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Ask the Expert – Jim Willie (May 2014)

By Geoffrey Rutherford 4 years ago 5380 Views


In this exclusive interview, Jim Willie answers questions from our readers about the gold and silver markets and global economies.

Transcript

*Recorded May 9, 2014

Sprott Money News (SMN): Hi. Welcome back to Ask the Expert here on Sprott Money News. I'm your host Geoff Rutherford, and on the line with me today we have Mr. Jim Willie. Jim Willie is a statistical analyst with 25 years experience in research and forecasting. He runs his website Golden Jackass, dedicated to mega-forecasts related to the degradation and destruction of the global financial system, gold prices and more.

And with that, we'd like to welcome Mr. Jim Willie. Welcome Jim!

Jim Willie: Good to be on board, first time and kind of excited.

SMN: Excellent, Jim! Excellent, Jim! We're really honored to have you here today with us.

So Jim, let's start off with kind of, I guess in the broader sense in terms of what's happening, you know, throughout the year, where do you see the price of gold and silver looking by the end of this year or even going into 2015?

Jim Willie: Well, I come from a different angle, and it's just my style and my preference for the analysis, because I don't like to waste my time. I don't waste my time with the C.F.T.C. rulings. I don't waste my time with the COMEX dealings. I look at their inventory, but I expect that by the time 2014 this year ends, the markets are not going to look anything like what they did at the beginning of the year.

We're starting to enter a real acceleration of events. Price consideration, "What's the price today? Did it go up? Oh gosh! There was whacking of $18 and it recovered." I don't look at those things. I'm busy studying important factors that are very important toward the discontinuity, quantum jumps, grand disruptions and the prevailing factors nowadays.

I really don't wish to be argumentative and nasty and difficult, but I think that we’re on an event schedule, and so much depends on these wildcards that are not really looking too well. Like how much of a depth of suicide tendency does the U.S. government have regarding its dollar and the banker cabal that controls them?

SMN: Right, right.

Jim Willie: I mean it depends on the Russian demand for payment by Europe in Russian Rubles or maybe even Chinese Yuan for energy payments. We don't know if that's going to happen. It depends on a launch of gold-backed currencies, and I think when one or two comes, we're going to see six. So there won't be one or two. They need a critical mass.

It depends on Germany awakening and flipping toward an Eastern alliance, and we're starting to see some indications of that now.

It depends on the price; gold that is, depends on whether Turkey is defiant in their public offer, the global offer, perhaps, to serve as intermediary to provide gold, because that was what the Iran workaround was.

SMN: Right.

Jim Willie: If India bought oil and gas from Iran and paid for it with gold they bought from Turkey. This is the role Turkey has served for 1000 years. So will they publicize it? I don't know. It depends.

Will the U.S. and NATO Nazis, are they willing to blow up the Gazprom pipelines in Ukraine?

These aren't just made answers. These are Nazis, supported by the U.S. and NATO Soros hidden groups. Okay. It depends on whether Western Europe withdraws its support for the U.S. and NATO insanity. I think slowly they well, one by one, just like they did in Syria.

It depends on whether we're going to have some actual law applied to the COMEX.

SMN: Right.

Jim Willie: They're refusing to make gold contract deliveries. Are we ever going to see the guilty parties called on their illegal activity? It depends, the price of gold, that is, depends on whether we get a few Western banks suddenly collapsing, and believe me, behind the scenes, it's a frequent event, a bank, one particular bank...

Gosh! I remember one day back in September of 2010, Bank of America almost collapsed and failed overnight, but some Bush, Narco money, $13 billion overnight, confirmed by two independent sources, where I left out the details, and they both provided the same correct details. Unbelievable!

Anyway, these near-failure events are constant. It depends on will the mining companies go on strike and not provide COMEX with any more gold?

SMN: Good point.

Jim Willie: It depends on whether the GLD is revealed for its own fraud, supplying the COMEX, to the backdoor, its gold, and refusing legitimate qualifying shareholders delivery of gold.

It depends on whether the U.S. government debt defaults. It depends on whether China pulls the U.S. plug on the toilet.

SMN: Right.

Jim Willie: So we're on an event schedule but numerous wildcards seem at risk of occurrence right now.

SMN: So with all of these sorts of factors, you know, kind of look at the general outlook, we have to kind of look and see if all these factors are going to be answered in some way or another, I guess.

Jim Willie: Yes. And expect that every couple of weeks maybe one of them will happen. These are not big wildcards anymore. We're getting extreme pressures, and I think we're going to start to see a few of them happen quickly...

