Economic Collapse

As expected the Euro is breaking up. This is the first sign and the beginning of the end of the Euro as France and Germany discuss breaking away from the PIIGS:
http://www.telegraph.co.uk/news/worldnews/europe/7837874/Germany-and-France-examine-two-tier-euro.html

Great article from Zeal on Gold and the events of the last two weeks. Here’s the author Adam Hamilton’s final remarks:

The bottom line is euro-gold €1000 is a very important psychological milestone in this global gold bull. Just as $1000+ did here in the States last autumn, €1000+ will make gold far more appealing to legions of European investors. Their buying will drive gold even higher. So to see €1000 challenged this week for the first time ever, even if it doesn’t hold, is very exciting. Gold history is being made before our eyes.

While probabilities favor the super-oversold euro bouncing and scuttling this initial €1000 attempt, it is only a matter of time until this level holds for good. Euro gold has powered higher on balance for years despite the simultaneous strong bull market in the euro. While it isn’t as bad as the dollar, ultimately the euro is just another devaluing fiat currency that investors can help protect themselves from by owning gold.

Read the article: Euro Gold €1000 at zealllc.com

Interesting events on Wall Street: Dow falls 1000 points an hour before closing and then recovers. Gold is now the preferred currency as it again moves above 1200 USD/Oz and reaches new heights in Euro, SEK and other fiat paper. Key words to understand the Dows “recovery” late in the trading day: “plunge protection team“. Jim Sinclair on King World News, highly recommended:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/5/6_Jim_Sinclair.html

Just came back from the pre-premiere of a Swedish-made movie called “Overdose - The Next Financial Crisis“. It’s narrated by Cato Institute affiliate and free-lance writer Johan Norberg and the movie is also based on one of his books. I must say the movie portrays the dire mess we are in, in a manner that’s very easily grasped. This makes it a very good movie to share with your friends if you find it difficult to get people close to you to listen to boring financial lingo. Highly recommended! The film features trend forecaster Gerald Celente, investor Peter Schiff and many others.

For everyone in Washington D.C., the Cato Institute is screening the film on the 17:th of May 2010.
Facebook group is also available.

As I and many other have been warning readers since the very beginning: Keep your Gold in your OWN possession. The official gold/silver vaults are empty. Paper gold is worthless. Get the metal. For an update, listen to this interview on King World News.

Unemployment in the USA has reached at least 20% according to a recent Gallup poll. Shadow Government Statistics puts the number at about 22%. The fact is that the official reported unemployment level of 10% i far from the real truth. The US is cooking its books as Greece did to enter the Euro-zone. They got caught. The market now values the risk of borrowing money to Obama higher than to Warren Buffet. There will be no jobless recovery. This is not the beginning of the end of the recession, it is the start of an epic depression. What should you do to protect your savings? Buy gold and silver and keep it in your own possession. The only risk you take by doing that is being robbed by desperate unemployed criminals.

This is a great article by Alar Tamming, Tavex, Estonia and Dr. Krassimir Petrov, Ahlia University, Bahrain on the situation we are in right now minus all the mass-media propaganda. Their cannot be a “jobless recovery”, you can’t print your way out of this mess. Keynesianism is wrong at the core, no matter what bureaucrats, politicians, journalist or bankers tell you. The printing of money of Central Banks around the world has gone parabolical and the paper will return to its intrinsic value of zero. Read the rest of this entry »

As I posted a two days ago, Peter Schiff does not agree with Nobel Prize winner Paul Krugman about China and what would happen if the chinese stopped buying US debt. As he said in the video he would write an in-debth article on the same subject. That article is now available, entitled “Paul Krugman Versus Reality“. Here are a few quotes:

In his latest weekly New York Times column, Nobel Prize-winning economist Paul Krugman put forward arguments that were so nonsensical that the award committee should ask for its medal back…

According to Krugman, our secret weapon of economic invincibility is the Fed’s ability to print dollars endlessly. If China were to foolishly decide to attack us by selling our debt, the Fed could simply step in and buy the excess with newly printed greenbacks. (In other words, Krugman sees no difference between funding the debt and monetizing it. See my latest video blog on the subject.). For Krugman, China would gain little from such an attack, but would lose the ability to export to its best customer and suffer severe losses in the value of its dollar holdings. Krugman’s worldview is reassuring - but it has absolutely nothing to do with reality…

There is a huge difference between selling your debt to another and “selling” it to yourself. When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of U.S. Treasuries, the Fed would have to expand our money supply by a corresponding amount. Even Krugman acknowledges that this would cause the dollar to lose value; however, he feels that a weaker dollar is good for America and bad for China…

Krugman does not believe that a tanking dollar will translate into higher interest rates or higher consumer prices at home. No matter how many dollars the Fed creates, or how much value those dollars lose relative to other currencies, he is confident that as long as unemployment remains high, rates will stay low and inflation will remain under control. This is absurd…

To construct a policy around Krugman’s ridiculous assumption that we benefit China more than they benefit us is to invite catastrophe on an unimaginable scale.

This is actually exactly how money works on Wall Street these days. I’m not kidding, but Jon Stewart sure is:
The Daily Show With Jon Stewart: In Dodd We Trust

Peter Schiff takes on Nobel Prize winner Paul Krugman’s column in the New York Times in this little clip explaining why Krugman is wrong on China and the impact of a Chinese massive sell-off of US debt on the Dollar. This is a good example on the difference between a Keynesian view (Krugman) and the view held by the Austrian School of Economics (Schiff). For some fun on the difference between these schools of though, watch this rap video.

I’d love to see a debate between these two guys.