STORM2K

Gold closed at a record high yesterday. It's funny to watch the experts scramble for reasoning. The short positions taken by the "bullion banks" hit an all time high last week so gold may have a short term set back or it may not. Usually when the short positions get to these extreme levels gold falls but there so many compelling reasons why the gold bull is running. But one thing is for sure......Gold is screaming high inflation in the future. I hope people are listening. Gold is a NO VOTE of confidence for our money changers.

http://money.cnn.com/2009/09/11/markets ... 2009091115

What goes up, must come down

brunota2003 wrote:What goes up, must come down

The problem are the fiat currencies (currencies backed by nothing). Every time the world has experimented the results end the same - a rush to the safety of gold and silver as these are the only true extinguishers of debt with no counter party liability. We are witness to it now. Gold has been on a terror ever since our money supply and national debt started jumping after 2001. It has now gone parabolic (money supply and national debt). Barrick Gold just threw the towel in (by closing out their hedges). These hedges are going to cost the shareholders 5.6 billion in equity completely wiping out their retained earnings and will probably bankrupt them - they have officially waved the white flag of defeat on their outrageous short positions. China also for the first time ever removed the restrictions against their citizens making it legal for them to buy gold and silver and just recently ran state sponsored tv ads urging their people to buy. These are all warning signs of a major financial change coming. The winds are blowing. A storm is a brewin.

While I wouldn't go all out and say the US dollar will crash in the future (although possible), I do think that US debt will be a major problem for us to deal with in the future. I think that's the reason for the gold price to rally. We will see a major change in our domestic and international economy in the next few years to come.

Speaking of the debt, it is interesting that US gov't hint at US will not be the largest consumer in the future, which would hurt China's export market. It would be interesting to see how will China deal with the major change and how will US manage the huge amount of debt. I think US will eventually have to cut back government spending and raising tax in the future and that's why I am leaning toward a very slow recovery and will not reach 2005/06 level in the near future unless another huge bubble is created.

zaqxsw75050 wrote:While I wouldn't go all out and say the US dollar will crash in the future (although possible), I do think that US debt will be a major problem for us to deal with in the future. I think that's the reason for the gold price to rally. We will see a major change in our domestic and international economy in the next few years to come.

Speaking of the debt, it is interesting that US gov't hint at US will not be the largest consumer in the future, which would hurt China's export market. It would be interesting to see how will China deal with the major change and how will US manage the huge amount of debt. I think US will eventually have to cut back government spending and raising tax in the future and that's why I am leaning toward a very slow recovery and will not reach 2005/06 level in the near future unless another huge bubble is created.

You make a good point about seeing a major change in the domestic and international economy. The problem here is the fed is completely boxed in. They say they have an exit plan but it is just hot air to pacify the markets. Wall Street is drunk on taxpayer liquidity and stimulus. They are totally in the clouds on this. The interest on our debt is now our 4th largest budget item. It now exceeds 300 billion. How on Earth are you going to raise interest rates to calm inflation when the interest is already your 4th largest budget item? The dollar continues to sink under it's own weight. A weak currency symbolizes a weak country. Check out the real time balance sheet of the United States. This is a disaster!

http://www.usdebtclock.org/

If you scroll to the bottom you'll see unfunded liabilities from Social Security, Medicare, and Prescription Drugs @ 59 trillion. The entire World GDP is about 50 trillion!

Invest in canned food instead!

somethingfunny wrote:Invest in canned food instead!

Actually that is very good advice. The problem with inflation is once people see it as a problem it creates a self fulfilling prophecy. People rush to spend their money in fear of rising prices. This strains inventory levels and causes further price increases which leads to shortages. Ask anyone in a hurricane zone what happens when everyone tops off on the way home from work.

