Freetruth

Gold: War of Attrition

Deflation has had the upper hand as the number of bad loans has swamped the fractional reserve/credit money system. The Fed is pumping its heart out and the US Treasury is helping all it can. Increasing the amount of debt is what they do and they have met a wall of resistance from lenders and borrowers. The entire system requires ever more amounts of debt or it crashes. Basically everybody got tapped out and there were no more loans to make. Since the number of (existing) bad loans is finite and the amount of new credit money that can be created approaches infinity, there will come a time when deflationary factors are overwhelmed by the pumping. Mr. Bernanke and Mr. Paulson will get their wish, in spades.

I expect that by the end of 2009 most people will think that they were successful in "unclogging" or "defreezing" the system and away we go. But it will be too late by then to stop the pumping before we get massive inflation. The Son of Bubble Monster will be bigger and badder than the little hiccup that so many just panicked over.

Finally, gold is insurance, not an investment. If you don't have any you will likely be very sorry at some time over the next five years. If it is your only investment then you could also be disappointed in the near future.