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Avoiding Wealth Confiscation... With Profit!

Stock-Markets / Financial Markets 2010 Feb 05, 2010 - 07:07 PM GMT

By: DeepCaster_LLC

“The issue which has swept down the centuries and which will have to be fought sooner or later is the banks.”

Lord Acton, 1834-1902

“In the absence of the gold standard there is no way to protect savings from confiscation through inflation…

Deficit Spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

Alan Greenspan, 1966 (!)

Protection and enhancement of wealth is an ever-increasing challenge.

The First and foremost Threat to Wealth is de facto confiscation by government and Mega-Financial Institutions.

Therefore, we identify several of the most serious Threats and offer a Strategy designed to protect Wealth, and to Profit.

One Prospective Threat emanates from The Securities and Exchange Commission’s recently enacted Rule that would prohibit depositor redemption of their deposits in money market funds in times of “extraordinary stress”.

Incredible! Are not times of “extraordinary stress” precisely those times when depositors will likely have the greatest need for their funds? Under the new rule:

A fund can now prevent people from withdrawing their money if three conditions are fulfilled:

• The fund’s share price falls below the fund’s stable net asset value per share.
• The fund’s board of directors approves liquidation of the fund.
• The fund notifies the SEC of its decision to liquidate and suspend redemptions.

But if the shares price falls below the fund’s stable net asset value per share, that would likely indicate a financial crisis which would likely occur at a time when many depositors would most need to redeem shares.

And in the event of such a crisis would not this rule impose a de facto confiscation of depositors wealth?

Conclusion: think thrice before parking Money in Money Market Funds.

Consider also the U.S. Treasury’s Christmas Eve provision of a de facto unlimited government (i.e. Taxpayers) guarantee of Fannie Mae and Freddie Mac obligations. De Facto, this is an imposition of yet another U.S. Taxpayer guarantee that Mega-financial-institutions will be funded at par. Indeed, as Tyler Durden explains, ongoing Fed actions are tantamount to spending $1.5 Trillion via expanded Treasury (i.e. Taxpayer) Debt to protect Mega-Financial-Institution Bondholders.

“…the one aspect of financial reform that the Administration should be focusing on, the shadow nationalized balance sheet, that of Fannie and Freddie, keeps getting absolutely no focus…banker bonuses are merely a tiny speck when one considers the massive incremental leverage that America will be saddled with each and every year as ever increasing losses at the institutions that funded the housing bubble, and, consequentially, those lenders that have funded these GSEs, are not only recognized but continue to be funded at par. In essence this is money coming out of America's middle-class pocket…

 How to spend $1.5 trillion without Congressional approval

Step 1: Federal Reserve purchases $1.5 trillion in Fannie Mae and Freddie Mac securities, creating $1.5 trillion of monetary base to pay for these purchases.

Step 2: U.S. Treasury quietly announces unlimited support for Fannie Mae and Freddie Mac on December 24, 2009, exploiting a loophole in a 2008 law that was originally written to insure a maximum of $300 billion in total mortgage principal (not losses, but principal).

Step 3: Over the next several quarters, the U.S. Treasury issues $1.5 trillion in new Treasury debt to the public, taking in the $1.5 trillion in base money created by the Fed in Step 1.

Step 4: U.S. Treasury hands that $1.5 trillion in proceeds from the new debt issuance to Fannie Mae and Freddie Mac.

Step 5: Fannie Mae and Freddie Mac use the proceeds to redeem the $1.5 trillion in mortgage securities held by the Fed, thus reversing the Fed's transactions in Step 1, without the need for any other "unwinding" transactions (watch). The base money created by the Fed comes back to the Fed, and the mortgage securities purchased by the Fed disappear, by burdening the American public with a new, equivalent obligation in the form of U.S. government debt.

 Outcome: The Federal Reserve closes its positions in Fannie Mae and Freddie Mac securities, the quantity of outstanding Fannie Mae and Freddie Mac liabilities declines by $1.5 trillion, thus allowing their remaining assets repay the remaining liabilities without a $1.5 trillion hole of insolvency, and the outstanding quantity of U.S. Treasury debt expands by $1.5 trillion in order to protect the lenders, while ordinary Americans continue to lose their homes and jobs.

