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Could you explain. I'm really trying to understand the rush to buy gold, when it's so high. Isn't it going to crash?
I usually go by the adage, when their selling low, I'm buying. If they're buying high, I'm selling. And if everyone is talking about it, your too late
Historically, you would be correct. Gold hit $800 an ounce in 1980 shortly before it crashed. In current dollars, that would factor to around $2000 an ounce. However, I believe what's going on is an exception because in the late 1970s-early 1980s, the Federal Reserve deliberately took us into a recession in order to stop inflation. Then, we were able to grow again thanks to the cutting of interest rates, taxes and implementing some free market policies. Today, the Fed can't cut rates because we entered into a recession with the rates at 0% instead of 14%. So the Fed now has to either keep rates near 0 and risk the running up of inflation due to the printing press or they start raising rates and risk losing what economic growth we have. And as the Obama team with their Keynesian economic leadership has shown, they're not going to want to raise rates and stop the printing press anytime soon. I believe gold is shaping out to have much stronger fundamentals than in the 80s.
First Four days of May and the Treasury redeems $ 144 billion, who is selling, will it cause China to dump the US treasuries while there is still value to the dollar?
Even as the market is now surging on rumors of massive pan-European bail outs (someone explain to us how a tsunami of failed banks is equity positive... or for that matter how imminent monetization is EUR positive), Bloomberg is reporting that the liquidity crisis in Europe has struck smack in the middle: after the FinMin released a draft bill to forcibly write down real estate asset holdings by 10, investors in certain mutual funds have panicked and attempted massive redemptions, which in turn forced redemption halts by these funds which likely are woefully undercapitalized to begin with.
The problem with the American economy is the imbalance between what we produce and what we consume as a nation. Credit and debt allows us to consume more than we produce. This easy credit mask the fact that the American worker is too expensive in the global free market for labor, as capital is less bound by nation borders.
Capital will seek the path of least resistance, like water influenced by gravity. Capital was artificially damned up in the USA, which allowed the USA standard of living to be much higher than most of the worlds. What happens when you remove the dam? The answer is that water will seek the path of least resistance and find a new natural equilibrium level with rivers and streams. The means that levels will rise in other places as a direct consequence of levels falling from the artificially high levels created by the dam.
The path of least resistance for capital, in other words, the path to profit maximization, exists in places where there is low labor cost, low regulation and low taxes. This is why so many jobs have been off shored and out sourced and why so much production has been moved oversees and why so many good say “Made in China”. Debt has hidden the stagnation, if not decline, of our productive capacity.
When John Williams says that there will be hyper inflation, he says that because one of the primary causes of inflation is an expansion of the money supply. The government stopped publishing M3, which is or was the broadest reading of the money supply. I think that was about 4 or 5 years ago and the last year that they publish this figure; the money supply had gone up about 13% year over year. John Williams, of Shadow Stats fame, started calculating M3 from the components parts that it was made of.
Different people have a different interpretation of what the “Hyper” in hyper-inflation means. Some see examples of hyper-inflation to be represented by current Zimbabwe or the Weimar Republic of Germany in the early 20th century. I think we will see inflation, in a few years, that exceeds the inflation of the Jimmy Carter years, where it was above 10% then. The only way to avoid this is too radically raise interest rates…..which would certainly kill a debt driven economy that needs to borrow to consume. Yes, high inflation is definitely in the near future. I am going to claim high exemptions on my taxes so I get my money up front, then when I have to pay back the government…..it will be in dollars that are worth about 10% less than when I earned them. Better to have the government absorb the loss of purchasing power than my family.
I guess middle income consumer automatons are more important than old folks on a fixed income to politicians. After all, the Dems and Reps can just blame the other guy and not sacrifice their FL voter base.
Historically, you would be correct. Gold hit $800 an ounce in 1980 shortly before it crashed. In current dollars, that would factor to around $2000 an ounce. However, I believe what's going on is an exception because in the late 1970s-early 1980s, the Federal Reserve deliberately took us into a recession in order to stop inflation. Then, we were able to grow again thanks to the cutting of interest rates, taxes and implementing some free market policies. Today, the Fed can't cut rates because we entered into a recession with the rates at 0% instead of 14%. So the Fed now has to either keep rates near 0 and risk the running up of inflation due to the printing press or they start raising rates and risk losing what economic growth we have. And as the Obama team with their Keynesian economic leadership has shown, they're not going to want to raise rates and stop the printing press anytime soon. I believe gold is shaping out to have much stronger fundamentals than in the 80s.
There is a diferent way to price gold devide the suply by M3. Doing it that way we should be at about $7K per OZ by 1980's peek. also price the dow in gold. we should hit bottom at about 0.85 oz to buy the dow. We are currently about 1/2 way up and down the respective bubbles. Front Page some food for thought.
YouTube - Meltup
It is a bit long but well worth the time to watch it.
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