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Fed Crosses the Rubicon and Ignites Powerful Parabolic Gold Bull Market
The Market Oracle ^ | Nov 08, 2010 | Clive Maund

Posted on 11/08/2010 2:50:13 PM PST by An Old Man

Fed Crosses the Rubicon and Ignites Powerful Parabolic Gold Bull Market Commodities

Gold and Silver 2010

Nov 08, 2010 - 02:27 AM

By: Clive_Maund

The Fed crossed the Rubicon last week with its announcement of another massive tranche of QE (Quantitative Easing or in common parlance money printing), known as QE2. It is thus clear that what is now known as QE1, which was portrayed at the time as "one off rescue of the financial system" was nothing of the kind, but represented instead the bursting of a dam that can never be put back together again. The junkie has graduated to another level, from that of being merely a chronic debtor, unable to live within its means and sponging on the rest of the world, to selling its own future down the river in order to maintain its voracious consumption habits in the present.

One thing we can be sure of is that the rest of the world is "not going to take this lying down" - what is sauce for the goose is sauce for the gander, so we can expect this new fashion for massively ballooning the money supply to catch on increasingly around the world, as various countries seek to maintain adequate liquidity and remain competitive in global trade by taking the same proactive hands on approach to manipulating their currencies in a downward direction as the US.

So let's now be crystal clear about what we are talking about and looking at here - we face the prospect of massive global across the board currency debasement and inflation resulting from same. Where does hot money go in such circumstances? - it goes into tangibles, commodities, collectibles and the like - and especially into the Precious Metals - anything which provides a bulwark against the ravages of inflation. Sure - there are massive deflationary forces out there, but since politicians and business leaders like to make money and be popular for as long as possible, they are going to keep these forces at bay for as long as possible, regardless of the future consequences. A deflationary collapse means riots and politicians being chased through the streets and being strung up from lamp posts etc. That collapse must come, and come it will but hard on the heels of a massive hyperinflationary episode that leave the broad swath of the middle and working classes destitute and ruined.

The upper classes and elites will by then have fled to their tax havens where they can sell the gold bars they have stashed away and continue to live lives of ease and comfort, far from the madding crowd, who will set about cannibalising each other in conditions of anarchy and mayhem. This will be the time of "the great global reset" when the absurdly astronomic debts and derivative pyramids etc will be completely wiped clean by the simple expedient of being rendered totally worthless. If you are a creditor at this time tough luck - you won't get enough back to buy yourself a pretzel. This will also be the time when a new generation of leaders will rise up who have galvanised and harnessed the energy of the mob and go on to become future politicians who will reinstate some kind of gold standard and a new order will rise up from the ashes of the old. At this point former political leaders who may be getting bored with island life, however comfortable, would be well advised to avoid a premature attempt to go back and do a Mrs Gandhi or Mrs Aquino, as they might come to an untimely and sticky end.

Even without the benefit of hyperinflation, most major bullmarkets end with a parabolic blowoff move, so it is clear that if we do end up with hyperinflation - and all the signs are pointing to that - the parabolic acceleration in gold, which our long-term chart shows has not even started yet is going to be that much more pronounced and it could rise to levels which would seem to many now to be insane. Here we should note that while gold's rise will of course be real money, which is what gold is, simply moving to compensate for the loss in value of fiat, it should actually be gaining in real value as gold becomes a magnet for hot money seeking speculative gains, which will be an important driver for the final vertical ramp that is expected to mark the end of the bullmarket.


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS:
Is everyone ready? Got gold?
1 posted on 11/08/2010 2:50:17 PM PST by An Old Man
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To: An Old Man

Perfectly straight line up since august. Where’s the parabola?


2 posted on 11/08/2010 2:52:29 PM PST by DManA
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To: An Old Man
What does he mean by "parabolic?"

That it's going up real fast, then going back down real fast?

3 posted on 11/08/2010 2:53:47 PM PST by E. Pluribus Unum ("Government has no other end, but the preservation of property." --John Locke)
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To: An Old Man
Never been a 'gold bug' never will. If you were in and cashed out, I was wrong. It happens. ;)

Physical gold is the concern now (last few years). Got milk? Yeah I got the mustache to prove it. Got gold? meh in most cases. Paper gold looks scary beyond short term.
4 posted on 11/08/2010 2:58:20 PM PST by allmost
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To: DManA

The idea that a curve may come arbitrarily close to a line without actually becoming the same may seem counter to everyday experience.


5 posted on 11/08/2010 2:58:40 PM PST by An Old Man
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To: An Old Man

Silver is going up too, a lot! Silver $27.76/oz 1.00


6 posted on 11/08/2010 3:00:31 PM PST by Anti-Bubba182
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To: An Old Man

Thank you for deigning to explain the math oh wise one.


7 posted on 11/08/2010 3:14:59 PM PST by DManA
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To: E. Pluribus Unum
"What does he mean by "parabolic?" "

He making a comparison to a "Parabola" which is a polynomial of degree 2 in x is a parabola with a vertical axis.

When inflation is infinate, the curve representing the rate of increase will appear to be straight up.

8 posted on 11/08/2010 3:17:45 PM PST by An Old Man
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To: An Old Man

For years we have talked about the fact that the Federal government has trillions in unfunded social security liabilities.

Likewise the state and local governments have been handing out pension plans with no basis for paying the pension bill.

Now the Fed steps in and prints money to paper over these political decisions.

The politicians do not have the guts to cut government employee benefits or senior citizen benefits. So the alternative is to print funny money.

If you are sitting with a bunch of cash, it is time for you to invest it in commodities, real estate, and some stocks.


9 posted on 11/08/2010 3:24:55 PM PST by Presbyterian Reporter
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To: An Old Man

The US is hurting because there are no jobs. The wackos think the solution is to dilute the value of the dollar so when prices go up, some people think that the economy is improving.

What will happen instead is that we will have inflation PLUS unemployment.


10 posted on 11/08/2010 3:56:41 PM PST by Leftism is Mentally Deranged (Annoying liberals is my goal. I will not be silenced.)
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To: E. Pluribus Unum
What does he mean by "parabolic?"

Going upward at an accelerating rate


11 posted on 11/08/2010 4:08:22 PM PST by HangnJudge
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To: E. Pluribus Unum
Hence the smooth line in this graphic at the source
Note the log scale calibration on the y-axis


12 posted on 11/08/2010 4:12:09 PM PST by HangnJudge
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To: HangnJudge
Exponential would be the word I would use.

A parabola can be U-shaped or inverted-U-shaped.

13 posted on 11/08/2010 4:43:09 PM PST by E. Pluribus Unum ("Government has no other end, but the preservation of property." --John Locke)
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To: An Old Man
GOLD $1400!

The Rise In Silver Is Breathtaking

14 posted on 11/08/2010 4:44:03 PM PST by blam
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To: An Old Man

What he means is asymptotic increase, not parabolic.


15 posted on 11/08/2010 4:48:58 PM PST by bert (K.E. N.P. N.C. +12 ..... History is a process, not an event)
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To: Anti-Bubba182
Silver is going up too, a lot! Silver $27.76/oz 1.00

$27 lasted about twelve hours.

16 posted on 11/08/2010 9:00:27 PM PST by Vince Ferrer
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