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Silver and Gold Prices Delivering Terrible News for America -- Dollar on the edge of free fall.
American Thinker ^ | 04/11/2011 | Steve McCann

Posted on 04/11/2011 7:17:35 AM PDT by SeekAndFind

In the United States, the media's interest has been focused on who won the game that was the potential government shutdown.  As usual the reporting is based on a sporting event and not the importance of the change of direction the shutdown represents.  At the moment there is no winner or loser; that will be decided if and only if spending is dramatically reduced and government begins to shrink appreciably.  

Many of us have repeatedly called attention to the financial markets and international uncertainty precipitated by American monetary, fiscal and foreign policies by focusing on bell-weather commodity prices, particularly precious metals.  On Friday silver pushed above $40.00 a troy ounce for the first time since 1980 and gold reached a new all-time high in nominal terms at $1,474.19.

Recent predictions and those generally accepted by the markets have silver hitting $50.00 a troy ounce and gold to crash the $1,550.00 mark soon.  While these rallies have had clear links to fears about inflation, there is more to this situation than just inflation fears.

In fact both markets actually have surplus supply.  While demand is good, particularly for silver in industrial use, much of the demand is driven by investors.  It is not a matter of industrial demand but rather demand driven by investors.

Recently, much of spike in bullion prices has been triggered by geopolitical tensions.  In what has become the most inept handling of international crises in recent American history, the Obama administration has set in motion a potential radical takeover of the government in Egypt, a prolonged civil war and stalemate in Libya, a jihadist government in Yemen, and an open door for Iran to establish hegemony over the Middle East.  The probability of a war involving Israel in the next few years has gone up exponentially.

Among other questions weighing on the markets are: what will the Federal Reserve do next?  The latest round of quantitative easing is due to end within the next few months.  As the American economy continues to flounder and stagnate due to the overbuilt housing markets and stubborn unemployment, will the Fed then launch yet another round of easing (in essence creating money)?  The gold market is fully expecting that they will.

This will result in an even weaker dollar and as worldwide commodities are priced in dollars, the dollar value of these items will continue to rise.  Hyper-inflation will no longer become a theoretical discussion.

If the Fed does not begin another round of easing, it will be only because current inflation has become such major concern that the Fed will have no choice but to raise interest rates to combat that potential debacle.  However, another side-bar to the lack of another round of easing will be: who will buy the Treasury debt of the United States as it continues its enormous deficit spending without a significant rise in interest rates?  A major buyer in the past, Japan, will no longer be able to buy US debt due to the enormous earthquake and tsunami damage; in fact it may be forced to sell part of its holdings, thus competing for buyers with the US Treasury.  The US deficit problem will become far worse without substantial, not token, spending reductions.

There is no question that with the ham-handed and inept management of the revolt in Libya and the on-going upheavals in the Middle East, oil prices will remain high and will in all likelihood continue to rise further.  Food prices and supplies are hitting crisis levels throughout the world, and have begun to impact the American consumer more so every day.   The ostrich-like approach of the Obama administration and the Fed to these issues cannot continue much longer. 

These rises in inflationary pressure have pushed US interest rates -- actual rates less inflation -- into negative levels.  This is true also in China, where inflation has become the government's chief concern, as they have raised interest rates three times in the past five months.  Co-incidentally demand for gold there has skyrocketed.

Per Jeffrey Currie of Goldman Sachs who predicts gold will hit $1,625 by the end of the year:

Gold is ultimately dependent upon real rates, which are a function of both inflation expectations and monetary policy.  A top in gold prices will only become apparent when the risks of sovereign default are behind us with a clear and successful exit of the stimulus we've seen over the last few years.

These risks are extremely high, as most recently witnessed in Portugal which has had to ask the Eurozone for upwards of a 100 billion Euro bailout.  The diversion of the government shutdown, while long on entertainment quality, is important only if it leads to a seismic shift in spending and tax policies in the United States.  The Federal Reserve is essentially out of ammunition if it wants to maintain any semblance of credibility and not pursue monetary policies guaranteed to cause a massive financial collapse. It has already pushed the limit beyond the safety point.

