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Most Read Posts (64 articles) – Discover which articles Underground Investor™ readers are most interested in. See the full database, including the most recent articles that may not be listed below,  by clicking the link above.

Sept. 27, 2007 – 101 Reasons Why Managing Your Money is the Quickest Way to Build Wealth
Sept. 25, 2007 – 10 Surefire Ways to Make an Investment Fortune
Sept. 15, 2007 – Why the U.S. Feds 0.50% Rate Cut Won’t Save the Markets
Sept. 15, 2007 – U.S. Interest Rate Cut to Have Little Long-Term Positive Effect
Aug. 20, 2007 – How Much Does the Gov’t Really Manipulate Markets
Aug. 9, 2007 – More Gov’t Foolishness (or Lies) Again: Markets are Sound…NOT!
Aug. 9, 2007 – Chinese Tariffs and the Nuclear Option
Jul. 24, 2007 – How to Invest Like the World’s Greatest Investors
Jun. 17, 2007 – Get Out of Dollar-Denominated Bonds While You Still Can!
May 1, 2007 – Uranium Stocks are Finally Getting the Attention They Deserve
Apr. 23, 2007 – The Emperor’s New Clothes Abound in the Investment Industry. Don’t Get Cheated by Your Advisor
Apr. 20, 2007 – Use Intelligent Strategies to Push Risk Back onto Investment Firms
Apr. 19, 2007 – In Risky Markets, Follow the Behavior of the Ultra-Rich, Not the Rich
Apr. 12, 2007 – The Secret to Investing

Gold Investments (37 articles) - Use traditional rules to invest in gold stocks and you’ll lose money hand over fist with this asset class. Learn more about one of the most important components of every portfolio for future years to come. See the full database, including the most recent articles that may not be listed below, by clicking the above link.

April 23, 2008 – Will U.S. Markets Crash Now or Later?
Feb. 4, 2008 – Could Chinese New Year’s Fuel the Next Rally Higher for Gold Stocks?
Jan. 29, 2008 – Even After This Strong Run, Gold Stocks are Still a Bargain Today. Here’s Why.
Jan. 5, 2008 – A Sneak Peak at Our Premium Level Information
Nov. 4, 2007 – Is Hyperinflation Coming to the U.S.? It’s Time to Stock Up on Gold.
Nov. 4. 2007 – Gold is the Best Investment Today, History Tells Us So.
Nov. 2, 3007 – Gold Expensive at $791/oz.? Not by a Longshot
Jun. 5, 2007 – Learn How NOT to Invest in Gold
Mar. 30, 2007 – Navigate the Minefields of the Investment Information Highway
Mar. 7, 2007 – This Bounce in Gold Markets Merits a Cautious Approach
Mar. 6, 2007 – Gold Stocks Correction – What it Means?
Feb. 28, 2007 – How to Profit from a Weakening Market, Gold Stocks, & More, Part II
Feb. 28, 2007 – Buying Opportunity in Gold Stocks
Feb. 28, 2007 – How to Profit from a Weakening Market, Gold Stocks, & More, Part I
Feb. 23, 2007 – Uncover the Ignored Asset Classes
Feb. 12, 2007 – How Do I Know that Institutional Money is Still Not on Board with Gold?
Jan. 25, 2007 – If You Don’t Own Gold Stocks, You Need To
Jan. 23, 2007 – Building Wealth Requires More than Just Contrarian Investing
Jan. 14, 2007 – Use the Long Tail of Investing to Accurately Predict the Price of Gold
Jan. 11, 2007 – The REAL DEAL about Gold and Energy
Dec. 13, 2007 – Commodities and Asians: Apparently We All Look Alike
Nov. 6, 2006 – Sometimes Silence is Golden
Oct. 10, 2006 – Shock and Awe Awaits Global Markets
Oct. 4, 2006 – Is Gold’s Correction Over Yet?
Oct. 2, 2006 – Fiat Currency Concerns Give Rise to a Gold & Silver Backed Currency System
Oct. 1, 2006 – The Gold Timeline – A History of Gold Prices
Sept. 16, 2006 – Has the Commodities Bubble Burst? No, No, No!
Sept. 13, 2006 – Sell the Rumor, Buy the News
Sept. 11, 2006 – Gold’s Speculative Stigma is Unwarranted
Sept. 3, 2006 – Gold’s Glitter is Genuine
Aug. 14, 2006- Knowing Your History is More Important to Creating Wealth than Fundamental Analysis

Financial Crisis, Dollar Crisis & Recession Proof Investing (30 articles) – Foolish investors’ eyes lit up as New Century Financial dropped from $30 to $20 a share during the recent subprime mortgage fiasco. Their hearts thumped with excitement as shares dropped from $20 to $10 and they doubled down. When shares dropped to $5 they thought it had to be the bottom and put their last remaining money into New Century. A month later, they lost everything. There is similar optimism surrounding the dollar today from self-declared currency experts. Discover why the dollar is much more likely to go the way of New Century than experience a comeback like Muhammad Ali’s Rumble in the Jungle. For the most recent articles, perhaps not listed below, click the above category link.

June 26, 2008 – The One Question That Will Have the Greatest Impact on Your Financial Future
May 14, 2008 – What’s Driving the Price of Oil Higher? It’s the Dollar, Stupid!
April 30, 2008 - How Low Will the Feds Go?
April 17, 2008 – Monetary Inflation. How Increased Paper Wealth Can Translate into a Lower Standard of Living
March 3, 2008 – Why Investors Will Never Make Money in this Bear Market
Feb. 20, 2008 – The Secret to Building Wealth in Volatile Markets
Feb. 6, 2008 – Is Recession in the U.S. Coming? We’re Already in One.
Jan. 28, 2008 – The Outcome of the Fed’s Interest Rate Cuts? History is the Best Oracle.
Jan. 24, 2008 – The Fed’s 0.75% Interest Rate Cut – A Recipe for Future Disaster
Dec. 7, 2007 – The Dollar Panic. Is it Real?
Sept. 19, 2007 – Signs of a Peak Investment Crisis Keep Coming
June 18, 2007 – Alan Greenspan’s Call of Checkmate on China is Premature
June 17, 2007 – PIMCO’s Bill Gross and the Economist Agree with SmartKnowledgeU 6 Months After the Fact!
May 28, 2007 – The Politics of Higher Oil Prices
May 26, 2007 – Asian Countries Pooling Reserves to Protect Themselves from the Incredible Shrinking Dollar, Part II
May 25, 2007 – Asian Countries Pooling Reserves, Part I
May 3, 2007 – The Death of the 3-Year Treasury Note
Apr. 1, 2007 – The Next Cold War Will be an Economic One
Jan. 25, 2007 – Dollar-Denominated Bonds Faltering
Jan. 9, 2007 – Use the Longtail of Investing to Accurately Predict Dollar Behavior
Jan 7, 2007 – 10 Reasons Why Dollar-Denominate Bonds Aren’t Safe
Dec. 21, 2006 – Iran Presents More Trouble for the U.S. Dollar
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Free Stock Picks (24 articles) – While our top-shelf stock picks and ideas that have since returned 100% to 200% returns are reserved for our members only, here read articles about some mid-shelf stock picks and ideas that have already returned 30% returns in less than a year. Access the full database, including the most recent articles that may not be listed below,  by clicking the topic link above.

Jun. 4, 2007 – To Prove the Effectiveness of Our SmartKnowledgeU™ Investment System, Even Our Weakest Picks that We’ve Given Away for FREE Have Soared
Apr. 29, 2007 – After BAIDU, Possibly Focus Media
Apr. 2, 2007 – Profit, Don’t Lose From Market Corrections
Apr. 2, 2007 – Global Warming Presents Easy 30% Gains for Underground Investor Readers
Mar. 13, 2007 – Beware the Perpetual Bulls, Part II
Feb. 18, 2007 – Banking Sector FY 2008 – Positive for Japan & India, Negative for China
Jan. 4, 2007 – Chinese Technology Companies to Watch in 2007
Dec. 19, 2007 – MSFT and Internet Protocol Version 6
Dec. 12, 2006 – It’s Time to Keep a Close Eye on Indian Stocks ICICI & HDFC
Dec. 7, 2006 – The Ocean Becomes a New Growth Point in the World Economy
Oct. 30, 2006 – What’s the Safest Place to Invest in the Oil Industry Now?
Oct. 30, 2006 – You’ll Find Ignored Investment Opportunities in the DRC & Libya
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The Peak Investment Crisis & Stock Market Crash (57 articles) – Bubbling underneath the surface, there lies a peak investment crisis. When it hits, savvy investors will build a fortune. Unfortunately, most investors will be blindsided and lose great fortunes instead. Access the entire database, including the most recent articles that may not be listed below,  by clicking on the above category link.

Nov. 4, 2007 – Is Hyperinflation Coming to the U.S.? It’s Time to Stock Up on Gold.
Nov. 4. 2007 – Gold is the Best Investment Today, Part II
Oct. 15, 2007 – Our New Forum on Facebook: Crisis Investing
Oct. 9, 2007 – Beware the Turbulence that Lies Beneath the Surface, Part I
Sept. 20, 2007 -The Signs of a Peak Investment Crisis Keep Coming
Sept. 19, 2007 -Why the U.S. Fed’s 0.50% Rate Cut Won’t Save the Markets
Aug. 9, 2007 – More Gov’t Foolishness Again
Jun. 29, 2007 – Don’t Let the Strength of the U.S. Markets in the First Half of 2007 Fool You
Mar. 11, 2007 – It’s the Difference Between Chasing & Building Wealth
Mar. 6, 2007 – What this Correction Means for Gold Stocks
Feb. 28, 2007 – How to Profit From a Weakening Market & Gold Stocks
Sept. 9, 2006 – The Peak Investment Crisis
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Jul. 24, 2007 – How to Invest Like the World’s Greatest Investors
Feb. 25, 2007 – Frontrunning Can Make You a Fortune
Jan. 30, 2007 – The New Paradigm of Successful Investment Strategies
Jan. 21, 2007 – 10 Reasons the Longtail of Investing is the Only Way to Build Wealth
Jan. 16, 2007 – Use the Longtail of Investing to Predict Major Market Events with High Accuracy
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Sept. 1, 2006 – What Mark Cuban Failed to Realize About Investing

The Biggest Investment Myths (62 articles) – All investment professionals, from investment firms to financial consultants to the financial journal purposely spread tales of lies and deception. Jim Cramer, an investment professional that amassed a fortune as a hedge fund manager, recently stated that the last thing he ever wanted to do is to tell the truth. Find out why deception is part of the game in the investment industry.  Click the category link above to access the full database, including the most recent articles that may not be listed below.