The below is from a University of Texas professor. It's funny but the "experts" were telling the Argentinians the same lies right before they collapsed from an enormous debt struggle (search youtube "Argentina Collapse" and you'll find a great 12 part documentary on how they collapsed and how it totally destroyed their middle class - the Government and super rich robbed from the poor and middle class, left them destitute and starving on the streets - it is the blueprint for which our government is acting - our poverty rate is the highest ever and Goldman Sachs pay per employee is the highest ever). How on Earth can you spend and finance yourself into prosperity? Our Economy is based on 70% consumption from a consumer thats broke and maxed out. We need a nation of producers and savers, not of consumers and spenders. Gerald Celente a famous trends forecaster is telling Americans to brace for the worst or Greatest Depression ever. He's calling for an imminent collapse to begin if not next quarter (October-December) then after the Christmas holiday season since he's calling for the worst retail sales ever. Gerald Celente is incredibly accurate - google him and you'll see his track record of predictions.

Here's part 4 of Gerald's interview calling for the collapse. When he speaks I listen.
http://www.youtube.com/watch?v=LK_2fT60Z1Y


http://finance.yahoo.com/tech-ticker/ar ... he-Problem
Galbraith: Government Spending Is the Solution, Not the Problem

Posted Sep 14, 2009 12:06pm EDT by Aaron Task in Newsmakers, Recession, Banking
"If the government is no longer providing the impetus for economic stabilization, where is it going to come from?"
That's the question University of Texas professor James Galbraith asks of those advocating for the government to reduce spending and start eliminating programs supporting various parts of the economy.

"I'm in favor of thinking about exit strategies [but] I'm not in favor of implementing them," Galbraith says. "It's way, way too early. Government spending - that is absolutely the reason why this has not turned into the [second] great depression."

As with his views on Wall Street reform, Galbraith believes we need to do more to revive the economy than just revert to the status quo. "What's the strategic direction of economic growth going forward?," he asks.

Answering his own question, Galbraith says the U.S. "could use a decade of public capital investment to rebuilt common infrastructure." Furthermore, we need to "mobilize and direct resources" to tackle the twin challenges of energy independence and global climate change, he says.

"Unless we come to grips on the strategic question, we're not going to be making adequate progress toward sustained economic recovery," the economist says.

Inherent is this discussion is Galbraith's view that concerns about deficits are misplaced, as we'll discuss in a forthcoming segment.

Argentina is not the US. I'd be more concerned if we hadn't already struggled with and surmounted even larger debt and deficit loads (in relation to GDP) multiple times in our nation's history. The debt spiral needs to be stopped, but it's in no way critical at this point. Several other developed nations actually carry significantly larger debt loads than we do. I'd suggest that Japan-style stagnation is a much more realistic problem for us.

gtalum wrote:Argentina is not the US. I'd be more concerned if we hadn't already struggled with and surmounted even larger debt and deficit loads (in relation to GDP) multiple times in our nation's history. The debt spiral needs to be stopped, but it's in no way critical at this point. Several other developed nations actually carry significantly larger debt loads than we do. I'd suggest that Japan-style stagnation is a much more realistic problem for us.

We did have a really high debt/gdp after WWII but back then we were a manufacturing superpower. The world bought things from us that they needed so we were able to dig out. Now we have shipped our manufacturing base overseas. Our economy is driven by consumption. Also since we closed the gold window in 1971 our spending has gone completely haywire (as all fiat run systems do) and while spending like no tomorrow we lost our real productive economy. Not only is our debt approaching 12 trillion but if you add unfunded liabilities our debt is over 70 trillion which exceeds the entire World's GDP. How's that for spending? This is why a collapse is likely. Greenspan avoided a collapse after the dotcom implosion by artificially lowering interest rates and pumping massive liquidity into the system. The result was the 2008 debacle. Now we have driven rates even lower - Sweden actually has negative rates! What will be the result?