SMN: Right.

Jim Willie: ...starting with Russia demanding Rubles for oil and gas. Just start, that's the easiest one.

SMN: The Ukrainian conflict right now, is that a factor in this as well, do you think as well, Jim?

Jim Willie: Ukraine? Oh sure! Ukraine's a huge issue. Most of what we see in Ukraine boils down to being a Dollar issue in preserving the global reserve currency. It also is an issue of trying to get in the way of the formation of the Eurasian Trade Zone led by China and Russia with India as a significant partner. They're not going to use U.S. dollars in payments.

SMN: Right.

Jim Willie: I have a friend who lives in Switzerland. He's actually Irish, but he had an interesting phrase, and he said, "I heard this from Engdahl, William Engdahl. Europe is the grand prize.”

SMN: Right.

Jim Willie: And it's always been the grand prize. Well, due to NATO and World War II considerations, the United States is pretty much captured, colonized, integrated Europe. That's about to change. I think Europe is going to turn its attention eastward.

So what were motivations for Ukraine, but trying to interfere with the Eurasian Trade Zone and trying to get in the way of Russian Gazprom.

And by the way, Cyprus and Syria had Gazprom elements to the motive of attack...

SMN: Right.

Jim Willie: ...each one very well ahead. Gazprom Bank is one of the prominent Cyprus banks, and Russia was using some of its banks in Cyprus to convert treasury bonds to gold. That's why the U.S. and the Western nations clamped down on Cyprus and tried to basically shut it down.

The confiscation of accounts, that's kind of a sideshow, because where else in the entire Western world have any confiscations and bail-ins taken place? Nowhere, nowhere.

SMN: Right.

Jim Willie: I think Ukraine is going to be the U.S. Dollar Waterloo event. I think that's where we push Russia, keep pushing, pushing, and Putin's challenge is going to be to force a standoff militarily, so that the issue and battle becomes commercial and financial and the United States and the West loses, because they're insolvent, with toxic currencies and weighed down by huge, sovereign bonds that they can never pay back and they're inflating away.

So this Ukraine story is really quite interesting, but I think we're going to see a lot of movement in Ukraine. I made a forecast a month ago that way quicker than 12 months Ukraine would have another fall in their regime. They would have a counter coup.

SMN: Right.

Jim Willie: Recall that in Egypt, the Morsi puppet regime lasted less than 12 months, backed by the United States. I don't think Ukraine is going to last 12 months. I think they're going to be a lot less, and, you know, when they lost all their central bank due to a hooded criminal overnight truck raid by the, I think the Langley forces, and then you had $70 billion vacated from the banking accounts in Ukraine that included official accounts for the government and oligarch money. It all went to Switzerland.

So how is Ukraine supposed to survive without their central bank gold for backing their banking functions and without any capital in their banks at all?

SMN: Right.

Jim Willie: It's just a zone of chaos.

SMN: Right. I see.

Jim Willie: It's really quite pathetic.

SMN: Now we kind of looked at what's happening in Russian and Ukraine. Going back to banks now, is there any truth to the claim that bullion banks have sold approximately they say 50,000 metric tons of gold, in the form of allocated certificates, with not an ounce of physical gold behind those certificates? What are your thoughts on that, Jim?

Jim Willie: Well, I think you've got to get the timing correct. They sold those certificates a long time ago as bullion bank accounts, but then they raided and seized the gold. Maybe the better way of describing it is, a lot of account holders in bullion banks in Switzerland have no gold behind their allocated account.

SMN: Okay.

Jim Willie: They once did, and I was told by my excellent gold trader source. He's been talking to my ear now since the summer of 2008. For instance, he gave me advanced warning three months in advance of the Lehman failure, and then 30 days in advance he gave me notice of Lehman, Fannie Mae and an insurance derivative firm, and I didn't really get correctly the AIG, but I got two out of three.

SMN: Right.

Jim Willie: So Jim, that's two more than anybody I've asked. So this fellow told me, back in 2009. In 2010, he was very loud about this. He said, "It is probably over 40,000 metric tons of allocated gold accounts that have been improperly taken, mostly in Switzerland, but also in London," and in the last year, he said, "Jim, no doubt in my mind it's 40,000 tons, but I'm now beginning to think that it's closer to 50 to 60,000 tons," and they have no potential of replacing the gold for these important wealthy family account holders.

SMN: Right.