Oct. 25, 2007 – New Home Sales Went Up. So What?
Oct. 15, 2007 – Beware the Turbulence that Lies Beneath the Surface, II
May 6, 2007 – Economic Reports Drive Short-Term Behavior, but Hardly Represent the Truth
Mar. 21, 2007 – The Short-Term May be Rosy, but Beware the Financial Crisis that is Building Steam
Mar. 4, 2007 – Foreign Markets aren’t as Risky as the Pundits Say
Feb. 23, 3007 – Evolve Your Investment Strategies with Evolving Technology
Feb. 6, 2007 – My Problem with Investment Newsletters (except ours, of course!)
Feb. 4, 2007 – 10 Questions to Help You Find a Superior Financial Consultant
Jan. 30, 2007 – A New Paradigm of Successful Investment Strategies
Jan. 25, 2007 – Despite Evidence to the Contrary, Millions of Investors Will Believe Whatever they Want to Believe
Jan. 7, 2007 – 10 Reasons Why Dollar Denominated Bonds Aren’t as Safe as You Think
Jan. 5, 2007 – How Understanding MMA Champions will Make You a Better Investor
Dec. 18, 2006 – The True Determinants of Wealth Have Nothing to do with Asset Allocation
Nov. 12, 2006 – The Greatest Investment Myth Exposed: Why Modern Portfolio Theory WILL NEVER Make You Rich.

Wealth Literacy (88 articles) – Wealth Literacy is the new Financial Literacy. Financial Literacy may teach you to be fiscally responsible but you can still be financially literate and remain poor. Wealth Literacy fills in all the holes of Financial Literacy and teaches you how to build wealth today. Click the category link above to see new articles that may not be listed below.

Oct. 15, 2007 – Our New Facebook Investment Group – Crisis Investing
Oct. 9, 2007 – Beware the Turbulence that Lies Beneath the Surface, I
Apr. 23, 2007 – Beware the Emperor’s New Clothes -Don’t Get Cheated by Your Adviser
Apr. 20, 2007 – Intelligent Investment Strategies Push Risk Off of You & Back onto Investment Firms
Apr. 19, 2007 – In Risky Markets, Follow the Behavior of the Ultra-Rich, Not the Rich
Apr. 17, 2007 – Why Wealth Literacy is More Important than Financial Literacy, Part II
Apr. 15, 2007 – Why Wealth Literacy is More Important than Financial Literacy, Part I
Apr. 13, 2007 – Pop Investing is All the Rage, but it’s a Loser’s Game
Apr. 12, 2007 – The Secret to Investing in 3 Easy Rules
Apr. 10, 2007 – Build Wealth by Answering These 5 Questions
Mar. 30, 2007 - How to Navigate the Minefields of the Investment Information Highway
Mar. 12, 2007 – The Short-Term May be Rosy, But Beware the Financial Crisis that is Building Steam
Mar. 11, 2007 – The Difference Between Chasing Wealth and Building Wealth
Feb 23, 2007 – Uncover the Ignored Asset Classes
Feb. 21, 2007 – Why Traditional Education Stifles Your Ability to Build Wealth
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Feb. 8, 2007 – 10 Reasons Why a Professional Athlete’s Best Friend Needs to be his Financial Adviser

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Apr. 11, 2007 – Building Great Wealth in Stocks Requires Understanding Politics
Apr. 1, 2007 – The Next Cold War will be an Economic One
Apr. 1, 2007 – Possible U.S. Military Intervention in Iran
Mar. 13, 2007 – To Err on the Subject of Chinese Tariffs May Expedite a Shakespearean Tragedy
Dec. 17, 2007 – Do Free Markets and Free Trade Exist?

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May 14, 2009 – What’s Driving the Price of Oil Higher? It’s the Dollar, Stupid!
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Uranium Investments (3 articles)– The bulk of this information is contained within our members only area, but you’ll find an article or two here. Click the above category link to see the full database of articles, including the most recent articles that may not be listed below.

May 1, 2007 – Uranium Stocks are Finally Getting Some Attention. Better Late than Never.
May 1, 2007 – What Does Uranium Futures Mean for the Future of Uranium Stocks?

Africa Investments (5 articles) – For the more daring investor willing to place small bets for HUGE returns, Africa awaits.

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China Investments (21 articles) – Articles about Chinese stocks and the Chinese stock market.

India Investments (4 articles) – Articles about Indian stocks and the Indian stock market.

Japan Investments (4 articles) – Articles about the Japanese economy and stock market.

Russia Investments (1 articles) – Articles about the Russian economy and stock market

U.S. Stocks (25 articles) – Articles about U.S. stocks and the American stock market.

Vietnam Investments (3 article) – Articles about Vietnam and the explosive yet unregulated Vietnamese market.

Investment Psychology (22 articles) – One of the most important but yet most overlooked and ignored aspects of investing is psychology. Discover how an improper mindset can be the difference between huge losses and huge gains in your portfolio. Click the above category link to see the full database of articles, including the most recent articles that may not be listed below.

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Options Investing (10 articles) – We don’t discuss options much here but occasionally, if there is a compelling play, we’ll write an article or two.

Water Investing (1 article) – Read articles about investing in water as a commodity as the world’s fresh water supply becomes more scarce.

The Zen of Investing (42 posts) – Read articles from our resident martial arts expert regarding how understanding principles of martial arts can make you a much better investor. A combination of “The Art of War” and “The Art of Investing” if you will. Click the above category link to see the full database of articles, including the most recent articles that may not be listed below.

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Below, I’ve summarized pertinent points of this growing food crisis:

• Though the mass media has continued to virtually ignore this massively important story, food riots, instigated by soaring food prices, occurred in about 30 countries last year, including Haiti, Zimbabwe, Ethiopia, and Bangladesh. Due to shrinking food stocks, leading agricultural commodity exporters such as India and Argentina imposed bans on overseas sales of food products.

• Last year, global rice stocks fell to a 30-year low after droughts decimated crop yields in China and Africa. At one point, during a two-week period in April of 2008, prices of rice rose 50%. Rice is the staple food for more than 3 billion people. According to the World Bank, the real price of rice and wheat respectively rose to a 19-year and a 28-year high last year.

• At the recent G8 Agriculture Ministers meeting held in Treviso, Italy in April of 2009, US Secretary of Agriculture Tom Vilsack stated that climate change had materially affected the challenge to feed the world’s population – expected to reach 9 billion by 2050 from today’s current number of 6.5 billion. As a solution, he called on the G8 to back the use of science in agriculture, including genetically modified organisms, to boost productivity.”

• In 2009, for the first time ever, the United Nations reported an unprecedented 1 billion+ people went hungry every day and predicted that this number would continue to rise due to persistently high food prices and the continuing economic crisis.

Though the above unfolding catastrophe should be the leading story of every major media outlet in the world, instead swine flu has trumped this potentially much greater catastrophe. World Health Organization (WHO) officials have currently assigned the worldwide risk of swine flu to a Phase 5 level indicative of an “imminent pandemic”; if starvation were considered a disease, the risk factor of this hunger catastrophe would be assigned the WHO’s highest rating of Phase 6.

Beyond the surface points I noted above, there are some truly disturbing facets of this hunger catastrophe that lie beneath the surface. Given that the WHO has labeled swine flu a pandemic with a recent figure of confirmed cases at 1,316 worldwide, it is no exaggeration to consider a hunger pandemic that currently has more than 1 billion victims a catastrophe. Though droughts, low crop yields, and the spectacularly foolish, inefficient experiment to turn food into biofuels have all significantly contributed to the imminent mass starvation problems that will soon materialize, the truth is that the easiest and most efficient way to address the hunger catastrophe is purposely being obfuscated and hidden by the world’s Central Banks and financial oligarchs. Ironically, one of the most significant components of the troubling rise in food prices, monetary inflation, is also the easiest symptom to attack and solve as opposed to other solutions that seek to raise crop yields through the increased use of biogenetically engineered seeds. In addition, though poor climate conditions have undoubtedly contributed to low crop yields in recent years, the real effect of monetary inflation on plunging food stock levels is often obscured by governments through highly inaccurate and deceptive PPI (producer price index) numbers.

Of the current 6.5 billion people in this world, 50%, or 3.25 billion, live on a daily wage of $2 that has not changed in years, despite the fact that significant erosion in the purchasing power of these $2 over the past decade. In turn, the billions of people that subsist on $2 a day spend $1 on food daily. Simple math dictates that if the price of basic diet staples in the developing world (rice, corn, wheat, etc. but specifically rice) rises to $2 or $3 a day or more, more than 3 billion people will no longer just be hungry, but will begin to die from starvation. In previous essays of mine, I have outlined a strong argument for significant inflation in our future despite the persistent campaigns to spread deflationary beliefs. If time proves my arguments to be correct, then a doubling, or even a tripling or quadrupling in the prices of basic food staples is a real and distinct threat to the mortality rates of billions of people. Given the magnitude of this moral crisis, no matter one’s stance in the debate of inflation versus deflation, it is imperative to grant consideration to the possibility of strong inflation in imminent years and its implications for 3.25 billion of our fellow citizens.

This is precisely why the moral disaster of mass global starvation that looms in our near future must first and foremost be approached as a direct symptom of the foolish and dangerously destructive monetary policies now being implemented by the US Federal Reserve, the Bank of England, the Bank of Japan, and the European Central Bank. The United Nations, in their press release, stated that mass global hunger today is attributable to rising prices, and none other than former US Federal Reserve Chairman Alan Greenspan, in a rare moment of clarity, stated in 1997 that “price increases are really the same thing as depreciation of the currency”. There is little doubt in my mind that one of the largest components of rising food prices over the next five years will be a very significant “food tax” that is directly attributable to the debasement of all major global fiat currencies. Thus, one of the most efficient and effective steps we can implement to prevent our current global hunger catastrophe from evolving into a global starvation catastrophe is to re-institute a sound monetary system in which all money is backed by gold or silver or a combination of both.

