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John Rubino

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners…

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Best Quotes of March 2006

Ted Butler, Investment Rarities
"If someone had asked me to devise a method, or scheme, that could propel silverprices sharply higher, I don't think I could have dreamed up anything more potentiallybullish than the Barclays ETF.

At the heart of the silver story is the structural deficit and disappearing inventories. For more than 60 years, we have continuously consumed more silver than has been produced on a current basis, necessitating the draw down of inventories every year. As I have repeatedly stated, there is no more bullish or temporary a condition possible in any commodity than such a circumstance. In time, it guarantees a price rise sufficient to eliminate the deficit. The reason the silver deficit could exist for so many years was because so much silver had been accumulated through the ages that it took many decades to eat up those inventories. When inventories cease to be available, silver hits a brick wall. Prices must rise and the deficit end.

What the proposed ETF promises to achieve is the acceleration of the time that available silver inventory will run out and we will smack into a brick wall...The largest single pool of investment capital in the world exists in institutional and individual retirement accounts. The total amount of capital in this category runs into the trillions and trillion of dollars. In the US, much of this giant pool of assets that covers institutional pension plans is governed by the Employee Retirement Income Security Act of 1974 (ERISA), which sets standards in how these funds should be safeguarded. Very simply stated, fiduciary responsibilities by plan administrators must be conducted by "prudent man" principles, including what type of assets could be invested in with plan funds. Again, staying simple, this meant only investing in sound securities, mainly stocks and bonds. Commodities or commodities futures contracts were strictly forbidden.

Commodity ETFs change all that. Because they are structured as a common stock, they make it possible for investment by many types of accounts, where investment was not legal or possible before. This is what I would have never been able to imagine - someone actually came up with a way to connect or link the largest pool of investment capital in the world to the one market that could least handle (at least on an orderly pricing basis) an infusion of such funds, real silver. Just to put it into perspective, one-tenth of one percent of trillions is billions. I don't see how billions of dollars could flow smoothly into the silver market. It's like trying to stuff ten pounds of ice cream into a one-pound container - no matter how you do it; you're going to make a mess. This is the other reason why I was sure the regulators would reject the silver ETF.

By the time this silver story plays out, the $50 Hunt Brothers episode will merely be a footnote in silver history."

Steve Saville, Speculative Investor
"It is very unlikely, however, that the US$ will ever COLLAPSE in value relativeto any other fiat currency. The reason is that ALL of these currencies are inthe process of being inflated into oblivion; it's just that over the next fewyears the dollar is likely to move towards that ultimate destination at a modestlyfaster pace than some of the other major currencies."

Jim Puplava, Financial Sense
"Inflation can manifest itself in either of two ways. It can show up in the realeconomy in the price of goods and services as it is doing now or it can surfacein the asset markets in the form of higher prices for assets be it bonds, stocks,commodities or real estate. Just look at the '80s and '90s for financial inflationand this new decade for hard asset inflation in the price of real estate andcommodities.

This brings me to the next reinflation effort which has now begun. Why else would M3, which has been growing at an annual rate of 8%, no longer be reported by the Fed? Monetary inflation is the reason. The U.S. is spending and borrowing too much money. Our current rate of spending is out of control and beyond balancing through tax increases, so monetary inflation through monetization is next. As the Fed goes on hold -- perhaps after the Fed funds rate is taken to 5-5.25% -- the dollar will begin its relentless decline."

Puru Saxena, Money Matters
"The absurd money-creation continues. Slowly yet surely, the "stealth" confiscationof savings is gaining momentum as money loses its value. Central banks claimthat they are raising interest-rates to fight inflation. At the same time theyare slipping in more rum into the punch bowl, thus creating just what they saythey want to fight - inflation! Take a look at the latest year-on-year moneysupply growth-rates around the world:

Australia + 9.1%
Britain + 11.7%
Canada + 7.7%
Denmark + 14.7%
US + 8.1%
Euro area + 7.3%

When I glance at these mind-boggling figures, at least I don't see any monetary tightening taking place! Make no mistake, this excessive liquidity is inflation that banks are creating and this inflation is destroying the purchasing power of your hard-earned money. As asset-prices continue to benefit from this monetary insanity, the wealth inequality is getting wider resulting in social unrest in several parts of the world. The ultimate truth about inflation is that it always benefits the rich who are able to ride the inflationary wave by investing in assets, whereas the poor become even more impoverished as things continue to become more expensive."