Edit to add: When Greenspan lowered rates to 1% and put the money supply on steroids we had commodities go bonkers (oil running to 147 and gold running to $1000). Check out whats happened since 2008 -----> http://www.youtube.com/watch?v=ckFfzoplC-I

Gold continues to soar despite a record short position of 35 million ounces of gold held by the "bullion banks". Everyone must read the "disturbing trends". The author said the trends (financial trends from 1970 to present day) have a Weimar-like* feel. They are simply eye popping.

http://www.usagold.com/amk/disturbingtr ... 9exec.html

Bail, rescue, print formula
no cure for what ails America

by Michael J. Kosares

"[E]normous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself." -- Warren Buffett

Some might believe that we have reached a culmination of sorts for the financial crisis that began in 2008 and that from here things are going to get better. This study draws the opposite conclusion. The bail, rescue and print formula being employed by the federal government and central bank today is simply a continuation of policies that brought about the crisis in the first place. Only now, as you are about to read, they are being conducted on a far grander scale. The repercussions, I might add, are likely to arrive on a far grander scale as well.

From time to time I update this Disturbing Trends table which first appeared in my book, The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold (1997). The table's purpose is to isolate and monitor key economic data that have had an impact on gold demand in the past, and likely to affect it (and investor psychology) in the future. I use 1970 as a start date because that was the year just before the United States officially detached the dollar from gold and launched the new era of fiat currencies -- the era in which we still find ourselves today. From 1971 on, the monetary system behaved differently than it had under the gold standard. Simultaneously, individual investors began to include gold in their portfolio planning as a defense against the profligate policies that they feared would follow. As such, 1971 serves as something of a demarcation point for students of the contemporary gold market.

The numbers in the table below speak for themselves and do not require a great deal of embellishment. They describe a monetary and financial system in crisis. I last researched and prepared this table in 2007. Much has changed over the past two years, and I could not help but note that the numbers had begun to take on a distinctly Weimar-like* feel.

- Foreign-held debt up 26,347%.
- One-year addition to the national debt up 12,681%.
- Adjusted monetary base up 2701%.
- A $12 trillion national debt.
- $592 trillion in derivatives positions.
- A nearly $700 billion trade deficit.
- And, last but not least, a currency that has depreciated by 82%.

At the end of each one of those examples I could have added ". . .and counting." This is not the kind of report card that generates a great deal of faith, or even sympathy, but rather some nagging questions about how it all happened.

Disturbing Trends is simultaneously one of the least and most popular pieces I have written. Whenever it is updated, I get numerous requests for reprint. I also get complaints about its bleak view of the future. As the saying goes though, the turtle never got anywhere by keeping his head in his shell. Likewise, today's saver/investor stands a greater chance of staying out of harm's way by understanding the problem rather than ignoring it. So bleak though this study may be, it also serves a positive purpose as an unambiguous call to action.

Please keep in mind that the first wave of investors who reacted to the message in Disturbing Trends paid between $250 and $300 per ounce for their gold. These early buyers have emerged from the latest round in the on-going financial crisis with their wealth relatively intact (assuming they achieved the recommended 10% to 30% diversification). Also, be aware that none of the conditions that induced those initial purchases has changed, except that they have decidedly worsened.

The article quoted above is written by someone with interest in selling gold, so the analysis should be taken with a grain of salt.

My prediction: massive gold "bubble" burst in the next year. Inflation is forecast to remain flat through 2010. Gold is skyrocketing irrationally, just like real estate did and then oil. It'll soon be time to get out if you have it. Historically gold has has been a horrible investment, and IMHO this time is no different. It's at a 2000-year high, which just shouts "SELL" to me.

People often say, and I paraphrase, "the massive recent government creation of money will drive inflation". This would normally be true, but you have to remember that in this particular case, the government-created money represents only a fraction of the money that has evaporated in the real-estate collapse and the stock market collapse last fall/winter. The overall national and global money supply is actually significantly smaller than it was this time last year. The real danger going forward if the economy doesn't recover quickly enough is deflation, not inflation, in which case holding significant quantitites of any commodities will be very very bad.

gtalum wrote:The article quoted above is written by someone with interest in selling gold, so the analysis should be taken with a grain of salt.

My prediction: massive gold "bubble" burst in the next year. Inflation is forecast to remain flat through 2010. Gold is skyrocketing irrationally, just like real estate did and then oil. It'll soon be time to get out if you have it. Historically gold has has been a horrible investment, and IMHO this time is no different. It's at a 2000-year high, which just shouts "SELL" to me.

