Thursday, October 21, 2010

Gold Is The One Sure Bet Amidst The Current Global Currency Crisis

By David Levenstein:

Ten years ago when gold was trading below $300 an ounce the universal manta was, "sell gold." Central banks were selling or leasing their gold in an attempt to get rid of their gold holdings and convert the money into bonds. Gordon Brown the then Chancellor of the Exchequer a role akin to the posts of Minister of Finance or Secretary of the Treasury in other nations managed to sell most of the British gold holdings at the low. At the same time some of the major gold mining corporations completely mistimed the market and hedged their output at the lows. But, this is hardly surprising as most of the major mining giants are run by people who are brilliant engineers and metallurgists, who know how to mine and produce, but who do not necessarily know much about market action. Then, when the price moved to $500 the mantra was the same except it got louder. And, then this happened again when gold hit $700, $900, $1000, $1100, and $1200. Now everyone is waiting for a large correction in gold price.

Luckily for some of us, these calls were ignored, and by investing in gold, some investors have managed to preserve their wealth. Gold has been in a bull market for ten years, and yet some of these "super-stars" still fail to see what is happening. As I have mentioned on many occasions the main driving force behind the gold price has been the declining value of the US dollar the world's reserve currency. It has been on a downward spiral since 2001 when the dollar index was 120. It then traded down to a low of around 70 in April 2008, and after rallying a few times is once again back on the slippery slope on

How High For Gold And Silver? Part II: Hyperinflation

By Jeff Nielson:

In Part I, I presented readers with a very strange scenario. We have had the price of gold and silver surging higher for a decade - as a response to unprecedented currency-destruction by our desperate and reckless central bankers, and endorsed by our political "leaders", who serve those same bankers.

Thus, the surge in bullion prices has had little to do with the (absolute) "value" of gold and silver rising, and everything to do with the crisis of our paper-money being relentlessly driven toward zero. The monetary phenomenon where currencies approach zero is referred to as "hyperinflation".

The Wikipedia "definition" of hyperinflation notes that there is no consensus on a definition of this term, but puts the most emphasis on the particular definition of "at least" 50% inflation per month (and compounding). This equates to well over 1000% per year, or roughly 100 times as much as almost any of us has experienced in our lives. Many precious metals commentators (including myself) have warned that hyperinflation in one or more Western economies (starting with the U.S.) is a highly likely result - if not a near-certainty (and yet few of us endeavour to specifically define it).

Now we get to the "strange" part. As a matter of simple arithmetic, we know that as a currency goes to zero, the price of goods (such as gold and silver) goes to infinity. Yet despite a plethora of hyperinflation warnings, when we look around for estimates/predictions of the future price of gold, we see numbers that go no higher than about $10,000/oz. Even those who never excelled at math know there is a gigantic gulf between the number 10,000 and infinity (starting with millions, billions, and trillions).

There are only a few ways in which we can attempt to resolve/explain this logical paradox. The price-targets could be only "medium-term" rather than long-term price targets, but I personally don't recall seeing use of the phrase "medium-term" in most such analyses. The price-targets could be the "predictions" of these commentators if-and-only-if hyperinflation does not occur. Again, my own recollections are that most other authors are not making this distinction.

This leaves only one other possible explanation for this logical disconnect: precious metals commentators (including myself) are unable to truly understand hyperinflation, and therefore our "predictions" for future prices are a reflection of this lack of comprehension. I will argue that this is not only the obvious answer, but the only answer which fits - given our level of comprehension of such economic (and mathematical) on

Keiser Report - Currency Wars, Gold & Debt

Britain slashes spending, raises retirement age

It seems Britain has finally realised that printing and borrowing money does not create wealth.

(Reuters) - Britain will cut half a million jobs, lift the retirement age and slash welfare as part of an unprecedented cost-cutting drive announced on Wednesday which will test the strength of the economy and the government.

The long-awaited spending review confirmed 80 billion pounds of cuts, sent unions into a fury and turned up the heat on the Liberal Democrats, the junior coalition partners who campaigned against such sharp fiscal tightening before the May election.

The jury remains out on whether the economy -- just recovering from the worst recession since World War Two -- can survive the squeeze which will cut growth by around half a percent each year. Analysts expect the Bank of England to keep monetary policy super-loose for the foreseeable future.

Nor is it clear whether the cuts -- aimed at bringing down a record budget deficit of 11 percent of GDP -- can actually be achieved. More of the burden has been shifted to the notoriously hard-to-cut welfare bill -- an extra 7 billion pounds on top of the 11 billion pounds cuts already announced.

Conservative finance minister George Osborne said that was the best way and would mean that government departments outside protected areas like health and international aid would only see their budgets shrink by, on average, 19 percent, not the 25 percent announced in his budget.

"Tackling this budget deficit is unavoidable. The decisions about how we do it are not. There are choices. And today we make them," the 39-year-old who took office in May told parliament.

He said the state pension age for men and women will rise to 66 by 2020 and that 490,000 public sector jobs were likely to disappear over the next four on

French Protests Intensify

If the French are on the streets due to an increase in the pension age, something that has occurred in Australia several times without significant dispute, imagine what it will be like when the bad debts of the PIGS countries drag the Euro down again and pensions wont buy anything.

From the Guardian:

Last Saturday, at the end of a massive trade union demonstration in Paris, a group of about 200 self-proclaimed anarchists walked towards the Bastille square, and, instead of taking over the prison that is no longer there since the 1789 revolution, they tried to occupy the new opera house.

At 8pm, an unreal scene was visible from outside. On the first floor, through a huge glass window, bystanders could see opera lovers with a glass of champagne in their hands before the evening's performance while RoboCop-like police were taking over the ground floor and arresting the on

Barack Obama 'will not visit Golden Temple over Muslim photo fears'

From UK Telegraph:

Members of Mr Obama's White House team reportedly visited India last month and told Indian officials they were concerned that if the president wore the traditional headscarf during a visit to the Golden Temple, the photographs might be used to portray him as a Muslim, according to the New Delhi-based Indian Express.

Mr Obama, whose father was a non-observant Muslim, has been dogged by rumours regarding his faith since his battle for the Democratic presidential nomination against Hillary Clinton in 2008. He has highlighted the fact that his middle name is Hussein at times to boost his credibility abroad since becoming on