Howard Ruff, Ruff Times
"Silver will not be just twice as profitable as gold in the next few years, butmany times more profitable--maybe ten times more profitable. Silver is in hugeshort supply; the inventories are gone! Unlike gold, government can't dump thesilver in the market to artificially suppress the price because they have none.Silver is still the poor-man's gold, and the time is not far away when it willbe difficult to find any silver at any price short of $100 an ounce."

Stephen Roach, Morgan Stanley
"What happens to the world economy if the bond market conundrum is suddenly resolvedand real long-term interest rates revert toward historical norms? My guess isthat this is not good news for what has been a liquidity-driven, increasinglyasset-dependent global economy."

Jim Willie, GoldenJackass
"A return to normalcy is poppycock, never to happen! We have gone so far afield,so far from anything recognizable or rectifiable, that normalcy is not even remotelypossible in the gold and crude oil markets. The USFed will tighten until theycause a crisis, then deny their role, then clean it up, probably followed byeasing of interest rates. The next LTCM fiasco lies around the corner, underthe surface, ready to be revealed, sure to wreck havoc. Gold and crude oil willbe given a grand assist when it happens, not if. It is guaranteed since the USFedcan no longer even define what "neutrality" means in its policy. Besides, whatit says usually obscures its actual policy motive. My firm belief is that theEnron model was hatched from the USGovt incubator, where it continues."

Doug Noland, Prudent Bear
"As easy as it seems that it should have been, I don't feel I effectively counteredthe absolute nonsense that our Current Account Deficit is driven by unrelentingglobal 'capital' inflows. And I have not even come close to shedding light onthe reality that unchecked - and inevitably unwieldy and unstable - global financehas been a commanding force within what the New Paradigm crowd trumpets as virtuousfree-market 'globalization.'

Why then, you may question, do I suspect that Credit Bubble-like analysis will garner more attention going forward? Well, I believe the Fed and global central bankers may finally comprehend that they are facing a very serious problem - that Credit and speculative excesses begetting greater excess demand a true tightening of global financial conditions. Importantly, hope that a cooling housing market will obligingly chill the Bubbling U.S. economy is fading rapidly. As the 'Flow of Funds' confirmed, the Credit system is currently firing on all cylinders and the Bubble economy has a full head of steam. The U.S. Current Account and Global Imbalances are poised to only worsen, fueled by Bubble dynamics that now command Credit systems and asset markets around the globe. Expectations for a slowing U.S. are shifting to fears of a runaway Global (Credit)."

Reg Howe, GATA
"Alan Greenspan confessed to the gold price suppression scheme. The EuropeanCentral Bank confessed to the gold price suppression scheme. Barrick Gold confessedto the gold price suppression scheme in U.S. District Court in New Orleans onFebruary 28, 2003, The Reserve Bank of Australia confessed to the gold pricesuppression scheme in its annual report for 2003. And now the Bank for InternationalSettlements, the central bank of the central banks, has confessed to the goldprice suppression scheme by saying 'the provision of international credits andjoint efforts to influence asset prices (especially gold and foreign exchange)in circumstances where this might be thought useful.'"

Richard Daughty, the Mogambo Guru
"The unusual action of silver and gold here lately is the result of lots andlots of guys, businesses and banks on the hook for billions and billions of dollarsin short sales, year after year after year. The rise in the prices of gold andsilver means financial death for them. So buy them with confidence, perhaps evenwith a little malice against those creeps, as they can't keep it up for muchlonger, and the prices of gold and silver will shoot to the moon when they finallygive up."

James Turk, GoldMoney
"The federal government desperately needs strong economic activity in order togenerate the highest possible tax revenue to decrease its reliance on debt. Butrising interest rates dampen economic activity. Rising interest rates also havean unfavorable impact on expenditures: A 6% average interest rate on $8.2 trillionof debt results in a higher interest expense burden than a 4.6% rate.

Thus, higher interest rates restrain tax revenue while increasing the level of expenditures. Together these factors worsen the budget deficit, which then causes the federal government to borrow even more money. The resulting higher level of debt leads to a greater interest expense burden, further worsening the deficit. Consequently, the federal government is rapidly moving to the point where borrowing becomes necessary to meet its interest expense obligations. This condition is not sustainable. If the vicious circle is not addressed and corrected, it will turn into a death spiral in which the dollar is destroyed."

