James Turk talks to Egon von Greyerz

Great video with two very good physical metal investors. It is a long video (28 min), but good information. Click here. These guys have been in precious metals since the beginning.

They talk about gold and silver as real money vs. global fiat currencies. They also talk about gold over silver as an investment. Although silver is volatile, buy whatever physical metal you can afford as a base, and then work towards having both metals. Under the current environment, it is better to have some physical silver than no physical metal at all. If you have lots of money to invest, buy physical gold first.

Egon speaks in-depth about the Swiss franc and Swiss banking.

Gold and Silver update

As we march closer to Martin Armstrong’s turning date on his Economic Confidence Model of June 13-14, 2011, gold seems to be holding above $1500 and silver above $35. Currently at $1536 and $38.

We will wait and see how that date plays out for all markets, including gold and silver.

Richard Russell is urging his subscribers to buy silver again. Click here. He also is suggesting EFT funds of silver, so this is a short term play, which gg doesn’t like. Only buy EFTs for short term trading and only 10% of your precious metals holdings. This is the money you can afford to lose. If you can not afford to lose money, hold your precious metals investments in physical gold and silver in a private vault for the long term. GG  bought some silver coins a couple of weeks ago, but she is waiting for that June 13-14 date to decide to buy more or not.

Starting to see the Japan impact

As groovygirl has stated before, Japan was the third largest economy in the world and a major player in the “just-in-time” global supply chain. American business will soon be using the word resilience in the first paragraph of their annual report instead of profit. One, because the economy has taken another turn and there is no profit to be had. And two, if you don’t have a product, there is no possibility for profit.

Click here for zerohedge’s post about Japanese car exports dropping 68% in the month of April. That is a major impact on world GDP.

And while this would be the ideal environment for US carmakers to grab market share, the fact that many are missing critical Made in Japan components in their supply chain means that there is a broad-based supply drop.

Ah, the fallacy of the Western system of production. Soon, everyone will learn the hard way.

Many more downgrades of Japan the last few weeks. What was their first clue, the shutdown of reliable electricity to major areas of the country or the continued release of nuclear radiation?

Latest Letter from Martin Armstrong dated May 22, 2011

Click here for the latest letter from Martin Armstrong entitled The End of Time? Part 1, dated May 22, 2011 (36 pages).

If you have trouble with the link above, try this link.

This is a partial summary of Mr. Armstrong’s discovery of the Economic Confidence Cycle.

China is not dumb

Groovygirl continues to be amazed at Western countries’ interpretation of China’s actions in Europe and around the globe.

Click here. Some of this article concludes that China is “bailing out” Portugal because they don’t want to take a haircut on the debt they hold in Europe and in Euros. Really?

Groovygirl says that China has been buying up Africa’s raw materials with its excess USdollars and now it is doing something similar in Europe. China has a more long-term view. And it is in the position to buy all the world’s resources with other countries’ deflated currencies. And it will succeed because it is a creditor nation, not a debtor nation.

In 50 years, even if Wall Street is still the world’s trading center, the entire world’s wealth will be transferred to the emerging markets. Simply because they can name their own terms because they have less debt. China and India have an advantage over other BRIC nations because they have more people and more technology in addition to less debt. Yes, they will go through a rough time economically, but a downturn with huge debt and downturn with no debt is the difference between a world influence and a world power.

China knows that the debt they hold will default at some point. But at that time, they will be the biggest economic country on the planet. Nations will have to negotiate their debt or sacrifice doing business with the only country with money to spend and in control of the globe’s raw materials. China can name their own price for that debt: national assets, trade in whatever currency they chose, including gold, a nation’s gold reserves, national monuments, loyalty, anything.

The only thing that China lacks completely is a diverse debt portfolio where they can have a nation’s debt default completely and it will not hamper their long-term plan. Buying euro debt, in this case, Portugal, is part of the diversification. Buying gold is another part of that plan. Buying Africa, another. Becoming trading partners with Russia, another. Trading in Asian currencies only, not dollars, with Brazil, Russia, other Asian countries, all part of that long term plan.

You may say, but the US has its military strength. Yes, that is true, at the moment. But, the US is a debtor nation and soon will not able to afford to continue to buy loyalty or a standing army like they have in the past. In addition, just as Rome used valuable resources fighting Barbarians from the north, the US is using valuable resources to fight terrorists.

If China and India have the largest consuming nations in the next 10 years, will the threat of a loss of trade with the US really be such a threat? And if you haven’t been outside the US in the last 20 years, the world is pretty much tiring of the US bully. The Middle East is just waiting for the opportunity to tell us to take a hike.