The gold market is telegraphing to the world, and particularly Washington D.C., that there is no confidence that they can turn the ship of state around and make real substantive changes in fiscal and foreign policies. Commodity marekts are following:

                 hat tip: minyanville

The world is undergoing massive changes and challenges, yet never has America been in the hands of a more inept and ideologically driven government than it is today.  As a result and as never before in it's history, the future of the country increasingly depends on the whims and actions of other nations and leaders, an outcome that can only lead to disaster. 

There is still a slight window of opportunity open and that hope rests on the Republicans in the House of Representatives to curtail spending in future years, significantly reduce regulations and repeal laws such as ObamaCare.  Also any potential Republican candidate contemplating running for President must forcefully and without hesitation speak out candidly in the bluntest language possible about the future and the devastating action of Obama and the Democrats, all the while doing so without fear of what may be said about him or her in retaliation.



TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: devaluation; dollar; gold; goldsilver; inflation; silver; slivergold

1 posted on 04/11/2011 7:17:46 AM PDT by SeekAndFind
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To: SeekAndFind

I think Soros sees this as his crowning achievement - destroying the currency of the world’s largest economy.


2 posted on 04/11/2011 7:20:32 AM PDT by MrB (The difference between a Humanist and a Satanist - the latter knows whom he's working for)
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To: SeekAndFind

“Also any potential Republican candidate contemplating running for President must forcefully and without hesitation speak out candidly in the bluntest language possible about the future and the devastating action of Obama and the Democrats, all the while doing so without fear of what may be said about him or her in retaliation.”

I hate to say it but the only person doing that right now is Donald Trump.


3 posted on 04/11/2011 7:23:40 AM PDT by Georgia Girl 2 (The only purpose of a pistol is to fight your way back to the rifle you should never have dropped.)
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To: SeekAndFind; All

Is silver ever gonna take a correction/consolidation breather again? I’m beginning to wonder. It blew past $30 and now has blown past $40 and I still see no signs of a letup. I want to buy more physical to add to my long position but hate buying on such a wild upswing. Perhaps if the Fed gives no indication of starting a QE3 after the QE2 is suppose to quit in June, maybe that will cause silver prices to stumble and give me a chance to buy more then. On the other hand, who knows what the price will be by the end of June? A drop back to $40 may be a significant downward correction by then. Sheez! Any thoughts by more seasoned metals investors are always appreciated.


4 posted on 04/11/2011 7:32:54 AM PDT by OB1kNOb (Solution to Libya's problem: They want a new Muslim leader, I say, give them ours...2 problm solved!)
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To: Georgia Girl 2

This is one reason I want to see Trump in the debates. He could blow them wide open. He would have nothing to lose but the election.


5 posted on 04/11/2011 7:33:41 AM PDT by RC2
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To: Georgia Girl 2
I hate to say it but the only person doing that right now is Donald Trump.

There's Congressman Ryan and Sarah Palin as well.

L

6 posted on 04/11/2011 7:44:56 AM PDT by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: SeekAndFind

The ostrich-like approach of the Obama administration and the Fed to these issues cannot continue much longer.
I give five to one odds they do.


7 posted on 04/11/2011 7:46:50 AM PDT by Vaduz
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To: Georgia Girl 2

Fear of their reputation being smeared is the one thing that holds back everyone running EXCEPT Trump. And what angers me is the left is going to smear anyone who runs no matter what they say so they may as well speak the truth.

But they are cowards. And maybe for good reason. More people believe the left media and there is no right media. Ross Perot is not the dummy the press made him out to be. Here was a man who, at the time, was one of the richest people on earth. And the press made him out to be some kind of paranoid loony bird who went around drooling all over himself. And there will probably be responses to this post saying he WAS a loony bird because they believed CNN.