Throughout this crisis, the ultimate objective of Bernanke and Geithner has consistently been to protect the bondholders. This objective will not change unless the leadership changes.”

“Observations On The Ongoing $1.5 Trillion GSE Wealth Transfer” Tyler Durden, Zero Hedge, 1/25/2010

Tyler Durden eloquently identifies one, but only one of several, ongoing “Initiatives” which result in de facto Mega-Bank Wealth Appropriations.

For example, do not fail to consider that the private for-profit U.S. Federal Reserve recently indicated they would return their Bailout Profits of some $50 Billion to the U.S. Treasury.

But before applauding this apparent generosity too loudly, one should speculate (we do not “know” – The private for-profit Fed refuses to tell even Congress) what The Fed makes from its ongoing operations. For example, it prints (keystrokes) money into existence for free and then uses it to purchase Treasury Securities on which U.S. Taxpayers are obligated to pay interest, just to consider one Fed “Profit Center”.

Mega-Financial Institution Profits are truly Staggering, as acknowledged by the Mega Financial Institutions themselves.

The Central Bankers Bank, The Bank for International Settlement in Basel, Switzerland, publically reported some $11.9 Trillion in Mega-Financial Institutions’ OTC Derivatives Gains in the 6 months from June, 2008 to December, 2008 when Investors were losing Trillions in the Market Crash that Fall (see www.bis.org, path: Statistics>Derivatives>Table 19). Could it be that Mega-Banksters might have “known something in advance” or been instrumental in Causing the Fall, 2008 Crash?

This is not mere Wild Speculation when one considers the clear and convincing evidence that a Fed led Cartel* of Central Banks and their allies and agents regularly, both overtly and covertly manipulate Major Markets.

*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts And December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2009 Letter entitled  "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the “Alerts” and “Latest Letter” Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”

Especially victimized by price Suppression of Gold and Silver. Yesterday’s $50 Takedown is a case in point.

The Cartel’s motivation for this is clear. Were Gold and Silver to become increasingly widely acknowledged as the legitimate Ultimate Stores and Measures of Value, that would further delegitimize the Cartel’s Fiat Currencies and Treasury Securities. In that event The Cartel would lose Power and Profit. (Deepcaster has designed a Strategy to Profit from Gold and Silver despite Cartel Intervention. See “Defeating The Cartel…with Profit” (03/28/2008) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.)

And as if the foregoing were not sufficient Threats consider that yet another scheme to Transfer Wealth from Investors and Savers worldwide was recently floated by the U.S. Department of Treasury and Labor.

That Scheme would require Savers to Invest a portion of their (some $15 Trillion in aggregate) 401(k) plan and IRA’s into U.S. Government bonds which would provide annuity-like payment streams. A de facto nationalization of retirement accounts.

Of course, this prospective requirement would create additional (much–needed by the U.S. Government) demand for U.S. Treasury Securities, which are increasingly disfavored by Buyers (like China and Japan) who have, historically, been the largest buyers.

Of course, such a Requirement would be a de facto confiscation of the Retirement Savings of Millions. That is because U.S. Treasury Paper will surely become increasingly devalued in the next few years due to increasingly massive issuance, and consequent hyperinflation.

Indeed, the Obama Administration’s tax package referred to in the Recent State of the Union Address would require:

• Small businesses to offer IRA’s, and
• Require 10% of the funds to be kept in U.S. Treasuries

And as if these actual and prospective confiscations were not enough, perhaps the largest Wealth Confiscation in History has already occurred, and is still occurring, towit.

Since the founding of the private for-profit U.S. Federal Reserve in 1913, the Purchasing Power of the U.S. Dollar has declined over 97%. This has resulted a de facto confiscation of the Wealth Savers, Retirees and U.S. Dollar denominated Asset Holders around the World. A Stealth Tax, in other words.

Worse, in the past 8 years the Purchasing Power of the U.S. Dollar declined over 30% -- Wealth confiscation via The Cartel is accelerating.

And as if all this were not enough, the ongoing Confiscation of the Wealth of Investors and businesses alike is being Masked by bogus Official Statistics.

