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Here is an article I just finished on gold and why you need to convert all of your dollar-denominated savings and holdings into it ASAP. It will bepublished on SeekingAlpha soon, currently pending approval.
2009: The Bull Market in Gold
With the massive monetary expansion experienced in recent months and the promise for unprecedented levels of money and credit supply increase in comingmonths, the United States Federal Reserve looks on paper to be sending America straight into hyperinflation. Germany's post-World War I Weimar Republic,post-World War II Hungary, 2001 Argentina, and present day Zimbabwe are all analogous examples of massive debt monetization, which all led to hyperinflationarydisaster. Never before has the entire world's economy been linked to one nation's, however, as is the case today with the United States. In a case ofeconomic mutually assured destruction, foreign creditor nations and their central banks can't afford to spark a run on the US Dollar, because it would killtheir own export-based economies, as well as devalue their debt repayments and foreign exchange reserves. But the United States has been financing consumptionthrough debt for decades and has resorted to monetary expansion to finance its debt and deficit spending, which is only going to increase with BarackObama's infrastructure and social programs. The Troubled Assets Relief Program (TARP) itself amounts to $700B, all of which will essentially be"printed." Foreign demand for US debt is all but gone, as creditor nations are now attempting to unwind their USD positions. Huge creditor nationslike China and Iran were net sellers of US Treasuries in recent months, attesting to the weakening of the American debt bubble. So where's all this excessliquidity go?
The answer is gold, and it is the only way to prevent the hyperinflationary scenarios referenced above from materializing in the United States.
The Fed has been on a money printing binge of unprecedented proportions, but has been able to thus far "trap" the excess liquidity from reaching theconsumer level, which is what causes price inflation. It started a massive foreign currency sale this summer through the Exchange Stabilization Fund (ESF) thatled to a supply increase of Euros and suppression of dollar usage. It has been liquifying troubled banks by issuing them T-bills financed through monetizationin exchange for toxic assets by utilizing reverse repurchase agreements. And it has used the recent deleveraging and commodity collapse (partially caused bycredit defaults in many of the overleveraged institutions that were supporting the commodity bull) to supply the temporary demand for US Dollars and feedingits own foreign exchange reserves.
But the excess liquidity thus far is trapped in time-sensitive and manipulated instruments now, and without a demand for American debt, it has to go somewhere.As T-bills expire and the stock market descends further, actual currency is going to be released out of sequestration into the economy. The Fed cannot allowthe market to breach below its November lows, unless it wants widespread insolvency in insurers and banks, which are legally required to halt operations in theevent of insolvency. I've heard estimates of 7500 and 8000 in the Dow as being minimum support levels that, if broken for an extended time, would lead toeconomic collapse in America as financials would all go under. To prevent this and to finance Obama's deficit spending, actual dollars will have to beinjected into the system and they will be.
Weakness in the dollar causes strength in gold, which is something the Fed (through America's banks) has been suppressing for years. COMEX shorts dominatethis suppression of gold prices, but this act will be discontinued to prevent economic collapse. Allowing gold's price to rise to current fair levels (andthen rise further to represent gold's rising fundamentals) will soak up much of the excess liquidity, preventing hyperinflationary price increases inconsumer goods. Gold reached backwardation this month, signifying the big gold market manipulators are abandoning their short positions.
Ben Bernanke is a proponent of dollar devaluation against gold and is a staunch advocate of Frank D. Roosevelt's decision to do so in 1934 during the GreatDepression. Dollar devaluation is one of the government's most prized tools, as it allows debts to be paid back in devalued nominal terms, transferringrisk and purchasing power destruction to American taxpayers, who have no clue what is going on. Inflation is a tax on the people and with a fiat currency, apower-limitless Fed can (and has) tax the hell out of the American people.
The dollar, and fiat currency as a whole, faces collapse now, however, as the artificial wealth created and used in the past few decades is now showing itsnature as being just that-- artificial. The global monetary system will have to return to some sort of precious metal backing, directly or indirectly, andsurging gold prices is essential for this to occur.
