Soaring Gold and a Sinking Dollar Signal Trouble Ahead (This is a completely man-made catastrophe)

American Thinker ^ | 10/18/2010 | Claude Sandroff

[WebFocus]

As measured by the price of the forward December contract on COMEX, the value of gold is up nearly 30% -- over $300 per troy ounce -- since last October, and it recently closed at a record high (in nominal terms) of $1,374 per ounce.

Hardly unique among commodities, gold has had lots of company in the trading pits. Silver is up by 32%, and even the price of coffee is on the rise -- not only on the exchanges, but at Starbucks too.

Gold's unflinching rise has caught many traditional equity investors off-guard, and some are even angry about it. Warren Buffet's investment partner Charlie Munger, who lists to the right, counterbalancing Buffet's leftist leanings, has remarked recently that even though gold seems to be working as an investment theme, those who invest in it are "jerks."

But several financial seers -- Marc Faber, Jim Rogers, and Peter Schiff among them -- saw gold's rise as inevitable and linked it directly to the massive ongoing issuance of cheap money by the Federal Reserve and other central banks. When easy money from Alan Greenspan's Fed caused the dot-com bubble to first inflate and then burst, these observers realized that the Fed would launch another easing campaign to birth another investment bubble: housing. Once the housing bubble burst, even more violently than the dot-coms, there was little left to inflate. The Fed decided to think outside the box, and through quantitative easing, it became the buyer of last resort of treasury bonds and toxic mortgage debt. In so doing, The Federal Reserve has managed to achieve the perverse distinction of throwing fuel on a fire that it itself ignited.

The markets are clearly horrified by the Fed's direction, and traders are rushing out of the dollar and into any asset not under the control of the Fed. Since Bernanke tipped his inflating hand in Jackson Hole in August, the dollar has fallen over 8% against the broad basket of currencies constituting the dollar index. Both the Canadian and Australian dollars are effectively at parity with the U.S. dollar for the first time in history, the Swiss franc is trading at an all-time high against the dollar, the Singapore dollar has reached a level versus the greenback not seen since 1982, and the Japanese yen strengthens almost every day and sits at a fifteen-year high. Even the European central bankers have halted the printing presses since their recent experience with financial Greek tragedy, and as a result, the Euro buys 1.4 dollars, the highest levels of the year.

There is a sense that not even the Fed believes that its policy of purposeful inflation will stimulate either investment or growth. After all, what good did their previous version of quantitative easing accomplish?  Despite historically low interest rates, foreclosures in September rose above 100,000 for the first time, and monthly initial jobless claims rose to 465,000.

So cash is rushing into gold as gold fulfills its historic role as inflation hedge and alternate currency in a world where signs are pointing to the dollar relinquishing its hundred-year reign as the global reserve currency. Interestingly, except for a few cranks, very few market actors believe that gold and its precious relatives are anywhere close to forming their own new asset bubble.

Gold cannot be created by central banking fiat. It remains scarce and difficult and expensive to find and mine. Indeed, by most historic markers, gold and silver are still wildly undervalued. Discounting for inflation, gold would have to exceed $2,000 per ounce to equal its previous peak value reached in 1980. Goldman Sachs has recently revised its upper price target for the metal to $1,650 for 2011. Average historic ratios of the Dow Industrial Average and the price of gold would argue for $1,800. And other models can justify still higher numbers.

We are on the precipice of a currency crisis, a completely man-made catastrophe. The men who orchestrated it first created a central bank in 1913 that eventually took us off the gold standard and devalued the purchasing power of our currency by 90%. Later, others in the 1930s and 1960s erected a viral, insatiable welfare state and attempted to feed it and keep it at bay with high taxes and waves of financial, stock, and real estate bubbles. Then we elected Obama, who decided to go down in history as the great destroyer by unleashing several trillion-dollar bubbles at once. We know the names of all of his co-conspirators and hope to punish them severely in a few weeks.

For those who had the foresight to accumulate gold (or silver or platinum), there might be some comfort in knowing that you managed to stave off complete financial disaster by funding your own domestic central bank. The sobering truth, however, is that history provides very few examples where dramatically rising gold prices do not point to unnerving instability or disaster.

