”, are now asking, "Okay, suppose you are right, what am I supposed to do?"

1. Start reading. Educate yourself with Google. Subscribe to newsletters and news feeds. I strongly recommend that you get “The Daily Reckoning”. I’ve been reading it for years and I think the contributors are very perceptive. I fact, I just signed up for Doug Casey’s newsletter on gold and silver investing.

2. Buy some CEF stock. This Canadian company does nothing but hold gold and silver. You own the stock, not the metal. Check its trend and buy if it dips.

3. Buy GLD stock. This is a fund that tracks the exact price of gold - each share = 1/10 of the price of an oz. of gold. Buy SLV stock - each share = 10 oz. of silver.

4. Buy some gold or silver Eagles – 1 oz coins produced by our Mint. Very beautiful. Go to your local coin dealer - in Denver that would be Rocky Mountain Coin on Broadway. If you don't have a local coin dealer you can do it all on the internet, phone and mail. Go to http://www.kitco.com/. Put them in a safe, or safe deposit box (but be mindful of the previous confiscations).

And speaking of educating yourself - start by clicking on the movie below - very easy to take explanation of how and why you are getting screwed every minute of every day (maybe that could explain your crankiness lately) by the so-called FED.

Gold and Silver: Dips and Corrections

Another kind of dip!

This is some of the best advice I've seen. If you are not in the market, buy now. If you are already in, read on...

Corrections
By: Jason Hommel, Silver Stock Report

My portfolio of mostly silver stocks is down about 17% from its high last week on May 11th. And in that time, gold has dropped back from a high of about $720-$725 down to a high of $719 earlier today, and loads of so-called analysts are calling for a correction, or trying to describe this week's price action as a correction. Sigh. I've not been doing this for very long, only about 7 years now, and I've seen my own portfolio of silver stocks lose just about 50% three times now, on the way up to over 1000% gains. I never use stop losses--that's just a way to get kicked out at the bottom--which is a fool's game. I stay fully invested in the sector, rarely trade more than 10% of my portfolio in a month, and keep my cash to generally between 1-5% of my overall holdings. So, be patient, take heart, and stick with it; especially you newer investors.

Continue reading

This just in ...

Another step forward for silver ETF
SEC approves rule change
Silver rallies on speculation

By John Spence
CBSMarketWatch
Tuesday, March 21, 2006

BOSTON -- A controversial exchange-traded fund tied to silver prices moved a step closer to reality Tuesday. The Securities and Exchange Commission has approved a rule change for a silver ETF in registration from Barclays Global Investors that would allow the product to list on the American Stock Exchange, although the fund has not yet been cleared to launch by regulators.

Click title for more...

Donny Darko's Rabbit

I present two scenarios in their entirity for your reading pleasure.

It Happened Quite Suddenly…

Really, more suddenly than most people thought that it could. Even some of the doomsayers were caught by surprise. Who would have thought that America could go from super-power to third world status, in just two short months?

Some blamed the Chinese. Others blamed OPEC. Still others knew that it had been building for a long time and that all it would take is one or two major currency crisis’ to make things go from bad to terrible.

In late 2006, the US sent an economic A-team to China. Their stated purpose was to cut a deal with China on trade and currency issues. But the real purpose was to go with hat in hand to their creditor and ask for an extension on their credit line. Unfortunately, China had already made up its mind that there would be no further credit increases and in fact, the US needed to make good on its repayment promises, …namely Treasury Bonds. Of course, the A-team offered to buy the bonds back and even offered a premium to sweeten the deal. However, China demanded to be paid for the face value of the bonds in gold. The US Treasury no longer had any gold. Fort Knox had lain empty for many years, as the Treasury had sold off gold to keep the price down and make it look like monetary inflation wasn’t as bad as it really was. If the US began trying to buy gold to pay the Chinese off, the additional money they would have to create would flood the market making things worse and the demand on gold would make the price skyrocket, thus exposing the Dollar fraud.

China had the upper hand and they knew it. If they couldn’t get a private deal for gold from the US, they would have to make deals for machinery, oil, gold and other metals with other countries. They would have preferred that those be in private also, since once exposed, they would create a run on Dollars. But such things are hard to keep secret in the world market. Markets and currencies talk. They are the best forms of communication that ever existed, especially on matters of an economic nature.

Even though China had over a Trillion Dollars in their reserves, they also knew that they had a tiger by the tail. And even though the tiger probably couldn’t devour them, they new it could do some major damage if they let go without wearing it down a little. They needed to ditch their Dollar reserves, but they needed to do it in such a way that it didn’t promote a Dollar panic. Such a panic would cost them in the later stages of their divestment, and that needed to be avoided, if possible. At the same time, they realized that they needed to start the divestment as quickly as possible. If they waited until another nervous holder of Dollars started to dump them, they would be hurt even worse. They couldn’t take that chance. Better to be the one to start the panic than end up on the other end with worthless paper. They knew they couldn’t get their trillion dollars out the reserves, but they figured that if they were careful they might be able to retrieve 70 cents on the dollar.