Rising gold prices represents the excess liquidity being soaked up and also causes nominal equity values to rise without dramatic rises in consumer goods. Goldhas little utility outside of store of value, which is why its price hasn't collapsed at nearly the same rate other commodities, like oil and natural gas,have. As crude and steel suffered demand destruction from consumers losing wealth quickly, gold was barely touched at all and in fact probably would have showneven more strength hadn't it been for the aforementioned manipulations of the Fed and the global deleveraging of financial institutions.
Technically, gold appears poised to break out of its countertrend down move in its primary bull, leading to much higher prices soon. It broke out of its 50DMAon strong volume recently and is approaching a 200DMA breakout. With backwardation occuring this month, all indicators point to gold surging in the comingmonths.
Gold and gold miner stocks are also looking quite bullish. I recommend Royal Gold (RGLD), which recently broke out of a great long-term base, as well as ElDorado Gold (EGO), Goldcorp (GG), Iamgold Corp (IAG), Barrick Gold (ABX), Randgold Resources (GOLD), Jaguar Mining (JAG), Anglogold Ashanti (AU), Agnico-EagleMines (AEM), and Newpont Mining (NEM) for the coming year. Also, look into buying the gold ETF (GLD) and the Ultrashort 30-year Treasury Bond ETF (TBT) as theUS debt bubble collapses and debt monetization starts to show up in the Fed's balance sheets. I do suggest buying lots of bullion, however, as stock marketreturns are in nominal dollar-denominated terms.
The American total credit market debt to GDP ratio is at unprecedented highs, well above 350%, and this with ridiculously manipulated inflation numbersartificially deflated through hedonics. The government deficit could top $2 trillion next year. And the Fed is going to print money to pay for it all. The onlyway to prevent hyperinflation is to return to some sold of hard asset-backed monetary system and to allow gold's price to rise dramatically.
My prediction: gold breaks $2000/oz in 2009 and $10,000/oz by 2012.
It is currenctly about $850/oz. Save your financial future from collapse. BUY GOLD NOW.
2009: The Bull Market in Gold
With the massive monetary expansion experienced in recent months and the promise for unprecedented levels of money and credit supply increase in comingmonths, the United States Federal Reserve looks on paper to be sending America straight into hyperinflation. Germany's post-World War I Weimar Republic,post-World War II Hungary, 2001 Argentina, and present day Zimbabwe are all analogous examples of massive debt monetization, which all led to hyperinflationarydisaster. Never before has the entire world's economy been linked to one nation's, however, as is the case today with the United States. In a case ofeconomic mutually assured destruction, foreign creditor nations and their central banks can't afford to spark a run on the US Dollar, because it would killtheir own export-based economies, as well as devalue their debt repayments and foreign exchange reserves. But the United States has been financing consumptionthrough debt for decades and has resorted to monetary expansion to finance its debt and deficit spending, which is only going to increase with BarackObama's infrastructure and social programs. The Troubled Assets Relief Program (TARP) itself amounts to $700B, all of which will essentially be"printed." Foreign demand for US debt is all but gone, as creditor nations are now attempting to unwind their USD positions. Huge creditor nationslike China and Iran were net sellers of US Treasuries in recent months, attesting to the weakening of the American debt bubble. So where's all this excessliquidity go?
The answer is gold, and it is the only way to prevent the hyperinflationary scenarios referenced above from materializing in the United States.
The Fed has been on a money printing binge of unprecedented proportions, but has been able to thus far "trap" the excess liquidity from reaching theconsumer level, which is what causes price inflation. It started a massive foreign currency sale this summer through the Exchange Stabilization Fund (ESF) thatled to a supply increase of Euros and suppression of dollar usage. It has been liquifying troubled banks by issuing them T-bills financed through monetizationin exchange for toxic assets by utilizing reverse repurchase agreements. And it has used the recent deleveraging and commodity collapse (partially caused bycredit defaults in many of the overleveraged institutions that were supporting the commodity bull) to supply the temporary demand for US Dollars and feedingits own foreign exchange reserves.
