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Turk:  “I’d like to begin with Friday’s unemployment report, Eric.  There are some important messages that we should be taking from it:  First, the report was a shocker in several respects....

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“Aside from the small number of new jobs created, the number of people working as a percent of the workforce has now dropped to 62.8%, which is the lowest level since March of 1978.  Friday’s report is simply another step in a downtrend that began in 2000, when participation peaked at 67.3% of the labor force.  So millions of workers have exited the labor force.

This leads me to my second point:  Friday’s unemployment report makes a mockery of all the rhetoric by central bankers as well as apologists for central planning that the economy is doing well.  It is not.  A solid economy can only happen when there is good employment both in terms of the number of people working and the quality of their jobs, in the sense that they contribute to wealth creation.  After all, economic activity is about people interacting with one another and exchanging useful goods and services.

If fewer people are employed in productive ways, there is less commerce being transacted, and that means a weaker economy.  And here’s another key point, Eric:  A weaker economy means that over-leveraged banks are more vulnerable to losses when they do not extend credit wisely.

Worryingly, whenever the quality of bank balance sheets is called into question, a banking crisis is usually not far behind because depositors inevitably become concerned about the safety of their money when they learn about the asset side of bank balance sheets.  And they should indeed be worrying about their bank deposits because banks around the globe are loaded up with government paper, the quality of which is deteriorating as government spending continues unabated.

Look, for example, at the US government’s debt load.  Its direct debt increased by $0.6 trillion to $17.3 trillion since the debt limit was increased in October.  That’s an annual rate of increase of around $2 trillion.  There is a minority of concerned people in Congress who have prudently sought to rein in these outlandish increases in the debt by controlling government spending, but this group appears to have been sidelined. 

This result brings the next step even closer.  It won’t be long before those politicians in control abandon the debt ceiling altogether so that they can forever avoid the political skirmishes that arise when the limit needs increasing.   They think that they can perpetuate this broken fiscal and monetary system.  But the reality is that the debt load is so huge, the can has already been kicked down the road to the edge of the cliff.

All of this is of course very bullish for gold and silver, Eric.  Too much government debt means the currency will be debased to lessen the government’s debt burden, which has happened time and again throughout monetary history.  So it is really not a surprise that the precious metals have started the new year with meaningful strength.  Today’s action is particularly important.

Gold is probing overhead resistance above $1250.  Silver is probing overhead resistance above $20.  These are key areas.  Once these levels are hurdled - and I expect they will be soon - it will be more evidence that the precious metals made important lows this past June, more than 6 months ago.

So gold and silver continue to build a huge, deep base of support.  Physical metal is being accumulated at bargain basement prices by strong-hands, and people are getting their money out of the banking system and putting it into something safe with no counterparty risk.

For 13 years the precious metals have been one of the world’s best performing asset classes.  Given that the Federal Reserve is losing control of interest rates, which seem destined to continue rising from their May low, the burdensome debt load of governments will be called into question, as will the banks around the world that are loaded up with this dubious paper.  The outcome will be an explosion in gold and silver prices in 2014.”

James Turk: Founder & Chairman of GoldMoney

and the author of “The Money Bubble”

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