During the recent G8 Agriculture Ministers meeting in Italy, when US Agriculture Secretary Tom Vilsack used this platform to promote the business interests of the biogenetic agricultural industry, such chatter was a smokescreen designed to deflect attention away from the true culprit of this catastrophe – monetary inflation. Given Vilsack’s history of well-documented supported for bio-genetically engineered agricultural crops, including his award as Governor of the Year by the Biotechnology Industry Organization in 2001, his preferred solution to this crisis offers no surprises. Those who invest in Monsanto (NYSE:MON) now, in terms of monetary profits, will likely emerge smelling like roses a couple years down the road. Still, a larger moral question than the debate over the safety of bio-genetically engineered food or the morality of using a crisis to promote business interests must be answered – “How significant are the contributions of our unsound monetary system to the greatest potential humanitarian crisis of our lifetime?”

Given the course of monetary policies being implemented by our global Central Banks, though this is a prediction I hate to make and detest even more if it comes true, the likelihood is very strong today that hundreds of millions of people will starve to death within the next five to ten years. Though many will find this prediction outrageous, remember that many of my predictions that were considered outrageous 2-3 years ago have now come true. I write this article not for shock value, but for the simple reason that this crisis is avoidable if we begin altering our solutions to the global financial crisis today. However, a persistent refusal to acknowledge the primary role of our fraudulent monetary system in creating this worldwide financial crisis will only serve to cement this obscene prediction in future years.

Should this grim hunger catastrophe continue to progress as increasingly seems likely, growing numbers of food-inspired riots and complex national security issues caused by mass migration issues will arise that will necessitate a response from our world leaders. Should this happen, I have no doubt that our world leaders will spin the starvation catastrophe as attributable to every reason imaginable but the true culprit – our unsound monetary system. Should this problem progress, eventually millions of rural poor will migrate to urban centers, driven by a need to earn higher wages to buy increasingly more expensive food. Ironically the consequence of flooding urban areas with cheap labor in developing countries will be significant wage depression for higher income earners and the rapid deterioration of the middle class into the poor.

Historical precedent for this outcome already was already set during the post NAFTA-years in Mexico, when NAFTA policies created a mass migration of poor into urban centers and effectively destroyed the wage potential of the middle class. Thus, this hunger crisis will not only affect the survival rates of 3+ billion people, but it will also negatively impact the earning potential of billions of urban dwellers in the future as well. Hopefully, this potentially epic humanitarian and moral disaster will finally serve as the necessary blaring alarm to citizens of the world to address the equivalent moral disaster that is our fiat monetary system.

JS Kim is the President & Founder of SmartKnowledgeU, LLC, a fiercely independent investment research & consulting firm that helps clients create wealth during this ongoing global financial & monetary crisis.

Recently, Bank of America CEO Ken Lewis testified that former US Treasury Secretary and ex-Goldman Sachs CEO Hank Paulson instructed him to disobey securities law and conceal material losses in the Merrill Lynch merger from investors. Lewis additionally testified that Paulson threatened to fire him and his entire board if he tried to back out of the Merrill deal. These revelations, too, did not surprise me, for these kinds of activities, devoid of all morals and ethics, have been occurring regularly within the financial industry for decades. It only seems as if such transgressions are more numerous today because of the recent attention given them in the media, but in reality, they have neither proliferated in frequency nor expanded in egregiousness.

Anyone that has ever worked for a Wall Street firm is well aware of the danger an analyst brings upon himself when he refuses to tow the official corporate party line regarding stock ratings for a firm that is simultaneously closing a financially significant deal with the analyst’s employer. Even though this atmosphere of “unspoken coercion” of inflated stock ratings existed for decades, when the bull was strong on Wall Street, very few journalists found this story newsworthy. Even though regulatory laws were passed many years ago to separate investment banking interests from securities interests within the same firm, the percent of US stocks covered by Wall Street firms rated as a “buy or hold” actually increased from 89% (2003) to 93% (2007) after the passage of aforementioned regulations. Who in their right mind would ever believe that 93% of all stocks covered by Wall Street should be rated a “buy or hold” and that only 7% should be rated a “sell”?

When regulations are enforced through self-monitoring and self-policing as is too often the situation, and when all financial regulatory agencies are themselves lacking in integrity and transparency, new regulations can be enacted every day without effect. Self-regulations and regulations imposed by morally bankrupt people have never been effective. How quickly we forget that UBS Paine Webber financial consultant Chang Wu was fired by branch manager Patrick Mendenhall no more than several hours after Enron executive Aaron Brown complained to Mr. Mendenhall about an email Mr. Wu had sent to his clients. In the email that Mr. Brown found “extremely disturbing”, Mr. Wu had advised all of his clients to sell Enron stock due to massive liquidity problems he had uncovered, even though UBS Paine Webber had rated it a strong buy. (Source: CNN, “Financial Adviser Fired Over Enron Advice”, 26 March 2002). After Mendenhall fired Wu, UBS sent an email to their clients retracting Mr. Wu’s statement, informing them that Enron stock was “likely heading higher than lower from here on out.” (Source: New York Post, 4 October 2006).

We should be cognizant that in light of the Enron scandal, that this level of deceit has not been a recent development. In 2001-2002, a partial list of companies that had to re-declare earnings due to erroneous information contained in previous earnings announcements included the following companies: Adelphia, AOL Time Warner, Arthur Anderson, Bristol-Meyers, Squibb, Freddie Mac, ImClone, Citigroup, General Electric, JP Morgan, Tyco, Worldcom, Dynergy, Enron, General Motors, AIG and Hyundai. Many of the company names on this list are the same companies that have been exposed as withholding material information from their investors about their financial health either in this year or in recent years. And let us not forget that in the early 2000’s, JP Morgan, Morgan Stanley, Goldman Sachs, Credit Suisse First Boston, Lehman Brothers, UBS Warburg, and US Bankcorp Piper Jaffray all paid fined between $32,5000,000 and $400,000,000 for engaging in deceptive and unethical behavior (Source: PBS Frontline, “The Global Settlement, an Overview”, 28 April 2003).

In regard to such ethical issues, unfortunately, little has changed today. With the blessings of FASB and our current administration, almost every major bank in the US is cooking their books today (i.e. consider that, of $4.2 billion of Bank of America’s recently declared earnings, $1.9 billion was attributable to a non-recurring event, the sale of China Construction Bank shares, and $2.2 billion was attributable to a fantasy-land valuation of Merrill Lynch structured notes). As I previously stated though, the Enronization of America started well before the Enron scandal. If we take a moment to dwell on what aspects of our financial system have been Enronized with fraud, it would include our financial ratings system led by Standard & Poors and Moodys, our mortgage system, our banking system, our equities analysts and financial analysts, our accounting system, our regulatory agencies including FASB, the SEC and the CFTC, our media, our politicians, our corporate executives, and lastly and most significantly, our monetary system.

In fact, though the current media focus seems to be on morally bankrupt financial executives and institutions, the fact is that this scenario could not have proliferated over the past several decades if the problem did not run much deeper than just our financial infrastructure. If other integral aspects of our society were uncompromised, they would have flushed out the dishonesty so prevalent in our financial industry many years ago. So the real question that needs to be examined is this – How exactly did the Enronization of America become so systemic?

The Enronization of our Legal System

The first phase of the Enronization of America occurred through our legal system. Most of us make the grave mistake of equating our legal system with morality, but law and morality are creatures that often reside at opposite ends of the spectrum under our current legal system. Since those that make our laws are also the same amoral people that control our financial system, often our laws have very little concern with governing morality and much more focus on ensuring that the very elements that hold power maintain or expand their power. Most Americans automatically equate a behavior as right or wrong depending on whether a law defines such behavior as legal or illegal without any critical thought, and this is a mistake. The fact is that today, many laws have nothing to do with morality. In fact, our legal system is laden with such hypocrisy at times that it allows for the very same behavior to be defined as legal if a financial elite is engaging in the behavior but illegal if a “regular Joe” is engaging in it.

Consider that US corporations can legally funnel hundreds of millions of dollars of overseas earnings to sham off-shore shell corporations specifically set up to serve as a tax-evasion shelters and this action is considered legal, but wealthy US individuals that essentially attempt to do the same thing regarding their own personal income will be prosecuted for tax evasion. Consider that Richard Strong, CEO of the former Strong Mutual Funds, admitted to skimming $1.8 million from his clients’ accounts that essentially was the equivalent of stealing, yet under the auspices of our current legal system, was not sentenced to a single day in jail (Source: Washington Post, 23 June 2004). Yet there is little question that if a hungry, unemployed man steals food equivalent to a fraction of the money Richard Strong stole, he will go to jail if caught. Stealing $1.8 million may be legal, but it certainly is not moral.

In 2005 and 2006, CEOs from the 11 largest firms in America paid themselves $865,000,000 in salary even though their “leadership” caused a loss of $64,000,000,000 of market capitalization in their firms during the same equivalent time period (Source: BBC News, 22 June 2006). Yet, if an employee of this firm performed as miserably as did these CEOs, their reward would almost certainly be a pink slip, not millions upon millions in bonuses, salaries and perks. Again, paying oneself hundreds of millions in salary and hundreds of millions more in bonuses despite contributing to unemployment and the massive loss of shareholder wealth is by all means legal though few would dispute the unethical nature of such behavior.

Were our legal system truly to regulate morality, many executive suites of America’s largest financial corporations would transform into ghost towns as a great percentage of executives would be jailed. There are numerous actions that are considered “legal” today that would be illegal if moral and righteous men were making our laws, and even a handful of “illegal” behaviors that would most likely be re-categorized as legal. Suffice it to say, if our legal system has been Enronized, our regulatory agencies by default, have also been Enronized. The Enronization of our Securities and Exchange Commission (SEC) has never been more apparent its failure to shut down Bernard Madoff and protect American and foreign families from fraud even though independent financial fraud investigator Harry Markopoulos informed the SEC both in writing and verbally numerous times of the fraudulent nature of Madoff’s fund over a nine-year timespan.

During Congressional testimony regarding this matter, Mr. Markopoulos stated that when the SEC repeatedly ignored his warnings about the fraudulent nature of Madoff’s practices, he began to fear for his as well as his family’s safety, a damning indictment of not only the SEC’s abject failure to regulate, but also of their propensity to protect powerful members of the financial elite, even when they commit fraud. The continuing failure of other regulatory agencies such as the CFTC to act in the interests of American people is also quite evident. Consider the CFTC’s recent approval of fraudulent financial products such as the new E-mini Gold and Silver futures contracts, introduced on April 19th by CME group, that settle strictly in cash. Futures contracts that specifically prohibit the delivery of its underlying commodity explicitly allow its participants to legally naked short a commodity with zero intention of every purchasing or holding the underlying physical asset in their possession. If this transpires, a fraudulent commodity market that can never resemble the free market dynamics of its physical market is established.