8 posted on 04/11/2011 7:48:42 AM PDT by Terry Mross (Only a SECOND party will get my vote.)
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To: MrB

“I think Soros sees this as his crowning achievement - destroying the currency of the world’s largest economy.”

With destruction comes chaos. Out of chaos comes order...a new world order. When you are trying to create world government these things have to happen.

ORDO AB CHAO.

The puppetmasters create “disorder” so the people will demand “order”. The price of “order” always entails a handing over of control and loss of freedom on the part of the citizenry. Out of “chaos” comes “order” - THEIR order - their new WORLD order.

Orwell described it as Reality Control.


9 posted on 04/11/2011 7:50:58 AM PDT by Jack Hydrazine (It's the end of the world as we know it and I feel fine!)
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To: OB1kNOb

I’m asking myself the same thing. I’m no expert but I think it will shoot through the roof after the debt increase vote, raise it or not. If I really believe this I’ll be buying some today. So let me say, I half way believe it. However the hell you believe something “half way”.


10 posted on 04/11/2011 7:51:41 AM PDT by Terry Mross (Only a SECOND party will get my vote.)
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To: MrB
I think Soros sees this as his crowning achievement - destroying the currency of the world’s largest economy.

Soros did not do this. Everyone who participated in the leveraging up of US debt public and private did this. In the total credit market Soros's billions are not a minnow in the ocean.

11 posted on 04/11/2011 7:53:57 AM PDT by AndyJackson
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To: SeekAndFind

Earth calling BernekeIdiot and “TurboTax” taxcheat Geithner..... =.=


12 posted on 04/11/2011 7:55:05 AM PDT by cranked
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To: Georgia Girl 2
and the devastating action of Obama and the Democrats

This has been going on all my adult life, under socialists and under RINOs. They have all had their trotters and snouts in the trough.

13 posted on 04/11/2011 7:56:04 AM PDT by AndyJackson
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To: SeekAndFind
Doug Kass: The Apocalypse Is Coming Soon! Buy Protection!
14 posted on 04/11/2011 7:56:39 AM PDT by blam
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To: Vaduz

They don’t have an ostrich like approach. The inflation resulting from the devaluation we are witnessing is the only salvation, the only cure for the cancerous debt. The devaluation is by design.

Massive spending reductions will lower the slope of the debt growth curve but will do nothing to reduce the outstanding debt. Only inflation and devaluation will do that.

The power of compounded moderate inflation is immense and over a mere five years at 7% can reduce the debt by half merely by devaluation. The trick is to establish a moderate and tolerable rate of 7%

Some think the US$ will be dropped as the reserve and that may very well happen. My view is that many others have a very similar problem and there will be a general relative devaluation and price inflation. Gold and silver are primary indicators the process is in effect.

A good old fashioned major war is about all that can knock the process off track. I don’t discount that possibility.


15 posted on 04/11/2011 8:03:57 AM PDT by bert (K.E. N.P. N.C. D.E. +12 ....( History is a process, not an event ))
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To: SeekAndFind
Gold is ultimately dependent upon real rates, which are a function of both inflation expectations and monetary policy

It is amazing how few people understand gold, including this idiot, who being a New York banker apparently has lost sight of all sense of the fundamentals of an economy, in particular the cost of production. Gold, being a hard to produce commodity of some intrinsic industrial value has a fundamental value the is dependent upon the cost of service, labor, and other commodities that make up that production cost. So, price increases averaged over some period of time reflect increased price levels, i.e. inflation, which affect all factors of production (an old term that our paper chasing elite have long ceased to use).

This fundamental price, the cost of production is based upon hard realities. Now onto that base price is also built premiums based upon perceptions of currency risk (sovereign debt default or further inflationary pressures indicated by the rate of printing money which is indicated by the amount by which market interest rates lie below what are perceived to be natural interest rates that provide a reasonable return on capital). We have seen this before. The fundamental cost of a house is the economic value of the land + labor and materials to build the house. Our paper chasers on wall street have been willing to multiply that value by a large multiple, and when that multiplier began collapsing back towards levels that buyers with credit based upon real earning could actually pay, it began taking our whole credit system with it.

