Canary in the Gold Mine

Like a battering ram in a medieval siege, gold keeps hammering away at the gate. For the third time in less than twelve months, the yellow metal is once again crashing into the $1,000 per ounce level.

As of press time, it looks like gold will close above that level today and will set a new record in the process. Even if the breach is fleeting, who can doubt that it will mount another assault soon? In the meantime, there is no shortage of market analysts who are not buying gold while questioning the motives of those who are.

Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I'm buying a lot.

When individuals choose to accumulate savings in the form of gold rather than interest-bearing paper deposits in government-insured accounts, there is only one reason for doing so: they fear that the interest will not be enough to compensate for their expected loss of purchasing power through inflation. This fear reflects both current inflation and the expectation for future inflation.

While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold.

Some believe that gold investors are primarily motivated by fear. It is often assumed that gold is the one asset class that holds its value when all other asset classes are falling due to market uncertainty.

But this explanation brings us right back to inflation. When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press.

When governments act to prop up sagging markets, or bailout investors or depositors of failed institutions, they create inflation (print money) to pay for it. This, in effect, transfers capital from prudent investors to speculators.

At the same time, it pulls the rug out from under the safest vehicles of traditional investment – bonds and cash. It becomes hard for investors to protect their principal, much less grow their wealth. Some turn to gold, with its historically guaranteed ‘floor' against losses, and others start making ever riskier investments to try to ‘beat' the inflation rate.

Gold's appeal as an asset of choice during times of political uncertainty, particularly during wartime, is again a function of its being a hedge against inflation. Wars are always expensive. They are also often unpopular, which makes paying for them through tax increases politically dangerous.

As a result, they are almost always financed through the ‘secret tax' of inflation. For a nation that loses a war, or suffers revolution or systemic civil conflict, there is always the chance that its currency could become worthless. While this may not be the kind of inflation that we read about in the business section, it is the ultimate form of the monetary malady – whereby a currency loses all of its purchasing power.

Whenever the price of gold rises sharply, I always take it as an early warning sign that inflation expectations are rising. If those expectations are not met, its price will fall. If the market is correct, gold will maintain its gains. And if the inflation continues to intensify, so too will gold's rise.

Most analysts, however, simply look at the dubious CPI to determine the presence of inflation and inflation expectations. They perennially forget that prices are a lagging indicator and only a symptom of inflation, and may in fact not be rising at the moment when inflation kicks into high gear.

The anti-gold camp takes their greatest solace from the bond market, where things have been eerily quiet. They maintain that since bond yields have not risen much, inflation must not be a problem, and so the gold bugs are simply paranoid. The bond market, they tell us, is populated by ‘vigilantes' who sound a bugle call at the first whiff of inflation.

But this argument ignores the fact that central bankers themselves are the biggest bond buyers and are in effect ‘vigilantes-in-chief.' Their outsized participation in the market has led to gross distortions. When the Fed or another central bank buys treasuries, real returns are not considered. Purchases are made for political reasons rather than investment merit, which renders meaningless the signals current bond prices are sending.

The gold-bashers also believe that reduced consumer demand due to unemployment will keep inflation pressures at bay for the foreseeable future.

However, inflation will ultimately act to reduce the supply of goods much faster than unemployment reduces demand for goods, sending prices up despite lower demand. The stagflation of the 1970s is an example of such an outcome.

The bottom line is that gold is continuing its long-term bull run, and those who dismiss the message behind its rise do so at their own financial peril. When it comes to inflation, gold is the canary in the economic coal mine. Just as unseen toxins kill the canary before the miners succumb to the fumes, a spike in gold is a harbinger of reckless monetary devaluation.

Our leading commentators think that since they can't see or smell the gas, all those canaries (gold prices, commodity prices) must be dying of natural causes. Good luck to them when the toxins flood the mine.

Comments

[oldgoldbug:]

I learned a lot listening to Harry Browne including when he backed off of precious metals and recommended a balanced portfolio. I believe you are the one to continue his tradition of making common sense evaluations based on the facts and not on market hype or government disinformation. I applaud you for sticking to your guns based on your interpretation of the facts.