In recent months, the regulatory agencies have demonstrated a propensity to still prosecute criminal activity that occurs among the “regular Joes”; however, if your rank is among the financial elites, a clear and repetitive response of inaction has been established.

The Enronization of our Media

The second phase of America’s Enronization has occurred through the mass media. Ben Bagdikian, the author of the seminal work on media mergers and consolidation titled The Media Monopoly, has noted that almost all major media in the US is now under the control of five major conglomerates – Time Warner, Disney, Murdoch’s News Corporation, Bertelsmann of Germany and Viacom. To be fair, there are a handful of major news organizations not controlled by the “big five”, including The New York Times, The Washington Post, The Chicago Tribune and Los Angeles Times. However, Badgikian’s basic premise that the problem with our media is “not one of universal evil among the corporations or their leaders” nor one of “a general practice of constant suppression and close monitoring of the content of their media companies”, but one of a contradiction between the values of free enterprise and the interests of giant conglomerates, is still valid.

Today, many important news stories break on the internet by bloggers well before they attract the necessary viral proliferation to draw the attention of major media outlets. Today, a strong case can be made for the argument that one will find a greater level of truth and integrity in reporting on the internet than in major information distribution channels such as CNBC.

The Enronization of Our Critical Thinking Skills

Undoubtedly the Enronization of our media has evolved into the Enronization of our educational system. Though this is a topic that commands the devotion of an entirely separate article, the financial elites have heavily influenced the curriculum taught at leading American educational institutions for decades now. For example, over the last century, the Rockefeller family has donated millions upon millions of dollars to leading economic schools such as the University of Chicago and Harvard Business School. Even if you don’t buy into the strong likelihood that millions of monetary donations to educational institutions buys the financial oligarchs influence over our educational curriculum, you should at a minimum consider this possibility. Perhaps it is the monetary influence of financial elites such as the Rockefellers that is largely responsible for erroneous economic beliefs about inflation and our monetary system that persist today.

To grant further support to the suggestion that the financial elites likely utilize their money to guide certain aspects of the curriculum at leading educational institutions in America, recall that in 2002, David Rockefeller stated in his own autobiographical memoirs: “For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as “internationalists” and of conspiring with others around the world to build a more integrated global political and economic structure – one world, if you will. If that’s the charge, I stand guilty, and I am proud of it.” The only difference today is that the cabal working against the best interests of the US and all American families is no longer secret, but well documented and well known.

Since the above statement is sure to stir up cries of conspiracy regardless of the fact that it is directly attributable to a member of the financial oligarchy, let us take a minute to consider the Enronization of our critical thinking skills. Why do those with a keen interest in suppressing the truth about the origins and nature of our current global financial crisis have great success in doing so merely by simply using the word “conspiracy” to marginalize the well-constructed arguments of others? Why do the people that attempt to discredit these truthful revelations never offer more than flimsy verbal accusations devoid of any evidence to validate their accusations?

And why do we rarely, if ever, challenge the fact that the vast preponderance of people that flippantly dismiss valid arguments about our current global financial crisis are those whose personal wealth depend upon deluding masses of people about the health of our stock markets and the soundness of our financial institutions and monetary system? Today, the Enronization of our institutional education system has dulled our aptitude of critical thinking to such a degree that we now look to others to do our thinking for us. Instead of challenging the propaganda that makes zero sense, we are all too willing to be duped into believing erroneous concepts just because they are written in a textbook or a newspaper.

As a prime example of this, consider the propensity of Central Banks and the IMF to pre-announce massive gold sales that they rarely execute. From a purely logical standpoint, can anyone well versed in logic truly argue one beneficial reason for doing so? In 1999, when now UK Prime Minister pre-announced the sale and actual eventual execution of 400 tonnes, or more than half, of the Bank of England’s gold reserves, his announcement promptly caused the gold market to plummet to $250 an ounce, the lowest price in the last decade. For an institution interested in making profits, it is a foregone conclusion that pre-announced large sales of gold reserves will significantly depress prices; thus what is the reason behind such an announcement other than to purposely depress prices? Yet, when skeptics are presented with such evidence and can offer no valid counter-argument, instead of intelligently considering the validity of another’s viewpoint, too often we are apt to shut off our brains and repeat beliefs that have been repeatedly rammed down our throats rather than critically assessing the situation for ourselves.

In the seminal book about warfare, The Book of Five Rings, legendary samurai Miyamoto Musashi wrote, “true enlightenment can be seen by what a person has done, not by what he says. Those who have missed the mark may chatter all day long about this and that, but they have never done anything. Anyone can make a good argument, but few can show good results.” If we as Americans wish to stop the Enronization of our country and to reinstitute our rights of self-determination and our Constitutional rights to a sound monetary system that are paramount to a free society, we must judge people not by what they say but by what they do. We must listen not to those that present hollow arguments and that can demonstrate no positive track record of results, but rather focus on the thoughtful arguments of the few that have been able to illustrate the intelligence and validity of their views because their predictions have been vetted over time.

As a nation, we have become Enronized because we too often focus on the false arguments of those that are well versed in the art of persuasion yet have a persistently poor track record of results. As a prime example, consider this video of Congressional testimony where former US Treasury Secretary Hank Paulson disingenuously claims that he advocates greater transparency in US markets when in fact, Goldman Sachs, under his direct leadership, aggressively lobbied to repeal laws that granted financial markets transparency. We are much too apt to accept the words of people rather than to take the more intelligent approach of analyzing their actions to judge the validity of their words.

The Enronization of Our Leaders

The final phase of the Enronization of America has occurred through our power structure and politics. The financial oligarchs that wish to suppress the truth about their role in this crisis have been very opportunistic in forming close relationships with the highest echelons of government and then using this inordinate power to polarize the masses and further consolidate their power. The revolving door among Central Banks (i.e the Bank of Italy, the Bank of England, the US Federal Reserve), Goldman Sachs, the US Treasury, JP Morgan, and Citigroup has been well documented so I won’t repeat the prolific work of others here. However, using politics or nationalism as a divisive maneuver is often a favored tactic of the financial elites, so we must remain vigilant against immoral attempts to deflect our attention away from the true causes of this crisis, such as the scapegoating of immigrants or other shameless tactics.

When obfuscation of fact and misinformation systemically replace transparency and integrity as they have in our modern society, we have little chance of producing a favorable outcome to this current crisis. Twenty-six banks have failed thus far in the United States this year and every single bank failure announcement, without fail, has occurred on a Friday afternoon after market close so that the revelations of these bank failures cannot adversely affect markets while they are open. Additionally, such announcements are timed as such to grant investors two weekend days to forget about these failures.

America has been Enronized over the past several decades not because of Democrats and not because of Republicans, but because of the financial oligarchs that have ruled and continue to rule our country. The Enronization of America has happened under President Clinton’s watch, it continued under President Bush’s watch and it is now progressing under President Obama’s watch. Until we wake up and correct many of the flaws in our thinking and in our justice system, the Enronization of America will continue. Arthur Shopenhauer, a noted German philosopher, once stated, “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

We have already passed through the first stage where truth has been ridiculed. For several decades, those that attempted to reveal the price suppression schemes executed by governments and Central Bankers against gold and silver were ridiculed as conspiracy loonies. Today, the evidence of this manipulation is so overwhelming (please reference all of Ted Butler’s tireless work to expose silver price manipulation) that men that dwell firmly inside the confines of the mainstream, men that previously would never have dared to publicly state such sentiments just 10 years ago, are now stepping forward and publicly acknowledging the existence of price suppression schemes that interfere with free markets (i.e., Donald Coxe, chairman of Harris Investment Management in Chicago).

Today we have progressed to the second stage of truth, when truth is violently opposed. Within the past year, former Treasury Secretary Hank Paulson testified multiple times in Congress that it is not reality that is important to stock markets, but only what people think they know, even if what they think is wrong. Though he did not make that statement in these exact words, Paulson regularly emphasized the vital importance of consumer confidence to the performance of capital markets. In the end, confidence levels measure consensus belief and often have very little correlation to the reality of underlying economic fundamentals. In a bear market, such as the one in which we are currently engaged, it is safe to say that rising stock markets serve as a barometer of deceit. The greater the deceit by our leaders, the more likely stock markets will act irrationally and rise when there is no foundation to support the rise, including the most recent rally that we have witnessed in US markets in March and April of 2009. I will go on record here in believing that we will see another waterfall decline in US and global markets by the end of this summer.

It is no wonder, given the propensity of our leaders to deceive, that US consumer confidence jumped to its highest level this month since last November. As long as markets react positively to lies that prevent the masses from understanding the grave situations of our faltering economy and monetary system, our government and financial leaders will continue to prevent people from knowing or understanding the truth. One merely has to consider that FASB conveniently altered mark-to-market regulations immediately prior to first quarter 2009 earnings season and immediately prior to stress tests that were to be conducted on these same institutions to realize that our current administration is not any more interested in disclosing the truth or increasing transparency than previous administrations. Again, we would be wise to remember Miyamoto’s sage advice to judge someone not by his or her words, but by his or her actions.

The fragility of America’s emotional state regarding the dire economic situations that existed during the last US Presidential campaign left America vulnerable to blindly accepting anybody that promised change, but again we must consider the actions, not the words, of this current administration. We must look at the men appointed to “solve” this crisis and understand that almost all of these men come from the same unethical institutions such as Citigroup, Goldman Sachs, and JP Morgan, that were largely responsible for creating this crisis. The most efficient way to solve a crisis caused by lack of ethics and morals is not to put the most morally bankrupt people in the nation in charge. It should disturb us all that men like Paul Volcker have been appointed to lead a Presidential advisory board when he once stated in reference to rising gold prices in the 1980’s:

“That day, the U.S. announced that the dollar would be devalued by 10%. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.”(Source: Volcker’s memoirs printed in the Nikkei Weekly, November 15, 2004).

Men that clearly state a position that collusion to rig markets is preferable to the transparency and integrity of free markets should never be appointed to any position of leadership in our country. Despite the lack of leadership from the financial elites during this crisis, they have made it clear that their agenda of concealing the truth from us will not prevent them from shamelessly pinning us with the blame for their errors by increasing our taxes and devaluing the purchasing power of our dollars.

