The time for buying gold is running short in the aftermath of monetization.
Posted by Adam King on April 06, 2011
Time’s a’wasting to start buying gold.
April 06, 2011 – The time for buying gold is running short in the aftermath of monetization. Equities, when valued relative to gold have been in steep decline for the past ten years, losing nearly 80%. That is all the proof we need that the market is on artificial life support and not running on the fundamentals. History is repeating the last decline in the Dow/gold ratio and hyperinflation could easily send it plummeting to historic levels.
We all know by now that turning the stock market into a giant sponge to sop up a flood of liquidity that has no support can’t be sustained. And it can’t get an economy back on its feet. Sooner or later somebody is going to have to pay the piper. That somebody is us.
Foreign central banks are all downsizing their investments in treasuries and the private sector is dumping them entirely. So the Fed repatriates the debt. But with nothing but Bernanke bucks to pay for them, long-term yields have nowhere to go but up. That equals inflation, and since we’re holding the bag, that means here.
The Fed won’t like that very much and almost certainly will raise fund rates to try to stop it. Suddenly the interest on all of that debt they brought back home will spike, carving out an ever growing percentage of tax revenues. When it reaches 40% — which could happen in just a few years — history dictates that hyperinflation is inevitable.
Obama to the rescue. He appoints a committee to find a way to balance the budget by 2015 — oddly coincidental to what the National Inflation Association (NIA) has tagged the most likely timeframe for hyperinflation to strike. But knowing that the task is virtually impossible, he deftly redefined ‘balanced’ to exclude interest payments on the debt.
No surprise there — even the most optimistic of us have come to expect nothing but gimmicks from our government when what we need are real solutions. The NIA offers this very sound advice: “It is essential that all Americans begin preparing for hyperinflation immediately.”
The gold market is telling us the same thing, and there is no time like the present to start buying gold.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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