Jim Willie: So they're getting threats. They're getting pressures. They're getting lawyers involved. And now they've got class action lawsuits in Switzerland, at least two. They're multibillion-dollar lawsuits, and I've come to learn that in all likelihood, they involve nondisclosure agreements.

So this is getting very nasty. These prominent families, they don't mess around. If they've got $150 million worth of gold and suddenly there's no gold, they've only got certificates, these banks are not in a position to go out and easily replace the funds.

They have fine print in the exchange-traded fund investments where they can redeem in cash. In bullion bank accounts, they're very different. They're not standard commercial bank accounts. These are not bank boxes, safety boxes. These are bullion bank accounts where an owner says, "I've got these bars with these serial numbers and these markings, and they're mine and you're holding them. I want to see them," and they're not even permitted to see them.

So they have got three choices, these bullion bankers. They can buy gold on the open market and bid it up.

SMN: Right.

Jim Willie: They can face felony prosecution, or they can be shut down, and there's always the fourth, they can get killed.

SMN: Now interestingly enough, this may be of interest more to our Canadian listeners, but I think this is of interest to all of our listeners. Given that Canada has sold much of its gold reserves, and with our trading relationship as well as geographic proximity with the U.S., what difficulties do you see in store for Canada, Jim, in the times ahead, and specifically the Canadian Dollar?

Jim Willie: Well, unfortunately Canada hitched its wagon to a criminal, broken, toxic big locomotive called "the United States."

SMN: Right.

Jim Willie: They sold their gold, and if you want to find their gold, ask Mulrooney, ask him. If you want to find their gold, ask Barrick. If you want to know the fate of Canada, ask Barrick, "What are they doing with their Evergreen Gold Contracts? Why are the big Toronto banks so deep into the derivatives, in support of the U.S.?" and a better question that's more recent, probably since last September or so, "Why is ScotiaMocatta, why are they playing with J.P. Morgan, supplying them their gold?"

SMN: Right.

Jim Willie: So everything has turned sour, and I expect Eastern Canada. I separate the two. Eastern Canada is going to suffer the same fate as the United States and become de-industrialized, and any attempts, any big initiative to re-industrialize will involve China, as I call "The Taskmasters."

SMN: Right.

Jim Willie: Eastern Canada is going to have, I think, the same kind of extreme supply chain problem that the United States has, because their currency is going to be considered to be tainted when the new currencies arrive. They have a parade of gold-backed currencies coming. It's not just going to be the Russian Ruble or the Chinese Yuan. I think it will involve the Gulf Dinar, with the Saudis. I think it will involve the Nordic Euro.

The Germans, with their friends the Dutch, the Austrians and the Finns, Finland...

SMN: Right.

Jim Willie: ...they're all ready. They're just waiting for the moment. They've got a Nordic Euro, and they've got plans for gold backing. Germany may be in the news, with its repatriation of 330 tons, and U.S. reneged on sending back and replacing their gold bars last year saying that for logistics problems they only could ship off 7 tons. What nonsense! They had tremendous logistics in Kiev, Ukraine, just a month ago, in the middle of the night, very, very good logistics!

SMN: Right.

Jim Willie: So Germany already has a lot of gold. I think they've got something like 4000 tons. So in the news is the replacement of 330 tons. So in the news is under 10% of German gold. They've got a lot of gold.

So I think that we're going to get down to a situation of "Show me your gold or else we're going to sell down your currency."

SMN: Right.

Jim Willie: "And once we sell down your currency, you're going to have tremendous import price inflation."

Most people are studying here how the U.S. Fed, I call it "U.S. Fed," because it's sitting in the United States, but it's not U.S. It's cabal. The Fed and the Euro Central Bank and the Bank of England are printing all this money, and it's unsterilized, and a lot of analysts, including good ones, make the error that all this hyper monetary inflation is going to cause price inflation in a huge way. Well, it's not, not until the currency crisis comes, and it's coming. It's right around the corner.

SMN: Right, right.

Well, I mean, kind of going back to looking at a crisis. I mean, you mentioned Russia; we talked about Russia a little bit, as well before, and likewise how they're trying to rebuild or make that re-connection to China, as far as the Yuan is concerned, but I mean, looking at what's happening in Ukraine, just to kind of go back to this as well, I mean, U.S. sanctions against Russia really have no teeth, apparently, and the U.S. and Europe are not in a position to sanction Russia severely, yet the Russian economy seems to be on the ropes. I mean, I wonder Jim, can you explain why their economy is hurting so badly if the West’s sanctions are so mild?