Consider the following Real Numbers from Shadowstats.com which calculates the Real Numbers for the U.S.A. the way they were calculated in the 1980’s and 1990’s before Official Data Manipulation began in earnest.

Official Numbers       vs.      Real Numbers

Annual Consumer Price Inflation reported January 15, 2010

2.72%                              9.68% (annualized January Rate)

U.S. Unemployment reported February 5, 2010

9.7%                               21.2%

U.S. GDP Annual Growth/Decline reported January 29,

2010 0.10%                              -4.62%

What to do?

The Systemic Solution

Allowing the International Economy to be based on a Fiat Reserve Currency such as the U.S. Dollar is unsustainable.  No Fiat Currency Regime in the history of the world has ever survived indefinitely. Fiat Currencies simply facilitate Mega-Banksters Mega-Profits.

So The Systemic Solution is apparent.  We outline it as follows:

1) Re-link the world’s Reserve Currency (the U.S. Dollar) to Gold and Silver, the Monetary Metals which are both stores and measures of value, tangible value.

Failure to re-link currencies to Gold and Silver will allow a continuing massive and unsustainable inflation of the money supply and credit by the Fed-led Cartel* of Central Bankers.  Unless such re-linking to Gold and Silver is accomplished, the U.S. Dollar is likely doomed in the long-run, with severely negative consequences.

Money supply inflation typically leads to price inflation and the continuing extraordinary rate of increase in the money supply, (as a number of commentators have pointed out) is leading us down the path to a Hyperinflationary Depression.  (c.f. shadowstats.com).  And, more ominously, it is leading us to an attempt to implement The Cartel “End Game” (see June Deepcaster’s 2007 Letter “Profiting From the Push to Denationalize Currencies and Deconstruct Nations” at www.deepcaster.com.).

But the private for-profit U.S. Federal Reserve and its Cartel Allies are not likely to give up their Fiat Currency and “un-backed” Treasury Securities that easily - - they are the source of its power and wealth.  The Fed and associated International Financial Allies will strenuously resist.  Thus,

2) Legendary investor Jim Rogers has neatly expressed The Solution to the problem of The Fed:  “The Fed should be abolished and Chairman Bernanke should resign.”  (March, 2008, CNBC)

An excellent idea.  Indeed, The Fed is a private for-profit group of International Banks, whose main motivation is in providing profits for, and protecting the interests of, The International Bankers’ Cartel and favored institutions and associated parasites, not in serving the needs of U.S. citizens (or most citizens of other countries for that matter). The nonprofit group Carrying Capacity Network (www.carryingcapacity.org) advocates Auditing and Abolishing The Fed.

• To replace The Fed, and in order to protect ordinary citizens interests, the U.S. Congress should create a genuinely National Bank under the auspices of the U.S. Treasury Department as authorized by the U.S. Constitution.  That truly National Bank should be the money issuer for the United States, not the private for-profit Cartel of International Bankers known as The Fed.

This is not such a radical idea.  President Kennedy caused U.S. Notes to be issued late in his presidency as a replacement for Federal Reserve Notes.  [He was killed a few months after the issuance was started and the U.S. Notes disappeared from the market.] This would relieve U.S. Taxpayers from the obligation to pay interest on the dollars The Fed prints for free.

The Cartel End Game

We are facing an ongoing international crisis of unprecedented proportions.  It is clear to Deepcaster that those who run the Fed-led Cartel cannot be so stupid as to not know where their hyperinflation of the money supply and consequent Consumers Price Inflation (according to shadowstats.com CPI, as of the January 15, 2010 Report, was 9.68% (Yr/Yr %) as of December, 2009), and other bubble-crisis-creating policies are leading us.

Thus if The Cartel leaders know what they are doing what is their ‘End Game’? For details regarding The Cartel’s ‘End Game’ Strategy see “Investor Advantage — Revisiting the Cartel's 'End Game'” (3/6/09) and “Surmounting The Cartel’s ‘End Game’ Juggernaut” (09/25/09) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.

The Solution – A Strategy for Investors & Traders

The Solution is to invest in Hard Assets according to the following Strategy designed to diminish the effects of adverse Cartel actions.