Sep 13 02:29 AM

[sticktoitiv...:]

Inflation comes a knockin', anything else new? That canary pecked the bucket a while ago. You have a smart audience, they know it's coming for em.

Sep 13 03:29 AM

[Mad Hedge F...:]

uuyn Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year, compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy at $12.70 (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month and is up 144% YTD, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Sep 13 07:01 AM

[ebschor:]

I have 25% of my portfolio in gold. I have been accumulating gold for about 5 years now. I have been trying to explain to all of my friends why I have been doing it. This article is all I will show them now.

Thank you again Senator Schiff. I can't wait until we have to call you that!

Sep 13 08:16 AM

[Mongoose:]

Don't be surprised if a final assault by the short sellers is around the corner. Don't let them shake you out. Add to your portfolio as they create the last correction before 1000 is viewed in the rear view mirror.

Sep 13 08:54 AM

[yellowhoard:]

Anyone who owns no gold or silver now should determine how much is appropriate for their portfolio and buy half of that on Monday.

Then wait and see. If the market breaks out to new highs, and closes above the old highs on a Friday, fill the rest of the position.

If the market trades back to the 200 moving average, fill the position.

People with long term objectives are hoping for one last pullback to buy more. I know I am.

Kick Dodd's ass Peter.

Sep 13 09:19 AM

[optionsgirl:]

Let's not forget that the central banks are buyers, too. China, Russia, Qatar, Argentina, even tiny Equador have all increased their positions over the last few years. The proposed IMF gold sale has been reduced to 403 tonnes.

Sep 13 09:35 AM

[basehitz:]

Peter, I understand that you were in communication with John Mauldin recently on the inflation/deflation analysis.
www.frontlinethoughts....

I respect both of you. I’m sure you are aware of his conclusion. For others who have not yet read John’s post, his closing remarks were:
“A mentor of mine once told me that the market would do whatever it could to cause the most pain to the most people. One way to do that would be to allow deflation to develop over the next few quarters, thereby probably really hurting gold and other investments, before inflation and then stagflation become (hopefully) the end of our perilous journey. Which of course would be good for gold. If you can hold on in the meantime.”

As an investment thesis, my interest now is commodities. It appears that Banana Ben has decided to trash the dollar as a “solutions” to our parabolic debt. Asset reflation also provides cover for the fraudulent bank mark-to-myth balance sheets. So owning “stuff” protects wealth. The complication is how traders behave in the interim. Printing infinite money reflates assets with what will be a worthless currency. I hope they are not that reckless, but I’m not confident.

Given our consumption led economy, my “tell” will be if govt stimulus carpet bombing and Tout TV endless cheerleading can persuade recently frugal consumers to stop saving/paying down debt, and resume reckless overspending. Back-to-school shopping results are due soon. If unsuccessful in spite of 6 months of this campaign, then I expect the following:

• Market selloff
• USD and UST move higher as a “safe haven”
• Commodities selloff in reaction to USD.

The goal then would be to load up on commodities and those that produce them, and short UST and USD. All data to date indicates that most of the folks aren’t buying the hype as measured by increased savings and debt reduction. As long as that continues, this is how I play it.

Eventually, I expect you will be right in a big way.

Sep 13 09:36 AM

[tripleblack:]

AM basehitz, I like your read on things, with one addition.

What I see as key to the question of "Whither the American Consumer?" regards credit.

The situation among the cards everyone lugs around on their backs (they just THINK they are in their wallets and pocketbooks) has really deteriorated lately. Banks have been jumping up interest rates, fees, fines and rules, partly to beat to the punch the new regulations landing on them from Washington, and partly as a RESULT of those new regulations.

These moves have truncated the available credit of virtually everyone (whether they realize it or not - many don't find out until their hardly-ever-used cards are declined at a store). This has a strong dampening effect on consuming, of course.

Credit card rates have come unhinged from other interest rates, and this has not gone unnoticed by the consumer as well.

A strong "tell" of efforts to restart the consumer will be if the government quickly moves to "improve" the credit card and banking acts. The over-reaction has already settled in place, now I predict there will be a pulling back.