If you want to have a long-term view, do the same thing on an individual level. Get rid of personal debt, secure and build up cash and resources (physical gold and silver) to purchase income-producing assets very cheap in the future. If you have cash (held as valuable currencies such as gold and silver) in the future and not debt, you can name your own price for any asset.

GDP Revised (again)

First Quarter (2011) GDP revised to 1.8%. Click here. This is dismal, guys. We are NOT in a recovery. As John Williams has explained, we are in the second leg of a Depression.

The revisions give us the truth, although rarely covered by MSM.

There is no growth here. In fact, we are teetering toward the black abyss. Groovygirl hopes you are well prepared for further inflation in prices, lower housing prices, and higher unemployment/under-employment.

It is also very possible for a correction in stocks, but the market is so thinly traded that one large hedge fund (with cash from a bank with access to the Fed’s funding window) and two computers could probably keep it afloat for a while longer. Groovygirl is a little concerned that the insider selling/buying ratio has now slowed. Insiders do not seem to be selling as they have for the last 9 months. If they are all out in anticipation of a market correction, it could happen at any time.

Example of hyperinflation happening now in Belarus

Click here for an article about the economic crisis in Belarus. When you read the article you will notice a few things, government’s main actions to fight the debt crisis of the country is the devalue the currency which causes prices to rise and people to hold anything else but that currency. The reaction to rising prices is price controls. The next step after price controls….manufacturers and wholesalers to stop producing because they can’t afford it, which causes supply problems and black market economics.

The price of children’s diapers has “gone completely insane” in Minsk, said Natalia, a 24-year-old mother also queuing outside the refrigerator store. “I used to buy a pack for 69,000 rubles, now they cost 140,000,” or almost half the 343,260-ruble monthly child benefit paid by the government, she said.

“We have become paupers,” said Tatiana, a 70-year-old woman in the line who also declined to give her last name. “We have been squeezed into a corner by this devaluation.”

The elderly and those on welfare/unemployment are hit first and hardest. The suggestion in the article is the nationalize assets to pay creditors or secure more debt. This is an extremely short-term solution for the country. If you nationalize assets, how can you make any advancements in the future? The future cash flow from your assets’ investments will all go to your creditors. With your people unemployed, they will not create enough tax income for regular services, including welfare and unemployment and social security benefits. So now you have a devalued currency and no way to improve your country’s investment in the future because you just gave away all your assets for the chance for more debt in the short-term.

A default or partial forgiveness of debt is the only viable way to address these problems. But the world banking system has taken those options off the table.

Hopefully, some country will stand up to creditors and tell them to take a hike.

I don’t know that the US will be quite this bad, but we are taking these same steps, because they are the only steps available now. The world is slower to give back dollars because they are used for trading, but at some point, other trading currencies will be set up and the world’s dollars will come  rushing back to the US. This is already starting to happen to the dollar as a store of value as the Fed must pick up the slack of China’s and Japan’s lowered treasury holdings/buying (especially long term holdings). Other countries are in serious talks to trade oil for other currencies other than dollars. They are probably already doing this under the table on a smaller scale.

Japanese economic reports

Finally, someone addresses the issue that groovygirl first thought when she heard that Japan’s economy declined 3.7% in the first quarter of 2011.

Groovygirl said to herself, didn’t the earthquake strike in March? That is less than 30 days of reporting and the country faltered 3.7 percent? Wow, can’t wait to see second quarter. And she also thought, Japan’s economy has not just slowed, it has stopped completely. But no one in the MSM regime remotely mentioned this. In fact, groovygirl went actively searching for data. She started thinking maybe Japan had a different quarterly structure from the rest of the world.

But this little piece of information didn’t slide past Chris Martenson, he addresses his subscribers here, Japan Teeters Over.

Of course, the confirmation of Japan’s completely dead economic outlook for the foreseeable future was confirmed by Goldman today. Goldman has downgraded China and upgraded Japan. Uh-yeah. In Goldman speak, that means Japan has collapsed, sell everything.

Japan will have an economy, it will just be purely based on clean up, rebuilding and printed money. That is a heavy capital input situation with no short-term return except survival mode.

Once again, let me state that Japan was the third largest economy on the globe before the earthquake. This is having a major impact on the global economy right now and moving forward.

Groovygirl will not even go into the ongoing radiation containment problems. That is a whole another post.

John Williams

John Williams was interviewed by Eric, written interview here. This is a good summary of John’s thoughts on hyperinflation and how to prepare.

Gold and Silver update

Seem to be holding silver near $32-$35 which is positive. Click here for Jesse’s charts from yesterday. We will see how we end the week.