After the A-team’s uninspiring trip, the President went to China to beg, in person. This only made the Chinese smile. They knew they would not be budged and it amused them, the antics that their American counterparts were willing to go. They viewed the circumstances as very big embarrassment, and it was. The US had lost face.

Soon after the president returned, trade sanctions were proposed and passed in Congress. 30% tariffs were to be levied on all Chinese imports. Apparently, the Congress hadn’t been paying much attention and didn’t realize that most of the products sold in American stores were made in China. The President made one last call to the Chinese in a last minute attempt to get some additional credit, but the Chinese refused to budge. So, the president signed the tariff bill into law.
The immediate effect was that prices in stores went up some 30-40%. That same week, China began quietly buying as much material and commodities as it could, use their Dollar reserves. At first, this was barely a blip on the radar. Oh, the dollar index began to fall, to be sure, but that had been forecast anyway. The treasury department had been going back and forth on a “strong Dollar” vs. “weak Dollar” policy for several years. No one really knew what they had in mind, but anyone who could add and subtract realized that wildly expanding money supply could only mean inflation and a weak Dollar, so no one got real excited that first week.

By the second week, politics were getting very interesting in the United States. People who were on fixed incomes, and especially people who were on Social Security and government pensions, were suddenly finding it hard to make ends meet. They had used up half on their monthly income in one week. They could read the writing’ on the wall and started calling their congressional representatives. At the same time, Congress was in the process of raising taxes to try to offset the loss of bond sales. This then hit those who worked. Suddenly, at the same time that things were getting more expensive in the stores, they had, on average, 20% less money to begin with. It was being taken through the additional taxes. They also called their congressional representatives.

So the legislators were getting calls from two very vocal groups, one telling them to raise benefits and the other telling them to cut taxes. With the loss of bond sales they knew they couldn’t do both, so they did what they had always done…they stalled.

It was about the third week that many more oil producers started requiring purchasers to use any currency other than Dollars. Venezuela had already done so, as had Iran and the UAE. As soon as they realized what China was up to, they also began to divest themselves of the Dollar. Soon the Dollar index was falling like a rock. The Euro and Yuan were gaining rapidly, as they were still easier to trade than gold and had a lot less debt attached to them. But because they were fiat currencies as well, many were also trading gold. This made gold “shoot for the moon”. It quickly reached its real value to the Dollar of $3000/oz and continued to climb. Silver, being the poor man’s gold also started climbing at an accelerated rate. It grew even faster than gold, for as the demand climbed it became apparent that there was a lot less silver in the world than was previous thought…. far less. Silver quickly attained $100/oz, then $200, then and $300 in a matter of days.

The result on the COMEX was complete collapse. Several major trading firms had been manipulating the price of gold and silver for years. Suddenly their short contracts had to be delivered in metals that were very expensive. It wiped out the market place and several large corporations with it. As the COMEX collapsed, the Stock market came under fire. Usually these markets traded off of one another. But with the collapse of the COMEX and the Bond markets, the Stock market started to look like a suckers bet. So, investors started to flee in droves.

All the while, the market programs on CNBC, Bloomberg and CNN Financial, continued to tout it all as a correction that would quickly be over with little harm to anyone. The trouble was, no one was watching anymore. Most had ditched their cable and satellite when the bills became difficult to pay. As the prices went up in the stores, businesses had to give their employees a raise in order to keep them on. This led them to an increase in the price of the domestic products that they sold.

So, prices all around were going up at an alarming rate. Crime exploded, especially in the cities. But people weren’t stealing TVs or cars; they were stealing food, gas, silver jewelry and flatware, gold (where they could find it) and currency. Banks were getting robbed two and three times a week as people became desperate to find currency with which to buy food and gas.

Police were over-worked, like everyone else, over-taxed and suddenly underpaid. At the same time, they were coming under fire for trying to enforce traffic laws, drug laws and gun laws. It never occurred to them that these laws were foolish to begin with, that they violated the very essence of the Constitution and freedom that was supposed to be the “Spirit of America”. But suddenly, if an officer tried to stop a speeder, he was likely to be fired on by an angry citizen who saw no useful purpose to his being pulled over for a regulatory infraction that harmed no one. People were packing firearms. Some concealed, but most not. After a few officers were killed trying to take arms away from the citizens, they decided to let that go too. Soon, they stopped responding to all regulatory functions and simply responded to actual crimes…you know…the ones that had actual victims.

It was along about the fifth week that power disruptions began to appear. Many of the power companies still employed union workers, and like everybody else in America, they were finding it hard to make ends meet. But they weren’t calling their congressional representatives, they were calling their union leaders and complaining about unfair wage practices and that the union leaders were failing in their representation responsibilities. Initially the unions went to the employers and tried to work out a deal. But, the companies were already in a bind as the price of everything was going up faster than they could get rate increases from the state regulatory boards. They were already operating in the red and the banks weren’t being very helpful.