The FHA loosening lending standards to reprise sub-prime mortgages is just the first step. Look for similar motion in the retail credit markets as well, though there it will be more indirect ("...after all, TARP should be good for SOMEHTING, right?" - note, thought process of the politicians sweating the next election, not mine)


On Sep 13 09:36 AM basehitz wrote:

> Peter, I understand that you were in communication with John Mauldin
> recently on the inflation/deflation analysis.
> www.frontlinethoughts....
>
> I respect both of you. I’m sure you are aware of his conclusion.
> For others who have not yet read John’s post, his closing remarks
> were:
> “A mentor of mine once told me that the market would do whatever
> it could to cause the most pain to the most people. One way to do
> that would be to allow deflation to develop over the next few quarters,
> thereby probably really hurting gold and other investments, before
> inflation and then stagflation become (hopefully) the end of our
> perilous journey. Which of course would be good for gold. If you
> can hold on in the meantime.”
>
> As an investment thesis, my interest now is commodities. It appears
> that Banana Ben has decided to trash the dollar as a “solutions”
> to our parabolic debt. Asset reflation also provides cover for the
> fraudulent bank mark-to-myth balance sheets. So owning “stuff” protects
> wealth. The complication is how traders behave in the interim. Printing
> infinite money reflates assets with what will be a worthless currency.
> I hope they are not that reckless, but I’m not confident.
>
> Given our consumption led economy, my “tell” will be if govt stimulus
> carpet bombing and Tout TV endless cheerleading can persuade recently
> frugal consumers to stop saving/paying down debt, and resume reckless
> overspending. Back-to-school shopping results are due soon. If unsuccessful
> in spite of 6 months of this campaign, then I expect the following:
>
>
> • Market selloff
> • USD and UST move higher as a “safe haven”
> • Commodities selloff in reaction to USD.
>
> The goal then would be to load up on commodities and those that produce
> them, and short UST and USD. All data to date indicates that most
> of the folks aren’t buying the hype as measured by increased savings
> and debt reduction. As long as that continues, this is how I play
> it.
>
> Eventually, I expect you will be right in a big way.

Sep 13 10:06 AM

[Donald Ingram:]

Mongoose - You are correct. See my article this section on the amount of shorts in both silver and gold that have been amassed by the bullion banks. You will be surprised! And yes - don't let them shake you out. Stay long in the physical.


On Sep 13 08:54 AM Mongoose wrote:

> Don't be surprised if a final assault by the short sellers is around
> the corner. Don't let them shake you out. Add to your portfolio as
> they create the last correction before 1000 is viewed in the rear
> view mirror.

Sep 13 11:24 AM

[paxjds:]

Banks are shorting gold while buying a new canary every day, not telling the public that the bird just died. Market manipulation continues. Meanwhile central banks and many governments are increasing their gold holdings. Some governments, ie. China, are encouraging and TV advertising for their citizens to purchase gold and silver. Germany has vending machines for citizens to purchase gold and silver.
You better bet your last bottom dollar buying Gold and Silver,that either a new world currency or regional currencies are in the works to replace existing and reflate world assets, or to just let existing currencies devalue by the continuation of running the printing presses. Watch the New G20, the new World Order. Currency Change will come as soon as september 20, or no later than 2011 to bail out the world governments and central banks.
Protect yourself with Gold and Silver. Guns and Bullets might be a great secondary investment plan. Just dont sit there a stack of dollars that will be worth a stack of dimes in five years.

Sep 13 11:42 AM

[stanbo:]

Im new to this but it seems kind of stupid to me in the world we live in now to hang on to paper money when you can have the real thing ,silver or gold or both.

Sep 13 12:49 PM

[optionsgirl:]

Dear Triple: "Wither" the American consumer is more like it! Shriveling on the vine...

Sep 13 01:05 PM

[oldgoldbug:]

Excellent.
I use my stack of pre 1964 silver dimes to show the kids how a dime is a dollar and change and a dollar and change is a dime. I don't know if they get it or not. The concern about the dollar and indeed the whole situation appears to explode.
Don't know about the "New World Order" - wait a minute - weren't they in the WWF? Actually, there is a lot more of an analogy between fake wrestling and fake economics than we want to admit.