Claude can be reached at csandroff@gmail.com.

[Lancey Howard]

From yesterday:

Gold And Silver Are Getting Crushed

[Alberta's Child]

I understand the rationale behind these "currency crisis" statements, but there's one point that isn't clear to me:

When easy money from Alan Greenspan's Fed caused the dot-com bubble to first inflate and then burst . . .

If "easy money" is the underlying cause of the currency crisis, then why didn't we see the same decline of the U.S. dollar and the same run-up in the price of gold and other commodities during the "easy money" period of the late 1990s described in this item from the article?

[AdamBomb]

"The markets are clearly horrified by the Fed's direction, and traders are rushing out of the dollar and into any asset not under the control of the Fed."

Translation - investors are putting their money into gold and foreign companies that cannot be choked by Obama's heavy-handed regulations and taxes. Think about how the EPA is single-handedly destroying any chance the U.S. has of competing with companies in foreign countries. I cannot afford to invest in American companies. Add healthcare, fed printing money, enormous debt and you have a complete collapse of the U.S. economy and its ability to compete.

[MichaelCorleone]

Truth be told, Charlie Munger is far smarter and wealthier than I am.

But methinks it’s best to heed the warnings of people like Schiff, Rodgers, and Faber.

[EyeGuy]

“... Charlie Munger, who lists to the right, counterbalancing Buffet’s leftist leanings....”

####

Munger would have to bear staunchly and heavily to the right to counterbalance Buffet’s elitist Communism.

“Leanings”, my asz.

[Ronald_Magnus]

My advice, (which is free and worth every penny), would be for those with a lot of gold to sell NOW, before the bottom drops out. Then take that money and buy up as much bargain basement quality real estate as you can. Anybody agree?

[WebFocus]

RE: Then take that money and buy up as much bargain basement quality real estate as you can. Anybody agree?

---

There are those who are arguing that the Real Estate market is not going to bottom FOR YEARS !

At the rate the government is moving (e.g., printing money, going into debt), we are repeating the same mistakes that Japan made in the early 90’s resulting in their LOST DECADE.

At the rate we’re going, I’m not sure if we can assume that Real Estate will continue to perform the way it did the past decade prior to the subprime meltdown.

Look at this FR thread for instance :

http://www.freerepublic.com/focus/news/2609369/posts?page=27#27

TITLE : 17 Years Later, A Japanese Homeowner Sells His Home For A Third Of What He Paid (Coming to America?)

[RaceBannon]

people need to stop quoting Peter Schiff, he is wrong so much, it aint funny!

http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4ADRA_enUS399US399&q=peter+schiff+predictions#hl=en&expIds=17259,17315,23628,23670,23945,24815,25646,25834,26328,26637,26761,26849,27059,27127,27143,27151&sugexp=ldymls&xhr=t&q=peter+schiff+wrong+predictions&cp=14&pf=p&sclient=psy&rlz=1T4ADRA_enUS399US399&source=hp&aq=f&aqi=&aql=&oq=peter+schiff+wpredictions&gs_rfai=&pbx=1&fp=6cd6d4c3e6deab23

[RaceBannon]

Schiff is an IDIOT!!!

http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4ADRA_enUS399US399&q=peter+schiff+predictions#hl=en&expIds=17259,17315,23628,23670,23945,24815,25646,25834,26328,26637,26761,26849,27059,27127,27143,27151&sugexp=ldymls&xhr=t&q=peter+schiff+wrong+predictions&cp=14&pf=p&sclient=psy&rlz=1T4ADRA_enUS399US399&source=hp&aq=f&aqi=&aql=&oq=peter+schiff+wpredictions&gs_rfai=&pbx=1&fp=6cd6d4c3e6deab23

WHAT THE TEA PARTY IS NOT TELLING YOU ABOUT PETER SCHIFF
Peter Schiff at the 2008 libertarian Convention, saying that libertarians must insult GOP members to show they are not like them, and that Libertarians must INFILTRATE the GOP and run as GOP members in order to win
http://www.youtube.com/watch?v=3ncLTFoTFa8&playnext_from=TL&videos=gKm7t4j9Wgc

---

Schiff is pro-gay marriage, pro-drug legalization and against the war in Afghanistan
http://blogs.courant.com/rick_green/2009/10/peter-schiff-arrives-give-me-m.html

---

Why do the Ron Paul guys support gay marriage?
http://www.queerty.com/ron-paul-on-gay-marriage-20071210/

---

http://www.schiffforsenate.com/index.php?q=news/constitutional-candidates-congress
Schiff’s own website endorses Adam Kokesh, the anti-war traitor who also tried to tell people he was a Republican, all after leading anti-war marches across the WORLD!