And this is precisely why the energy of those that participated in the recent teabag protests is improperly focused. Yes, our government has contributed to the instability of our economic infrastructure. However, the government is not the root cause or the prime perpetrators of our global financial crisis. This honor belongs to the financial oligarchs and the fraudulent monetary system they have instituted. Today, governments have devolved into nothing more than an instrument of execution for the financial oligarchs. The late great John F. Kennedy was the last US President to understand and recognize the massive flaws and amorality of our modern day monetary system, as evident in his signing of Executive Order 11110. Were the honorable President Kennedy still alive today, but a regular citizen, voicing the exact same displeasure against our current monetary system as he did half-a-century ago, I have little doubt that those in power would have already marginalized his arguments and labeled him as a “conspiracist”.

The End Game: How to Stop the Enronization Process

The lack of transparency and the veil of secrecy that has existed in our financial world for a very long time now have enabled the Enronization of America. Furthermore, the misinformation campaigns that the financial elite have engaged upon for decades have further supported and maintained the ignorance of the masses. If one merely focuses on gold and silver markets, one can uncover a mountain of deceit. Consider that when Central Banks lease gold, they still claim it as an asset on their balance sheets, an obviously fraudulent practice. In fact, I could fill another ten pages with the deceitful reporting practices of Central Banks regarding gold that I have uncovered, but I don’t want to dilute the central focus of this essay, which is not to focus on the Enronization of commodity markets but to focus on the systemic-wide problems of fraud in America. This is not an indictment of American citizens, but an indictment of those that reside at the very top of the power structure, and most specifically, the financial elites.

In the end, let us not look to the words of our financial and government leaders for truth, but to their actions. If there has ever been another institution in the history of America with a persistently worse track record of accomplishing their stated mission than the US Federal Reserve (that of maintaining price stability), I can not think of one. Thus, we should permanently shutter institutions that have a track record of utter failure and that have consistently failed to act in the interests of their citizens. This list would include the US Federal Reserve as well as the Bank of England, the Bank of Japan, and the ECB. We should also permanently shutter those financial institutions led by corrupt executives that have cumulatively made billions from the purposeful deception and bankrupting of American families. Finally, if you are a shareholder with voting rights, it is incumbent upon you to exercise your rights at general meetings to oust all corrupt directors and executives at corrupt firms. Because it is near impossible to regulate morality, the only sustainable solution to stopping the Enronization of America is to remove the very institutions and people responsible for this process. As current administrations of major governments all around the world have demonstrated an unwillingness to do so, it is patently clear that this movement must originate from the people.

If we all desire the freedom of self-determination that is impossible with a corrupt monetary system, this change will have to come from the people. If we all desire a sound monetary system devoid of the ability to be mercilessly manipulated by elements of the US Treasury, the US Federal Reserve, the Bank of England, Goldman Sachs and JP Morgan, this change will have to come from the people. If we all are opposed to leaving a legacy of indentured servitude to the financial elite for future generations, then this change will have to come from the people. The alternative consequence of our inaction will be the manifestation of Shopenhauer’s third stage of “truth as self-evident” at a not-so-distant time in the future when it will be far too late to affect a positive outcome from our current financial crisis.

JS Kim is the President & Founder of SmartKnowledgeU, LLC, a fiercely independent investment research & consulting firm that focuses on understanding the roots of our current monetary and financial crisis to create wealth.

More recently, at a G20 meeting in late March 2009, the IMF announced its plan to sell 403 tonnes of gold reserves to address some problems of liquidity. Even though this news was merely old news that was being recycled from the end of 2008, the prominent forum which the IMF leveraged to re-release this old statement focused the attention of neophyte gold analysts on fears of gold supplies flooding the market in the future. And just like magic, we experienced déjà vu again when gold prices plummeted lower (from $928 per fine troy the day after the announcement to a low of about $880 an ounce just one week later on April 8th). When I heard this announcement, I was at once immediately very skeptical of the IMF’s commitment to execute this plan. If the IMF truly makes good on its threat to sell 403 tonnes of gold in the future, the IMF would fail to accomplish their goal of flooding markets with gold supply and would accomplish nothing more than the transference of global wealth from Western nations to Eastern and Middle Eastern nations as I surmise that China, Russia, select OPEC nations and other nations with large trade surpluses or a desire to decrease their US dollar exposure would be more than happy to absorb the available supply. Thus, I believe that the purpose of their announcement was nothing more than a smokescreen that will never experience full execution designed to temporarily drive the price of gold down.

China’s recent revelation that it secretly increased its gold reserves by 76% over the past several years also surprises me not in the slightest as I have predicted China’s engagement in such activities for a couple of years now*. China’s revelation proves that there is little transparency in global gold markets and that the “officially” reported numbers have little relevance as they can be, and most likely will continue to grossly misrepresent the truth. As skeptical as I was about the Bank of Italy’s announcement and the IMF announcement when they occurred, I am equally skeptical of China’s announcement. Given China’s history of public comments about their grave concern regarding the stability of the US dollar and their years of engaging in secretly increasing their gold reserves, when it finally publicly reveals a new gold reserve figure, for what reason should we give this announcement credibility as being truthful?

Governments take full advantage of the fact that they can easily convince millions of unthinking people to believe something as long as they print the statement in writing and in a “credible” newspaper. Ultimately, I suspect that China’s actual gold holdings of 1,054 tonnes, up from their last reported figure of 600 tonnes, are in reality, significantly higher than this amount (as this figure still only represents a tiny 1.6% of their overall reserves). Though I can only speculate about the timing and nature of China’s recent gold revelation, I believe that China made this revelation to “test the waters” and observe the impact of their announcement on gold markets. Ultimately such a revelation, even if it does not fully disclose China’s true gold position, will significantly assist its final determination of its end target percentage of gold reserves.

Furthermore, I am confident that China has not only been secretly supplementing their gold reserves, but that they have also been very quietly adding significantly to their silver reserves, their petroleum reserves, their agricultural reserves and their reserves in base metals. Though base metals will most likely continue to experience a longer timeline to significant recovery than precious metals, they too, will eventually strongly recover in the coming years. The overwhelming majority of analysts state that China’s strategic hands are tied by its massive holdings of US dollar denominated debt and that it can’t possibly dump their massive holdings of US dollar denominated debt without hurting its own economy. This is just not true. There are plenty of means to hedge against eventual significant US dollar decline and China has already revealed its partial hand with its significant additions to its gold reserve.

Just a few days ago, I wrote an article about deflation and gold investments in which I stated, “We’re likely to see some downward pressure in the gold and silver futures markets in the very near term and specifically next Monday [Monday April 27th]“. Indeed yesterday, gold dropped in the COMEX markets by $6.80 an ounce (the ask price closed at $907.20 an ounce), though silver actually ended up closing just about even, higher by one penny an ounce. Furthermore, today, Tuesday, April 28th, I predict that the downward pressure in COMEX gold markets is likely to continue and I would not be surprised to see gold pushed below $900 an ounce at some point in intra-day trading today (author’s note – I released this article about 11 hours before COMEX markets opened in New York on Tuesday).

However, these two days of downward pressure (if another downward day materializes today as I believe to be likely) do not negate the likelihood of another strong leg higher in both gold and silver in May or June. While the gold markets were obviously buoyed at the end of last week as a result of China’s revelation, knowing that the gold markets would dip yesterday and very likely today, while also understanding that these dips do not signify a reversal in trend has nothing to do with fundamental nor technical analysis, but rather with understanding the complexities of the price suppression schemes that the US Federal Reserve and the US Treasury execute. One has to understand all the games that are played in these markets to not be misled by the massive amounts of “white noise” that exist in precious metals markets that are purposely created by the financial oligarchs that control the US Federal Reserve and her sister Central Banks. Unfortunately, the analytical world of gold is full of gold neophytes that have not put in the considerable amounts of research necessary to understand either the fundamentals of the gold market that drive its long-term behavior or the complex relationships among Central Banks’ gold reserves, currency markets, and the US Treasury that drive its short-term behavior.

In reference to the article above, the author publicly stated his belief nearly two years ago in June of 2007 that it was an erroneous assumption to believe China’s strategic options in currency markets were handcuffed by US debt. In addition, the author specifically stated his belief in China’s secret accumulation of gold reserves multiple times over the past two years through the private forum of his SmartKnowledgeU™ Platinum Membership. For years, he has instructed his clients regarding how to create wealth from gold investments and silver investments during the ongoing financial crisis.

Thus, the proponents of the prolonged deflation argument suggest that significant acceleration in money velocity is years away. Here’s why they are wrong. The US government has been creating debt for many years now at a faster rate than they can service it. Normally the US issues more US Treasury debt to foreign nations to receive more dollars in order to service their existing debt. As you can see from the US Treasury’s own data below (the most recent data provided has a two-month time lag, thus the reason the charts stop as of February 2009), net foreign purchases of US Treasuries which were a positive $28 billion as recently as March of 2008, have now been in a negative trend for five months now. Considering it is safe to assume that foreigners have been net sellers of US Treasuries in March and this month as well, this trend has now extended to 7-months. If the US Treasury can not obtain enough dollars from Treasury bond and note auctions, then they must eventually ask the US Federal Reserve to print more dollars out of thin air to service their existing debt because if the US Treasury defaults on interest payments of Treasury bonds or notes, this event would be catastrophic.

If the trend of net selling of Treasury bonds by foreigners continues, as seems highly likely, this will contribute to the acceleration of money velocity in the near future as it is likely that an increase in dollars in the monetary supply will work their way through the fractional reserve banking system to be multiplied into greater amounts. However, even in the absence of accelerating money velocity, the mere expansion of monetary supply indeed causes inflation. I have seen many people fall victim to believing tenets and principles just because they are contained in books or in newspapers, though history has proven that many principles believed for decades and even centuries were complete shams propagated by people with hidden agendas. Many people can not even properly define inflation. Rising prices do not cause inflation but inflation is rather caused by an increasing monetary supply.

Furthermore, as I predicted over a year ago in this video I released in April of 2008, though virtually every talking head on TV disagreed with my views back then, I stated that foreign purchases of US Treasuries, corporate bonds and equities would soon turn negative and that foreign capital would withdraw from US markets in large quantities. At the time I made this prediction, net foreign capital inflow had been very healthy at $41.3 billion in March of 2008 and even healthier at $48.4 billion for the prior month. Just three months after my prediction, foreign appetite for dollar denominated bonds and equities fell off a cliff as foreigners determined that the risk of buying assets denominated in US dollars outweighed the rewards. In the below chart, we can see that for eight consecutive months, foreigners have been pulling capital out of the United States. If this trend occurs, as again seems highly likely, markets will soon be flooded with US dollars, again accelerating money velocity.