So the unions began work slowdowns, and sabotage of the systems. The North American electric grid had been in dismal shape for years anyway, and the tampering and work slow downs quickly brought it to its knees. Rolling blackouts became the norm. Some areas never saw commercial power again. The power companies were taken over by the government, and the military was sent in to the major cities to restore the distribution system. In order to conserve power, distribution to residential areas was cut off. The people there were told to relocate to camps that were set up in all of the major cities to provide better efficiency in distribution of food and services and to conserve electrical power. About half of the population went to these camps only to find out that they were then stuck there. His or her vehicles were confiscated, but it really didn’t matter, no one could afford gas anymore. They were given work assignments under the guise of “helping America get back on her feet”. But most of these jobs consisted of maintaining the camps and assisting the military in working on the power grid and the telephone system. Some worked on water systems, others in shipping areas of the remaining businesses, which had also been taken over by the government or had to operate under heavy supervision. Pirating and stealing were rampant.

By the sixth week, most of the interstates were empty. The gas stations had long since run out of customers. They could still get fuel, but few could afford it. Gasoline was running around $35/gal. Before the crash, they had used gas prices to entice customers into their store. They rarely made more than 2-3% on the fuel sales; their real money was made in the food and drinks they sold. But they couldn’t get supplies anymore. Many of the distributors had gone out of business, unable to afford the rising costs of their workers and fuel. Some distributors had been taken over by the government, but these serviced the camps and elite who lived in the big cities. Highway robbery was common if one were to venture down a lonely highway without a military escort. Farmers would come in and trade crops and fresh meat for fuel. This kept the stores in business, but it was slow and they had to be wary of thieves coming in to steal their goods. Everybody took their safety seriously, so everyone in the rural areas carried firearms. They knew that they were the only ones who could be responsible for their safety. It really was that way all along, but they had let the government convince them that it could protect them from all crime. Some chuckled at that thought, but most just smacked their head at their past foolishness. The folks in the camps weren’t so lucky. They were disarmed upon entering the camps. So, they became victims of the various camp gangs that ran the underground economies.

By the seventh week, government offices were all closed. The Dollar had completely collapsed and wasn’t accepted for payment on anything. Dollar bills of all denominations blew down the semi-empty streets of the cities. Many government workers were thrown into the camps or out on the street. The government could only pay them in goods that it stole from businesses and farms that it had taken over. Some people revolted directly. This mainly happened in small towns and counties where leaders had refused to believe that their authoritarian reign was over. Judges and lawyers who had cheated citizens in court were commonly seen hanging from trees and lamp posts, their houses burned to the ground. A few sheriffs and deputies went that way too. Tax collectors had long been dispatched or had gone into hiding.

By the eighth week, the government ran the cities and the country folk ran themselves. There were too much ground and not enough soldiers to police the whole country. The government was able to use its forces more efficiently in the higher density areas of the cities, and for the most part that is where they stayed. Even though convoys were escorted by the military, they often came under fire and were pirated. Trade sometimes occurred between the country folk and the city folk, but it was illegal from the government’s position, even if a few of the city leaders and elite were some of the major players. So, the government turned a blind eye. It had no choice.

In two months, the United States had gone from being the biggest consumer market in the world, to a country that had nothing to trade and no currency with which to trade. Prices worldwide had exploded, as foreign central bankers divested themselves of Dollars and had to buy much more expensive currency to replace it. This required them to do what all central banks do…. print more money, which continued their own vicious cycle towards worthlessness.

And, on a brighter note...

THE ULTIMATE CONTRARIAN INVESTMENT FOR 2007
by Nathan Lewis

Of all the "investments" one might make at this time, one of the best may be to be prepared for a breakdown of the economy as we know it. This is not necessarily a prediction - any more than having fire or flood insurance is a prediction that you will have a fire or flood. Nevertheless, it is based on an observation that there are many factors that may render the relatively near future quite a bit different than the recent past. This may seem kooky to some, but at least I am kooky in good company. I note the billionaire master investor, Richard Rainwater, has gone public with his own "preparing for major change" plans, and if you begin to pay attention you will find that many wealthy individuals have been making similar preparations for themselves. Is there something they know that you aren't hearing about on the evening news?

What I am talking about could be summed up as: the lights go out and don't come back on again. Foreign oil shipments stop, or are blocked. Maybe freight shipments of goods from China and elsewhere become impossible. Maybe food is no longer delivered to the supermarket. In short, an economic breakdown something like what happened to the Soviet Union, but possibly on a worldwide scale. In such case, there will be no rescue because there will be nobody to do the rescuing.

There is a surprisingly long list of factors that may lead to such an outcome. The gradual and irreversible decline of world oil production, beginning approximately now, is one that has been getting the most attention. I would also note the much more dramatic potential collapse of North American natural gas production, which is imminent since the continent's natural gas production verifiably peaked in 2001. Major ice deposits such as the Antarctic ice shelf or the glaciers of Greenland have been melting at an accelerated pace, with some geologist and geophysics types now whispering that their collapse could take place within a couple decades, raising sea levels by tens, if not hundreds of feet. Given that most of the metropolises of the world are less than a hundred feet above sea level, we can imagine the effects of all of these going underwater simultaneously. Fisheries production is near collapse, and grain production has been falling for several years now. Grain production is now well below consumption, and formerly large world grain stockpiles have been run down to multi-decade lows on a days-use basis.