Jim Willie: Well, two big reasons, and I think they're indisputable at this point. The Russian economy is suffering for two big things. First, they're a huge export economy. They export all kinds of industrial metals. They don't export gold.

SMN: Right.

Jim Willie: But they are responsible for 42% of the global platinum. Well that's kind of important.

SMN: Exactly.

Jim Willie: All right. They have a huge amount of oil and gas that they export. 40% of all the German usage of gas is from Russia. 30% of all the German usage of oil is from Russia. All right. The two factors are these: their export customers are suffering from a chronic, ugly recession.

I don't buy into the story of a recovery. It's not even considered legal to talk about a recession anymore. They talk about "the non-recovery recovery." It's becoming a joke. It's becoming an exercise in the Goebbels definition of Nazi propaganda.

SMN: Right.

Jim Willie: There's no such thing as a "non-occurring recovery," or "How's the recovery going?" and “We’ll assume that you must discuss the recovery”. No. There is no recovery. You've got, in the United States, for five consecutive years, approximately a 2% to 4% recession. In Europe, the same thing and worse in Spain, Portugal and Italy.

So are they importing a lot of Russian goods? I'm talking commodities. There're not a whole lot of finished products, except maybe caviar and vodka, but are they bringing in a lot of Russian imports? I don't think so. So they're not seeing the big export income.

The second thing has to do with the financial shenanigans. Just to screw with Russia, New York and London bankers are engaged in sabotage of the Russian Ruble. So they're knocking it down and therefore causing them an import price inflation. They want to import soap or razor blades or cars, Mercedes, whatever, it costs a lot more, so they’re getting higher prices and lower income from their exports.

This is a combination of economic woes and typical banker cabal warfare and when the Russians comply, this is what's ironic and sickening about it. When they comply and demand Russian Rubles to be used for their trade of, you know, for "You want the shipment of gas? Fine, Germany. Pay us in Rubles." The Russians will be forcing the Europeans to bid up the Ruble and screw in return the London and New York bankers who are driving down the Russian Ruble. They're shorting it. They're going to get caught in a squeeze, these bankers.

SMN: Interesting!

Jim Willie: You know these are not really mysterious elements. We read in the news how the New York and the Western bankers are suppressing the Ruble, but we don't think about the consequences. Well, it's a snap back.

I think they're going to see a quick recovery and a flight to prosperity as soon as they demand a Ruble payment for their products. The London bankers are going to be trapped, and the U.S. and Western Europe reaction, I think will be a sudden defensive posture. Look for these Western Europe nations, not France. France is the poodle.

SMN: Okay.

Jim Willie: Look for Germany to flip. Look for France to be on the west side forever, on the Titanic, waving their flag. We share the red white and blue with France. Look for Italy to break ranks. Look for Spain to break ranks.

Here's one of the really interesting keys to the whole conflict, and that is there's going to be a desire from the London bankers, the Parisian bankers, the Frankfurt bankers, to keep and preserve and to win the Chinese Yuan bond trade. They've already got these Yuan swap facilities in place. In order to preserve the Chinese bond trade, they're not going to piss off the Russians.

This is how the Russian-Chinese alliance is shaping up. You can't isolate Russia if they've joined to the hip with China.

SMN: Right.

Jim Willie: You can't isolate Russia on the commercial front if you want to court the financial side of China. The U.S. has got very bad strategy, which leads me to believe that they’re on a suicide mission.

SMN: Particularly when you think about how much money the U.S. owes to China. I mean, how could you now try to take down a nation that is so closely tied to them?

Jim Willie: Well, yes. China is converting to a lot of property, not only Toronto property, but New York and Los Angeles, California urban property. They’re owners of 60% of the commercial property in Manhattan, New York. They're buying up property all the time in Los Angeles, San Francisco. They're converting, and, you know, they cannot convert quickly enough, because they're not accumulating anymore, but they're lying as to how much they're shedding, getting rid of their treasury bonds.

SMN: Right, right.

Jim Willie: Everybody's lying to everybody now...

SMN: Right.

Jim Willie: ...and the biggest lie of all, regarding the gold world, it doesn't have to do with COMEX. The biggest lie has to do with the Chinese saying, "We only have 1050 tons. They've got over 20,000 tons.

SMN: Right, right.

Jim Willie: Well, that's not well understood. The Russians and the Chinese each have over 20,000 tons.