Currently, the saving grace that is preventing accelerating money velocity at this point is the unprecedented current account deficit that the US maintains. This deficit, estimated by the IMF to already by $393.25 billion as of April, 2009, already exceeds the entire US current account deficit for all of 2001 (-$384.70 billion). Of course, if one adjusts the IMF 2009 April estimate for inflation, then this number would not exceed the 2001 deficit, but nonetheless, it is a huge number for the 1st quarter 2009 that illustrates the US is importing far more goods and services than it is exporting. Consequently, the net current account deficit that the US maintains has countered some of the increases in US dollar supply created by the aforementioned two situations. China on the other hand, has a huge current account surplus because it exports far more goods and services than it imports.

However, if we look at the long-term picture as illustrated in the chart below, it is evident that we are on track this year for a record annual current account deficit. The question is if the extrapolated figure will actually be realized. If indeed we proceed to reach the extrapolated figure on the below graph, then indeed accelerating money velocity will not materialize. But if we realize this unprecedented current account deficit, then this spells doom for the US economy. Will Barack Obama accept a collapsing US economy in the first year of his new administration? Furthermore, if the US Federal Reserve wishes to manufacture deflation, then doing so will cause a lose-lose situation. If the US economy survives on imported goods and services, then millions of additional Americans will lose their jobs as the US job sector continues to contract. As the job sector continues to contract, then US dollar denominated bonds and equities will continue to lose value, foreigners will continue to dump these instruments, and the resultant flood of US dollars will counteract deflation.

The US Federal Reserve has already tipped their hand with their willingness to expand the monetary base at unprecedented rates. The choice will soon come down to throwing bad money after bad money and the inflation of the monetary base to ridiculous levels (which eventually will translate into enormous increases in the monetary supply) or economic collapse and very angry and perhaps rioting citizens. In the end, as I stated above, for massive inflation to occur, the “bailout money must eventually end up not just in the monetary base but in the monetary supply.” When we look at the choices for the future, I firmly believe that the US Federal Reserve, as it has since its inception in 1913, will choose to sacrifice the US dollar and massively increase monetary supply by any means necessary.

I take great offense to Mr. Pandit’s willingness to remove all responsibility for this crisis from “each and every employee” in the financial services industry. What made America a great country in the past was each and every American citizen’s willingness to take personal responsibility for his or her mistakes instead of sloughing the blame onto someone else. What made America a great country in the past was the courageous transparency of American leaders to discuss the truth with her citizens, as painful as that truth may have been, versus the cowardice of deception to dishonorably fool the masses into believing a picture of reality that is a lie.

Today, we have a global financial system that is morally bankrupt, shrouded in secrecy and devoid of transparency. Today, we have men in the financial industry that abuse their positions of authority to plant stories in the media that distort the truth so massively that they must continue to tell more lies merely to cover up their past lies. In fact, the lies of the financial industry have become so repetitive and predictable, that one week before big US banks started to declare their earnings this season, I wrote an article here that stated Big Banks would announce surprisingly positive earning statements based upon Enron-style accounting tricks, and indeed they have.

And don’t expect any negative news when the US Treasury and the US Federal Reserve publicly announce the results of their “stress tests” on the 19 largest US banks by the end of this month. The “stress tests”, most of which have now been completed, were such a joke that even the Federal Deposit Insurance Corporation called them pointless and devoid of credibility. The “real facts” will never be told by any of the men that have led us into the crisis for they have not the courage nor the moral character to do so. The “real facts” are that this crisis was triggered not by subprime mortgages, commercial paper, financial derivatives, collapsing stock or bond markets, but by a fraudulent monetary system. A fraudulent monetary system allows for massive distortions in capital markets that would be near impossible with the implementation of a sound monetary system.

Though the US Federal Reserve has instituted this fraudulent monetary system, the biggest enablers of this fraudulent monetary system are the Big Banks. So yes, each and every employee of the financial industry must be held accountable for their role in this crisis. Ignorance is an excuse only for the weak and morally repugnant, not the honorable. For three years now, I have predicted, in writing, every major step of this crisis, months, and sometimes years before they eventually unfolded. Since 2006, I have strongly advocated gold investments and silver investments as a way to create wealth during this crisis. My predictions have been remarkably accurate for more than three years now not because I have remarkable psychic skills. I have been able to do so only because I have understood that the origin of this crisis is a fraudulent monetary system enabled through the corrupt relationships that exist among Big Banks, Central Banks, and governments.

Every Big Bank in the US creates money out of thin air through a system called the fractional reserve system. In the US, the reserve ratio requirement (RRR) is NOT 10% as most American’s believe. It is in fact, effectively zero percent, a fact that all executives at big banks do not want you to know. This means that Big Banks can effectively create $100 million of loans for every $1 million of deposits they receive if they so desired. If you and I tried to execute the same business plan with our everyday businesses, you and I would be thrown in jail for fraud within two weeks. In essence, due to the fractional reserve banking system, every single dollar we deposit in a bank is effectively being devalued from the moment it leaves our hands. Considering that it takes us a minimum of several months to many years to withdraw and spend all of our savings, the money we withdraw from banks will always have less purchasing power than the money we originally deposited with them. Of course, other factors such as the monetary decisions of other major Central Banks affect the dollar’s worth, but in essence, the above statement, even its simplicity, still holds true. Since I extensively explained how devaluation of the US dollar happens in this article, I won’t repeat myself here.

In addition to the Big Banks, the US Federal Reserve, the biggest bank of all, also prints money out of thin air. When Central Banks and participating banks create money out of thin air, they impose a punitive tax upon all of us, willing or not, that they euphemistically repackage and re-label as “inflation.” However, this is a tax that necessarily must be factored into one’s earning power every year. Let me explain. Consider if in 2006, you lived in California and earned a modest (for the state of California) $155,000 annual salary. From this figure, you had to deduct 33% for federal income tax and another approximate 10% for state & local income tax. Most Americans in this income bracket would believe that their net earnings for the year was 57% of their annual salary, or $88,350. However, most of us forget to compute one last very important calculation to determine our true net salary that year. In 2006, the true inflation rate in the US was about 10.5%. Since inflation decreases the purchasing power of your money, you must account for inflation as an “invisible tax” in your overall tax rate.

Thus, if you earned $155,000 in the state of California in 2006, your true tax was 33% + 10% + 10.5% = 53.5%. Consequently, your net earnings from your salary that year was barely over $72,000, certainly not $88,350 and certainly not $155,000. This is exactly why some years you may struggle to make ends meet even though you may be earning what you believe to be a very decent salary. Big Banks are and have been bamboozling all of us out of our hard-earned money through a fraudulent monetary system. And we have the Big Banks, and in particular, the executives at the biggest banks in America, to thank for our current monetary and financial disaster. These are the “real facts” that men like Mr. Pandit do not want you to know. So will I ever be empathetic towards financial executives at Big Banks? When these financial executives run their companies with integrity instead of dishonor, when they are aboveboard instead of deceptive regarding their contributions towards this crisis, and when they engage all American citizens in an open debate regarding solutions instead of shrouding their meetings in secrecy, I will become empathetic. Until this occurs, then no, because frankly, financial executives at Big Banks are getting a free ride right now in proportion to their level of responsibility in creating our present monetary crisis.

So here are two simple steps every American and every citizen of the world must take to end the tyranny of Big Banks. While these steps are not perfect, they will succeed in changing the financial system in America if you truly desire real change.

(1) If you work for a Big Bank, start looking for another job and quit within six months. If you did not understand how the US Federal Reserve and Big Banks are destroying America, if you’ve read this article, you can not claim ignorance as a defense anymore. If you continue to work for a Big Bank, you are silently agreeing that secrecy, deception, & moral repugnancy is okay. Quitting is not as difficult as it seems. I realized my mistake of working for a Big Bank years ago and left to start my own independent company that could truly serve the interests of my clients. If I was still working for a Big Bank today, I would still consider myself part of the problem instead of part of the solution. If you want to remain in banking and don’t want to start your own firm, obtain a new job with a community bank. You have options other than to work for a Big Bank and contribute to America’s downfall.

(2) If you have large accounts, investment, savings, mortgages, or otherwise, at a Big Bank, withdraw all your assets, close your accounts out and give all of your business to a community bank. Yes, you will lose access to more competitive rates that a Big Bank can offer. Yes, closing your accounts will be a hassle. However, the consequences of doing nothing can devastate future generations of Americans. So consider this action the greatest gift you can give your children and your grandchildren.

According to the FDIC, as of April 9, 2009, there are 8,256 FDIC-insured banks in the United States. Of these 8,000+ banks, perhaps taking action against the 20 biggest banks in America and the world is all that is necessary to bring sweeping reform and change to the US financial industry. However, if all banks enable our fraudulent monetary system, you may ask, Why the Big Banks? Here’s the answer. While it is true that all banks serve as enablers of this monetary crisis, it was specifically the Big Banks such as Goldman Sachs, Citigroup and the US Federal Reserve (as directed by Chairman and former JP Morgan director Alan Greenspan) that actively sought the repeal of the Glass Steagall Act (author’s note: For those of you unfamiliar with the Glass Steagall Act of 1933, it was an act loaded with provisions to specifically prevent the exact scenario we are suffering today). The Big Banks in the US lobbied to destroy the act and won this battle in 1999.

For those of you that understand the revolving door that exists among the US Treasury, the US Federal Reserve, JP Morgan, Goldman Sachs and Citigroup, it should be obvious to you why JP Morgan, Goldman Sachs, and Citigroup have all survived this crisis thus far. Seasoned gold and silver investors have often speculated that data seems to incriminate JP Morgan and HSBC US as the two Big Banks that consistently short the majority of gold/silver contracts in the futures markets. So to re-establish any semblance of free markets again in America, the Big Banks must be broken up. Furthermore, a transition period to a sound monetary system is necessary and it is not realistic to believe that a systemic collapse of the global banking system is necessary for change. We still need banks to operate during the transition period and thus, we should lend our support to small community banks during this time.

