I'm gonna turn this over to mike maloney
okay really get set up I'm gonna talk a
little bit about the current housing
bubble mortgage debt this is the the
cumulative current account deficit but
look at where mortgage debt is these
this is what we've done using our houses
it's ATM machines to buy SUVs and all of
that stuff that we buy from China and
Japan that creates this current account
deficit and this is people refinancing
their houses the household sector debt
as a percent of GDP this is the
homebuilders index as compared to the
Nasdaq they look pretty darn similar
there and it has started to roll over
this is out of the local newspaper in
Los Angeles home prices jumped 17% in
the house land at Southland do we have a
housing bubble no we've got a hyper
bubble inflation adjusted home index
price back to 1890 this is the cost of
building the home this is the population
in the 10-year bond yield home prices
are just in loonatics bill the home
building industry this is the insider
buy sell ratios now to understand what
this is you need to know what the
average is and there's always more cells
than bias because the owners of all
these companies and the insiders are
issued stock when they start up the
companies and eventually that stock does
get sold but it's usually around three
three cells for each buy we've got 314
331 nine thousand seven hundred and
forty four so all the home builders are
getting out of their own industry they
know that there's a bubble here and that
this is the top yeah yeah banking
industry remember that three is the
average 11 11 five point four nine point
one they know what's coming
debt-to-gdp this is a really interesting
chart you know we had a previous peak
here if you notice
in 1929 when the stock market crashed we
were right here this is the is not
people borrowing money this is the
contraction of the GDP during the
Depression people that had already
borrowed money lost their homes and
their businesses to the banks during
this contraction so as in a ratio chart
two things can drive this up you can
either borrow more money and it goes up
or you can shrink the GDP and it goes up
if you pay back some of that money it
goes down or if you increase the GDP it
goes down well right now we're way up
here if there is a crisis or and one of
these bubbles pops if the real estate
bubble pops then you're gonna see this
chart just just go to the moon and the
banks are going to end up owning most of
this country federal budget trajectory
this is a projection and we're right in
here and our revenues and our spending
I'm not as much of a deflation estai
think we're going to have a short
deflation I think that what's going to
happen is that we're going to have been
burn the currency Bernanke is our next
Fed head and that we're going to get a
well I'll open that PowerPoint later
we're gonna have the housing bubble pop
there will be a contraction in the m3
money supply because of all the wave the
tsunami of bankruptcies that's coming
and at the same time people are going to
be dumping all their dollar denominated
assets on the international markets
anybody that's in in any dollar
denominated asset if they're a foreigner
and they see the the US dollar index
break its its support they're going to
be dumping these and if foreign central
banks start dumping the dollar plunges
internationally but that caused
skyrocketing import prices and we don't
make that much stuff anymore
so you're gonna see an in deflation I
call it Jim pop lava used to call it
that a while back but your everything in
the United States houses
and your wages and the this the the and
the things that you don't need are going
to go down in price well the things you
do need anything like oil the is going
to skyrocket as the dollar plunges they
have to offset that by raising the price
to have the same purchasing power
overseas so you're gonna see oil
skyrocket and then they may unpack at
that point and either start using the
euro or perhaps gold and that is the
point where China will completely unpaid
for the dollar because they will have
nothing to lose they import about thirty
percent of the world's commodities and
they use more than 50 percent of the
world's cement and as the dollar plunges
the price of all those things is
skyrocketing as long as they stay pegged
to the dollar they're gonna see the same
inflation in those prices as we will and
at that point they will probably unpaid
from the dollar and then we've got all
of this money flooding back to us
they're all selling their dollars on the
markets so all those dollars are coming
home from overseas JP Morgan one of the
original holders of the Federal Reserve
he said this before the feds of the
Federal Reserve gold and silver our
money everything else is credit
inflation-adjusted gold you can see that
we don't we haven't hit these eighteen
year highs and prices if your inflation
adjust everything Gold is still dirt
cheap this is the gold crude light sweet
crude ratio and it's down in the range
of six or seven and it needs to get back
up here at fifteen or so so we're
fifteen to twenty eight probably
eighteen so we're probably gold needs to
rise probably three times to get this
ratio this ratio out of whack that which
is out of rat whack now back into
equilibrium we've seen this chart before
but I bring it back just to remind you
that this is again an exponential curve
going right off the top of the chart
this is inflation-adjusted Dao going
back to 1800 it's actually two indices
pasted together because the dad didn't
exist all the way back to 1800 but the
1929 crash and then you see an
inflation-adjusted crash that died
actually bumped its head on 1,000 from
1960 to 6 to 82 but when you take away
inflation that crash was every bit as
bad you can see it overshoots to the
downside here into the upside here as
the 1929 crash and we're headed right
back there and you will see Dow and the
goal and gold meet one day the Dow goes
this gold silver ratio I mean the Dow
silver ratio this started out at around
50 here in 1980 but it even goes lower
than that
this is 81 goes a lot lower than that in
80 but we're currently still at 1500 so
a silver has a long way to go to get
back to its equilibrium the silver
deficit now we're finally getting to the
silver story one thing that sort of
bothers me is the increase in production
part of it is because of the commodity
prices in copper and nickel and zinc and
lead all the consumption that's going on
in China bringing a lot more silver to
the market through the people that
produce silver as a by-product but last
year I sat here and listened to Hekla
and Coeur d'Alene and pan-american talk
