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"The average age of the world s greatest civilizations has been two hundred years.

These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from libe rty to abundance, from abundance to complacency; from complacency to apathy, fro m apathy to dependence, from dependence back into bondage." - Professor Joseph O lson When credit is tight, we have receivables mounting across a wide swath of manufa cturing. Consumers' willingness to buy large-ticket items like cars and applianc es diminishes. "All bubbles are caused by price rise triggered by increased spending ability wh ile supply has not decreased." - Kannor. Cheap credit, punishes savings and enco urages investment/speculation, misallocation of capital. There are those within the leadership who are concerned that average home prices have gotten too high for most first-time buyers. Against a background of cheap money and plenty of credit, house prices across the country have become unafford able to most first-time buyers. But it is to be noted that Land is the most-used collateral for bank loans; its value is thus crucial to the credit edifice. According to the theory of Keynes, employment depends on aggregate demand, whose components, in the private sector, are consumer spending and business investmen t, while the level of investment spending depends on the interest rate and the r ate of expected return on new investments. Milton Friedman was wrong; money supply does not drive the economy. Spending doe s. The money must get into the hands of the people who will spend it, which is w hy the economy runs better at full employment. If the new money is used to create new goods and services, prices will remain st able. Businesses have set aside a record amount of cash because there's no need to inc rease capacity when the health of the consumer is in doubt. Who will buy their p roducts, that's the question? That's is why Keynesians focus aggregate demand r ather than on money supply. Consumption and investment are both spending and--as we noted earlier--spending generates activity and grows the economy. Presently, there is no suitable outlet for investment because households are cut ting back to patch their balance sheets. Government can help by increasing defic its and putting people to work. Then business investment will resume, state reve nues will increase, and the economy will rebound. Deficits work. If deficits were a problem, the yields on government debt (US Treasuries) would go up. But yields are historically low and headed lower. The GOP says that defic its are a problem. The market says that deficits are not a problem. Who is right and who is wrong? Smart people will trust the market and ignore the political o pportunists. But if an economy starts with real GDP of $14.3 trillion (i.e. the level for 20 09), and it is shocked by a surge in deficit spending, such as has been the case in the U.S., GDP will grow, but the economy will then eventually return to esse ntially where it began. However, the deficit spending shock leaves the economy i n a more precarious overall condition because the same sized economy must now su pport a higher level of debt. Going forward, the diminished private sector must generate the resources (i.e. t he funds) to service and/ or repay the increased level of debt. If the private s ector is not successful in generating the additional resources needed, the gover

nment sector must either go deeper into debt or impose additional taxes on the a lready stressed private sector. Considerable evidence suggests that this self-de feating process has already resulted in transfers of resources from the private sector to the government sector. There is a reduced incentive to take risks in a n environment of substantially higher taxes. Thus, inflation and real GDP could both post surprisingly meager readings. In this environment, holdings of long Tr easury paper will serve not only as a safe haven but an asset whose value will a ppreciate significantly. Another aspect of the debt problem must be considered. The debt was used to acqu ire a large number of things that are no longer needed in the sense that they ar e not viable in view of current economic circumstances. The high debt ratio refl ects vast amounts of unused factory capacity, office space, warehouses, retail s pace, and other facilities. The real quantity of money has important effects on the efficiency of operation of the economic mechanism ... Yet only recently has much thought been given to w hat the optimum quantity of money is, and more important, to how the community c an be induced to hold that quantity of money. ... it turns out to be intimately related to a number of topics ...(1) the optimum behavior of the price level; th e (2) the optimum rate of interest; and (3) the optimum stock of capital; and (4 ) the optimum structure of capital. Americans are so deeply vested in the game of capitalism that they can t see how i t s been perverted by the top 0.01% to deny the other 99.99% any real chance of wi nning. They have ordered $1 trillion more bailout for distribution, totally ignorant of its ineffectiveness. Worse, they are unaware how the destructive effect of cont inued monetary excess kills capital formation and leads to enduring recessions t hat morph to depression. Each new round of Quantitative Easing and gold price suppression assures an even higher potential gold price as long-term forecast target. The official policies are ruinous, and even destroy capital, eroding capital formation, and circumven t job creation. The eventual gold target in my view has moved from $5000 to $700 0 in the last few months. No remedy is in the works. No solution is even pursued . No liquidation of toxic assets is underway. More stimulus is planned for the U SEconomy, as home foreclosures continue and bankruptcies continue and bank closu res continue and lending is obstructed. The more money the syndicates and govern ments in partnership create in futility, the higher the gold target becomes. "The choice [is] not between stimulus and austerity. It [is] between policies th at boost private-sector confidence and those that kill it." Job Creation Point#: The first and most important job is the entrepreneur. ---------------------------------------------------------------------------The first and most important job (from an economic policy point of view) is the entrepreneur. This is a small business person that is the starting point of all business. The entrepreneur is a risk-taker that is seeking profit by providing ( or hoping to provide) goods and services for a profit. Profit is CRUCIAL for bus iness start-up and expansion. Without profit, there is no incentive to start and grow a business. For those that vilify the idea of profit, they miss this point entirely and forget that Profit is the key to a healthy, growing economy that u ltimately creates the private jobs that are necessary for a healthy and sustaina ble government sector. When an entrepreneur reaches profitability, then job creation becomes necessary for the enterprise to keep growing. In the world of supply and demand which many

