BERAL, INC.
Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944
E-mail: mlikar@aol.com

Remembering Mr. Churchill

Monetary Stability is indivisible
200 Nations and 7.5 Billion people are involved
Maxim Litvinov, Russian Foreign Secretary in Germany , 1938
Nothing has Changed

June 10, 2013

I regularly visit a branch of JP Morgan Chase on 1st Avenue. I am confident in the money I deposit there. I enrolled my oldest son Gregory at the age of 4 in the Fieldstone Ethical Culture School in the West Side; followed 4 or 5 years later by my other son, Justin. In other words there was a peaceful structure and we all had confidence in the functioning of the American system. The circle which I briefly described there has never been any deficit and never a doubt in any default, personal or national. As the Habsburg Emperor Franz Joseph said over 100 years ago these were the “ Good old Days”.

In the year 2013 JP Morgan Chase is headed by a public figure, Jamey Dimon who is considered to be one of the best if not the best bankers in the United States.

The monies which I described in circulation was in dollars and we never questioned the value of our deposits nor did we imagine that loose mortgage policies and standards would dramatically impact the equity of American banks and this would have a severe impact on the markets and life in America.

In reality, we are all living in a dream world. A century before U.S. President Wilson arrived in Paris and said “ Peace abroad –good for business at home”. The result, William Zeckendorf’s masterpiece-the U.N.building on the East Side, 200 yearly speeches by 200 politicians-a replica of the Royal Albert Hall.

In the year 2013, the United Nations had 200 members. Most of these members had a currency and each of these countries did some business with the United States thus tying their currencies to the dollar. Meanwhile any of the 200 countries like Greece, like Spain, like Cyprus, or Hungary have its currency freely convertible to gold, it can change the value of its currency and it has certain liberty of incurring debt obligations. Since the banking is now globalized a major dislocation in any of the 200 nations like Cyprus can affect the American banking system . However, It is very difficult to devise a banking structure in the United States to have influence over the monetary transactions in Latvia, in Kazakhstan or Guatemala. All I can say is that the banking systems are intermingled and dislocation in a Central American country or Eastern European country or in a nation of the former Soviet Union could have an impact on the US Dollar and of course it could affect a bank like JP Morgan. A bank can take many defensive actions – it can raise credit rates, it can restrict credit and in fact, it is supposed to do everything possible to protect its own integrity and equity capital. We are fighting the First World War of Monetary Forces. A war which is totally unnecessary. What happens to an individual like myself or a retired man who visits the certain place branch of JP Morgan, basically has nothing to say about changes, whether it is internal or whether it is forced on the bank by external factors.

President Wilson in 1919 worked in a world which believed in the ideas of doing what is “good for business “. By 1938, Russian Foreign Minister Maxim Litvinov said “ Peace is indivisible “ . In the year 2013 we should give priority to stability at Chasse on First Avenue.

In the interim there is a quiet price increase and a quiet but persistent inflation in the United States. When my son Gregory was enrolled in 1974 in Fieldstone Ethical Culture School, I paid, if I am correct, $3,500. By 1992, the last year Justin was in school, the sum was $34,000. In 2012, the New York Times reported that most of the yearly charges by the private school of New York at $40,000.

Now this is the hidden inflation which takes away the buying power of the middle class and in turn has a tremendous negative effect on the economy and indirectly on the banks.

I have only dealt with effects on America . However, in countries in Europe, the undeclared inflation is even bigger and because it is followed by so-called irresponsible borrowing banking systems all over the world would be impacted and this would drift down to New York and other American branches of major banks.

It is time to look at the global picture as a background to what’s happened in the process I described. Inflation obviously has a negative impact on the stock market. Inflation creates unemployment and unemployment is responsible for withdrawals of money from the banking system . This lowers the bank’s equity and makes loans, commercial loans, personal loans, more and more difficult to get.

