Mountain Vision
Feb 1, 2012
Mountain Vision


"Just because you do not take an interest in politics does not mean politics will not take an interest in you!"

~ Pericles, 430 B.C.

Dear Mountaineers,

While we were busy last week preparing for our Inner Circle Briefing, and the Freedom Fest´s Global Financial Summit in the Bahamas, which is underway as you read this Update, the bigwigs of politics and business were visiting in Davos, Switzerland, at the World Economic Forum (WEF), eagerly mingling and scheming under the WEF´s slogan "commitment to improving the state of the world".

While much of what is said in Davos is not made public, a fair share of the topics and positions presented at the WEF are made available. However, most people are not that interested. Who cares what "they" talk about? It´s just that, talk, talk and more talk...

Possibly, that is true. I agree that, probably, most of the deals struck in Davos have little to do with "improving the state of the world". They are supposedly more oriented toward improving "the state of a few wallets and treasuries". Furthermore, a good portion of those grand solutions presented in Davos are nothing but hot air - well, maybe not so hot at 1700 meters above see level and minus 15 degrees Celsius..., but only air nonetheless.

Irrespective of what you think of the WEF, over the past 7 years, the Forum has published a report on Global Risks. This year´s Global Risks 2012 Report is again worth reviewing, not so much because of its predictive power. Actually, the accuracy of the Report´s forecasts has been lackluster. However, what makes the WEF´s report an interesting read is that generally you will find that the "top risks" discussed in the report will in fact be prominent topics and policy themes over the coming year.

In that sense, the WEF´s Risk Report is like an agenda of themes that WILL in fact get a good share of policy and media attention in 2012. What is the WEF? It´s a forum for politicians and lobbyists. Therefore, we should take note of what these people have in mind for the upcoming year...

The Global Risks 2012 Video

The WEF´s Global Risk Report warns of economic imbalances and social inequality, and how these risks could "revert the gains of globalization"...

The linked
Global Risks 2012 Video presents the findings of a survey of 469 experts and industry leaders who worry that the world´s institutions are ill-equipped to cope with today´s interconnected, rapidly evolving risks [and rightfully so].

The findings of the survey fed into an analysis of three major risk cases: Seeds of Dystopia; Unsafe Safeguards and the Dark Side of Connectivity. Quite frankly, if the titles of these "risk cases" don´t give you the shivers, possibly the video will.

By the way, a strange byline at the end of the video comes across as quite awkward: "This film is not authorized nor endorsed by the president, the First Lady or the White House." Now, why would it or should it be?! I leave any interpretations in your good hands / minds...

The Report - and its Top 10 Risks

In addition to the aforementioned "major risk cases", the actual Global Risks 2012 Report analyses the top risks in five categories - economic, environmental, geopolitical, societal and technological. Structured on a 10-year outlook, the survey captured the perceived impact, likelihood and interconnectedness of 50 prevalent global risks.

The figure I´ve included below lists the Report´s top 5 risks in terms of likelihood (Figure 4 of the Report). Then, next, take note of the top 5 risks selected, in terms of likelihood, over the past 7 years.

A few things appear to stick out here: First of all, the Top 5 risks chosen in the Report, in terms of likelihood, have changed every year. It seems awkward that the risks elected as the most likely over the medium- to long-term future would change EVERY year.

Secondly, it is noteworthy that the most likely risks elected by the reports "experts" are strongly influenced by the actual events and prominent media coverage in the preceding year. Possibly, the risks listed in the report, are merely themes and topics that are popularly launched and discussed at the WEF, and those that are most likely to find a political ear.

The Fundamental Risk, and the Cause, is nowhere to be found!

What I found most intriguing about the survey´s results, which are supposedly based on the outlooks of 469 (??!) of the world´s leading experts, is that although the Report recognizes the risk of a major systemic financial failure and that of ‘chronic´ fiscal imbalances, both in terms of likelihood and impact (see Figure 5 of the report below), the fundamental risk and true cause is nowhere to be found!

What is the biggest risk today? What is the fundamental and true cause for the fiscal imbalances and for the risks of a major systemic financial failure today? It is the MONETARY IMBALANCES that governments and central banks around the world have created. They have continuously lowered interest rates over the past 3 decades. Financial risk and returns are now priced at zero. Cheap money has resulted in large-scale, unprecedented mis-allocation.