policy makers keep ignoring, the entrepreneur is the visible and necessary engi ne of supply (production). We must remember that supply and demand are embodied in the functions of production and consumption . Consumption (demand) is VERY easy since all of us have wants and needs. We all w ant more stuff! The trick is production (supply). Production is very, VERY hard. D on t believe it? Become an entrepreneur and start a business from scratch! You wil l quickly find out that it is both risky and hard work. When I teach my home bus iness seminars, I usually advice my students to start part-time from home if pos sible. When the entrepreneur succeeds, the hard work and risk does not end. Managing an ongoing business in today s economy (mostly devastated by short-sighted, blundero us trillion-dollar government policies!) is a risky and difficult endeavor. Gett ing and keeping employees while satisfying customers and government rules, regul ations, mandates and a plethora of business and payroll taxes is VERY difficult. Therefore, if legislators and government policy makers are truly serious about ge tting the economy back on track and job creation , they must make every effort for b usiness start-up, growth and expansion (again, this is production) as EASY AS PO SSIBLE. Lower the costs and barriers of entrepreneurship and business expansion! This includes (but is not limited to) tax cuts, regulatory reform and cutting th e red tape, paperwork and bureaucratic hurdles that usually stymie business star t-up and development. Cutting (or better yet abolishing) corporate taxes would b e a huge boost for business expansion and private job creation. Unfortunately, government at this moment is unwittingly (purposely??) enacting j ob destruction policies. Right now, public employees are paid far more than priv ate employees for comparable work and if you do the math, you will see that ever y 2 public jobs created destroys at least 3-4 private sector jobs. Whether we li ke it or not, the bottom line is that government (rightly or wrongly) siphons mo ney, jobs and resources from the private economy. Should taxes go up in 2011 (as scheduled), this will only shrink the private economy and accelerate private jo b destruction. You cannot have a group of arrogant men trying to set interest rates and manipul ate the economy. You cannot have governments giving special favors to their rich est friends, the corporations and special interests that can afford to do all th e lobbying. This is what tilts capitalism to the point where it really isn't capitalism. Thi s is no longer a free market. We haven't lived under free markets in the United States since 1913, when the Federal Reserve was introduced. Banking institutions are more dangerous to our liberties than standing armies. I f the American people ever allow private banks to control the issue of their cur rency, first by inflation, then by deflation, the banks and corporations that wi ll grow up around the banks will deprive the people of all property - until thei r children wake up homeless on the continent their fathers conquered. The issuin g power should be taken from the banks and restored to the people where it prope rly belongs. Gold is selling for peanuts ng created by central banks quidity in the gold market, . Follow up with how output ries are being made, or how when compared to the staggering amounts of money bei around the world! 380 tonnes of gold (swapped) is li where mines produce only about 2,200 tonnes per year is actually falling, and how no new big gold discove few new mines are being opened.

