Considering that evidence of inflation abounds, the Federal Reserve has pulled off a good trick by convincing Americans that we are about to "suffer" through a protracted period of deflation. Why have we been so easily duped? In the past ten years, the monetary base has grown from $600 billion to $2 trillion. This expansion has accompanied a rise in the price of gold from below $300/oz at the beginning of the decade to around $1,200/oz today. The price of gold is the best arbiter for a currency's purchasing power. Therefore, gold is still telling us that inflation is eroding the value of our dollar. Other commodities, like crude oil, are telling the same story. Ten years ago, a barrel of oil was trading for $25. Today, it is $78.
The ECB president travels this weekend to Basel, Switzerland, were he will chair talks on new “Basel III” capital rules for banks. He refused to comment in detail ahead of the meeting, but warned banks that they could not in future expect the world’s taxpayers to put at stake such huge sums in rescue packages as in the past three years. “We cannot do that twice. The people in our democracies would not accept that.” He also said that “we need the same rules at the global level” and described the rise in importance of the Group of 20 summits, which also include China and India, as “one of the major structural transformations of global governance over the last three years”.
In Richard Russell’s commentary this week, the Godfather of newsletter writers discusses a decade of losses, fiat money being put to the test, ending an era of frivolity and real money (gold). In a time of great uncertainty, sometimes it is a good idea to turn to those with decades of market experience. As usual Russell kept his eye on the big picture. Here are a few snippets from this week’s commentary...
The nasty fiscal arithmetic of imperial decline that Harvard professor Niall Ferguson refers to is America’s unsustainable debt. Growing levels of debt according to Ferguson are now about to drive the US, like other great powers before it, over the edge of chaos; an event Ferguson believes will come sooner rather than later.
SYDNEY (MarketWatch) -- The Japanese Government unveiled a 915 billion yen ($10.9 billion) stimulus package on Friday, which includes incentives and reforms to boost employment, consumer spending and corporate investment, Dow Jones Newswires reported. It accounts for 0.2% of the country's GDP, the report said
September 9 (King World News) - We are at War. It may not feel like it, but we are. This is no ordinary war. It is not a military war but it is just as damaging because it has brought about a loss of freedom, poverty and an imbalance in wealth. The War I refer to is a Gold War. There has been a long running battle between governments and gold. Gold as the “currency of first resort”, as we have coined it at Hinde, is in a state of permanent competition with fiat or paper money, created by governments. Gold is in a permanent state of war with governments themselves. Gold is the vital barometer of the health of a nation’s underlying currency. The suppression of the gold price by government allows them to mask the mismanagement of their paper currency. This past century the US government has arguably been the leading culprit of suppression. They have consistently abused their currency status, by printing more and more IOUs. For countries to fund what they need by taxation alone is not possible without civil unrest. The printing of IOUs has helped to fund not only a coercive welfare system, but has aided the continual funding of armed conflicts around the world.
The Fed is proposing another round of “quantitative easing,” although the first round failed to reverse deflation. It failed because the money went into the coffers of banks, which failed to lend it on. To reverse deflation, the money needs to be funneled directly to state and local economies.
Confidence will continue to wane as more and more pressure is brought up to bear versus dollar, which in turn will force gold higher, as it continues to reassert itself as the world’s only real currency. In the end it will spell failure for dollar denominated assets. That will finally bring recognition that the system has failed. This will bring great pressure on the banking system and some major banks will fail. This is why only enough cash should be kept in banks for three months expenses, or six months for businesses and in your safe at home along with your gold and silver coins and weapons, you should have $5,000 in small bills, for emergencies. It is important to remember that this is part of a plan to nationalize the American banking system, so that it fits into the new National Socialist structure - the corporatist structure that members of the Council on Foreign Relations, the Trilateralists and the Bilderbergs have planned for us. This national banking system is to be the key to future World Government, or a New World Order.
The deceit comes in many guises. One of the greatest deceits is the masking of huge future financial problems associated with US government debt. Professor Laurence J. Kotlikoff, Professor of Economics at Boston University, says the US, and even IMF data, reveal that the US is already bankrupt. That is due to its unfunded Medicare, Medicaid, Social Security, defense and other liabilities totalling $202 trillion, or over fourteen times the annual US gross domestic product (GDP) of a little over $14 trillion.
We are entering a huge battle for supremacy of real precious metals vs paper money as the banking cartel threw everything in today to contain gold from breaking its all time high of 1264 and silver from breaking 20.00. With both gold and silver both exhibiting outside day reversals, the increase in OI (Open Interest) must show the banking cartel trying to cover but cannot due to the swift rise in metal prices. Means that buyers are not rolling but taking delivery of their physical metal. With a higher degree of leverage to the tune of 100: 1 you can bet the farm that banking cartel are very nervous that they will not be able to service the advancing army of physical metal demand.
Lately we've been hearing a lot of talk about Kondratieff cycles, Elliot Wave super cycle, end of the world, deflation, deflation, deflation. The first warning is going to come when the dollar breaks back below 80. That will signal that the current intermediate cycle has failed. As soon as that happens we can close the door on the dollar.
Sept. 8 (Bloomberg) -- China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar’s role in global trade.
The Federal Reserve's decision last month to step up its buying of Treasury securities could be laying the groundwork for inflation and a host of other political and economic troubles, former Fed governor Frederic Mishkin told CNBC.
This time around we expect Gold to be the victor. The deflationary threat in the economy still lingers, but the Fed’s decision to reverse its exit strategy during its last meeting and conduct replacement purchases of assets will likely continue to keep deflation at bay.
The multi-billion dollar hedge fund run by John Paulson has a huge position in gold.Zero Hedge reprints a portion of a Paulson letter sent to investors. In that letter, Paulson explains who is advising them to buy so much gold : Lastly, and perhaps most important, from a monetary policy perspective in developing an ability to forecast the timing and future price of gold we believe we have an unparalleled team. Former Federal Reserve Chairman Alan Greenspan has been extremely helpful to us in understanding the relationship between the monetary base, the money supply, inflation and gold prices.
Without confronting the stark reality of our situation, be it economic, political, or social, we will never be able change things for the better. Ignorance is not bliss. The ignorant always end up paying a steep price. The U.S. economy is going to experience some rather horrifying repercussions, for the actions of the elites who seek to derail our culture and replace it with another, and for the publics’ continued lack of vigilance to those actions.
It shouldn't take long for the word to get out that there is more paper of gold and silver out than actual gold and silver exists to back it up. Once this gets on the street it should not take long for the Comex reserves to get wiped out. Then financial chaos is right around the corner. However as chaos swirls around them those that possess actual silver and gold will see their investment shoot up perhaps skyrocket in value. I believe a conservative estimate would be to rise anywhere from 2 to 4 times in value. However given the volatility of anything financial these days I fully expect it to zoom to 5 to 10 times in value.