Likely Policy Responses - Ironically Contrarian to the Washington Consensus!

What do you think the political responses and economic policies to address these prominently published risks will be?

Severe income disparity: Will that be addressed with less bureaucracy, more freedom and better education? Or, will it merely translate into more taxes for the wealthy and more (ineffective) state sponsored job creation and consumer confidence initiatives? Chronic fiscal imbalances: Do you think we will see a sincere tightening of belts? I don´t think so.

The economic and financial issues, and yes, the risks of severe income disparity, are the result of government´s intervention in the free markets and their politically driven lack of monetary discipline. The political response pattern to these "2012 risks", to the likes of income disparity (translate social unrest), chronic fiscal imbalances, extreme volatility in energy and agricultural prices, will be based on more quantitative easing and more government intervention. It will be more of what we need less of.

In this context, I am reminded of last week´s excellent
commentary by Sovereign Man´s Simon Black, who is speaking at our Inner Circle Briefing in the Bahamas:

"There is a delicious irony in the world of economic policy at the moment.
Back in 1997 and 1998 I had a ringside seat to the Asian financial crisis from my trading desk in Seoul. When everything collapsed, the policy prescriptions from the World Bank and IMF for Asia´s sick economies were to:

1. HIKE interest rates,
2. CUT government spending,
3. Further deregulate, liberalize, and open their economies to foreign investment to attract capital;
4. And let their zombie banks FAIL.

Though, they experienced brutal recessions after swallowing this tough medicine, the two countries which carried out these policies to the fullest extent: South Korea, and Indonesia, are today among the most successful and dynamic economies in Asia, and the WORLD."

What you can expect in policy responses is the very contrary. Over the coming years, we will instead see more quantitative easing, more government spending and debt, more regulations, more protectionism, exchange controls and a lot of bank bailouts.

These are precisely the ingredients needed to further increase the risks of severe income disparity, chronic financial imbalances, extreme volatility in energy and agricultural prices, and yes, the risk of a major systemic financial crisis. So, in the end, maybe those 469 experts really know what they are doing. Maybe their risk forecasts are not so bad after all.

When the Biggest Risk Is What "They" Will Call the Solution...

In the end, with all the uncertainties and risks discussed in Davos, it all comes down to one thing: Money. Paper Money. And we expect there will be plenty of that!

In the cartoon above, Ms. Merkel says to Mr. Schwab (founder of the WEF): "Great, all the snow this year!" Mr. Schwab responds: "That´s not snow, it´s European debt paper!"

There are truly a few things that are certain in life...


Your "Swiss Mountain Guide"
Frank R. Suess



Gold off to the Strongest Start since 1980 - Sales of Bullion Coins at New Record Highs
Gold prices, heading for the biggest January rally since 1983, may rise 33 percent further to a record $2,300 an ounce early next year, according to technical analysis by Ronald Stoeferle, a commodity analyst at Erste Group Bank AG.

At Global Gold, the sales of bullion gold coins have picked up considerably as well. Claudio Grass, Managing Director of Global Gold says: "Particularly, the Maple Leafs and Australian Nuggets, which Global Gold sells at extremely attractive conditions, probably the most attractive in Switzerland, are very popular with international investors."

Gold, has risen 10 percent to $1,724.43 an ounce this month in London, the best start to a year since 1980. According to Bloomberg, a growing number of bullion gold coins have been bought by international gold investors and professional bullion traders. The gold bullion price has been rising rapidly, the most in three months, after the Fed said it´s considering additional bond purchases to boost growth. Investors are buying American Eagle gold coins from the U.S. Mint at the fastest pace since July 2010.
go to story

Living in a QE World - Or, Watching the Race to the Bottom...
All central bank balance sheets are exploding higher; they are all engaged in quantitative easing (QE) monetary policies.

The degree to which central banks around the world are printing money is unprecedented. The charts shown in the linked article and provided by Bianco Research, depict the balance sheets of the largest central banks in the world. They are the European Central Bank (ECB), the Federal Reserve (Fed), the Bank of Japan (BoJ), the Bank of England (BoE), the Bundesbank (Germany), the Banque de France, the People´s Bank of China (PBoC) and the Swiss National Bank (SNB). Noted on the charts are significant events or growth rates.