A major premise of The Strategy is that one can certainly remain a Hard Assets Partisan while at the same time insulating oneself from future Cartel Takedowns.  The following points provide an outline of The Strategy (particularly as applied to the Gold and Silver Markets) and are designed to help avoid such unpleasantness, or even possible financial ruin, in the future, as well as to profit along the way:

1. Recognize that The Cartel is still Potent, as difficult as that may be psychologically for Deepcaster and other Hard Asset Partisans to acknowledge (the February 4th nearly $50 Takedown of the Gold Price is a case in Point). The Cartel is still the Biggest Player in many markets and, if the timing and market context are propitious, the Biggest Player makes Market Price.  In addition, The Cartel has the advantage of de facto controlling the structure and regulation of various marketplaces and that is a tremendous advantage; just as the Hunt Brothers years ago discovered much to their dismay and misfortune, when they tried to corner the Silver Market.
2. Accumulate Hard Assets near the Interim Bottoms of Cartel- induced Takedowns.
3. In order to know when one is near the bottom of a Cartel-generated takedown, it is essential to take account of the Interventionals as well as the Technicals and Fundamentals.
4. For example, regarding Gold & Silver, near such Interim Bottoms, accumulate a combination of the Physical Commodity (Deepcaster prefers “low premium to melt” bullion coins) and well-managed Juniors with large reserves.  (Deepcaster provides a list of such Junior Candidates in our December 20, 2007 Alert “A Strategy for Profiting from Cartel Intervention” available in the Alerts Cache at www.deepcaster.com.)  The “Physical” and “Juniors” are for holding for the long-term as a Core Position.
5. Then, to the extent one wishes to speculate on the next “long” move, one should buy the major producers or long-term options on them.  These latter positions are for ultimate liquidation at the next Interim Top and are not for holding for the long-term.
6. Indeed, there will be a time when The Cartel price capping is ineffective and Gold & Silver make record moves upward.  The benefit of this Strategy is that one will likely be long in one’s speculative positions when this happens.
7. Near the next Interim Top, liquidate the long options and majors.  Again, in order to know when we are close to the next Interim Top, it is essential to monitor the Interventionals, as well as Fundamentals and Technicals.
8. At that Top, sell short or buy puts on Majors.  We re-emphasize the Majors as preferred vehicles for trading positions because such positions are more liquid and tend to be quite responsive to Cartel moves.
9. At the next Interim Bottom, cover your shorts and liquidate your puts and go long again to begin the process all over again.  We emphasize that it is essential to consider the Interventionals as well as the Fundamentals and Technicals in order to determine the approximate Interim Tops and Bottoms.
10. Be just as willing to go short as to go long, and even using leveraged funds. Deepcaster has already recommended seven short funds to subscribers, six of which are gaining, as we write.
11. Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of the Central Banker Cartel.  It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets only to have those assets effectively de-valued by Cartel Takedowns.  This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them.  In order to help prevent this and similar outrages, we recommend taking three steps:
    1. Become involved in the movement to abolish the U.S. Federal Reserve (a private for-profit Cartel of International Banks) as Deepcaster, Presidential candidate Rep. Ron Paul, and legendary investor Jim Rogers, all have advocated. The non-profit group Carrying Capacity Network (www.carryingcapacity.org) advocates abolishing The Fed.
    2. Join the Gold AntiTrust Action Committee which works to eliminate the manipulation of the Gold and Silver markets (www.gata.org).  GATA is a non-profit organization which makes a great contribution by gathering evidence regarding the suppression of prices of Gold, Silver and other commodities.
    3. Work to defeat The Cartel ‘End Game.’ Deepcaster has laid out the evidence regarding the Ominous Cartel “End Game.” Clearly The Cartel is pushing ever greater debts on Taxpayers and is sacrificing the U.S. Dollar to prop up international financial institutions and to maintain and enhance its Power and Profit.  But this sacrifice cannot continue forever.

Best Regards,

By DEEPCASTER LLC

www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation         Wealth Enhancement

© 2010 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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Comments

Mike 05 Feb 10, 23:16

Government confiscation of our stuff If the gubment maggots want trouble, let 'em try to confiscate ANYTHING belonging to the citizens. We'll eat 'em for lunch.