I got a message today from a potential client, saying, "Do you have any verifiable information that Russia and China have 20,000 tons?" and I said, "No!" I mean, what do you expect, a Reuters announcement? Do you expect a Stratfor report? Do you expect a TIC report from the U.S. government? No.

What I rely on is the word of my gold trader's source. I call him "The Voice." I don't like to talk much, or he doesn't like to have me talk much about his nationality or background, but he's been directly or indirectly a broker for the Chinese and their accumulation.

SMN: I see!

Jim Willie: They have been using various methods, including Interpol, to drain London of 1000 tons a month, ever since March 2012. I'm talking about over two full years. 25,000 tons of gold left London. I'm sure some of it is sourced through Switzerland. I'm sure some of it is sourced through the Vatican, but from the airports of London, 1000 tons a month, and when I ask questions, "Where did all this gold come from? I mean, why are they able to force London to part ways with this much tonnage?" the answer is really quite intriguing.

Apparently, the London bankers, over 10 years ago, I guess about 14 years ago, improperly used ancient Chinese wealthy family gold for the derivatives that underpinned, as foundation, the European Monetary Union.

SMN: Whoa!

Jim Willie: That's a big oops, huh?

SMN: It is.

Jim Willie: Yes. Well now London is given a couple of, well more than a couple choices. "You can source that gold, or we will send you to The Hague and make public all of your criminal activities regarding gold, or we can unleash the Triad on you and have you murdered." So they've decided on the first one of relieving themselves of 1000 tons.

The Queen is out of gold. Okay? This is the big news, the big, big secret. Russia has over 20,000 metric tons of gold. It's not from recent accumulation. They've always had it. The Voice has seen their vaults. They're under the Kremlin.

And we had a strange Tom Cruise movie that showed vaults under the Kremlin, and he made his way in there. The most ludicrous of methods, you know, phony ID cards and crap like that, right. Well, that's not the way the Kremlin works. It's not penetrable like that. They've got a lot of gold that goes way back, way, way back and they actually are the source.

I've got a couple of really well-connected clients who own gold accounts in private hands, and they say that "Well Jim, it's really interesting. Someday I'll have to show you a list of my gold, because some of them are Russian markings."

SMN: Oh!

Jim Willie: Yes. They have been providing some of the gold long ago.

So Russia and China are ready for a gold-backed currency, and what they're not ready for. This is difficult to fully comprehend, because you'd think, "Gee! If you’ve got the gold, launch the currency." You need to have the wiring connected already between your currency market and your commodity market. If you've got a currency connected and backed with a foundation, a support of gold or a mix of gold and silver or a mix of gold, silver, copper and oil or whatever, then you've got to have that currency market connected completely and without problems reliably to the commodity markets involved.

SMN: Right.

Jim Willie: And the Russians and Chinese are not ready.

What also they're trying to do is wait and wait and wait, get ready on the one side, but work vigorously to acquire a long list of affiliate nations. There's a new phrase out there, "The BRICS and associate nations."

I remember reading, I think a reliable article, it was a little over a month ago, and a number that sticks in my mind is that there were 82 nations that had signed up as associate for the BRICS movement, if you will...

SMN: Okay.

Jim Willie: ...like Indonesia, like Iran, like Vietnam, and the big herring in there is Japan.

SMN: Right.

Jim Willie: I believe they've signed on. Now they're nervous. They don't want another Fukushima, but there are motives for certain things, and, oh, this is off the mark a bit, but in March of 2012, the story all across Asia was the attack on Fukushima, not the accident at Fukushima.

SMN: Right.

Jim Willie: In the United States and the West, the story was the "accident at Fukushima," not "the attack at Fukushima."

SMN: Now, kind of switching from gold, let's take a look at silver, because I know we've talked about currency, we've talked about gold, but the demand for silver has been moving at an increasing rate, but silver has shown no real signs of stress for over a year. So Jim, where's all of the silver coming to support the new investment demand? I mean, where's it coming from? Silver leasing is not a factor, as it's in the gold market. So it would seem as though central bankers should have less control over the physical silver market than the physical gold market. Shouldn't silver be overwhelmed with demand, as the Dollar sold?

Jim Willie: It should be, and I point to the 1905 U.S. President Teddy Roosevelt event, where he created a stockpile of 6,000,000,000 ounces of silver, and I came to learn that in 2005 or 2006, it's very difficult and fuzzy to know when the event of its depletion took place, because it's not something the U.S. government and its controlled press would like to advertise, but somewhere around seven or eight years ago, it was completely drained.