Shown is the size of each respective balance sheet in its local currency. All are exploding higher. Most are still making new all-time highs. If the basic definition of quantitative easing (QE) is a significant increase in a central bank´s balance sheet via increasing banking reserves, then all eight of these central banks are engaged in QE.
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U.S. Siege on Swiss Banks Continues - Wegelin Bites the Bullet
The break-up of Switzerland´s oldest bank Wegelin, involved in a row with U.S. authorities over tax cheats, became necessary when clients pulled 4 billion Swiss francs ($4.35 billion) of wealth, Der Sonntag newspaper reported on Sunday, citing unspecified sources.

Under pressure from the investigation, the 270-year-old institution moved assets of 21 billion Swiss francs ($22.9 billion) to a subsidiary Notenstein Privatbank, which was then bought by cooperative bank Raiffeisen.

Wegelin is still left with U.S. assets under scrutiny from U.S. prosecutors. In his first interview since news of the sale broke on Friday, Wegelin head Konrad Hummler told the paper he had done the right thing at the right time. "We became the victims of a larger matter. I don´t want to say more than that," he said in a separate interview.
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Internet Censorship - Only a Matter of Time
The legislations called SOPA and PIPA have received much public attention. Critics fear that these anti-piracy legislations could threaten the freedom of speech online.

Unfortunately, these pieces of legislation are not the only laws which threaten an open internet. Few people have heard of ACTA, or the Anti-Counterfeiting Trade Agreement, but the provisions in the agreement appear quite similar to - and more expansive than - anything we saw in SOPA. Worse, the agreement spans virtually all of the countries in the developed world, including all of the EU, the United States, Switzerland and Japan.

The internet is clearly seen as a major challenge by most governments, even democratic governments. Governing would be so much easier if there was not all this uncontrolled, government-critical information on the internet... Brace yourself for more censorship!
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This Video Depicts the Broad Scope of the US Congress´ Internet Bill
Salman Kahn, founder of the Kahn Academy, does a brilliant job of explaining the totalitarian reach of SOPA and PIPA. Be sure to listen to the entire clip. The most draconian parts of the legislation are detailed in the second half of the clip.
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The Risks That Bankers Worry About Most
The fragility of the global economy is the greatest threat to the banking industry as a return to recession could mean more losses from bad loans and bank failures, according to an industry survey. The survey questioned 710 bankers, observers and regulators in 58 countries in November and December.
Macro-economic risk rose to become the number-one concern among bankers, the Centre for the Study of Financial Innovation, a forum for bankers and regulators funded by institutions including the Bank of England, reported in a survey today.

The amount of debt some countries have, access to liquidity and a scarcity of capital were their next worries, it said.

Meanwhile, Standard & Poor´s downgraded nine European nations on Jan. 13, saying recent policy steps may prove "insufficient" to contain the fiscal crisis, already in its third year. France and Austria were both cut by one level to AA+. S&P also lowered the rankings of Malta, Slovakia and Slovenia by one rank, and Italy, Spain, Portugal and Cyprus by two.
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The Three Biggest Lies the Government Is Telling You
In his article at, Charles Goyette, author of the New York Times bestseller The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments, discusses the most important "Government Lies".

Says Goyette: „Government lies are legion. So many are its lies, that narrowing them down to three of the most important is a demanding task. But our current crisis has been chiefly enabled by monetary policy, fiscal policy, and the global military empire. So I have chosen to focus on lies about each: the Federal Reserve, the orchestrator of monetary policy; the U.S. budget, the accounting of government fiscal policy; and a few of the Empire´s war lies."
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Living Through the Biggest Wealth Transfer of All Times - UNCONSTITUTIONALLY...!


© Copyright 2012, by BFI Capital Group AG, Bahnhofstrasse 29, 6300 Zug, Switzerland, website: The MOUNTAIN VISION UPDATE is published by BFI Capital Group (‘BFI’). Quotation is allowed if credit is given. Although every care has been taken in the preparation of Mountain Vision, BFI does not guarantee and cannot be held responsible for the accuracy of any statistic, statement or representation made. We recommend that you consult qualified professional advisors to determine the applicability of this information and opinion. The publisher is not a registered investment advisor. Readers should not view MOUNTAIN VISION as offering personalized legal or investment advice.
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