Economic Collapse

Dear readers,

Why is gold ascending in price? Why does it cost you more to go out for lunch today than one year ago? If you understand that gold is money that cannot be printed at will by Central Banks and you look at this chart, then you will be able to answer the questions above.

Source: http://research.stlouisfed.org/fred2/series/BASE

Note also that according to the Fed, we are not in a recession. But then again, according to Ben Bernanke, gold is not money. Now after you watch that clip, read this:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. …This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
- Alan Greenspan

Ben Bernanke is on the other hand doing exactly what Greenspan told the world in 1997:

[…] A government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit.
[…] Thus, central banks are led to provide what essentially amounts to catastrophic financial insurance coverage. […] If the owners or managers of private financial institutions were to anticipate being propped up frequently by government support, it would only encourage reckless and irresponsible practices.
[…] On the other hand, if central banks effectively insulate private institutions from the largest potential losses, however incurred, increased laxity could threaten a major drain on taxpayers or produce inflationary instability as a consequence of excess money creation.

Listen here to an interview Eric King of KingWorldNews.com did with Jim Sinclair in 2009 discussing this quote. Key words: excess catastrophic money creation without limit.

I advice you to watch what the Fed is doing, and listen with critical ears to what they are saying. The Fed is not only managing monetary aggregates, they are managing the perspective on economics (what Jim Sinclair calls “MOPE”). In essence they are saying one thing, doing another and at the same time understanding the third: Gold is money. Has always been. And will continue to be until we come up with a system without money.

We are at a point of critical systemic risk, as James G. Rickards told the GATA audience in London earlier in August. You should still be in wealth protection mode, and not in trading mode, now more so than ever.

Best Regards /Johnny

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 »

Powerful article on sovereign debt and gold. Here’s a quote:

Wherever we look at the world economy today, we see a wall of risk…and potential financial catastrophe. We see a large number of virtually bankrupt major sovereign states (US, UK, Spain, Italy, Greece, Japan and many more) teetering atop a financial system that is bankrupt, but is temporarily kept alive with phony valuations and unlimited money printing. Increasingly, therefore, investors will want to exchange this funny money for gold.

Duck Tales explains the dangers of loose monetary policy and hyperinflation. Very close to whats going on now in the world today.

Great interview with John Embry. He really makes the case for gold. As he puts it the question isn’t how high gold can go but how low fiat paper can fall:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/2/6_John_Embry.html

- “You should be in wealth-protection mode, not in trading mode”
John Williams

Very good audio interview with John Williams of Shadowstats.com released today. Listen carefully:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/2/6_John_Williams.html

As many of you know Peter Schiff is now running for Senator in the State of Connecticut. Schiff is an American economist of the Austrian School, author, commentator and popular video blogger who regularly appears in the role of a bearish pundit on numerous financial news networks. He predicted the Dotcom crash of 2000 and the Housing crisis of 2007/2008 and like the author of this blog he belives that the US Dollar is heading for hyperinflation. He is a licensed stock broker, the president of Euro Pacific Capital with a 100 employees who successfully protect their clients wealth by moving out of the US dollar and into real money such as gold etc.

If you want a crash course in the problems with the US economy, watch this. A good hour well spent with a lot of information and humor. Enjoy.

Disclosure: I have no vested interest in Euro Pacific Capital nor do I receive any payment for writing this.

Agora Financial, LLC & The Daily Reckoning interview with Marc Faber:
http://bitcast-a.v1.iad1.bitgravity.com/agorafinancial/DR/faber/indexAF.html

Rocky Vega of The Daily Reckoning took the effort to transcribe some quotes from a little video clip of Marc Faber, publisher of The Gloom, Boom, and Doom Report:

“There’s this huge debate between the inflationists and the deflationists… I belong more to the camp that looks at inflation and deflation from a different perspective. In the sense that in every system you can have some prices going down up and some prices going up. Say if you have a glut in consumer goods, then consumer goods prices can go up. But if you print money and have a zero interest rate, then home prices theoretically could go up, or stocks, or commodities. In any event your cash purchasing power goes down, that’s a symptom of deflation.”

“The worst investments in an inflationary period, when you print money and have large fiscal deficits are, of course, long term bonds and then cash. The best is to have foreign currency and commodities… also equities can protect you to some extent because they adjust upward as the currency goes down.”

“Regarding the dollar he says, “well, it will go to a value of exactly zero eventually.” When pressed for a timeline he explains, “Looking at Mr. Obama and his administration it should already be there, but I think it will take roughly ten years until people really realize that the fiscal position of the US is a complete disaster.”

My personal favorite from this clip:
On Bernanke: “He’s a money printer. He does that well.”

Paul Tustain, founder & CEO of BullionVault.com just put out this talk in writing. He has been touring Asia talking to investment professionals in Tokyo, Singapore and Hong Kong. It’s a very well written talk and gives you a comprehensive overview of what might be coming our way. Download the 12 page PDF here. He talks about US consumers and what an increase in interest rates would entail for the tax burden:

The cost of a $20 trillion national debt costing 5% per annum in interest rates would
be $1 trillion, or $10,000 per annum in taxes per year for every American family, just to
pay the interest, i.e. before a single government service was delivered. That is the cost of
maintaining a $200,000 per family national debt.
The unavoidable conclusion is that, on-plan, the US cannot react appropriately to a
developing inflation problem. The G20 pronouncement that interest rates would stay
low for the foreseeable future was true. There is no alternative to permanently low
interest rates on these budget figures.

Read the rest of this entry »