Welcome to the Room - September 8, 2006

David Galland, Partner, Casey Research
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Last Updated: September 01,2006


Dear Subscribers,


I am writing this between sessions at the Eris Society conference, Doug’s annual gathering of technologists, authors, ex-spooks, economists and freethinkers of all stripes.

As usual, the speeches and discussions cover a wide range of topics, all of which loosely hang together under the title of “interesting.”

For example, one of the highlights of this year’s confab was Howard Dully whose stepmother, unhappy with his behavior as a 12-year-old, trotted him down to a doctor for a lobotomy. Fortunately, the doctor seems to have botched the job for, after a foggy period, Howard’s brain rewired itself and he now functions very well. The idea that there were thousands of doctors performing this devastating and officially sanctioned quackery for years sent shivers through the audience. During Howard’s powerful and emotional presentation one hypoglycemic attendee actually fainted. Strong stuff.

Also on the topic of barbaric practices, we heard from Mark Pendergrast, a widely read author, who discussed the research for his book in progress on the Epidemic Intelligence Service, which was set up to quickly determine the sources of outbreaks of various epidemics. While Mark was generally positive on the work of the EIS, he also related stories from retired EIS officers on how they would go into mental institutions and inject the patients with all sorts of nasty diseases to see how the patients would fare. Mark’s take on the bird flu? It’s a real worry, and not a matter of “if” but “when.”

Yesterday morning, James Turk of GoldMoney (www.goldmoney.com), the premier service offering gold you can buy and sell and hold online, gave one of the most succinct and compelling presentations I’ve ever heard on the Fed and how that august institution has led us steadily to the precipice of a global currency collapse. Among his many insights, backed up with solid data, is that gold will be trading for $8,000 or higher within 8 years, and maybe even much sooner. He is even more bullish on silver, calling for it to top $400 over that same period. To quote Jim, “While those numbers seem incredible, it is impossible to overstate how much damage a central bank can do to the purchasing power of a currency.”

He also pointed to data suggesting the commodities bull market has 10 years or more to run. All in all, an interesting affirmation of the Casey world view. (We’ll have more from Jim in the September 1 edition of the International Speculator, published later today.)

Among other highlights, we also heard from June Arunga (http://www.aworldconnected.org/article.php/368.html), an articulate 25-year-old from Kenya who has worked with the BBC on a number of documentaries on Africa’s economy. Her presentation was inspiring, if for no other reason than her sound thinking on the free market solutions that could actually make a difference in Africa… but even more so, coming from someone so young. There is hope!

And finally, for this brief on-the-scene report, there was another very moving presentation by Linda Faillace whose prized flock of sheep was confiscated and destroyed by the politically motivated USDA, which used the unfounded and even laughable contention that they might be susceptible to mad cow disease. It made no scientific sense at the time and makes no sense now. Linda, whose story was picked up by the New York Times and all the major networks, has written an excellent book on her ordeal called "Mad Sheep". You can learn more and order a copy here: http://www.chelseagreen.com/2006/items/madsheep.

As was the case last year, we’ll look into publishing the Eris proceedings… more on that front soon.


On the Bad News/Good News Front

I received the following from Ed Steer, one of the driving forces behind GATA (www.gata.org). Ed is like a brain-bot, spending a certain number of hours a day searching the Internet for useful indicators and information, then sending it on to his private list.

Here’s his latest email…

"More incredibly bad figures released for Las Vegas' housing market. New home sales in July dropped 41 percent from the same month last year and existing home sales were down 35.1 percent. The 1,808 new home closings were the fewest since April 2003 and slightly more than half of the 3,474 closings in the previous month. Median prices for new and existing homes climbed 3.2 percent in July; however, the $299k new home median is down significantly from the $337k in June. New home building permits declined 47.7 percent in July to 1,566. There are nearly 38,000 high-rise and mid-rise homes in various stages of development."

Last night over dinner, I discussed the housing market with two Erisians in the industry, one in Orange County, California, and the other here in Stowe, Vermont. Each of my dinner companions confirmed that their respective markets had gone seriously soft. I asked the Californian, "So, would you say this is a ‘buyer’s market’?" To which he responded, "Well, I suppose it might be… if there were any buyers, which there aren’t."

In Jim Turk’s Eris presentation, referenced above, he discussed M3 – the previously closely watched but now discontinued measure of money supply – and showed a compelling chart that may explain why the government recently decided to stop the indicator. Namely, the powers that be don’t want to spook buyers of U.S. dollars.

Here’s the chart:



Some observations. For one, Greenspan took over the Fed in the early 1990s and led the reflation of the money supply throughout his career. The reason, according to Turk, that Greenspan’s pedal-to-the-metal approach to money supply didn’t trigger a return of the price inflation experienced in the late ‘70s when M3 had previously moved into the double-digit range, is that the money created in the 1990s went into financial assets, whereas in the 1970s, it went into to tangibles. The stock market crash of 2000, triggered a flight from the dollar, which coincides with the steady increases we have seen in gold since. As you can see in the chart, in the period leading up to the recent end of publishing M3, the Fed began to reinflate the money supply. It is Turk’s contention that by attempting to hide M3, the Fed may be hoping to be able to continue reinflating the economy–dropping dollars by the helicopter load in order to stave off an economic collapse– without spooking buyers of the U.S. dollar. He believes this is the path to a Weimar Republic style hyperinflation.

Only this time around, the monetary crisis will be even worse and it will extend worldwide versus locally, given that the U.S. dollar is the world’s reserve currency, a status not enjoyed by the currency of the Weimar Republic.

We definitely live in interesting times. Take precautions.

Don’t Miss It

We are now accepting reservations for the second-ever Casey Gold and Silver Stock Summit featuring members of the Explorers’ League.

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The dates are October 15 & 16, the venue is the Westin Bayshore on the waterfront in beautiful Vancouver. The first Summit, held earlier this year in Chicago, was a quick sellout, so if you are at all interested, click on the link just below to learn more and to register.

https://www.regonline.com?eventID=101607&rTypeID=77485

The easy profits in gold shares from the stealth phase are now behind us, but the BIG profits as the public gets involved are still ahead. This is your unique opportunity to get your specific questions answered personally by the most knowledgeable mind finders and developers in the world. Don’t miss it!

That’s it for this edition of The Room. It’s back to the sessions, this morning kicking off with an update on the latest developments in nanotechnology… a subject that has long been of interest to Doug.

More next week…



David Galland
Managing Director
Casey Research, LLC.


Sep 01, 2006