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1981 Movie Rollover Predicts Today’s News
Do you remember the movie titled “Rollover” which came out way back in 1981?  How fantastic and “scary” it was to see such a calamity portrayed?  At the time it was focused on the Arabs pulling Dollar deposits which could (would have) crashed the banking system.  It portrayed (and is still true to this day) that the Arabs figured out that they were pumping and delivering oil and in return receiving pieces of paper.  These pieces of paper (Dollars) had no real value on their own and were not in reality true payment.  But as long as they were passed around like a hot potato, they would “spend.”  It dawned on the Arabs that once their oil ran out, they would be sitting with a bunch of paper that may or may not have value or even spend.

Fast forward to today and we now see the Chinese faced with the same dilemma which is why they have been scouring the globe for the last several years buying up resources while contracting payment in Dollars.  China has run a current account surplus for years and they did recycle much of this back through our Treasury markets.  This was fine as far as the U.S. was concerned, it provided an easy source of capital to fund our deficit and took pressure off of the Fed to monetize.  This worked until the game got too big.  Not too big in our eyes mind you, too big from China’s perspective.  China did the math several years ago and figured out that they were not going to be paid.  They figured out that if they were paid it was going to be in newly printed and worthless chits that at some point would no longer “spend.”  The result is that they have basically stopped buying Treasuries and thus no longer lending to us.  The Fed as a result has been placed in the position of the buyer of last resort and outright monetization has become our monetary policy.

The situation back in 1981 was VERY different to what it is today.  We still had a manufacturing base and there was collateral galore.  Today, our manufacturing base has been shipped overseas and anything not nailed down has been borrowed against over and over.  This in essences is why the banking system is already dead, the collateral is bad.  Many assets have been re hypothecated so many times that true ownership is impossible to decipher and it doesn’t matter anyway because true value is only a small fraction of “carried” value on the books.

But why has it gone on as long as it has before coming to a head?  Why haven’t the Chinese (Russians) already pulled the plug?  In my opinion it is because we are still delivering metal versus purchases.  The East has been “carrying” us like a prize fighter just toying with his opponent.  They could have already “knocked us out” several years ago.  But why do that when we still had “money” to sell them?  It only makes sense to bleed as much metal (real money) as you can before the “knockout”.  In this manner you get to accumulate more and you leave your opponent with NONE!

If you get a chance to watch the full movie, please keep in mind that EVERYTHING is more severe, more acute and especially “faster” today than it was back then.  The financial position of the U.S. (western world), corporations and individuals is far more levered today than at any point in history.  Another way of saying this is that the “financial position” of the western world has never been weaker than it is today.  The portrayal of a financial system that is here today and virtually gone in a week’s time is very correct in my opinion.  As is the quote that “$2,000 Gold will be cheap by tonight.”  (This by the way was released when Gold was around $500).

Once there is a default (non-delivery of metal), the movie “Rollover” will come to real and very full life.  Dollar deposits everywhere will be wiped clean and any remaining will be devalued severely.  Your ability to purchase actual metal will completely dry up as metal will be withdrawn for sale by its owners.  You could have called this “opinion” or speculation on my part 5 years or more ago.  This is no longer opinion and has become mathematical fact.  The only variable left is that of timing, yet once this panic begins you can bet that it will be over very VERY quickly!  Forget listening to the boneheads in Washington or on CNBC, think for yourself, protect yourself, protect your family… because no one else is going to do it for you!