-- Posted Wednesday, 18 March 2009 | Digg This Article | | Source: GoldSeek.com
Two major problems: Banking Crises and Big Recession in Progress
The U.S. Government has three major programs going that are all inflationary. Bank Bailouts, Stimulus Package, Bloated Budget Package.
All three programs are mostly inefficient, wasteful, and will require massive amounts of new money and credit injected into the economy. New estimates are now $4-5 trillion.
First four months U.S. Budget deficit was $569 billion.
Unemployment over 8%
All bailouts and taxpayer funded programs take money from people who would otherwise spend it themselves; therefore government programs (usually pet programs) are not needed and mostly inefficient. 8,000 plus earmarks on the budget and stimulus package alone.
New Deal economics was a huge blunder – similar programs today. Roosevelt raised taxes to 90%. AAA (Agriculture Adjustment Administration) paid farmers not to grow crops and by 1935 we were importing corn, wheat and cotton. Digging a hole and filling it up is work but not good economic policy - GDP increases from the wages but no real wealth is created.
So called Deflation is a ruse to allow inflationary policies to bail out the banks
Obama’s New Energy Policy eliminates all incentives for Oil and Gas drilling and exploration in the U.S. Exact opposite as stated in his energy independent speech.
Prices are declining from overpriced, overbought and speculative levels and the current pullback will reach equilibrium soon. Then inflation will reemerge
Result of the Above:
Prices of everything will again start to rise when the money supply starts to circulate.
Wall Street will stabilize. But as inflation moves higher, interest rates will go much higher and this will hurt the stock market.
Gold and Silver investments will become solid investments and an ultimate store of value.
Currency traders will soon turn to gold as an alternative currency. Central banks and paper money losing credibility.
Commodities will resume bull market: 1) Supply constrained by curtailed projects due to banking crises. 2) Demand looming with industrialization of third world continuing. 3) Natural effects of the monetary excesses increasing prices.
Gold in 1980 at $800 was overvalued but based on the U.S. Price Index’s from 1789 should have been worth $265. Money supply in the U.S. has increased 5.6 times since 1980. This implies a minimum gold price of $1484. With $1-2 trillion of more money supply possible this ratio should go much higher. India and Chinese demand much higher than 1980. Bullish.
Mining stocks: growth industry as global progress revives mineral demand.
Precious metal companies will excel in the coming “deflation” to inflation environment.
Copper above $1.70. One of the most important economic indicators saying no Great Depression.
Best Investments: Gold, Swiss Francs, T-Bills, Oil, Basic Materials
-- Posted Wednesday, 18 March 2009 | Digg This Article | Source: GoldSeek.com
Ken Gerbino is head of Kenneth J. Gerbino & Company, an investment management firm now in its 35th year that specializes in mining stocks.
The company manages private equity accounts and the Gerbino Gold Group, LLC, (GGG) a private fund that invests in precious metal mining stocks. Ken is also the advisor to the publically traded Precious Capital Global Metals & Mining Fund traded on the Zurich Stock Exchange. He was also the precious metal mining consultant to $2 billion ICM Capital Management. The GGG has been ranked in certain past years as one of the top performing hedge funds in the United States.
Ken was the Founder and Chairman of the American Economic Council (AEC), a nationwide economic reform group that was credited with the passage of the United States Gold Coin Act of 1984, which established the United States Gold Eagle coin. AEC seminars included participation by Alan Greenspan, Noble Laureate F. A. Hayek and Robert Bleiberg, Editor-in-Chief of Barrons. A former member of the Senatorial Trust in Washington, D.C., Ken remains well informed on national and international economic issues.
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