SMN: Right.

Jim Willie: When I inquire, "Where's the silver coming from?" the answers usually involve two countries. It's a hidden supply chain from India and the Vatican. And when I ask, "Well, why would these countries play ball? Why would they support the banker cabal?" And the answer again all the time is the same, including from my best sources, the Vatican is the cabal and India is looking for favors for the future, and they don't want any terrorism on their soil.

SMN: Okay. Okay.

Jim Willie: So this deficit has been in there for ages, and I believe the annual deficit, which is very difficult to estimate, is getting worse by the year, by the month. When this is all done, when we get resolution and the markets go dark and then they open up and are fairer again, based on pricing on equilibrium of supply and demand, which there's no evidence right now of, my guess, my belief, my firm belief, confirmed by my smartest sources, including The Voice, is that the rise in the silver price will be somewhere on the order of triple the rise of the gold price.

SMN: Really?

Jim Willie: If you look at some of the information coming out of Sprott and coming out of Turk, for Gold Money, the volume of the purchases in dollar amounts for silver equal that of gold.

There's one other point.

SMN: Sure.

Jim Willie: A man in your house, John Embry...

SMN: Sure. Okay.

Jim Willie: ...he makes the point that the output for silver is 11 times in ounce, you know, volume. The output for silver, globally, from mining efforts, is an 11 to 1 ratio, versus gold.

SMN: Right.

Jim Willie: So that dictates an 11 to 1 ratio. If you take the current ratio and you move it to 11 to 1, that's where I think you see the triple.

SMN: So Jim, you're pro-gold, but how do you feel about gold miners? Do you believe that, like paper assets, they will get crushed with the rest of the paper gold out there, or will they offer some sort of upside when the system implodes?

Jim Willie: Well I think they're being destroyed right now, with the paper currencies, unless it's part of the S&P 500. I mean, if you look at the stocks that are doing well in the United States market, it's mainly the very large stocks. They're maintaining value on the whole market by support of the S&P itself, the S&P 500.

Remember, it's 500 companies, and they're all large companies, but the bankers are all in banking stocks...

SMN: Right.

Jim Willie: ...the big bank stock. They're all in the S&P 500. So they support the whole big basket at once.

So we're already seeing decimation. In fact, there is a rather ugly hall of shame, I don't know what the name of it is, but there's some firm that maintains a list of all the mining stocks that are down 90%, and it's a very long, long list, and then there's another group that maintains a list of all the stocks that are down to one penny or less, and it's at a record level. So I don't need to support the case that mining stocks are in trouble. I'm on record in early 2008, advising all of my clients, "Get out of the mining stocks and own physical metal."

Then later I add to that, "And the Sprott funds, both the physical gold, physical silver funds, are excellent. They're legitimate." Some questions have come on, you know, transforming the surplus from the net asset value and converting that into other assets. I said, "That's smart management. Don't worry about that."

SMN: Right.

Jim Willie: But I'm on record now, for six years, of disliking the mining stocks and preferring gold and silver bars and coins.

I don't necessarily recommend that you hold it in your own possession, because you can get robbed. I've got a funny story. It's a quick one, but I've got a friend who lives in Atlanta. He's going through a divorce, and he said, "Jim, the divorce is kind of easy. The hardest part is for me to dig up the gold that I buried in my backyard. We've got half an acre, but I can't seem to get in there to get my gold out, without my wife watching, because she watches me like a hawk every time I come by."

SMN: Right.

Jim Willie: Oh golly! No, but look! The stocks for mining companies are leveraged to the gold price.

SMN: Okay.

Jim Willie: The price is suppressed heavily, so you're leveraged on your suppression. Also, you've got almost no profit margin for a large and growing list of projects. I don't want to get into the whole issue of all-in cost or basic fixed costs, or whatever, but the profit margins are going away.

So why are the mining companies continuing their projects for their best and lowest-cost mine operations? They're wasting their assets. Instead, they should ask China if they’d like to pay them a 20% premium over the bastards in New York at the COMEX.

SMN: Right.

Jim Willie: So they're wasting away their best properties, and they’re mothballing their marginal properties, but they're bound by three things. They must offer a return to shareholders, which means they're squandering their best properties. They must continue with their debt service, so they must continue to squander their properties, and they got covenants with the banks on their debt. So they must continue to squander their best property. I don't get the logic in that.