People often say, and I paraphrase, "the massive recent government creation of money will drive inflation". This would normally be true, but you have to remember that in this particular case, the government-created money represents only a fraction of the money that has evaporated in the real-estate collapse and the stock market collapse last fall/winter. The overall national and global money supply is actually significantly smaller than it was this time last year. The real danger going forward if the economy doesn't recover quickly enough is deflation, not inflation, in which case holding significant quantitites of any commodities will be very very bad.

Dismissing the data he provides is not wise though. The growth rates of government are mind boggling and totally unsustainable. Also keep in mind gold is not rising - our dollars needed to buy are declining in purchasing power. The solution to print money has never worked in history. If it were that easy then we'd all be rich. And you are right about wealth disappearing. It is leaving the poor and middle class to the rich and powerful. Biggest transfer of wealth in the history of the United States is underway. Gold will be volatile in the short run and will be subject to sharp sell offs. But the medium and longer term picture is very clear. Gold is going much much higher as it has since 2001. Gold is a real currency and nations are flocking to it.

Gold has failed as a long term investment throughout history. Now is no different. Only speculators make money on gold, and even they lose most of the time.

Deflation is the real threat, and when it hits gold will collapse faster than oil did. I hope you can get out quickly enough.

gtalum wrote:Gold has failed as a long term investment throughout history. Now is no different. Only speculators make money on gold, and even they lose most of the time.

Deflation is the real threat, and when it hits gold will collapse faster than oil did. I hope you can get out quickly enough.

Thanks. I'm not in it to speculate. I refuse to hold dollars as savings because of our monetary policy. Gold has been a fantastic investment since 2001 (that is when our monetary policy started to go from crazy to totally insane). You can't keep giving dollars backed by nothing for actual things of value over the long run. Sooner or later the confidence game ends. We're seeing it now. If you look at every nation that has pursued the monetary policy of the United States it has never ended well for the vast majority. The rich and powerful are well positioned for this. The middle class and poor are not. I wish it was as easy as printing trillions. Remember the easy way out always gets harder in the long run. The hard way out always gets easier in the long run. The kick the can down the road has led us to a cliff.

Also gold and silver has always been the world's currency. The "smart" ones of society had the brilliant idea to stop using it which brought us where we stand today.

This guy gets it:

http://finance.yahoo.com/tech-ticker/ar ... ng-to-Get-"Much-Much-Worse"-Pento-Says;_ylt=Ak7kIIJKSxEAqolakKaNWTK7YWsA;_ylu=X3oDMTE2MXJqbzhlBHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDZ29mb3Jnb2xkaW5m?tickers=GLD,EGO,GEX,TIP,TLT,TBT,UDN&sec=topStories&pos=8&asset=&ccode=

Go for Gold: Inflation Is Here and Going to Get "Much, Much Worse," Pento Says

Posted Sep 16, 2009 09:30am EDT by Aaron Task in Investing, Commodities
Bernanke says recession 'very likely over' - AP
Fed Chief Says Recession Is ‘Very Likely Over' - NYT.com
Bernanke Sees Recession's End - WSJ.com

As is so often the case, Tuesday afternoon's headlines missed the nuance of the story. Ben Bernanke's full statement told a much less ebullient tale: "From a technical perspective, the recession is very likely over at this point," he said. "It's still going to feel like a very weak economy for some time because many people will still find that their job security and their employment status is not what they wish it was."

Michael Pento, chief economist at Delta Global Advisors, has a more fundamental critique of the coverage: "Why would anybody listen to this guy in the first place?," Pento wonders. "[Bernanke] told us the recession wasn't even going to occur. He was very slow to reduce interest rates and now very very slow to raise them. So I wouldn't put any credence in anything he does, at all."

Pento's primary concern is that the Fed's easy money policies are going to lead to further weakness in the dollar, which is down 14% since March vs. a basket of other currencies. Pento believes we're facing a major inflation threat - and much sooner than most people expect.