John Mauldin, Thoughts From the Front Line
"Why are home supplies rising? The simple answer is that demand is falling. TheUniversity of Michigan has an index which measures the intention of people tobuy a home in the near future. It is at its lowest level in 15 years. The NationalAssociation of Homebuilders Index which tracks a number of things but includespotential buying traffic in new home developments is also dropping dramaticallyin the last few months.

Bear markets begin when growth in real consumer spending peaks and beings to slow. I think I made the case above that consumer spending is going to face a real uphill battle as cash-out financing slows down, higher energy costs don't go away, higher interest rates translate into higher mortgage and credit card payments on top of legislation requiring higher minimum payments on credit card balances."

Texas Congressman Ron Paul
"If there were a 'housing hurricane,' it would be just like a real hurricane.You spend whatever people demand you spend and worry about it later. FANNIE MAEand FREDDIE MAC have a line of credit from the Treasury, and they would use itif they had to. And I'm sure other mortgage companies would qualify. Congresswould do whatever they feel they have to do...There is no historical examplewhere paper money has lasted for a long period of time. It works for a whileuntil the trust in that money is totally undermined, and then it ends up in aneconomic calamity, for the most part, in runaway inflation or other serious dislocations."

Paul McCulley, PIMCO
"The end of the housing boom will come soon, we think, and when it does, salesvolume in the property market will reverse wickedly. Housing prices don't crash,but volume of transactions does, as sellers refuse to face reality on pricingand buyers wait them out."

Peter Schiff, Euro Pacific Capital
"This week, as statistics revealed that China has surpassed Japan as the world'slargest holder of foreign reserves, the U.S. Congress continues to threaten Chinawith 27% tariffs on their exports to the U.S. The move, which is akin to a corneredgunman turning the pistol on himself and threatening to pull the trigger, revealsthe extent to which American politicians fail to comprehend the true nature ofthe current Sino-U.S relationship.

In desperate need of capital, America is hardly in a position to insult those providing it, or dictate the terms by which they do so. However, the latest tough talk on China comes shortly after Congressional action which blocked key purchases of American assets by foreign interests. Such posturing sends a very dangerous message to our creditors. If as a nation we have decided to sell off our cows to pay for imported milk, we can not complain when our trading partners actually show up to collect the animals.

As a result of the unprecedented foreign-financed consumption binge in the U.S., it is likely that nearly every major U.S. asset will ultimately pass into foreign control, including most companies in the S&P 500 and trophy properties in major U.S. cities. As America lacks the industrial capacity necessary to redeem its IOU's with actual consumer goods, access to capital goods and domestic assets is all that gives its currency value. Restrictions on the ability to acquire such assets will diminish foreign interest in accepting dollars in exchange for exports, and will dissuade foreign governments from holding huge reserves of dollars that they cannot hope to spend."

Paul Kasriel, Northern Trust Company
"Again, so what if mortgage defaults are on the rise? No biggie except that U.S.commercial banks have a record exposure to the mortgage market. About 62% ofbank earning assets are mortgage-related. (I do not have access to the data todetermine what part of this mortgage exposure pertains to commercial properties).What I'm driving at here is the potential for a bust in housing to cripple thebanking system. History tells us that a crippled banking system renders centralbanks less potent in combating economic downturns and promoting robust recoveries.In other words, if a housing bust led to large credit losses to the banking system,Chairman Bernanke could cut the fed funds rate to 1% and be surprised that alow interest rate did not have the same magic for him as it had for his predecessor."

James Grant, Grant's Interest Rate Observer
"There are more values in your hotel mini-bar than in the U.S. bond market."

Eric Andrews, Financial Sense University
"In 2008, the first Boomers will begin retirement and sell their stocks, bonds,and other paper promises into the market to pay for rent, health care, and gasoline.Who will buy them? The younger generation makes far less per hour, and even iftheir wages were equal, there are not enough of them to offset a 30-year supplyof selling pressure. Worse, as their selling drives the market down, no one couldbuy even if they wanted to, because who would buy a stock when the tide of themarket will sink for 30 years? Our Generational Transfer problem can be mostlyrighted by canceling Medicare and increasing the Social Security retirement ageto well over 70. Not so the stock and paper markets."

I. M. Vronsky, Gold-Eagle
"Gold & Silver Equities' fantastic performance in the last 5 years will slowlymesmerize and galvanize investor attention to the point Gold Fever contagionwill spread through the world -- as frantic investors seek to place their hardearned savings in vehicles demonstrating intrinsic value and high liquidity...likegold and silver equities."

 

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