National debt is over $13 trillion dollars and climbing at almost $2 trillion a

year while GDP is barely $14 trillion. Total residential housing value relative to GDP, makes for a good economic measu re. China has left its Hong Kong predecessor in the dust. Moreover, with a ratio of 3.5 it s reaching Japanese-like stratospheric levels. History tells us that bu bbles are unsustainable sooner or later they burst. And the bigger the bubble th e bigger the trouble is going to be. So the way I see it, the above chart sends a clear and loud message: China holds an unpleasant surprise for the world s econo mies. The USGovt strives for clarity about management of China's $2.5 trillion in FORE X reserves, the world's largest. It contains $868 billion in USTreasurys at last count. The growing fear is that, in anger over trade friction, or in disgust ov er horrible USDollar management, or from a response to discovered hidden USTBond monetization, or with ambition to displace the US from its catbird seat, China could dump USTreasury Bonds with a vengeance. The credit market analysts justifi ably call it the Nuclear Option. The Beijing officials have given veiled warning to reduce the USGovt deficits and to put aside thoughts of another Quantitative Easing. The next QE2.0 comes as sure as night follows day. The message is writt en on the wall, that the United States has forfeited its sovereignty with rampan t debt production rather than industrial production. This story is a gem. USTreasury bond issuance exceeds even the gargantuan USGovt deficits. The gap is $1.5 trillion over four years. During the past 45 months, the USGovt has accumulated an incremental $4.7 trillion in new debt, but the fed eral budget deficit has grown by $3.2 trillion, much less but still a mammoth am ount. Nobody asked why so, and nobody asks where the bond proceeds go. One is le ft to speculate that a vast bold new syndicate technique is simply selling bonds beyond newly formed debt, stealing the funds as proceeds, and tucking the bonds in foreign locations for syndicate usage on rainy days or retirement days. Perh aps it is for war funding far in excess of the stated costs, to save embarrassme nt and questions. Perhaps it is for enormous vertically integrated business inve stment in Afghanistan for industrial processing of poppy into heroin. Perhaps it is for the heavily rumored underground cities under construction for elite resi dent purposes. Perhaps it is extra costs for additional new military bases scatt ered across the globe. Perhaps the answer is simpler, in that it is just being c ounterfeited and stolen by the financial syndicate led by Goldman Sachs that con trols the USGovt financial ministries, and operates criminally with full impunit y (except for meager fines). My sincere belief is that all the above are part of the destinations for the money. The June USGovt official budget deficit was logged at $68.4 billion. During the same month, the USGovt borrowed a staggering total of $210.9 billion. These are not refinances of USTreasury debt in rollover. On a consistent basis, the USGovt has borrowed much more in each deficit month than was required to close the def icit and finance the debt accrued. The differential of excess debt issuance for the first six months of 2010 comes to a hefty $290 billion, a pattern in continu ance. USFed Chairman Bernanke before the USCongress testified that the USTreasury is n ot buying its own debt with printed money. He is a liar. He cannot identify the USTBond buyers. Sprott summarized the bulk buyers of the $1885 billion in USTreasurys through Q3 of 2009: 1. Foreign & International buyers which purchased $697.5 billion 2. The US Federal Reserve which bought $286 billion 3. The Household Sector which bought $528 billion (think printing press).

"The world does not have so much money to buy more USTreasurys. The United State s cannot force foreign governments to increase their holdings of Treasuries Doubl e the holdings? It is definitely impossible." With foreign sources unwilling or unable to support USGovt debt, the monetization card will be used repeatedly and powerfully inside the desperate US-UK quarters. When the process is more widely recognized and publicized, the USDollar will be trashed. It is that simple. No creditor nation whose leaders are in their right mind would continue to support the USDollar as the global reserve currency when its debt securities are the obj ect of colossal fraud and powerful monetization. Talk will be about $5000 gold. Talk will be about nothing fixed by the financial syndicate in power. Let's hope by then, the Interpol arrest warrants for many U S & UK bankers and some EU bankers are delivered. The warrants already exist and await timing to be served. Time of year that gold jewelers typically do their biggest business - the Muslim holy month of Ramadan, which ends with generous gift-giving in early September. After Ramadan comes India s post-monsoon wedding season, and in November there s Di wali, one of India s most important festivals. During the fall, jewelry makers in the U.S. and Europe stock up in advance of the Christmas shopping season. And in China, there are two big gold opportunities: the week-long National Day celebra tion starting October 1, and the Chinese New Year in early 2011. The head of China s largest credit rating agency has slammed his western counterpa rts for causing the global financial crisis and said that as the world s largest c reditor nation China should have a bigger say in how governments and their debt are rated. The financial crisis was caused because rating agencies didn t properly disclose risk and this brought the entire US financial system to the verge of co llapse, causing huge damage to the US and its strategic interests, Mr Guan said. Last week, privately-owned Dagong published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency. The results w ere very different from those published by Moody s, Standard & Poor s and Fitch, wit h China ranking higher than the United States, Britain, Japan, France and most o ther major economies, reflecting Dagong s belief that China is more politically an d economically stable than all of these countries. Mr Guan said his company s meth odology has been developed over the last five years and reflects a more objectiv e assessment of a government s fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth. Compared wi th the US conquest of the world by means of force, Moody s has controlled the world through its dominance in credit ratings. The US is insolvent and faces bankruptcy as a pure debtor nation but the rating a gencies still give it high rankings , Mr Guan said. Actually, the huge military ex penditure of the US is not created by themselves but comes from borrowed money, which is not sustainable. Large chunks are routinely funded off the books, borrowed from China, and passed with so-called "emergency supplemental" bills of the sort now before the House of Representatives, the sole purpose of which is to keep the money outside the b udget. Numerous economic studies have shown that investing in the military, even at hom e, does less for the economy than tax cuts, which do less for the economy than i nvesting in education, energy, infrastructure, and other areas. Government and central bank intervention through taxation and inflation destroys savings (wealth) and shrinks the pool of savings available for real investment in real projects (versus the malinvestments created by central banks inflation) demanded by consumers. What is needed is more savings to create more wealth for

