An (humorous) explanation of life.

On the first day, God created the dog and said, "Sit all day by the
door of your house and bark at anyone who comes in or walks past. For
this, I will give you a life span of twenty years."

The dog said, "That's a long time to be barking. How about only ten
years and I'll give you back the other ten?"

And God saw it was good.

On the second day, God created the monkey and said, "Entertain people,
do tricks, and make them laugh. For this, I'll give you a twenty-year
life span."

The monkey said, "Monkey tricks for twenty years? That's a pretty long
time to perform. How about I give you back ten like the dog did?"

And God, again saw it was good.

On the third day, God created the cow and said, "You must go into the
field with the farmer all day long and suffer under the sun, have
calves and give milk to support the farmer's family. For this, I will
give you a life span of sixty years."

The cow said, "That's kind of a tough life you want me to live for
sixty years. How about twenty and I'll give back the other forty?"

And God agreed it was good.

On the fourth day, God created humans and said, "Eat, sleep, play,
marry and enjoy your life. For this, I'll give you twenty years."

But the human said, "Only twenty years? Could you possibly give me my
twenty, the forty the cow gave back, the ten the monkey gave back, and
the ten the dog gave back; that makes eighty, okay?"

"Okay," said God, "You asked for it."

So that is why for our first twenty years, we eat, sleep, play and
enjoy ourselves. For the next forty years, we slave in the sun to
support our family. For the next ten years, we do monkey tricks to
entertain the grandchildren. And for the last ten years, we sit on the
front porch and bark at everyone.

Life has now been explained to you.

There is no need to thank me for this valuable information. I'm doing
it as a public service. If you are looking for me I will be on the
front porch.

WHY?

As we see Larry's predictions coming true (rising dollar, rising oil and turmoil in Europe and the Middle East), we can only wonder: why is gold falling? Actually, we should be asking an altogether different question, since we know why gold is falling - Western financial institutions are acting in concert to suppress the gold price. Why are Western financial institutions suppressing the price of gold? That is the question we need to ask and answer.

Stephen Leeb speculates in a KWN interview:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/5_Gold_%26_A_Global_Financial_System_In_Complete_Turmoil.html

Leeb speculates that the BIS and other central banks are afraid that if gold is recognized as Tier One currency then we will have a five digit gold price (in US Dollars) and the Dollar will lose its status as a reserve currency. Should that happen, we will have hyperinflation, because no one will buy worthless US paper.

That may be the answer.

Portugal joins chaos - Italy simmers.

Portugal is another arrow in the quiver of European instability. Al Reuters describes the situation thus: http://www.reuters.com/article/2013/07/03/us-portugal-crisis-idUSBRE96208E20130703

Portugal's commitment to austerity is question.

Italians are fretting that increasing interest rates once again threaten.

Dangerous signs multiplying.

The carefully crafted façade of Social Democracy is coming apart. According to Larry Edelson, we are moving into a cycle of war and sure enough: There is a war in Syria and perhaps another starting in Egypt. This is not affecting gold prices yet, but the price of oil is ratcheted toward $100/BBl.

The second thread is the accelerating pace of transferring gold from West to East. The size of tis drain is estimated at 500 tons/month. This is the consequence of the two or three takedowns orchestrated by Central Banks such as the FED. Someday we will find out why. Hopefully, as Bernanke is being tried.

The third thread is Greece (again). The Greeks are negotiating for the last installment of bailout money: E8B. The Troika complains that the Greeks are not living up to the privatization schemes they had agreed to and the Greeks are desperate to once again fool the troika. What happens if there is no agreement? Or the Greeks are no longer willing to live frugally? In any case, the E8B is the last installment so the Greeks can roll over some bonds. Then what?

Economic troubles of the Western world and China.

1. Socialism and Social Democracy.

At the bottom of the economic troubles lie the Universities (Academia), the Media and arts communities that have become dominated by the Left. These folks teach and promote various types of Socialism; whether actual government ownership or 'merely' directing economies - they teach a less efficient economic practice.