But the excess liquidity thus far is trapped in time-sensitive and manipulated instruments now, and without a demand for American debt, it has to go somewhere.As T-bills expire and the stock market descends further, actual currency is going to be released out of sequestration into the economy. The Fed cannot allowthe market to breach below its November lows, unless it wants widespread insolvency in insurers and banks, which are legally required to halt operations in theevent of insolvency. I've heard estimates of 7500 and 8000 in the Dow as being minimum support levels that, if broken for an extended time, would lead toeconomic collapse in America as financials would all go under. To prevent this and to finance Obama's deficit spending, actual dollars will have to beinjected into the system and they will be.
Weakness in the dollar causes strength in gold, which is something the Fed (through America's banks) has been suppressing for years. COMEX shorts dominatethis suppression of gold prices, but this act will be discontinued to prevent economic collapse. Allowing gold's price to rise to current fair levels (andthen rise further to represent gold's rising fundamentals) will soak up much of the excess liquidity, preventing hyperinflationary price increases inconsumer goods. Gold reached backwardation this month, signifying the big gold market manipulators are abandoning their short positions.
Ben Bernanke is a proponent of dollar devaluation against gold and is a staunch advocate of Frank D. Roosevelt's decision to do so in 1934 during the GreatDepression. Dollar devaluation is one of the government's most prized tools, as it allows debts to be paid back in devalued nominal terms, transferringrisk and purchasing power destruction to American taxpayers, who have no clue what is going on. Inflation is a tax on the people and with a fiat currency, apower-limitless Fed can (and has) tax the hell out of the American people.
The dollar, and fiat currency as a whole, faces collapse now, however, as the artificial wealth created and used in the past few decades is now showing itsnature as being just that-- artificial. The global monetary system will have to return to some sort of precious metal backing, directly or indirectly, andsurging gold prices is essential for this to occur.
Rising gold prices represents the excess liquidity being soaked up and also causes nominal equity values to rise without dramatic rises in consumer goods. Goldhas little utility outside of store of value, which is why its price hasn't collapsed at nearly the same rate other commodities, like oil and natural gas,have. As crude and steel suffered demand destruction from consumers losing wealth quickly, gold was barely touched at all and in fact probably would have showneven more strength hadn't it been for the aforementioned manipulations of the Fed and the global deleveraging of financial institutions.
Technically, gold appears poised to break out of its countertrend down move in its primary bull, leading to much higher prices soon. It broke out of its 50DMAon strong volume recently and is approaching a 200DMA breakout. With backwardation occuring this month, all indicators point to gold surging in the comingmonths.
Gold and gold miner stocks are also looking quite bullish. I recommend Royal Gold (RGLD), which recently broke out of a great long-term base, as well as ElDorado Gold (EGO), Goldcorp (GG), Iamgold Corp (IAG), Barrick Gold (ABX), Randgold Resources (GOLD), Jaguar Mining (JAG), Anglogold Ashanti (AU), Agnico-EagleMines (AEM), and Newpont Mining (NEM) for the coming year. Also, look into buying the gold ETF (GLD) and the Ultrashort 30-year Treasury Bond ETF (TBT) as theUS debt bubble collapses and debt monetization starts to show up in the Fed's balance sheets. I do suggest buying lots of bullion, however, as stock marketreturns are in nominal dollar-denominated terms.
The American total credit market debt to GDP ratio is at unprecedented highs, well above 350%, and this with ridiculously manipulated inflation numbersartificially deflated through hedonics. The government deficit could top $2 trillion next year. And the Fed is going to print money to pay for it all. The onlyway to prevent hyperinflation is to return to some sold of hard asset-backed monetary system and to allow gold's price to rise dramatically.
My prediction: gold breaks $2000/oz in 2009 and $10,000/oz by 2012.
It is currenctly about $850/oz. Save your financial future from collapse. BUY GOLD NOW.