more investment and the cessation of the theft of savings and wealth through gov ernment taxes and central bank depreciation of the currency. More savings and we alth is what is needed for a recovery to begin not more central bank and governm ent intervention. Take some examples. Check federal income tax withholdings from payrolls, state s ales tax receipts, trucker miles logged, total volume of electricity usage, and food stamps. They all scream recession for the USEconomy. Merely pointing to sti mulus funds, state budget plugs, liquidity programs, mortgage redemptions, and e xpanded central bank balance sheets totally miss the mark on effective economic craft. Nothing has been done in financial reform, bank asset liquidation, financial aud it of the major banks (including the central bank), business regulation streamli ne, tax relief, end of endless war, reduction of lobby influence, Goldman Sachs stranglehold of the USDept Treasury, or anything else that truly counts. During this next downturn, the policy failure will be more obvious, the failed central bank franchise system will be more obvious, and the ruined currency system will be more obvious. It became apparent that product prices would continue to be slashed in an effort to retain market share. When prices fall, layoffs ensue and the downward spiral begins. The next leg down will be falling wages and collapsing asset prices. Th at will add to unemployment while putting more pressure on bank balance sheets. Meanwhile, the downward pressure on wages has displaced millions of Americans, w ho have been forced into welfare. Why work for slave wages when you can sit on y our ass and collect welfare, right? Can you blame them? How can any nation expect to remain competitive with the rest of the world when it s handing out jobs and academic scholarships to less qualified individuals base d on race? ultimately, in the absence of an increase in aggregate demand, manufacturing wil l begin to stagnate again. It is very difficult to ask a struggling consumestocracy to purchase domestic go ods at a steep premium to their foreign counterparts. National pride will certai nly help some make the leap, but in many cases, the price gaps are just too larg e. Tariffs could be used to close the gap, but widespread use could very well put a n end to the Chinese (and others) vendor financing of the American economy. we have lost a good deal of Narional Soverignity by virtue of being dependent on other nations to fill our shelves with everything from soap dispensers to many food items. U.S. consumer is still widely considered to be a make-or-break factor in the wor ld's economic health. The reality, however, is quite different. Developing-econo my countries are increasingly paying more attention to internally generated grow th. They will attempt to fuel domestic consumption, while building up their valu able export sector. To achieve these objectives, these fast-growing countries wi ll invest in their own infrastructure, further fueling the demand for natural-re source commodities. Policy makers know that the time has come when the country's dependence on expor ts for growth must be replaced by domestically driven growth that focuses on con sumer spending and not fixed-asset investment.

The move to de-peg the RMB from the US$ gives Beijing the flexibility to either appreciate or depreciate the currency depending on global conditions. Any apprec iation will be modest given the small margins that most exporters enjoy. A long-term concern is whether China has key resources to maintain the growth pr ofile that the country has experienced over the last 40-odd years. Water may wel l be a key constraint. China's water-resource capacity is only of that of the wo rld average. In other words, the country has 20% of the world's population but o nly 7% of global water resources. The problem is compounded by the dispersion of those resources. The area around the Yangtze River accounts for 36.5% of the co untry's land mass, but holds 81% of its water. North of the Yangtze River lies 6 4% of the country's territory, but only 19% of its water resources. First, understand that the annual output of all the world's gold mines is only a bout $110 (R46.70/$) billion. Second, the value of all the gold ever mined is on ly about $6 trillion. The upshot: A major reserves holder like China can very ea sily disrupt the market, causing prices to spike . Curiously, the world has yet to fully recognize our precarious condition, even a s they provide us with life support. Washington is now entirely dependent on the reserve currency status of the dollar and the continued hibernation of bond vig ilantes. Without these supports, the United States would face complete economic arrest. Rather than allowing the American people to get back on our feet, Washin gton is stuffing us with even more debt. It's almost as if the feds are daring o ur foreign creditors to pull the plug. As a consequence, I predict that just as Dr. Keynes killed his patient, Keynesian economics will kill our economy. Writing down of assets is essentially a reduction of money in the system. The consequences of this meant in the banking system that money disappears off b ank balance sheets and reduce their lending capabilities. The Quantitative Easing of Fed allowed the money that disappeared to reappear a gain. It works nicely if the banks keep on lending. But if they don't the exerci se is fruitless as they protect themselves by not lending, but investing back in government bonds instead. It is inevitable that a growing world won't rely on a waning Dollar, but will se t up a system that immunizes them from the ailments of the Dollar. We believe di scussions are well under way to globally use a basket of the world's main curren cies as the benchmark for global trade. A global reserve currency must reflect the overall global economy's state not ju st one country. It must also have the flexibility to reflect changes in the perf ormance of different parts of the global economy. The 'basket' idea suits this r ole well.