This is just a short list, which does not address the verifiable and dramatic increase in geophysical activity worldwide, notably earthquakes and volcanic activity, or increasingly bizarre weather. Seattle was just hit by a hurricane - in December. It was called a "windstorm" in the news, and downplayed, since we all know Seattle doesn't have hurricanes, but when you have a cyclonic storm hundreds of miles wide with hurricane-force winds in excess of 100mph - what is it if not a hurricane? Disappointed skiers in North America (where the temperature is 14 degrees Fahrenheit above normal, again) might try getting on the plane to Israel, which recently got snowfall. A New Madrid fault quake would cut every connection - bridge, gas line, electric line, etc. - across the Mississippi, and potentially reroute the river itself into the Atchafalaya drainage, where it would have naturally gone years ago if not for a lot of levee work. This would bring to an end the entirety of Mississippi-based shipping. Even this doesn't get at all the things that have been going on, and the more perceptive have probably noticed that the moon and stars have been misaligned for a number of years now, or that anomalous weather has not just been an Earth phenomenon, but a phenomenon of other planets in the solar system as well.

Living doesn't really take anything more than keeping warm and dry - you don't even need to be dry if you are warm - and maintaining a stable caloric and nutritional intake. Nevertheless, a great many people, when faced with the idea of "preparation," conclude that they should try to maintain life as it exists today. (Toilet paper seems to have become a sort of totem for modern industrialized life.) This is vastly complex and difficult. They purchase high-capacity electric generators and may store several years' worth of food and petroleum products. Let's think about the food to begin with. If everyone is starving (as would quickly occur if shipments from food-growing areas ceased), then you will a) share your food with the hungry, in which case your supplies will quickly run out, or b) you will attempt to keep others from making use of your supplies, in which case you will man the machine gun posts until you are eventually overrun by those who become aware that you have the supplies they need. Many wealthy people have taken the well-stocked bunker approach, but it is expected that this will not be successful, as they will become natural targets due to their large stockpiles, perhaps falling victim to the very mercenaries they hired to protect them from the hungry hordes.

Thus, in the interests of suggesting something that might work better than the rich guy's strategy, and also something that a person of any means could undertake, I propose a much simpler, lighter, and more flexible approach. The ultimate goal should be to be able to produce food, and this means seeds, animal husbandry, gathering, hunting and fishing. As far as shelter is concerned, the goal should be basic foul-weather clothing and a knowledge of simple shelter design. Since mobility will be key -- many places where people now live will not be habitable -- and there will ultimately be little means of mobility except for walking, we should be able to carry our lifestyle upon our backs. Thus, let us consider preparations which, in total, weigh less than thirty pounds, and cost less than $1000.

1) A basic backpack. It's hard to carry stuff in your hands. Maybe something by Lowe Alpine, which is well designed and not very expensive. Shoot for 40-90 liters.

2) Good footwear. Running shoes are fine, although there are more durable alternatives. Plus at least two pairs of good quality athletic socks. Clothing can be begged/borrowed/improvised, but good shoes can be hard to come by.

3) Clothing for all kinds of weather. Modern outdoor clothing is amazingly good. The basic "outfit" consists of "midweight" long underwear tops and bottoms and a polyester "pile" jacket. Maybe two pile jackets for a bit more warmth, an extra pair of midweight or fleece bottoms, and a hat and gloves. All of this might weigh 5 lbs.

4) Some sort of outerwear/raingear. Among the most versatile is the basic military poncho, which you can buy for about $20. You can bet this has been used in every conceivable situation, and works as both outerwear and as a rudimentary shelter. It's also good camouflage, which may be useful.

With that alone, you can get from point A to point B by foot in all sorts of conditions. A person, even a relatively out-of-shape one, can easily walk 15 or 20 miles a day on paved roads. Thus, in ten days' time, you could go 150-200 miles. Don't be afraid to walk out of wherever you may be.

A simple blue poly tarp, the sort you can buy in a hardware store, makes a fine shelter. However, you can also make all sorts of simple structures from branches and other such natural material. I would recommend the Tom Brown books for instructions to build anything for a night to multi-year residence, from basic forest materials. You can make your own cordage from natural materials, but it would save quite a bit of time and effort to bring a roll of sisal twine and some nylon rope. I would also suggest a "space blanket" or two, which can be used as a fire reflector, cape, or rudimentary blanket. The books by John and Geri McPherson are also good.

Learning how to make fire with a bow drill is worthwhile, but for the shorter term it is easy enough to stock up on butane lighters, Esbit fuel bars, magnesium lighters, and so forth, all of which might weigh perhaps a pound.

A good knife is indispensable, and indeed a couple good knives might be the right way to go. Something good for hacking like a machete or hatchet, and a smaller knife for filleting fish and butchering game, or small-scale carving perhaps. Plus a sharpening stone. If you had to have just one tool, a Chinese-style cleaver would be good for everything from chopping small trees to mincing garlic.