The leaders of the American banking in the last 5 or 6 years actually became public figures. Bank of America had several presidents, they absorbed Meryll Lynch, the largest brokerage company in the United States and still its stock declined, only recently from $16 to $5 – they had to borrow $5 billion from Warren Buffet. In other words, these are extraordinary times. These men were on television more often than Humphrey Bogart and more often in Congressional hearings than Howard Hughes.

Can the banking leaders make vital and almost revolutionary changes to create stability. They have to keep the capital requirements and they have to balance the cash available to make personal, industrial, and speculative loans which are required for a growing economy. Our current economy puts banks in a questionable state and the slightest push to the left, to the right, to the value of the currency can affect the life of millions of people.

JP Morgan has to run its business at the time when they are getting out of the real estate problems in order to finance personal loans, credit card borrowing and the regular clientele. In order to increase their profits and balance sheets they have engaged in speculative stock market transactions. Further , banks are totally loaded down with hundreds of government regulations aside from dealing with regular business in an unpredictable state from one month to another creates Instability which in turn shakes value of the currency. If the currency is shaken, if the monetary structure of the banks is shaken in a small country the monetary problems will transfer to a bigger country, but the bigger country has only two answers. Either they put money to gold or change the laws in how they operate by shifting to austerity. The world population is increasing. 7 ½ billion people live on this planet – the Far East is injecting billions of dollars to the system and they run their life in an unregulated fashion. An American bank virtually has no power over the giant Chinese, Hong Kong, Indonesia, Philippines and Japanese banks. There is currently the basic concept of not having long term confidence in American banks, in the dollar and in the American government. We now have $17 trillion debt. The $17 trillion is likely to increase to $22 trillion by the time President Obama completes his second term. There is already talk of an increased interest rate – at 2% $22 trillion would mean almost $4 ½ trillion / $5 trillion interest alone a year in less than 4 years time. If the $5 trillion is injected to the monetary base, which floods to some foreign countries like Japan and China, or Brazil and can end up in a currency which people respect more than the dollar – namely gold.

If the ever mentioned $4 ½ trillion ends up in gold, it would represent at the current price of $1,500 300,000 ounces of gold which is one tenth of the current Chinese gold ownership. And we are only talking on one year’s interest alone. In 5 years China can own America.

In 1974 Mayer Berman , a friend and famous short seller stated at the New York Stock Exchange Society of Security Analysts “ OPEC will tender for the NYSE and Libya will get the garment district “. From OPEC to China!

Who can really understand and comprehend such numbers. The United States of America’s gold holding can be absorbed by two years of interest – almost unheard of in our 300 years of civilization.

I was a witness in 1974 at the Congressional Hearing when America legalized gold. There were eminent people as witnesses. Not one of them described the scenario that I am now putting forward.

In reality the horrible example of hyperinflation in Germany in 1932 does not frighten the world’s bankers and politicians. Hitler ended up costing 100 Million lives. 300,000 ounces of gold for interest alone is frightening. However, in political human damage we are going in the direction of Germany.

Are we facing a world crisis? Are we facing a crisis that can change our lives for decades? Such change, such events has only happened once in the last 100 years. In May 1940, less than a month after Winston Church became Prime Minister, historians reflected that had Churchill made a separate peace with Hitler, had he followed the sad example of France, we would be living after 1940 for decades in a different world. Churchill saved the Western Civilization. He stated very dramatically “if we fail, then our whole life in the United Kingdom, in the Western Civilization, and in the United States would change”.

In order to confront such major events, history needs an individual or individuals who have courage and determination to state to all people in the universe I have nothing to offer but blood, sweat and tears. When a country as big as the United States can have the backing of its currency taken out by two years of interest it is the crisis of equal or greater magnitude which Mr. Churchill faced in May 1940 and which we are now facing today.

The answer to such crisis is to find a man of similar vision and strength.

We are searching for Bobby Fisher.

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.

 

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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail: mlikar@aol.com

Copyright © 2011 Andrew Racz. All Rights Reserved.

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