Long Silver John

Weekly Recap: Is the U.S. Going Bankrupt?

If the Treasury is shifting to short-dated maturities to carry a growing debt load, and if the Fed is therefore even more reluctant to raise short-term interest rates, then if velocity starts taking off, what's left to stop the runaway train of inflation? How can reverse repos be undertaken in sufficient quantity to offset Treasury needs to borrow for both principal and interest payments? What tools would be left?

Falling Dollar: Finally Front-Page News

There has been a tremendous bi-partisan break-down of leadership on fundamental issues for the past 25 years. Neither party, nor Congress, nor the Administration, has done their job of safeguarding the American public. It is an across-the-board failure of leadership and it will be registered as one of history's most tragic, and needless, break-downs of a promising society.

Will the Dollar Decline Forever?

In 1923, as I recall reading, there was a fairly steep drop in the value of the Mark on world currency exchanges (down 2/3rds in four months). Then it paused with government intervention. Then, as the dam broke and faith evaporated, the value of the Mark simply vanished. The ones who survived were those who bailed out and converted into gold/silver. If the same pattern is happening here, look for a 3-4 month steep drop in the dollar (spike in gold/silver), followed by government intervention, then a swift demise of the dollar as the Chinese and others bail out of Treasuries. Just think of that. The Chinese are able to destroy our country by doing almost nothing. We can then expect to see political instability here, as the Internet makes organizing against government that much easier, accompanied by military adventurism by rogue states abroad (just wait and see as Iran gets the bomb). All this because our elected leaders believed their primary objective was to get re-elected.

Dollar Under Too Much Pressure. Decline Will Continue

It's pathetic that our "leaders" have put this great country into a financial position where all our enemies have to do to sink our currency is "nothing," just not show up for the bond auctions.

The Dollar's Long Term Trend Appears to Be Set in Stone

Isn't the focus on currency indices as a predictor of the future like looking at a car's speedometer to try to determine future speed? It seems like one needs to focus on what's under the hood (the engine and how many pulleys, etc. are putting a load on the motor) and the terrain, as well as how other cars are doing in the race?

Obama's Sure-Fire Formula for Accelerating Inflation

I think we should be allowed to print our own money on home computers. When the paper runs out, we just use thin slices of baloney. That removes any pretense as to what's going on. I would like to know the Fed's exit strategy for removing excess reserves. Don't they have to sell something? Like toxic assets on their balance sheet? Or can they just tell the banks to give the money back?

G20 and IMF Gold: A Late April Fools'

You can almost hear them saying, in their meeting: "Hey, let's announce another huge stimulus." "But what about inflation concerns?" "Okay, let's also have the IMF dump some gold, to drive down its price and dampen any stampede to gold."

U.S. Dollar Strength and Implications for Gold

Won't there be a stampede toward gold in non-US countries as their currencies fail? If US bonds are paying almost nothing in interest, the choice seems obvious...

Returning to a Gold Standard Is a Bad Idea

The government will never cooperate in the establishment of a gold standard because their main objective is to get re-elected, paying off special interests with taxpayer money printed by the Fed.

The private sector will set up its own parallel gold system, such as that which now exists at GoldMoney.com. It's basically an electronic currency pegged to physical gold bullion in vaults over in London (an electronic "Gold Certificate" concept, using the convenience of a PayPal-like system to transfer ownership of real gold grams among account holders worldwide.

In effect, those who are concerned about the value of their money will migrate over to such parallel systems, making the "official" government-issued money less relevant, especially after the big inflation-bang occurs.

Bye Bye Greenback

Agree 100% with your assessment. I converted large portion of my paper portfolio to gold bullion, gold coins and american silver eagles, starting about 8 weeks ago. Very tough getting gold coins now.... I had to wait over a month to get some Maple Leafs.

Fiat Money and a Profligate Congress: A Bad Combination

That law was called Graham-Rudman, and the exceptions ate up the rule. Same thing for gold standard. When deficit spending got out of line with gold supply, the government devalued (1934) or went off the gold standard (1971).

What's lacking is the willpower of our leadership, which is focused on getting themselves re-elected, taking PAC-money from the special interests.

Volcker is the only guy (short of Graham and Rudman and maybe Bob Dole) who had the guts to take a stand. Volcker must be getting extremely nervous about this whole thing.

Obama will have his chance, but the preliminary indications are that he's going to spend like there's no tomorrow. Doesn't look good for the dollar (which is why I'm long on silver (and gold)).

Dollar vs. Gold - Can We Trust This Change?

I just bought some 12-gauge buckshot for my new shotgun. The ammo was $1.00 per round. At that rate, I need to be careful who I shoot. The cost of the shovel I just bought (to start digging my bunker) also went up. Good idea about the breathing tube... I hadn't thought of that.

Fed to Issue Debt AND Print Money?

Correction: Mr. Clarida was former ASSISTANT secretary.

Fed to Issue Debt AND Print Money?

Since the "Federal Reserve Notes" in my wallet are, in reality, nothing more than "Federal Reserve Promissory Notes," maybe the Fed's issuance of debt simply reflects reality: that all this paper is just a paper promise.

Issuing more money, without corresponding increase in productivity, can't get traction and will generate inflation as velocity kicks in against a larger monetary base later in 2009. Governments have tried this many times in history through various mechanisms, but it never works.

The inflation in Germany in 1923 was foreseen by the monied class, which bought up gold and silver. The middle class was wiped out, as velocity rocketed with people running to the store to buy stuff before the prices went up.

I thought it was telling that, as reported by the WSJ on 11/14/08 that: "Says Richard Clarida, global adviser to Pimco and former assistant treasury secretary: 'The Fed understands that on a three to five year basis, a downward adjustment of the dollar at an orderly pace will be part of the global adjustment process.'"

The Fed "understands" that devaluation of the dollar is the end game? As the former Treasury Secretary, I assume Mr. Clarida is basing this statement on discussions he had with contacts at the Fed. How else could he make such a comment? That revelation should have been a huge story printed on page one.

Where this is heading is toward a devaluation of the dollar or hyperinflation (same thing). Once the horses are spurred to a gallop, I'd like to see how the Fed is going to rein them in. So the downfall could well be disorderly and a lot more precipitous than 3-to-5 years. Maybe 3-to-5 months...

Disclosure: Long John Silver is Long on Silver (and Gold)

The U.S. Dollar Is Following Argentina's Path

When the Fed starts buying long term Treasury Bonds, how does this "Round Robin" perpetual motion machine get any real traction? (i.e., does it come out somewhere as inflation?). I'm having trouble following it through to the ultimate endgame... Any thoughts?