about the increases in production that
they were going to bring to market this
year and I'm working the numbers in my
head and it was something like 30
million ounces and stuff and I'm
thinking wow if you guys are successful
you could mine silver at a loss
indefinitely they didn't have any plan
for keeping these two lines from
crossing and they could by just
withholding some production and then
they've got that silver at a higher
price they've got it in stock ready to
sell they could keep their door a bars
and that's what you've been trying to
get them to do you were the first one to
suggest it and thank you Jason it's I
believe in that I know that some of the
miners don't but I'm fully behind you on
this is a chart from right off of the
silver Institute's website and we've got
all the different types of purchases but
the one that I'm really interested in
here is investment demand and they're
only showing any investment demand in
2001 and 2004 and there's this big old
price spike here but imagine a casino
game one hand of cards if the house
loses you win ten times your bet
if the house wins you keep your bed
anyway and as long as you keep playing
you win of course there's no such casino
game but if there was we're how much
would you bet silver is that bet
there's there's no downside risk to
silver right now this is the financial
report of the United States you can go
to the US Treasurys website you can
download this thing these are some of
the figures but they are lying to us
this is a cash they they show us this
cash accounting you see this on the news
whenever you hear what the budget
deficit is and everybody rants and raves
about it for about two weeks and then
you don't hear about it again then three
months later they put the this complete
200 page report on their website and in
there you can find a generally accepted
accounting practices accounting and I
made these charts based on those numbers
generally accepted counting and
practices is what the US government
holds every public corporation - that's
the standard that they all have to come
to and it includes your accounts payable
and your accounts receivable the US
government doesn't want to live up to
the same standards
this is GAAP and if you add in the
off-budget
Social Security and Medicare you add
that in to the GAAP accounting this is
the cash accounting the GAAP accounting
and then with Social Security and
Medicare these do not include things
like the wars the war on terror the war
in Afghanistan the war
in Iraq this is 11 point one trillion
dollars that is 96 percent of GDP
America is broke with their Bush and
Greenspan have taken us past the point
of no return it's not possible to fix
this anymore it was possible before the
2000 elections we could have we could
have done something to fix the world
economy these are the entitlements these
are the things that are killing us
Medicare Social Security Medicaid
Medicare and Social Security but this is
the interest on the public debt and that
one is ultimately the thing that's going
to you can't borrow money forever
without the interest costing more than
what your payment is eventually and you
have to borrow so much more money just
to make that payment and the interest
the next day is so much higher that you
have to borrow more money to make that
payment and you get into the runaway
inflation the hyperinflation that they
had in the Weimar Republic in 1923 debt
versus income you this is just a nun say
it's not sustainable you can't do this
forever this is a total American debt
federal state local business household
and domestic financial sectors and we're
40 trillion dollars in this chart it
starts in two at the beginning of 2004
government is growing and private
industry the private sector is shrinking
and all of these things are part of the
government now last year there was a
bunch of rhetoric rhetoric about Iran's
nuclear program and that was really
because they're going to be establishing
trading for oil in Euros and they don't
want to see that happen because it takes
the dollars stature away that could be
the straw that breaks the camel's back
and throws our economy in a tailspin and
they're trying to prove they want to
maintain
power that they've got and this is the
big excuse and we have Iran surrounded
we've got Afghanistan on one side we've
got Iraq on the other side
President Bush just signed a two hundred
and eighty six billion dollar transit
bill more public works projects we've
got three of the most expensive wars in
history the war in Iraq 5.6 billion per
month 186 million a day 7.75 million an
hour Iraq and Afghanistan could could be
more than the total Vietnam War Mark
Fabra is long in in the long term any
country which lives beyond its means
will end up paying the price this is the
Consumer Price Index so this is showing
inflation
we've got 1944 so World War two the
Vietnam War all the money that we
created during that time came back to
haunt us with people driving up the
price of gold and when Nixon took us off
the gold standard in 1971 which is right
there the inflation just soared alan
greenspan 1966 in the absence of the
gold standard there's no way to protect
savings from confiscation through
inflation there is no safe a safe store
of value if there were the government
would have to make its holding illegal
as was in the case of gold the wear out
welfare state requires that there be no
way for owners of wealth to protect
themselves deficit spending is simply a
scheme for the confiscation of wealth
Robert Rubin former Treasury secretary
from 1995 to 1999 we can continue to
close our eyes and hope for the best
there's no way to protect to predict
whether that will work for another few
months or another few years but the odds
are extremely low that our financial
imbalances will solve themselves and we
place ourselves a great peril by not
facing these realities and bush and
greenspan are definitely not facing
these realities the former assistant
secretary of the treasury the US has be
come the world's largest debtor and the
ratio of external debt to US exports is
approaching crisis ratios of banana
republics
let me issue and control a nation's
money and I care not who writes the laws
if the American people ever allow banks
to control the issuance of their
currency first by inflation and then by
deflation the corporation's that will
grow up around them will deprive the
people of all property until their
children wake up homeless on the
continent their fathers occupied I
sincerely believe the banking
institutions having the the issuing
power of money are more dangerous to
Liberty than standing armies Thomas
Jefferson
you