What do you do after you have zero interest rates and you have flooded the world with money and credit? The answer is you attempt to fight off higher interest rates and see if you can dodge the inflation bubble that follows. The commitment for this current fiasco to save the world’s Illuminist banks has already caused an official debt responsibility for the US of more than $23 trillion of about 40% of world GDP. That is staggering and it is official. We wonder what the real figure is? It is also wise to remember that the Federal Reserve, and other reserve banks worldwide, all international, are responsible for the carnage we are witnessing.

The public is now paying for their gambling and corruption as central banks, who started this scam, transfer the debt to the taxpayers by buying up toxic garbage, guaranteeing losses and making sure none of the key Illuminist banks don’t go under. The Fed, privately owned, won’t let us look at their books, so we can tell what they are paying for these almost worthless assets. We are told it is a state secret.

There have been some salutary affects, but they are only transitory. As we can see the pace of job losses has slowed and will slow over the next year in anticipation of elections. About 80% of the stimulus package hits before the next election. There will be a slight increase in production and some inventory building. The real question is what will the Fed, government, Wall Street and banking due for an encore? They will most likely demand another stimulus package of some $2 trillion; keep zero interest rates and perhaps go to negative rates and continue to increase M3, money and credit, by 14%. That will neutralize the undertow of deflation and cause higher inflation. This game could last for a few more years, but one thing is for sure, many more are discovering what the game is and they are flocking to gold and silver in a flight to quality to preserve their wealth. If you have any doubts our Treasury Secretary, Mr. Geither, has recently told us the same plan of easing is in effect. The manipulation and losses in fixed assets will continue. The underlying deflation will not go away. The remedy more money and credit and low interest rates will prevail. The manipulation of markets will continue; world monetization is going on full bore not only in the US but in the UK, China, Japan and many other countries as well. They are all working together to bring down the world financial system when it pleases them to institute world government.

A good part of money and credit injections have been into world stock markets to give a semblance of normality and to make people think all is well. At the same time we hear of eliminating this orgy of money and credit, but it gets pushed off further and further into the future, as it forms another speculative inflationary bubble. There is no doubt that a groundswell is forming as inflation begins to appear again, an event that really started in May, five-months ago. As you can see jobs are not being created and that this financial largess is again flowing mostly into financial markets. The inflationary bubble is on the way again worldwide.

G-20 members that are flooding the markets with money and credit think they are doing a great thing saving us. These are scam and propaganda artists. All they are guaranteeing is higher gold and silver prices. Governments issue bonds and central banks in part buy them monetizing the debt. All this in the name of bailing out bankers, insurance companies, Wall Street and the federal government. Reckless spending is ruining almost all world economies. Borrowed money is subsidizing deficit spending in a big way and soon it will turn inflation higher.

We have just seen Treasuries, Agencies and GSE MBS expand $2 trillion over the past year and expect a further $2 trillion expansion for the next fiscal year. The private sector and foreign central banks are simply not capable of financing such deficits. That means credit expansion and monetization has to take place and that will be inflationary.

...

GOLD, SILVER, PLATINUM AND PALLADIUM

          The COT is unbelievable, the commercial are net short gold contracts of 270,797 right near its former high. The net increase this week alone was 54,089.  In the options and futures combined the total net is 290,212 contracts short an increase this past week net short addition 63,881.   In silver the net short of futures and options is 60,796. They are screwed.

It has now been six years since central banks embarked on supporting their currencies vs. gold. It was a futile effort because simultaneously they had to defend their currencies against the undertow of deflation. It was a battle they could not win and as a result gold has gained strongly versus all currencies in spite of massive manipulation in the form of gold sales. During that period gold rose from $350 to $1,009. Whatever the central banks did, it did not work.

The current depression and economic collapse has been caused by the decline of fiat currencies versus gold and its removal from the monetary system. Today all currencies, excepting the euro, are not convertible into anything and only survive on good will and monetary ledgermain. Based on these few facts alone it doesn’t take a genius to conclude why we have a worldwide monetary and financial crisis. Smart investors have not been taken in with the full faith and credit of all paper, non-collateralized currencies. This is especially true as gold completes its nine year first phase of a bull market, that will last through another 2 or 3 phases. What else could a prudent investor expect when many major nations are insolvent. As currencies decline against gold the stability of nations declines as well until ultimately they financially collapse. Remember, this all didn’t happen yesterday. It began on 8/15/71 when the dollar abandoned the gold standard. The only reason gold is not selling at $3,000 is due to intervention by central banks, many of whom are almost totally without gold. The suppression scheme slowed the assent of gold, but could not stop it. As the monetary crisis deepens central banks are forced to create more massive amounts of money and credit to keep the financial system from collapsing and as they do this they create inflationary bubbles, which create inflation and translate into ever higher gold prices, as investors flee in a flight to quality to gold – the only real money.

Since June 2000, when we began this quest, gold has outperformed every asset class. Gold has appreciated every year for nine years. The return has been about 8% annually. Up until now, and probably for the next few years, the powerful factor for gold has been and will continue to be inflation, as nations continue their massive expansion of government debt and central banks oblige by creating money and credit in ever massive amounts. The demise of the dollar will play an important part, because it is the world’s reserve currency, and gold is denominated in dollars. The Fed being the biggest inflator of all offers a perfect basis for further increases in the gold price.

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-- Posted Wednesday, 16 September 2009 | Digg This Article