There are other considerations that harm the mining stocks, and this is really a strong promotion for the Sprott accounts that are gold- and silver-backed, because the stocks, they're going into reverse and they're under extreme risk.

Here are some of the other risks. They've got the rising costs, because of energy costs. Here's an ugly one that's not well in the news at all. In Mexico, the cartels are stealing Mexican mine output...

SMN: Oh goodness!

Jim Willie: ...and the mining companies are lying about it. They're just saying they got a lower yield this quarter. Well, no they got lower ship output, the ship output.

I know someone who has actually had his face put in the dirt, with a guy holding a submachine gun.

SMN: Oh wow!

Jim Willie: They're hijacking almost anything coming out of the mining areas.

And now you got foreign government seizures. If you're the government of Chile or the government of Bolivia, you might think, "Hey! You know what, it's a pretty good idea. Let's just stop this operation. Let's demand a 50% increase on the royalties for the mines, and let's make sure that these workers, who are all from our country, get paid better."

SMN: Right.

Jim Willie: So you're getting labor strikes; you're getting appropriation threats; you're getting all these problems, pay scale, worker conditions. I mean, there was a time when all the platinum mines in South Africa were shut down due to issues over conditions, working conditions, safety conditions, and, you know, you've always got the environmental obstacles, but I believe that we're going to see some decline in gold and silver industry output, on a global level, by the second half of 2014.

SMN: Okay.

Jim Willie: That's the only way you're going to get the attention of the COMEX. Shut them down.

SMN: Right.

Jim Willie: Cut off their supply.

It's very sad. I mean, what's going on. I used to be an owner of some stocks, and for every winner, I had three or four losers. I get tired of the naked shorting. They're involved with a lot of finance deals, and then they sell more than they own. It's all over the place. Your stock markets are almost as corrupt as Wall Street.

I mean, I just don't cotton to corruption, and I don't say, "Well, let's hope for the best." No. Hope is very costly.

SMN: It can be.

Jim Willie: I prefer owning gold and silver and vaulting it outside Switzerland and outside any country that speaks English.

SMN: Now keeping in line with the mining, let's talk about equities and mining. I mean, do you still hold the position that these are a losing proposition within today's unprecedented political environments? I mean, specifically, Jim, equities in the precious metal mining companies, exploration companies and within junior mining space, should these positions be sold and converted into hold-in-your-hand or stored-offshore precious metals, something that's tangible?

Jim Willie: I think most of the small mining company stocks are going to get bought out. I mean, there're always going to be your superstars, like Agnico Eagle. There are a lot of good companies out there, but I've got to ask, "Are they squandering their best properties by squeaking out some profits for their shareholders at managing their debt? Are they wasting away their best property?" No. I think probably, sure they are, because they're in operation.

SMN: Right.

Jim Willie: I mean, what do they get for their gold and silver output? What do they get for their copper output? They get a corrupted price. It's not a fair price. So how many mining companies do you know who sell a good portion of their output to China directly, at a premium? So those are the companies to invest in.

But I think, in time you're going to see a lot of these companies bought out by the larger mining firms, and we’re seeing a battle of the titans gooing on right now that's really worth watching and watching closely. There's a Goldman Sachs guy, you know, another one of their princes, who's the head of Barrick Gold.

SMN: Right.

Jim Willie: I'm not sure. Correct me. I think his name is Thorton. I can't remember, but there's a Goldman Sachs guy, C.E.O. Why do they bring in a C.E.O. from Goldman Sachs?

SMN: Good question!

Jim Willie: For his mining experience, for his engineering experience, or to keep the lid on all the derivatives?

SMN: Right.

Jim Willie: So now the big story in progress, and the merger is going nowhere, is the merger between Barrick and Newmont.

SMN: Right.

Jim Willie: And they thought they had something a year ago, but it fell apart, probably during the discovery phase where Newmont probably discovered some of the scummy assets held on the Barrick books, and we're told, "If you talk about it in public, your little girl will be shot."

Now I'm firmly believing stuff like that, and no longer is that called "Stupid talk," after we've seen the string of banker murders, including some of their families.

SMN: And when you're referring to these murders, you're referring to what the mainstream media reports as "suicides," is that correct, Jim?

Jim Willie: Yes. One of them was a suicide from a nail gun done from 20 feet away. So they're a force, it's kind of like the recovery. If you have a story about a banker death, it's a suicide...

SMN: Right.