The best way to hunt animals is not with a gun or even a bow and arrow, but with snares and traps. Indeed, this method is so effective that it is illegal in most places, which is why nobody does it. A wide selection of snares and traps, of good-quality steel cable, might weigh another five pounds. Shop at Buckshot's Camp (www.bcamp.com).

Likewise, fishing with a rod and reel is fine, but a gillnet may be better. That's why net fishing is also illegal in most places. Pack a broad selection of hooks and line (tough to make yourself, but you can make a pole out of anything), and a couple gillnets, which can also be used to net birds.

A selection of a hundred varieties of fruit and vegetable seeds is remarkably lightweight - about three pounds. Be sure to get "heirloom" non-hybridized seeds.
A light sleeping bag and foam sleeping pad could be very welcome. For a very light sleeping bag, you can buy some reflective "space blanket" survival sleeping sacks, which weigh about 9 oz and cost maybe $20. They also have the advantage of being waterproof. These can be made warmer simply by piling leaves on top. (www.campmor.com)

A little plastic trowel is handy for all sorts of digging projects, from latrines to post holes to drainage ditches. With a folding military-type shovel you can make entire underground shelters.

Thus, we've covered seeds, hunting and fishing. Gathering you can learn from a book, and again the Tom Brown books are a good one-volume reference. Animal husbandry is a bit tougher since you're not going to be hitting the road with a breeding pair of goats or a box of live chicks. However, it might be worth learning about this anyway. You can even raise wild animals, such as ducks, and there could be feral chickens and hogs about. A hurricane in Hawaii in 1992 freed a population of chickens from their cages, and they have been happily breeding in the wild ever since.

A good week's worth of no-cooking food should also go in the pack. Consider nuts, peanut butter and jelly, cheese, hard sausage, chocolate, etc. A water bottle - a 2 liter plastic soda bottle is fine - a cooking pot (two to four liters aluminum, with a lid), a frying pan, and so forth.

At home, you might keep a few months' worth of food. Secure a good supply of water and, if climate demands, a reliable heat source.

The image of preparedness also includes a chunk of good farmland, I suppose, but this is not really necessary. In the event of such turmoil, upon migrating to farm country one would find either small survival communities willing to take new members (strength in numbers) or land whose previous owners will never show up to claim possession.

Lastly, and by far the most important, is a good attitude. If (heh heh) such a thing were to occur, consider it a grand adventure rather than a "disaster" - a child would, for they don't know that they were "supposed" to go to school rather than having a walkabout in the countryside. The ultimate goal is to gather in cooperative groups of good-hearted people, and treat each other well.

Have a splendid 2007!

Nathan Lewis
for The Daily Reckoning

The New Dollar, Same as The Old Dollar. Silver Dollar That Is

In thinking about what our world will be like after the coming economic collapse, I have wondered what will become of our current paper as its value goes down. If you've ever shopped in Mexico, you may have suffered peso shock when the grocery bill was 500. Will we see that? Speculation has it that an new Amero will be foisted upon us, along with Canada and Mexico, as we build the North American Union. (I prefer, and wrote about in 1975, the United States of North America, USNA. 100 States in all.)

In the article below, Edgar J. Steele reveales a old-new possibility, he calls it the above-ground economy. What if we started using our old silver coins again. They are still legal tender, but much increased over face value.

Say you went to buy a new car, and with gold at $700 an ounce, you pay the dealer 50 Gold Eagles face value $2500 US Dollars. He accepts them because he knows that they are worth $35,000. (Expect a little shaving here.) The sale is recorded at $2500 and the license and tax ramifications are obvious.

Would you be happy accepting $200 per week for your services is you were paid with four US Gold Eagles (face value $50 each) worth $700 each? Income - $10,400 per year. Not bad as that will buy $72,800 worth of stuff.

Hey, it's like reverseing inflation. Now we can stick to them.

Can this be stopped? Read the article.

If you've been singing along with this blog and developed an interest in gold, silver, and the falling dollar, I urge you to read it. It's long and very lively. No pie in the sky. The change will be all about change!

Silver Default in Progress

Not enough silver available at COMEX to cover shorts? Listen for yourself.

For background read this. Could this be the default that ends the silver manipulation?

What I Think Is Going To Happen

Predicting the future is a fool’s game, and I have often been proven to be a fool, so I feel qualified to give it a whirl.

1. The price of gasoline is going to continue going up, with occasional gaps up and slower declines from time to time. As $3 and then $4 per gallon is approached, consumption will show a small but increasing decline. Conservation will catch on.

2. Commerce will contract during this decline as the cost of doing business for all oil driven enterprises, e.g. farming, transportation and plastics, increases and more companies go under.

3. Increased joblessness, homelessness, hopelessness, suicide rate, and crime, all as natural consequences of the noose tightening on the necks of the workers, with stagnant wage increases, and in many cases, wage decreases, as illegal aliens continue to flood into the US.

4. The price of gold will continue to try to go up, but will be held back by bullion banks and their cohorts at all nations’ central banks. To say that the gold market is rigged is to understate the case. Of course it’s rigged, that’s why they call it the central bank.