On Sep 13 11:42 AM paxjds wrote:

> Banks are shorting gold while buying a new canary every day, not
> telling the public that the bird just died. Market manipulation continues.
> Meanwhile central banks and many governments are increasing their
> gold holdings. Some governments, ie. China, are encouraging and TV
> advertising for their citizens to purchase gold and silver. Germany
> has vending machines for citizens to purchase gold and silver. <br/>
> You better bet your last bottom dollar buying Gold and Silver,that
> either a new world currency or regional currencies are in the works
> to replace existing and reflate world assets, or to just let existing
> currencies devalue by the continuation of running the printing presses.
> Watch the New G20, the new World Order. Currency Change will come
> as soon as september 20, or no later than 2011 to bail out the world
> governments and central banks.
> Protect yourself with Gold and Silver. Guns and Bullets might be
> a great secondary investment plan. Just dont sit there a stack of
> dollars that will be worth a stack of dimes in five years.

Sep 13 01:51 PM

[woollyB:]

Gold went down with everything else and it's going up with everything else. It's All the Same Market, driven by liquidity flows.

Sep 13 04:35 PM

[Chickenpookie:]

Gold - Hmm, thanks for buying mine Friday. Inflation - Sure, because there's just huge piles of money chasing consumer goods right now. There's nothing like the beauty of a perceived increase in future prices to get the consumer shopping again, just in time for Christmas?

This thesis leaves out too many details Peter, and where was the interest in gold a few weeks ago? I remember hearing a lot about how gold was about to dive.

I think we all need to do some more homework before jumping to conclusions, if it were so simple, gold would already be $5000/oz. I can envision several mechanisms that could be used for paying down interest on the federal deficit without inflating, but haven't heard any consideration of this subject from inflationista's. The FED must have a myriad of ways for reeling in inflation and will do so at the appropriate time.

How many poor schlubs are going to be caught buying gold at prices which are too high for justification? Maybe once gold begins to outperform the S&P I'll think about buying it once again but right now I'm more concerned about an equities market sell off. That would hammer precious metals prices.

Sep 13 05:00 PM

[nmelendez:]

Most countries are buying the gold mines within their borders and buying their own gold while leaving the company on the market. You can buy their shares, you just can't change the management, it's fixed. However it still provides good investment strategy since these companies will survive due to Govt. financing. Private companies are going to be forced to pay higher premiums in the long run.
Example of this is China Gold.

Sep 13 06:42 PM

[JerryS:]

A well-written article. Thanks.

Sep 13 10:46 PM

[JerryS:]

A well-written article. Thanks.

Sep 13 10:49 PM

[Dan Schmeidler:]

The weaker dollar and the near-record high gold prices might be indicative of looming run-away inflation. However, we could very well be at the top/near-end of that cycle (even though Gold could very well shoot up another couple hundred points once it breaks resistance). But I still don't see how inflation can be rampant when banks (the main provider of capital and liquidity) are still facing massive write-downs on loan losses. That sort of asset destruction (on balance sheets) is offset by massive government intervention (a la printing press). But the propped-up banks are now largely government controlled, and if it's not their equity, than it's certainly the executives that are now forced to play largely to the tune of the Feds ( -now more than ever). In other words, they are not lending like they used to. In addition, continued mass-layoffs along with an expectation of prolonged high unemployment should also send the markets some clear signals with respect to wage increases.

So my concern is mainly where all the liquidity (monetary issues) and economic activity is going to come from to drive up inflation to the extent of run-away or hyper-inflation.

Sep 13 11:15 PM

[Hmm?!:]

Dan,

Your statements did cause me to pause and think for a second...however all I can see is a continuation of government moves that increase the money supply and decrease the economic efficiency of America. More money...less production.

Now you have a bunch of bankrupt banks and if there is inflation.......they charge higher interest and all their asset backed debts and bank owned property will float again. How can I see anything else happening.