During a February 5, 2003 PBS Frontline interview, conducted by correspondent Hedrick Smith, Charles Geisst, a professor of finance at Manhattan College in NYC, stated, “Certainly, Citigroup [and then CEO Sandy Weill] pushed for legislation to get rid of Glass-Steagall, pass what was called HR10 at the time, which became the Financial Services Modernization Act [of 1999]… In the year previous to the Financial Services Modernization Act, the thing that overruled Glass-Steagall, Citibank spent $100 million on lobbying and public relations…They spent a small fortune, a king’s ransom, if you will, getting rid of Glass-Steagall. In fact, when thrown in with other financial firms’ lobbying, it was closer to $200 million over the short period of time.”

Of course, the only real solution to this monetary crisis is to re-instate a monetary system backed by gold and silver. However, until that time comes, the intermediate step to take is to withdraw all support from all Big Banks and re-direct your support to your local community banks. I guarantee you that if we fail to act now, we will find ourselves in a predicament two to three years from now where it will be too late to take action for your actions will no longer have an effect. We have arrived at a tipping point right now and the simple actions above can help save our country and restore it to greatness. No matter your nationality or where you live, the greatest gift you could give every citizen of this world is to take the two steps above and to ensure everyone you know also takes the above two steps.

We still have much to learn from past US Presidents John F. Kennedy and Thomas Jefferson. John F. Kennedy once stated, “The very word secrecy is repugnant in a free and open society”. Thomas Jefferson once stated, “The government is best that governs least” and “When governments fear people, there is liberty. When the people fear the government, there is tyranny.” If we consider how the statements of these great US Presidents apply to our situation today, we will realize that never has secrecy in the US financial sector been greater and transparency less; never has our government governed more; and never have government and Central Banks feared us less.

Consider the $700+ trillion derivatives markets that nobody can seem to properly explain because they are unregulated and opaque, other than the fact that a good percent of this market is destined to blow up. And who do you think invented financial derivative products like Credit Default Swaps that are wreaking so much havoc on the financial system today? The Big Banks. Consider the fact that organizations like the Gold Anti-Trust Action Committee petitioned the US Federal Reserve Board and the US Treasury in 2008 for information regarding US gold swaps, but were denied information under the grounds that the disclosure of this information “would harm certain proprietary interests.” This secrecy regarding the US gold reserves and the secrecy of our $700+ trillion derivatives market is the very secrecy that President Kennedy referred to as “repugnant in a free and open society.” This should serve as a wake up call to us all.

Today, we find ourselves in a state of inertia that is induced by a fear created only by the fact that we have been dearly misinformed about the origins of this crisis. Our ignorance, in turn, is maintained by the secrecy and massive misinformation campaigns propagated by bankers. A misinformed, ignorant populace will remain in a state of inertia but an informed populace can create powerful change. The fact that we have been in a state of inertia for decades has created this obscene situation we face today. However, just as the law of inertia states that a body at rest is likely to stay at rest, the law of acceleration states that force equals mass times acceleration. Thus if we sincerely desire change, we must also seize the personal responsibility to inform all of our friends, our neighbors, and our co-workers about our fraudulent monetary system and the steps that can be taken to dissolve it.

We can consequently then generate mass and acceleration. A body set in motion is likely to stay in motion. This is how we can defeat the Big Banks. America has been in state of inertia not because we are stupid as the Big Bankers think of us. America has been in state of inertia not because we are lazy or uninspired. It has been a long time since the world has looked to America as the shining beacon of freedom and justice, but this is our opportunity, and ours alone, to seize. I am writing this article because I believe in the intelligence, the courage, the leadership, the diversity and the resilience of all Americans. And I do believe you will act upon reading this article.

If you believe that my views need be challenged, I agree, because in any free and open society, open debate and transparency is what leads to the best solution. But whatever you do, ACT. Merely pass this article on to your neighbor to open up a discourse then, for a debate about this is better than no debate at all. Also consider this article from a former IMF economist, Simon Johnson, called “The Quiet Coup.” Please take the time to follow this link and read that article as well. For those of you that have followed my writings for quite some time, you may be surprised that I am recommending an article from a former IMF employee, but trust me, it is an article well worth reading.

Perhaps if we take the small actions I suggest, the small community banks will morph into big banking giants, and we’ll have the same problems all over again. Perhaps, but if we all mobilize and place enough pressure on Congress to pass a Glass Steagall Act II by the time we finish taking the steps above, it will not. The only thing we know for certain is that if we do nothing, we will have sentenced not only ourselves but also future generations of Americans to a very bleak future. However, if we take action now, we can guarantee one thing. We the people will serve notice to the banks that we, and not they, are in control of our inalienable rights of life, liberty and the pursuit of happiness. America’s greatness is rooted in the strength of her citizenry, not her government and certainly not her corrupt banks. As the state of New Hampshire motto goes, “Live Free or Die.”

The timing of FASB’s ruling was in no part coincidental. There was a rush to approve the suspension of mark-to-market rules that allows US financial companies to use their “significant judgment” to value illiquid assets such as mortgage securities and mortgage-backed securities. I’m sure investors appreciate that valuation will be left to the significant judgment of financial executives since it was their fine judgment that helped fuel many of the steps of this global economic quagmire we find ourselves in at the present time. Furthermore, a Marketwatch article notes that, “The FASB approval comes after an effective lobbying campaign on Capitol Hill by the American Bankers Association and other interest groups. Roughly 800 bankers gathered in Washington earlier this week, in part, to meet and press lawmakers to send a message to FASB that the accounting rules needed to change.”

Does anyone but me find it immensely hypocritical that these very same bankers took full advantage of the mark-to-market accounting regulations when distorted market values aided the climb of their stocks to gross overvaluations and billions of bonuses were paid out based upon these gross overvaluations? And since I have heard arguments that FASB’s decision to suspend mark-to-market accounting laws was right because the fair value rule created gross misstatements of assets during bull markets, let me quickly illustrate that this argument is a circular one and holds no weight. In October of 2008, a CNNmoney.com journalist wrote: “The one fact everyone agrees on is that the current financial crisis centers on trillions of dollars worth of mortgage loans that were packaged together into financial instruments known as mortgage-backed securities, or MBS. Those securities were purchased by banks and Wall Street firms.”

Forgive me for adamantly disagreeing, but the one fact this journalist states that “everyone agrees on” is not even a fact. This is the very “fact” that those who support the end of the “fair value” rule falsely use to justify their position. They state that the the MBS market would not have been so greatly distorted and trillions of capital would not have vanished if companies had not been allowed to mark these assets on their book at their highly distorted mark-to-market values. To attribute our current global financial crisis solely to faulty mortgages or to their faulty valuations demonstrates little understanding of this current crisis. An unsound, fraudulent monetary system based upon fiat currency is what has enabled and created every significant distortion in housing markets and stock markets for nearly the entire past century.

With a sound monetary system, the creation of a $700 trillion derivatives gorilla would have been impossible, huge distortions in real estate markets would have been impossible, huge distortions in stock markets would have been impossible, and the subprime mortgage problem that the author attributes to creating the current global financial crisis would never have grown to its peak inflated state. Consequently, to state that mark-to-market accounting laws created huge distortions in the mortgage market that created this crisis is an invalid, disingenuous, circular argument at best and a flat out lie at worst. But such is the state of financial reporting today – investigative journalism has flatlined and instead almost always rallies to the official party line fed to the media by bankers and government officials.

Though the FASB changes may have come too late for US financial institutions to restate their earnings for the first quarter 2009, and if I’m wrong about the “good surprises” occurring during first quarter earnings announcements, the only possible future outcome of this accounting change will be surprises to the upside with second quarter earnings announcements. In any case, since any continuing rally will be built on the foundation of deception, be wary of a steep decline after this current rally ends. With expectations already so negative for first quarter earnings in US markets, all negative expectations have already likely been factored into the market. Furthermore, since financial executives now have carte blanche to assess asset valuations of their debt securities based upon some Alice-in-Wonderland fantasy land internal valuation model, I would not at all be surprised if some companies, despite the tight deadlines, succeed in convincing external auditors to work overtime to produce revised earnings statements in time for this month’s earnings season. Yes, I do understand that external auditors must approve the bank management’s revised valuation schemes, but given the failure of Moodys, Standard and Poors, the SEC, and most recently FASB, to protect the retail investor as of late, somehow trusting auditors hired by a financial firm to serve as the firm’s gatekeeper in keeping the firm honest provides me with little reassurance.

Additionally, if you have not been aware, financial companies had already been cooking their books to make their earnings appear better than reality before the suspension of the fair value accounting rule. For example, consider this story from Dow Jones Newswires in January of 2009 that reported that Wells Fargo, in reporting its 2008 4th quarter earnings, expanded its definition of bad debt from 120 days delinquent to 180 days delinquent to improve its earnings statement. Even if the corporate revisionists don’t beat the deadline for this earnings season, it merely means that the Big Deception will merely be postponed until 2nd quarter earnings are announced.

In any event, one should remain very vigilant about the modus operandus of financial corporations that they have already implemented and will surely implement again this earnings season: (1) Plant stories in the media about huge losses and worst case scenarios for earnings prior to earnings announcements; (2) With expectations so low, release news that is still negative but not as negative as expected, and thus can be spun into positive news; (3) Sucker in the suckers on more spun stories that the “bottom is in”; and (4) Sit back and watch the short-term rally. If this scenario happens this earnings season, it is near guaranteed to also cause a continuing temporary setback in gold prices and the prices of gold mining stocks as the masses fall victim to this ploy. However, this in no way detracts from the long-term strength of gold.

In the past, many readers have criticized the negative tone of my articles but I would firmly disagree with anyone that claims my articles are “negative”. One of my primary goals is to merely report the stories that the mainstream media fails to cover. If my search for the truth reveals a negative economic environment, then that’s what I report. I will gladly report optimism when I uncover reason to be optimistic. Secondly, in a global market so fraught with risk, and still fraught with grave risks, this doesn’t mean one can’t be profitable. One only needs to take advantage of investment strategies that are different than the masses and one can be strongly profitable. Being profitable in such an environment only takes the courage to zig when everyone else is zagging.

If you wonder why you should be so concerned about the FASB rule change, consider who was instrumental in getting the law changed and the parade of cheerleaders this decision has consequently inspired. Before the passage of the rule change, William Isaac, chairman of the Federal Deposit Insurance Corp. from 1981 to 1985, called fair value “a major cause of the credit crisis”. Robert Rubin, the former Citigroup senior counselor and US Treasury secretary, concurred and claimed that the fair value rule caused “a great deal of damage”. After the decision to suspend the fair value rule, Citigroup chairman Richard Parsons responded, “Good decision.” Edward Yingling, chief executive officer of the American Bankers Association applauded the decision as well: “Today’s decision should improve information for investors by providing more accurate estimates of market values.”