5. Eventually these banks will be unable to offset the rising demand. Gold will gap up in an eye-popping fashion. Silver will do the same, and eventually outpace gold in terms of percentage gain. The silver demand growth is much greater than that of gold and will continue to grow.

6. Electrical brown-outs and then rolling blackouts will increase, and become the norm in the US.

7. Housing prices will continue their slow slide down, foreclosures will jump (46% of mortgage holders have some form of Adjustable Rate Mortgage), and homes will be boarded up.

8. Eventually Fannie Mae, Freddy Mac, and the Federal Pension Insurance Program will go under. Huge accounting “frauds” will be unearthed.

9. An event will occur which will be the tipping point of a major currency, financial and stock market crash; NASDAQ 800, DOW 4000. Even the hyper-hedgefunds will stop buying Treasuries.

10. This event will probably involve the global oil distribution network. Gasoline will gap up to $8 to $10 per gallon.

11. As petrochemical fertilizer becomes too expensive to use, The Great American Breadbasket will return to its original condition as The Great American Desert.

12. Global delivery of goods to the fat American consumer will cease. Wal-Mart will collapse as Chinese goods become very expensive, especially when the remimbi is un-pegged from the dollar. (Are the Chinese waiting to unpeg as the coup de gras to the crashing dollar?

13. The dollar decline will have continued throughout this unfolding, and inflation will have jumped up at some point, prompting the Fed to jump interest rates to 1980’s levels, and higher.
World-wide recession, and then depression, will set in.

14. Today’s third-world countries will suffer less shock, as they are less dependent upon oil.

15. Regional wars will continue and increase.

16. The “Only Superpower in the World” will be stretched so thin it will collapse, as long supply lines become untenable. Long before this, however, the draft will have been reinstated and the people will take to the streets.

17. As food disappears from the grocery store shelves, riots break out in the cities, police attempt but are unable to quell, and there is no National Guard to call in as they are all abroad fighting the Oil Wars.

18. People begin to flee the cities as the store of resources is used up.

19. Those currently living the furthest from the high-rise high-tech centers will fare the best. Communities currently off the grid will thrive.

20. The human and domestic animal die-off will begin. Corporate enterprise will cease.

21. High level organization will cease and power will descend to the tribal level. Warlords with gangs will roam freely.

22. Those currently living with the land and off the grid will have to organize to protect their holdings. Trespassers will be shot.

23. Those with survival skills will survive. Self-sufficiency will be key.

24. All solar panels will wear out.

25. Centralized electricity generation and distribution will cease.

26. Globalization will cease.

27. The 100-year Fossil Fuel Frenzy will come to an end.

28. Global warming will continue, sea levels will rise up to 19 feet, but the natural balance will out. This will take hundreds of years, but life on earth will continue and thrive.

29. Off the grid will be the norm, as the grid will devolve.

30. Humans who band together in tribes will rediscover their humanity. The extended family will form the basis for the tribes.

31. All knowledge will not be lost, and we will not all live in caves.

32. Barter and trade will be the standard, but gold and silver money will still be currency. US dollars will be tinder.

33. Just as all other civilizations have failed, so will ours. What evolves to replace it will be interesting, but the Fossil Fuel Frenzy civilization was a one-off phenomenon, and will not reoccur.

34. As 90% of the humans die, peace and tranquility will eventual come to the planet. The human cancer with its uncontrolled growth will be defeated. Humans will again be part of nature. Tribal war will become ceremonial, and the coup stick will be popular.

34. It's all good...except for one thing. Depleted uranium. The entire globe will suffer "gulf war syndrome" due to the 2000 tons of atomized uranium placed in the atmosphere by the US during this war.

35. Cancer rates will climb to 50% by 2020.

36. Most babies born will die from their deformities. Those that do not may have evolved immunity.

We can only hope.

Note: These are not my original ideas. Original sources are contained in past blogs.

Dollar in Meltdown Mode - IMF to Act?

Something big is coming this week. Maybe a whole bunch of big things: Rove indicted, dollar plummets, gold, silver, gold and silver, Iran, full NSA Echelon exposed, Bush's head explodes, who knows. But I feel it in my bones. Be alert - the world needs more lerts.

By way of GATA:

We are in meltdown mode,' said David Brown, chief European economist at Bear Stearns. 'It's all being whipped up into a bit of a selling frenzy. The dollar has a massive portfolio of negatives against it: it's the long-term problems of the trade deficit, and the government's budget deficit.'

Bloom warned that 'phase two' of a sell-off would cause turmoil in the equity markets, as on Friday, when both the Dow Jones and FTSE saw sharp losses. 'I'm expecting an increase in volatility and uncertainty across the board,' he said.

Brown added that the dollar's woes were likely to be exacerbated by central banks shifting their reserves towards other currencies, including the euro. 'Asian central banks have been buying fistfuls of dollars as the flipside of their massive current account surpluses. They're long dollars.'

He added that with the US current account deficit with the rest of the world worth 7 per cent (ed. note: 5% in any other country would be melting point) of its GDP in 2005, the White House and the Federal Reserve would probably be happy to watch the dollar decline. 'I don't think Washington's going to be concerned,' he said.