On Sep 13 11:15 PM Dan Schmeidler wrote:

> The weaker dollar and the near-record high gold prices might be indicative
> of looming run-away inflation. However, we could very well be at
> the top/near-end of that cycle (even though Gold could very well
> shoot up another couple hundred points once it breaks resistance).
> But I still don't see how inflation can be rampant when banks (the
> main provider of capital and liquidity) are still facing massive
> write-downs on loan losses. That sort of asset destruction (on balance
> sheets) is offset by massive government intervention (a la printing
> press). But the propped-up banks are now largely government controlled,
> and if it's not their equity, than it's certainly the executives
> that are now forced to play largely to the tune of the Feds ( -now
> more than ever). In other words, they are not lending like they used
> to. In addition, continued mass-layoffs along with an expectation
> of prolonged high unemployment should also send the markets some
> clear signals with respect to wage increases.
>
> So my concern is mainly where all the liquidity (monetary issues)
> and economic activity is going to come from to drive up inflation
> to the extent of run-away or hyper-inflation.

Sep 14 12:01 AM

[ECHealthIns...:]

I maintain that Mr. Schiff though certainly prescient and correct will be again much like his housing bubble prediction and will be ignored about his gold prediction. The gold price will hit $1500 but only once people lose confidence in the dollar. This has not happened yet because the media has portrayed the recession as being over and Mr. Bernanke as the victor much like Greenspan before this current nightmare. I fear that once Schiff's foretelling comes true no one will be able to afford to buy the paper that his book is written on.
I have just been inspired to blog about the health care cost bubble that is also tearing a hole in our economy at echealthinsurance.com/.... Thanks for the inspiration.

Sep 14 02:06 AM

[Fighting Yoda:]

Inflation or deflation is still a tossup. As regards money printing and stimulus - everyone is doing it. China is actually printing a lot more money than even the US. All the trade surplus that China generates - Chinese Govt has to print money to pay local currency to exporters. If China did not do that its currency would rise a lot - China is not at all ready for it – it has to export at any cost.

$- As regards dollar - there is no substitute - Yen, Euro - those economies are doing as bad as US. Pound and RMB do not have a chance at all.

Bond market- I agree with Peter's point: "central bankers themselves are the biggest bond buyers and are in effect ‘vigilantes-in-chief." We have seen all these institutions worldwide are equally dumb and simply work as a herd. So bond market action is no conformation/indication of anything. Even though it likely is a much better indicator than the equity markets -which is full of completely clueless idiots.

"reduced consumer demand due to unemployment will keep inflation pressures at bay for the foreseeable future" - I do not agree with this. We already can see this prices of all goods have fallen despite unprecedented multi-trillion $ stimulus worldwide. Everything from home prices to autos, to oil, nat gas everything is down. My theory is - Fed can print money but it does not have an effective mechanism to distribute that money. 'Helicopters' can be used to drop money to financial institutions - but if they don't lend - it just stays there. That is what we have been seeing for over an year now - consumer credit is shrinking a lot - the classic liquidity trap. Other way to transmit money is through jobs and rising wages - they are steeply falling. Govt tax rebates and such programs - transmit only a small amount of money - cannot offset the all the wage losses.
I think the world has too much surplus capacity, created to satisfy the gluttonous US demand. As long as surplus capacity exits - it would lead to price wars (beggar-thy-neighbor) - so inflation would be kept at bay.

Gold Yes - you should definitely have it as a part of your portfolio.

Sep 14 02:46 AM

[L.A. Igrok:]

There're two obvious reasons while buying and stashing physical gold makes no sense now:
First, if everything goes OK and the collapse of global economy is avoided, then the price of the overvalued commodity will go down inevitably.
Second, if the collapse does actually take place, then gold will simply be confiscated by the government, exactly like it had happened during GD era.

Sep 14 06:05 AM

[optionsgirl:]

I do not think that will happen again. The tea party 9/12 march on washington was estimated at 1.5 -2 mil people. People are too upset and getting vocal for the government to pull something like that now. I believe it would result in violence in the streets.