---

All the Schiff bots are supporting a PRO-CHOICE candidate, too
http://www.youtube.com/watch?v=nDttx64zk4I

---

SCHIFF himself admits he believes the Iraq War is a QUAGMIRE in 2009!!
http://www.freespeechmonster.com/?p=103
Schiff has said this many times
http://peterschiffsays.com/defense.htm
Aug 7, 2009, Iraq is a quagmire
http://www.youtube.com/watch?v=P9t741ewbGA
Schiff blamed Iraq on bankers? Not on Saddam?
http://www.youtube.com/watch?v=zo81QDSuixk

---

What the Tea Parties are not telling you about Peter Schiff:
Libertarians need to infiltrate the GOP
http://belowthebeltway.com/2009/06/02/peter-schiff-libertarians-need-to-infliltrate-the-gop/
http://www.facebook.com/note.php?note_id=110955225375
http://www.campaignforliberty.com/blog.php?view=19285
http://www.godlikeproductions.com/forum1/message808505/pg1
http://answers.yahoo.com/question/index?qid=20090707200009AAzSQfB

---

Peter Schiff admits on camera that he has ZERO money investigated in American corporations or industry. If Peter Schiff refuses to invest in American companies, how can Peter Schiff say he is helping Americans keep their jobs?
http://ameriborn.com/shifty/

---

Peter Schiff repeating talking points of the lunatic left, listen yourself. He says in 2009 that Iraq is a QUAGMIRE when we already won!! He blames the war on bankers and whoever, and not a word about blaming it on terrorists! listen yourself, Schiff repeats left wing talking points to his radio audience about the Iraq war!
http://www.youtube.com/watch?v=zo81QDSuixk

---

Peter Schiff has made open statements that are quite like the statements of the anti-war leftists, to include the OTHER Ron Paul endorsed candidates Rand Paul and Adam Kokesh
http://www.google.com/search?hl=en&source=hp&q=schiff+%2B+isolationist&aq=f&aqi=g10&aql=&oq=&gs_rfai=
http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4GGIC_enUS220US220&q=peter+schiff+isolationist

---

Peter Schiff is pro-choice on abortion
http://www.google.com/search?num=20&hl=en&newwindow=1&rlz=1T4GGIC_enUS220US220&q=Peter+schiff+%2B+abortion&aq=f&aqi=g-c1&aql=&oq=&gs_rfai=

---

SCHIFF’S OWN WEBSITE CONTAINS AN ENDORSEMENT FOR KOKESH WHERE KOKESH IS NAMED AS AN ANTI-WAR PROTESTER
http://schiffforsenate.com/index.php?q=news/constitutional-candidates-congress
Adam Kokesh
Adam Kokesh is best known as an Iraq War veteran who returned opposed to the war and was a keynote speaker at Ron Paul’s “Rally for the Republic” that competed with the Republican National Convention in the summer of 2008.

---

Peter Schiff is pro-choice on abortion
http://www.google.com/search?num=20&hl=en&newwindow=1&rlz=1T4GGIC_enUS220US220&q=Peter+schiff+%2B+abortion&aq=f&aqi=g-c1&aql=&oq=&gs_rfai=
pro-immigration and said that there are too many jobs in the US we NEED to let in immigrants???
Peter Schiff admits on camera that he has ZERO money investigated in American corporations or industry. If Peter Schiff refuses to invest in American companies, how can Peter Schiff say he is helping Americans keep their jobs?
http://ameriborn.com/shifty/
This is SCHIFF in his own words!