So Much for Holding Off on Silver

Yes, apparently the Buffet news did have an effect yesterday, but by this morning it had worn off and both silver and gold jumped out of bed with great enthusiasm. Although this is old news now, you can find further analysis here.

New Horizons

Long suffering readers who do not know me personally may believe that I have interests only in gold, silver, war in Iran, Bush-bashing, etc.

I do, however, have other interests, for example podcasting. Although not a regular podcaster myself, I've been working with Dr. Dave over at www.shrinkrapradio.com for the past two years. I'm mostly been providing feedback, and in the process Dave and I have renewed our friendship over the Internet with the generous help of Skype, the Internet phone, which seems to lend itself to this sort of thing. I don't know if it's the headset, the fact that you can call any phone in the U.S. for a flat fee of $14.95 per year, or what, but it works well for us, and we are sure having fun.

Now Dave, always the entrepreneur, has branched into Internet talk radio. It's available live for call in or real-time chat Sundays at 10:00 am Pacific time. He asked me to participate in the first show which you can listen to here:

Spontaneous and unrehearsed as they say. But with a psychology/spirituality theme. Check us out and call in this Sunday if you have comments or questions.

Live, from the "bleeding" edge.

Hi Ho Silver, Away!

Listen Up!

If you have any "funny money" ($US) sitting around in cash or savings accounts, now is the time to buy Silver Eagles. I know its already more than doubled, but when it hits $100/oz don't say I didn't warn you. (Today you can expect to pay about $14.95 each.)

Listen or read, but get going now!

Or, do nothing, and watch as your dollar (which has already lost 80% of its value since 1971) turns into legal tinder.

Yakkity Mogambo

I look forward to reading (and listening to, at eRadio on www.fmnn.com) Mogambo Guru's rant every week more than I used to look forward to the Weekly Reader in 3rd grade. This guy, Richard Daughty, can make you laugh while you are learning (with plenty of links to back it up) that unless you take action now (buy gold and/or silver) you are going to lose your shirt and the box it came in.

May I suggest that if you have any interest in your own welfare, you too will track him down.

"Yakety Yak, Don't Talk Back" The Coasters

Dollars, Dollars, Everywhere, and Not a One Worth Squat

Recall the hullabaloo resulting from Iran's announcement last summer that they were going to start an Iranian oil bourse (exchange) to conduct oil trade in Euros instead of US Dollars.

Iraq had infamously done this before and had suffered invasion. The conquering US immediately reversed the Iraqi policy.

The fate of the Iranian oil bourse became unclear as deadlines passed and contradictory statements were made. The threat seemed to lose its potency and the issue faded back into the desert sands.

Now comes Bush's soul mate Putin ("I looked into his eyes and saw his soul" to paraphrase Bush the seer) with a similar concept and the power to pull it off.

It is critical to American hegemony for the USD to remain the petro-dollar. A petro-ruble or a petro-euro would not do. Although I have seen some discussion of how devastating this change would be for the US, the consensus seems to be that the War in Iraq was launched in part to prevent the potentially devastating demise of the petro-dollar.

But boy-howdy, it looks like that former KGB soul mate may be on his way to creating competition for the Almighty (world reserve currency) Dollar.

Mike Whitney reports:

"On May 10, Russian President Vladimir Putin ignited a firestorm that is bound to sweep across the global economy. In his State of the Nation speech to parliament,, he announced that Russia was planning to make the ruble internationally convertible so that it could be used in oil and natural gas transactions. Presently, oil is denominated exclusively in dollars and sold through the New York Mercantile Exchange (NYMX) or the London Petroleum Exchange (LPE) both owned by American investors. If Russia proceeds with its plan, the ruble will go nose to nose with the dollar on the open market sending several billions of surplus greenbacks back to the United States. This could potentially send the American economy into freefall; triggering a deep recession and an extended period of hyper-inflation.

Currently, the central banks around the world carry large stockpiles of dollars to use in their purchases of oil. This gives the US a virtual monopoly on oil transactions. It also forces reluctant nations to continue using the dollar even though it is currently underwritten by $8.4 trillion national debt.

Putin's plan is similar to that of Iran, which announced that it would open an oil-bourse (oil exchange) on Kish Island in two months. The bourse would allow oil transactions to be made in petro-euros, thus discarding the dollar. The Bush administration's belligerence has intensified considerably since Iran made its intentions clear. In fact, just yesterday, Secretary of State Condi Rice said that "security guarantees were not on the table" regardless of any Iranian commitment to stop enriching uranium. In other words, Washington will not provide Iran a non-aggression pact whether it follows UN Security Council guidelines or not.

Surely, this is a sign that Uncle Sam is on a fast-track to war. (Empahsis mine.)