On Sep 14 06:05 AM L.A. Igrok wrote:

> There're two obvious reasons while buying and stashing physical gold
> makes no sense now:
> First, if everything goes OK and the collapse of global economy is
> avoided, then the price of the overvalued commodity will go down
> inevitably.
> Second, if the collapse does actually take place, then gold will
> simply be confiscated by the government, exactly like it had happened
> during GD era.

Sep 14 08:36 AM

[Hot Richard:]

"...if the collapse does actually take place, then gold will simply be confiscated by the government"

Which is why you must couple physical gold holdings with the partnership of Smith & Wesson.

Sep 14 09:17 AM

[Zmartmoney:]

It seems to me that, between the equities market being awash in low-cost cash for foolish investments (banks stocks, anyone...?), and the Central Banks around the world manipulating the price of gold for all they're worth, that gold may limp along for quite some time against the headwinds of cheap dollars and manipulative short-selling. I keep seeing the market "price in" inflation, well ahead of it actually being seen in market prices of goods and services. The unwilling consumer seems to be the missing piece here to any "recovery," so that velocity of money is going to remain low, while we all tread water in pools of declining-value cash. That, in itself, will push gold up - but I think the view is going to look like a long, slow climb unless some event convinces investors to move from equities into metals, commodities, and foreign currencies. This slow move will keep people in the U.S. equities markets, well past their ability to become worth the price. I don't see a major move until next spring/summer. Assume the Obama government will try trickery and unConstitutional laws to control your gold if it does break out.

Sep 14 10:17 AM

[L.A. Igrok:]

".... you must couple physical gold holdings with the partnership of Smith & Wesson."

As history shows there is always someone with a bigger gun and more desperate.

Sep 14 10:21 AM

[L.A. Igrok:]

On Sep 14 08:36 AM optionsgirl wrote:
" I do not think that will happen again. I believe it would result in violence in the streets."

It only means that a single well-placed bullet can eventually be exchanges for a whole gold stock of yours.

Sep 14 10:33 AM

[optionsgirl:]

I don't understand your comment. Please, explain.


On Sep 14 10:33 AM L.A. Igrok wrote:

> On Sep 14 08:36 AM optionsgirl wrote:
> " I do not think that will happen again. I believe it would result
> in violence in the streets."
>
> It only means that a single well-placed bullet can eventually be
> exchanges for a whole gold stock of yours.

Sep 14 11:07 AM

[L.A. Igrok:]

On Sep 14 11:07 AM optionsgirl wrote:
I don't understand your comment. Please, explain.

At some point redistribution of wealth may occur through violence.

Sep 14 11:36 AM

[sticktoitiv...:]

"Which is why you must couple physical gold holdings with the partnership of Smith & Wesson."

A gun is no match for a whole swat team. The government has helicopters, bazookas, tanks, ect.

Sep 14 01:29 PM

[John Galt:]

On Sep 14 01:29 PM sticktoitiveness wrote:
> A gun is no match for a whole swat team. The government has helicopters,
> bazookas, tanks, ect.

In 1776 the Brittish had heavy artillary warships, decorated military commandment, Fancy Red Coats and the best trained/well financed military on earth.

The Freedom fighting Americans had rags ( not even standard uniforms), inexperienced officers, little funding and not enough weapons supplies ( They ended up having to steal weapons/supplies from the Brittish and old posts from the French/Indian War).

Thank god the freedom fighters defeated their oppressive government and set up a system designed for prosperity.

Sep 14 02:12 PM

[The Recusant:]

Galt--And they had the French navy blockading Yorktown, French muskets and powder, and French troops. We'd all like to think that we did it all by ourselves, but we didn't. It would likely not have turned out the way it did without our French ally.

Sep 14 03:40 PM

[Hot Richard:]

"Assume the Obama government will try trickery and unConstitutional laws to control your gold if it does break out."

True, but it is the State and not just an "Obama government". The State will stop at nothing to separate you from your money and keep you weak.

Sep 14 03:48 PM

[John Galt:]

On Sep 14 03:40 PM The Recusant wrote:
> Galt--And they had the French navy blockading Yorktown, French muskets
> and powder, and French troops. We'd all like to think that we did
> it all by ourselves, but we didn't. It would likely not have turned
> out the way it did without our French ally.