2. Less production to go around.

Why is Socialism so inefficient? Because Socialists do not prize efficiency, they prize equality. They also promote the growth of government. The resulting inefficiency reduces the amount of money people can be paid. Politicians promise more. The 'more' comes from printing money. Deficit financing, in other words.

3. Accumulating debt reduces funds available for investing. Why? Because there is interest being paid on the debt.

4. Printing money causes inflation.

Years of Socialist economy produces days of reckoning when the governments can no longer manage the debt and things implode.

A. Exploding debt by Central Banks. Central Banks print money then buy things like bonds. The banks then consider these "assets." Since the current crisis began the ECB's assets increased 200%, the FED added 400% and the Bank of China 800%.

B. Banks become over leveraged. In addition to the printing of money, Central Banks allow banks to become over leveraged. Take the big, German banks, the most solvent in Europe. They are leveraged by a factor of 30. Consider what this means. A bank that has 10B in reserves can loan out 300B. If times are good, the loans are bringing in interest. But, if recession hits and 5% of the loans become non-performing (customers can't pay), the bank's assets lose 15B and the bank is insolvent. And that's just the German banks, others are even more leveraged.

C. Banks are losing gold. The suppression of the gold price (orchestrated by the FED and the ECB), is promoting the transfer of gold to the East. The lower prices also lower bank reserves.

Some day heads will roll for all the manipulation. We know that English banks manipulated LIBOR (London Interbank Overnight Rates) increasing the bank distress in Europe. We know that gold price is being manipulated, causing gold production to decline and mines to shut down. Some of the perps will not escape scrutiny.

The Twin Financial Hurricanes.

Two storms are battering the financial world: 1. the European banking crisis and 2. the FED's intentions. To be sure, both are linked to the failure of Soft Socialism, or Social Democracy as it is called in Europe. It is the idea that the government knows best and can allocate funds from taxing away over one half of citizens' income and run education, health care, transportation and welfare. When productivity falls, the shortfall is made up of deficit financing. The problem is that Socialism kills individual incentive, so deficits have become a way of life. Add to this the chorus of Krugmans that deficits do not matter and Central Banks should print huge amounts of money and the current plight is certain.

Here is the latest on the twin financial crises:

1. The European banking crisis.

The EU finance ministers met in Luxemburg and produced a great failure. Then they met in Brussels which meeting has just finished this week. It took 7 hours to negotiate how to handle failing banks. These are the decisions:

1. they discussed the use of the European Stability Mechanism.
2. shareholders and creditors are liable first if a bank fails
3. want to allow governments to nationalize failed banks
4. want to stop the contagion from banks to nations.

"Bail in" is the way to go. In other words, the Cyprus model that strips large deposits. This will not calm the nerves of bank depositors. Will it start a bank run? Almost certainly.  So far, market reaction has been positive. However, the big question is 'what will the Germans do?' Merkel must look tough for the September election and without German help these agreements do not mean much. Another question is the consent of the EU Parliament. The system is so complicated that it is unwieldy.

The FED's intentions.

FED Chairmen used to be terse, close mouthed and prone to obfuscate. Bernanke tried to change this. In his latest news conference he raised the possibility that the FED would "taper" (meaning slowly phase out) the bond buying (QE), but maintain low interest rates. The Market does not buy it, after all, there is a connection between the bond buying and interest rates. Treasury rates increased and bond prices fell steeply.

Where will people put the money that comes out of Treasuries? What will China do?

Larry's latest prediction of gold bottom.

Would you believe between 1170 and 1200? We are almost there.

What is driving the banking difficulties in Europe? Banks are insolvent and Germany will not step in because there is an ELECTION in September and Angela Merkel does not want to defend Germany being stuck with bailout costs. Can the European banks last out the Summer?