The United States must protect its dollar-monopoly in the oil trade or it will lose the advantage of being the world's reserve currency. As the reserve currency, the US can maintain its towering $8.4 trillion national debt and $800 billion trade deficit without fear of soaring interest rates or hyper-inflation. Trillions of greenbacks are constantly circulating in oil transactions just as hundreds of billions are stockpiled in foreign banks. In effect, the Federal Reserve is issuing bad checks with every dollar printed on the assumption that they will never reach the bank for collection. So far, they've been right, and as the price of oil continues to skyrocket, the Fed just keeps cheerily printing more worthless paper sending it to the 4 corners of the earth. Regrettably, if Russia or Iran goes ahead with their conversion plan, then the bad checks will flood back to their source and precipitate a meltdown.

America's economic supremacy depends entirely on its ability to compel nations to make their energy acquisitions in greenbacks. If the flaccid dollar is not linked to the world's most vital resource, then banks will dump it overnight. This extortion-racket is the system we are defending in Iraq, not democracy. It is a huckster's scam designed to perpetuate American debt by forcing worthless currency on the developing world.

In a recent article by Dave Kimble, “Collapse of the petrodollar looming", the author provides the details of Russia’s importance to the world oil market.

“Russia's oil exports represent 15.2% of the world's export trade in oil, making it a much more significant player than Iran, with 5.8% of export volumes. Russia also produces 25.8% of the world's gas exports, while Iran is still only entering this market as an exporter. Venezuela has 5.4% of the export market.

Obviously, it is not in Russia’s interest to trade with its European partners in dollars any more than it would be for the US to trade with Canada in rubles. Putin can strengthen the Russian economy and improve Russia’s prestige in the world as an energy superpower by transitioning to rubles. But, will Washington allow him to succeed?

A growing number of nations are now focusing on the empire’s Achilles’ heel, the dollar. Venezuela, Russia, Norway and Iran are all threatening to move away from the greenback. Is this a spontaneous uprising or is it a new type of asymmetrical warfare?

Whatever it is, Washington is bound to be reeling from the affects. After all, war maybe possible with Iran or Venezuela, but what about Russia? Would Bush be stupid enough to risk nuclear Armageddon to protect the drooping dollar?

The administration is exploring all of its options and is developing a strategy to crush Putin’s rebellion. (This may explain why Newsweek editor and undeclared spokesman for the Council on Foreign Relations (CFR), Fareed Zacharia, asked his guest on this week’s “Foreign Exchange” whether he thought Putin could be “assassinated?!? Hmmm? I wonder if we’ll hear similar sentiments from Tom Friedman this week?)

The Council on Foreign Relations (CFR), the secretive organization of 4,400 American elites from industry, finance, politics, media and the military (who operate the machinery of state behind the mask of democracy) has already issued a tersely worded attack on Putin (“Russia’ Wrong Direction; Manila Times) outlining what is expected for Russia to conform to American standards of conduct. The missive says that Russia is headed in “the wrong direction and that “a strategic partnership no longer seems possible. The article reiterates the usual canards that Putin is becoming more “authoritarian” and “presiding over the rollback of Russian democracy”. (No mention of flourishing democracy in Saudi Arabia or Uzbekistan?) The CFR cites Putin’s resistance to “US and NATO military access to Central Asian bases (which are a dagger put to Moscow’s throat) the banishing of Washington’s “regime change NGOs from operating freely in Russia (“Freedom Support Act funds) and Russia’s continued support for Iran’s “peaceful development of nuclear energy”.

America has never been a friend to Russia. It took full advantage of the confusion following the fall of the Soviet Union and used it to apply its neoliberal policies which destroyed the ruble, crushed the economy, and transferred the vast resources of the state to a handful of corrupt oligarchs. Putin single-handedly, put Russia back on solid footing; taking back Yukos from the venal Khordukovsky and addressing the pressing issues of unemployment and poverty-reduction. He is a fierce nationalist who enjoys a 72% approval rating and does not need the advice of the Bush administration or the CFR on the best path forward for his country.

The US has purposely strained relations with Russia by putting more military bases in Central Asia, feeding the turmoil in Chechnya, isolating Russia from its European neighbors, and directly intervening in its elections.

When the G-8 summit takes place next week, we should expect a full-throated attack from the corporate media on Putin as the latest incarnation of Adolph Hitler. Watch the fur fly as the forth estate descends on its newest victim like feral hounds to carrion. (Putin’s announcement that Russia would be converting to rubles HAS NOT APPEARED IN ANY WESTERN MEDIA. Like the Downing Street Memo, the firebombing of Falluja, or the “rigged 2004 elections, the western “free press scrupulously avoids any topic that may shed light on the real machinations of the US government)

Putin’s challenge to the dollar is the first salvo in a guerilla war that will end with the crash of the greenback and the restoration of parity among the nations of the world. It represents a tacit rejection of a system that requires coercion, torture and endless war to uphold its global dominance. When the dollar begins its inevitable decline, the global-economic paradigm will shift, the American war machine will grind to a halt, and the soldiers will come home. Maybe, then we can rebuild the republic according to the lost values of human rights and the rule of law. Putin’s plan is set to go into effect on July 1, 2006.


On a different topic:

I hope you've been taking advantage of the "correction" in the price of gold and silver to fortify your holdings. For you procrastinators, there is still time as the precious metals slowly climb back (and will soon surpass their former highs).