Jim Willie: ...and all the rest of the information is fuzzy, murky and awaiting confirmation from the forensic office. Okay? But there was a banker who was murdered from a drive-by shooting in Belgium. That's not a suicide, nor did the police call it "a suicide."

SMN: Clearly not.

Jim Willie: They killed his wife too. So that's not a suicide.

No. I believe that bribery and threats of murder are two of the main devices used by the bankers to keep things in place a little bit longer.

But back to the mining stocks, I don't think it's a good idea to convert your mining stocks now to gold and silver bars and coins. You've suffered too big a loss. So leave it alone. Hope for the best. I don't like to hope, but you know, expect that there's going to be a rebound or some kind of a purchase with a premium by the large firms, but add nothing to mining stocks.

Add to the gold and silver exchange-traded funds or to gold and silver bars and coins. It's late. It's very late. If you haven't taken action by now, don't take extreme action like that. I mean, yes, your stock might be down 60%; you're sitting with a $0.30 stock, and it used to be almost a dollar; okay, so be it! You might get a big, strong rush in the next several months or a year or two, and you'll have a choice to cut your losses, get out with what you invested or see yourself converted to Newmont...

SMN: Right.

Jim Willie: ...or to Royal Gold or to, you know, one of the many other good companies. They're eyeing these little companies that have no market cap anymore. Why shouldn't they? Because they’ve got some engineering talent behind them. Engineering talent is one of the assets that these mining firms have, and that's why Zijin's, Z-I-J-I-N, and a couple of other big conglomerates in China, that's why they're buying these firms up. They want the expertise. They don't just want the property. Of course they want the properties. They want the engineering expertise.

They don't want the relationships and contracts with the COMEX. No. They'll cut them off as soon as they can.

SMN: Right.

Jim Willie: They're anxious to see some of them expire. They will not be resumed.

So, a lot of complexity is going on. It's very sad. I get a lot of thank you notes from my clients over the years, "Thank you Jim! Thank you! I converted to gold and silver, and yes, the prices might be kept down, but it's nothing like what happened with the stocks and their share prices in the last three years," and one guy said, "I put my son through medical school the last three years with some of the holdings, and I just skimmed a little bit of the profits."

But when you own gold and silver coins and bars and even the Sprott funds, when things change, when the toxic "paper fiat currencies," as they're called, I don't like calling them "paper fiat currency." They're just illegitimate debt-backed currency. We're seeing a debt write-down. Therefore, you should see a currency write-down, but they’re compensated with Q.E.

I like to point out, this is a nice little cute way of summarizing, if you had a panel discussion with Alan Greenspan in 1997 and you asked him, "Mr. Greenspan, Chairman Greenspan, could you tell us, would there come a day in the next 10 years when the federal reserve would cover over 80% of the U.S. government new debt and refunded rolled-over debt, and do so with an endless series of quantitative easings from unsterilized bond purchases?" He would have laughed and said, "Of course not! You can't do that," but that's our new normal, isn't it?

SMN: It seems to be.

Jim Willie: And it will continue, not until stability comes; it will continue until the whole system breaks, and that's was going on now, and your latest evidence of that is the attack on Ukraine, blamed on Russia.

I've got some smart friends from the United States who come visit and say, "Jim, why did Russia attack Ukraine like that?" and I said, "No. The United States did, with a black ops out of Langley, out of Soros funding and mercenaries in Europe, and all Russia did was to reclaim their naval base and take over Crimea."

No. Russia backed out, created a vacuum, and that's what the U.S. and its Nazi storm troopers came in to take control of. The Russians backed out. U.S. went in, stole the gold, moved a lot of the funds to Switzerland and forced Russia to take control of what I call "their Chesapeake."

If Russia had come in to attack Maryland, do you think the U.S. would come in and fortify the Chesapeake? Of course they would!

SMN: Well Jim, I'd really like to thank you for joining us today. Again, to our listeners, we've been speaking to Jim Willie, who is a statistical analyst with 25 years of experience in research and forecast, and again, all of you, please, go to his website Golden Jackass, and again, he's there talking about mega-forecast and a lot of the information that we've discussed today.

So again Jim, I'd really like to thank you for joining us today on Ask the Expert.

Jim Willie: It was my pleasure. I hope to be on again, and I just had my 10th anniversary of the newsletter.

SMN: Well congratulations on that, Jim! Congratulations indeed!

Well, again, thank you, our listeners, for joining us today. Again, go to SprottMoney.com for any information you need on precious metals.

I'm Geoff Rutherford. Thank you for joining us today. Have a good one.

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