On Tuesday, the government said PPI rose a much stronger-than-expected 1.7% in August. Come December, the price of oil will be up 100% from a year ago, Pento notes; given energy's major weighting, that will have huge ramifications for PPI and CPI data going forward. (Wednesday morning brought a higher-than-expected report on CPI. Both CPI and PPI remain negative on a year-over-year basis but the declines are narrowing and both are trending higher: for example, CPI is up 4.9% on a 3-month annualized basis, according to Miller Tabak.)

"Everybody knows inflation is here and is going to grow much, much worse," Pento says.

As a result, Pento remains bullish on gold and recommends clients invest in bullion, gold ETFs and miners like Eldorado Gold.

Funny gold quotes from the media after gold bull started running:

1. Gold $271: "Gold will continue to decline as it has for 20 years to $200 or lower."

2. Gold $275: "Gold is certain to continue its decline to $200 or lower due to deflation following the collapse of the stock market bubble."

3. Gold $310: "Despite a modest recent rise due to increased gold demand driven by investors’ fear associated with the 9/11 attacks, gold will soon resume its decline to $200 or lower once the fear subsides."

4. Gold $363: "The rise in the gold price since 2001 is due to a combination of temporary factors, such as investors’ fears about oil and inflation related to the War in Iraq and a weak dollar. Soon the positive outcome of the war will be clear, the dollar will strengthen, and gold demand will drop off, pushing prices back down toward $200."

5. Gold $410: "Economic recovery is pushing up gold demand and prices. The Treasury department has restated its strong dollar policy. Gold will soon lose its luster and fall back to $300."

6. Gold $445: "Gold prices increased only slightly this year over last year, indicating a topping in the gold price. Next year gold prices will fall to $300 or lower."

7. Gold $604: "The spike in the price of gold this year is due to short term dollar weakness. Look for the dollar to rally and gold to decline back to more normal levels below $400 starting next year."

8. Gold $695: "Gold traded mostly sideways over the last year, indicating a topping in the gold price. Look for gold to decline to well under $500 next year."

9. Gold $872: Early in the year, "Gold is participating in a bubble in commodities. When the commodity bubble pops, gold will fall more than 50% along with oil and other commodities." Later in the year: "Gold has crashed to $716 along with stocks and commodities and will continue to decline to $500 next year."

10. Gold $924: "The gold price reflects widespread concern about the financial system in the wake of the global financial crisis. As the system steadies, the gold price will drift down to under $700."

http://www.itulip.com/forums/showthread ... post121715

You're right, with those quotes it's starting to look more and more like the real-estate bubble.

gtalum wrote:You're right, with those quotes it's starting to look more and more like the real-estate bubble.

Nah it just shows what the so called experts know about finance - their lows keep getting higher each year. The Bullion Banks are losing their ability to manipulate gold prices. China just unleashed their massive population to buy. They made it legal for their citizens to own silver and gold - they know what is about to occur and they aren't too fond of civil unrest. The next great bubble is in treasuries. The dollar index continues to get rocked.

gtalum - I understand your argument and would agree with your logic BUT - and it is a HUGE but - the dollar fundamentals are the problem. If we had a stable economy that was built on producers and savers and if we ran surpluses then support would be there. But the opposite is true. Since 1971 we have been stripping away the engine of our economy. Since 1971 the decline of the dollar is breath taking. Our national debt is going to crush the United States because we consume and do not produce.

1971 is a key date because that was the date we completely lost the discipline of the gold standard. Without the gold standard we could print and spend as much as we wanted. Fast forward the clock to today and you can see the mess this has caused. Gold always was and always will be the true currency. Zimbabwe's merchants will only transact in gold. They (Zimbabwe's Government) took huge loans from the IMF and decided to pay them back through printing their currency. People left holding their currency were ruined. Entire families pan for gold just to buy bread and flour. The Government ruined this country that used to prosper.

[youtube]http://www.youtube.com/watch?v=s3LdNxV0yPM[/youtube]