If you trust the above group of people, then buy into the rallies that will occur when US financial companies start announcing earnings surprises, whether they occur this quarter or next. Otherwise, sell into these “fake” rallies if you’ve entered traditional stock markets in the past couple of months and move your assets accordingly into assets that will continue to climb higher as this monetary crisis deepens.

In the book F.I.A.S.C.O, an expose´ about the failure of Wall Street to serve their clients responsibly, author Frank Partnoy described the interview process for a highly sought-after position in Morgan Stanley’s asset management group. According to Partnoy, the Morgan Stanley executive that won the job told him that a key question in his interview process was the following: “What are the most important qualities a salesman can have?” The executive relayed to Partnoy that he clinched the job by answering, “Without a doubt, integrity. This is a trust business, and we are selling our trust.” I have always maintained that most successful investment professionals employed by large commercial investment firms would be extremely successful in any sales position, whether that position was in the pharmaceutical, automotive, or retail industry. Given the scandals that have rocked nearly every single commercial investment firm around the world, trust is now a very hard sell in the investment industry. Still, the most successful investment professionals have always been consummate salespersons, and they still know exactly how to psychologically manipulate you to gain your trust. And this is where the crisis can help you identify whether or not an investment professional is deserving of your trust.

Over the years, many different studies regarding stock market performance among investment professionals have come to the same conclusion – that top investment professionals employed by the commercial investment industry are barely likely to perform better than random stock picking. Among the most well-known of these studies was a series of studies performed by the Wall Street Journal in which Journal staffers were instructed to choose stocks by flinging darts at stock table pasted to a board. In late 1998, the WSJ printed the results of 100 of these dart-throwing contests. The professionals won 61% of the time, but still lost an embarrassing 39% of the time to stocks selected by random dart throwing. Against the Dow Jones Industrial index, the professionals’ winning percentage plummeted from 61% to 51%, meaning that half the time the index beat the professionals and half the time, the professionals won. Thus, an investor that merely bought an index fund would have performed nearly as well as every investment professional that partook in the study, and without having to pay any management fees.

Since then, many academics have attributed the near equivalent performance of investment professionals and major market indexes to the efficient market hypothesis (EMH) that states that no investor can earn abnormal returns by trading in securities markets because all security prices reflect all available information. This is utter nonsense. Investment professionals rarely outperform market indexes not because of the EMH but because of the GMH, the Greedy Market Hypothesis. Investment professionals employed at commercial investment firms all over the world generally have one job – to bring assets into the firm, NOT to produce stellar returns for clients. Since their primary job is to convince potential clients to hand their money over to the firm, as odd as this may sound, investment professionals rarely know a lot about investing. They know a lot about how to present themselves to appear to know a lot about investing, and even more about superior sales tactics, but not a lot about investing.

On the contrary, if an investment professional’s primary job was to maximize portfolio returns, then top investment professionals would most likely significantly outperform the returns of major indexes in their respective countries. If you have wondered in the past why the performance of many investment professionals mimics the performance of your domestic stock market index year after year, it is because they employ the terrible diversification sales strategy (versus a legitimate investment strategy) to manage your portfolio. As a consequence of this emphasis on selling versus returns, if you’ve parked your money with a commercial investment firm, you are likely to own every single major component of the stock market index in your country. This is the scam of diversification – you will own almost exactly the same stocks that comprise the major stock market indexes. Furthermore, during terrible global markets such as the ones we have recently experienced, you will be paying management fees for the gift of achieving the same returns as an index fund.

Poor global markets do one thing well. They expose all the flaws and ugly scams, including diversification, that investment professionals employ to gain your trust and your money. All the strengths of salesmen masquerading as investment professionals that are glorified during bull markets are readily exposed as weaknesses during terrible markets. Be warned that this doesn’t mean that their sales skills will diminish, as surely many of the best salesmen will rack up well-constructed but fallacious arguments to convince you that market bottoms have formed when indeed they have not. However, if you fall victim to their same sales ploys after reading this article, no matter how expert their sales tactics may be, you have no one to blame but yourself this time around. Why? This crisis has made it easy to spot the frauds.

Just because an industry has spent billions of dollars on marketing a strategy over a period of many decades does not make it a wise strategy. Instead of clinging to a false belief that has only benefited commercial investment firms for decades and never the average investor, every investor should be using this opportunity to challenge and investigate the validity of past investment beliefs propagated by the industry. Though the commercial investment industry has propagated a lot of lies over the past few years, I maintain that diversification is still the biggest lie that the greatest majority of investors refuse to acknowledge. If you are one such person, let me use history to help you shed yourself of this lie. Throughout the course of history, many “incontrovertible truths” have been proven to be lies after long periods of time when millions of people fiercely clung to such lies as truth.

For example, because of oppression by certain authorities of the Catholic Church that occurred hundreds of years ago, millions of people fiercely clung to the erroneous conviction that the sun revolved around the earth, even though the astronomer Copernicus had already documented many compelling reasons that invalidated this “truth” by 1514. In fact, more than 100 years later, this false belief still persisted among the masses, and when the astronomer Galileo agreed with Copernicus, the Catholic church, under orders from Pope Paul V, convicted Galileo of heresy and subjected him to house arrest for the rest of his life. The Catholic Church condemned Galileo for supporting an indefensible position that they stated “[was] contrary to the true sense and authority of Holy Scripture”. Of course, this example is just one of the most famous of thousands of false beliefs propagated by men in positions of authority throughout the course of history.

In light of the above historical perspective and the fact that you will not find a single investment professional that significantly outperformed any of the major global stock market indexes over the past two years by employing a diversification strategy, it is time to seriously question the “wisdom” and the true intent of diversification. Why does the commercial investment industry hire its financial consultants from such a far ranging diversity of professions? If you wanted to work for Ogilvy & Mathers as an advertising executive, you would have no chance of being hired unless you had many years of experience in advertising. If you wanted to work for HOK as an architect, you necessarily must possess a degree in architecture. But if you wanted to work for a commercial investment firm as an investment advisor, the most important qualification that you needed to have, bar none, was the ability to sell, not the ability to understand financial markets.

I have always maintained that diversification is a sell-side strategy that commercial investment firms employ to hide the flaws and weaknesses of their salesmen and saleswomen that understand very little about how to identify the macroeconomic trends so important to understand the best ways to invest your money. Diversification theory states that it is impossible to know what asset classes will perform well every year and thus, the reason diversification is necessary. This is a lie. Because of the commercial investment industry’s emphasis in their hiring and training processes in the ability of their employees to sell, it may be impossible for THEIR investment consultants to know what asset classes will outperform this year; however this does not mean that it is impossible for ANY investment consultant to know what sectors will outperform this year.

On August 14, 2006, to prepare investors for this developing crisis, I wrote an article called “The Days of Buy and Hold are Over”, in which I stated: “Unless your name is Warren Buffet, the days of buy and hold are over. Actually even if your name is Warren Buffet, the days of buy and hold are over. At least they are for the rest of this decade. Buy and hold as a strategy is dead and will get you nowhere for the second half of this decade.” Just in case investors did not understand my message completely, I followed-up this article with a more explicit message just two days later on August 16, of 2006, in which I discussed the fact that the S&P 500 in mid-2006 stood at the same level it did 7 & 1/2 years prior on January 1, 1999. Regarding this situation back then, I stated : “And that’s the good news. The bad news is, as of 2006, the U.S. stock market’s performance will likely become even worse for the rest of this decade.” I was so adamant about these views back then because for anyone willing to seek the truth, the fact that an imminent crisis was brewing was crystal clear and indisputable. As I said, diversification is a total cop-out but a fine strategy best reserved for salesmen that understand nothing about macroeconomics. And this brings me to my last and final point.

Today, trust still probably ranks as the number one most important quality for choosing an investment consultant. Poor markets, ironically, make this task infinitely easier. For those investment consultants that are asking for your trust today, just seek out their track record of performance for the past two years. If they have significantly outperformed the global market indexes during this time, it is very likely that you can trust them as obviously they have executed some markedly different strategies from the rest of the crowd to achieve their returns. If they have performed in line with the general poor performance of the global market indexes – adding gains when the global markets experience a bear-market rally, and losing value when the indexes tank – you almost certainly need to keep searching for someone you can trust.

Many investment firms apply not only the terrible theory of diversification to their portfolio management strategies but also to the analysis they disseminate. In other words, when global market indexes experience a bounce, they employ one analyst that writes a publication stating that this is merely a bear market rally, while another one of their employed analysts writes an article that this event marks the beginning of a new bull market. When oil is trading near $50 a barrel, they employ one analyst that states oil is heading to $80 a barrel while another one of their analysts states that oil is heading to $30 a barrel. Or, if they have analysts that make 10 wrong calls in a row and then make one correct call, they extol the virtues of this one correct call while conveniently burying the grave errors of their prior 10 predictions. Of course, investment firms that employ the above strategies will appear to be correct all the time, but a simple check of their track record should reveal them as either fraudulent or trustworthy.

Given the accessibility to a firm’s track record granted by the internet, checking a firm’s track record during the last two years should be fairly easy. Review their performance track record through their blogs and publicly posted information. Since many firms will delete their erroneous predictions on their own website, Google the firm’s name and see if you can find other websites that re-published their past predictions. Review emails a firm may have sent you during the past two years since you now have the benefit of hindsight to determine if the majority of their predictions have been excellent or plain rubbish. Taking these few simple steps should allow you to uncover a clear and unbiased record any firm’s track record. In the end, if you can’t find any public information that allows you to establish or verify an investment firm’s track record, than this type of discovery should raise a serious red flag.

During a bull market, you may not know who to trust as everyone looks like a genius, but during terrible markets, when very few perform well, finding an investment firm you can trust should become infinitely easier. Just follow the tips above and finding a trustworthy firm to inform you about the best ways to invest money during this crisis should become a cinch! And what analysts should you trust in the future? To avoid the Machiavellian professionals that are using this crisis for self-promotion, simply identify the small group of analysts that posted warnings of this crisis months and years before it happened. Any analyst that understands that the fraudulent monetary system implemented by Central Banks is the true root of this crisis would have been able to see this crisis coming for a very long time now.