No doubt we had help from the French ( as they kept the English busy even in other parts of the globe). But please don't forget our brave forefathers weren't JUST fighting the English. They had numerous German Mercenaries ( Hessians) that were known to be some of the must brutal fighters in the war.

My point is that Clinton & Cornwallis had a lot more resources, but through clever maneuvering of George Washington, Nathaniel Greene and others, the good guys won.

Sep 14 04:44 PM

[bottoms-up:]

I can see your point, but who's to say the G-20 is not involved with hammering the price of gold down? Look at the obvious manipulations in the equity markets. Governments have everything to lose by not hanging together on this one, so how do we know that gold prices at $1,000 are not more of the same?

Sep 15 11:58 AM

[ebworthen:]

Actually, gold had an inverse relationship to the markets long term.

It also retains value in deflation and inflation.

Universally valued too.


On Sep 13 04:35 PM woollyB wrote:

> Gold went down with everything else and it's going up with everything
> else. It's All the Same Market, driven by liquidity flows.

Sep 16 02:06 AM

[ebworthen:]

FDR tried to confiscate privately held gold, but the success rate was extremely low, something around 15% (the suckers).

What are they going to do, search my house? I could bury it in the yard and they'd never find it, nor have the resources to do so.

I wouldn't underestimate the willingness of many Americans to revert to the black market economies in a time of need (and corruption in Washington and Wall Street).

On Sep 14 06:05 AM L.A. Igrok wrote:

> There're two obvious reasons while buying and stashing physical gold
> makes no sense now:
> First, if everything goes OK and the collapse of global economy is
> avoided, then the price of the overvalued commodity will go down
> inevitably.
> Second, if the collapse does actually take place, then gold will
> simply be confiscated by the government, exactly like it had happened
> during GD era.

Sep 16 02:13 AM

[Bill S. Friend:]

Glock thank you, the forty five holds nine shots.

If the money supply is increased threefold, then there is 300 per cent more money chasing the same goods and services. How can accountants and investment professionals be so ignorant. I also like Yellowhoards point made a couple months ago, the Chinese will break the shorts.


On Sep 14 09:17 AM Hot Richard wrote:

> "...if the collapse does actually take place, then gold will simply
> be confiscated by the government"
>
> Which is why you must couple physical gold holdings with the partnership
> of Smith &amp; Wesson.

Sep 16 06:45 PM

[Chickenpookie:]

Was I wrong? Peter - Your timing was impeccable, please tell us more!


On Sep 13 05:00 PM Chickenpookie wrote:

> Gold - Hmm, thanks for buying mine Friday. Inflation - Sure, because
> there's just huge piles of money chasing consumer goods right now.
> There's nothing like the beauty of a perceived increase in future
> prices to get the consumer shopping again, just in time for Christmas?
>
>
> This thesis leaves out too many details Peter, and where was the
> interest in gold a few weeks ago? I remember hearing a lot about
> how gold was about to dive.
>
> I think we all need to do some more homework before jumping to conclusions,
> if it were so simple, gold would already be $5000/oz. I can envision
> several mechanisms that could be used for paying down interest on
> the federal deficit without inflating, but haven't heard any consideration
> of this subject from inflationista's. The FED must have a myriad
> of ways for reeling in inflation and will do so at the appropriate
> time.
>
> How many poor schlubs are going to be caught buying gold at prices
> which are too high for justification? Maybe once gold begins to
> outperform the S&amp;P I'll think about buying it once again but
> right now I'm more concerned about an equities market sell off.
> That would hammer precious metals prices.

Sep 26 02:52 PM

[phdinsuntan...:]

phillips curve revival: is the unexpected, not the expected inflation the way to create jobs. Gold is telling us that no jobs will be created in the US with the devaluation. No deception is policy failure. Inflation will come with the devaluation via import costs, as all imported inputs go bananas starting with crude oil, thats why natgas is free. Oz dollar only currency doing the right thing.

Oct 21 07:05 PM

[john the ba...:]

Its not inflation that is comming knocking it is the devaluation of the dollar and the possibility of war as a means of stimulating the econimy

Nov 12 10:27 AM