---

video of Peter Schiff saying that LIBERTARIANS must infiltrate the Republican Party
http://www.ustream.tv/recorded/1583738
You cant download it directly, I tried, but hey, you can record it! :)

---

Peter Schiff appears at a Rand Paul/Adam Kokesh/Peter Schiff fundraiser
http://www.youtube.com/watch?v=AYwb_P-ssK0
Rand Paul, Adam Kokesh, Peter Schiff, and others holding a fundraiser at Webster Hall in New York.
http://www.randpaul2010.com
http://www.schiffforsenate.com
http://www.kokeshforcongress.com

[TexasRepublic]

“Then take that money and buy up as much bargain basement quality real estate as you can. Anybody agree?”

Ever since the Carter years, I have figured that any tangible asset is a potentially safer haven to store wealth than paper money. While I like land as much as anybody, there are downsides: 1) the government knows where your land is 2) the government can re-appraise and tax it however they wish 3) the government can confiscate your land 4) you can’t flee the country and take your land with you 5) land is not very liquid - it can be hard to sell on short notice and recoup what you paid for it.

[Ronald_Magnus]

“Ever since the Carter years, I have figured that any tangible asset is a potentially safer haven to store wealth than paper money. While I like land as much as anybody, there are downsides: 1) the government knows where your land is 2) the government can re-appraise and tax it however they wish 3) the government can confiscate your land 4) you can’t flee the country and take your land with you 5) land is not very liquid - it can be hard to sell on short notice and recoup what you paid for it.
“

All good points, and I could see this happening if we continue down the road we’re on. But the country just may be about to put the brakes on this trip down said road. Government’s heavy hand may become much lighter. A person with multiple rental properties bought now at ridiculously low prices would be sitting pretty. I know WebFocus reports prices will go even lower, but a downside to waiting would be that the quality bargains may be already scarfed up by other investors. I myself own one rental house and am looking to see if I can scrape together enough to purchase another one once this foreclosure mess is cleared up.

[The Comedian]

My advice, (which is free and worth every penny), would be for those with a lot of gold to sell NOW, before the bottom drops out. Then take that money and buy up as much bargain basement quality real estate as you can. Anybody agree?

You must be kidding.

Do you know what a bargain Polish real estate was in 1939?

There is a reason people purchase gold instead of real estate.

Real estate only has value when it is within a jurisdiction that maintains rule of law and property rights.

When a jurisdiction decays into thugocracy, people who have the means buy gold so that when they bug out, they can take some portion of their wealth with them.

How safe do you think your property rights are under the current regime?

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[Ronald_Magnus]

” You must be kidding.

Do you know what a bargain Polish real estate was in 1939?

There is a reason people purchase gold instead of real estate.

Real estate only has value when it is within a jurisdiction that maintains rule of law and property rights.

When a jurisdiction decays into thugocracy, people who have the means buy gold so that when they bug out, they can take some portion of their wealth with them.

How safe do you think your property rights are under the current regime?”

You’re obviously sure things are going to go to hell in a hand-basket. I’m betting they won’t. Time will tell who’s right.

[The Comedian]

You’re obviously sure things are going to go to hell in a hand-basket. I’m betting they won’t. Time will tell who’s right.

Actually, math will tell who's right.

And it's me.

We can't recover. It's not mathematically possible.

The only question is when the gigantic crash momentum overcomes the puny efforts of the evil pinhead cabal in DC.

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[Ronald_Magnus]

“We can’t recover. It’s not mathematically possible.”

If you truly believe that, then you have to believe that Freepers here who are investing time and money in conservative candidates in the hope they can turn this country around are just suckers, because according to you, all hope is lost.

[The Comedian]

“We can’t recover. It’s not mathematically possible.” If you truly believe that, then you have to believe that Freepers here who are investing time and money in conservative candidates in the hope they can turn this country around are just suckers, because according to you, all hope is lost.

You can attempt to emote and create distractions over the issue all day long as far as I care. It doesn't change a thing.

It is mathematically impossible to save the American economy as now composed.

BTW, the debt-based Federal Reserve fraud is *not* what made America great, nor is it what conservatives are fighting to retain. It's what killed us. And the sooner that it and the fake manipulated economy it created die together, the sooner we can get back to rebuilding a *real* America based on value, thrift, productivity, and NO CENTRAL BANK.

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.