16 posted on 04/11/2011 8:13:13 AM PDT by AndyJackson
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To: OB1kNOb

If you want more, average in, and don’t try to time the market.

If you want to buy on the drops, look at the typical percentage pull-backs in recent years, and let that set your realistic plans of when to time your buys. (Don’t wait for a 25% drop off the peak when the norm is 10-15% off the peak before the climb restarts).


17 posted on 04/11/2011 8:15:39 AM PDT by Atlas Sneezed ("If you touch my junk, I'm gonna have you arrested.")
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To: MrB
How much does Soros do to destroy national currencies and how much is just being able to see countries trying to do the impossible and being the first vulture on the scene when things crash?

Either way I'd be willing to bet that he is hanging around the Treasury right now.

18 posted on 04/11/2011 8:17:08 AM PDT by KarlInOhio (Extremism in the defense of liberty is no vice! Tea Party extremism is a badge of honor.)
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To: SeekAndFind

But Obama and the media are now telling me everything is OK with our economy and we’re in full recovery, there is nothing to see and that I should move on...... lol


19 posted on 04/11/2011 8:31:21 AM PDT by Red6
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To: bert
The power of compounded moderate inflation is immense and over a mere five years at 7% can reduce the debt by half merely by devaluation. The trick is to establish a moderate and tolerable rate of 7%

One problem is that under the Clinton administration a lot of the debt was issued on short term bills and notes rather than long term bonds to temporarily reduce interest payments and the deficit. We have to continually refinance the debt and will get killed on interest charges when the bond buyers say "1% isn't acceptable in a 7% inflation environment. We demand 10% interest." and you suddenly we have trillion dollar interest payments.

Right now $7.5 trillion of the $9.1 trillion publicly held debt are in bills and notes which mature in less than 10 years. Look at http://www.treasurydirect.gov/govt/reports/pd/mspd/2011/opdm032011.pdf for a breakdown of outstanding debts, their rates and maturity dates.

20 posted on 04/11/2011 8:32:55 AM PDT by KarlInOhio (Extremism in the defense of liberty is no vice! Tea Party extremism is a badge of honor.)
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To: bert

The ostrich like approach is not looking at debt but they think one can spend out of debt however A good old fashioned major war is about to start.


21 posted on 04/11/2011 8:42:30 AM PDT by Vaduz
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To: SeekAndFind
Commodity marekts are following:

That chart's been showing up a lot lately, and I was wondering why it only tracked commodities and Fed purchases for two years.   Here's the comparison going back four decades:

--apparently the 'marekts' don't really have anything to do with Fed purchases after all.

22 posted on 04/11/2011 8:45:25 AM PDT by expat_panama
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To: KarlInOhio

.....We have to continually refinance the debt and will get killed on interest charges .....

I didn’t say it would be easy or even possible. It seems however to be the consensus course.


23 posted on 04/11/2011 8:48:09 AM PDT by bert (K.E. N.P. N.C. D.E. +12 ....( History is a process, not an event ))
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To: bert
The power of compounded moderate inflation is immense and over a mere five years at 7% can reduce the debt by half merely by devaluation

It would also reduce real wages by that amount. The Country might owe less, but the citizens will be much poorer. Wages rarely come close to increasing at the same rate as high inflation.

24 posted on 04/11/2011 9:06:48 AM PDT by Prokopton
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To: OB1kNOb

I want to go long but I just can’t pull the trigger.
Everything is at the mercy of forces beyond any market control and until the fed decides about QE we won’t know about that factor either - by then that will be factored in and it will be too late to buy.
I’m sitting this one out, but if I had to choose I would go long again.


25 posted on 04/11/2011 9:20:30 AM PDT by bill1952 (Choice is an illusion created between those with power - and those without)
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To: bert
"e inflation resulting from the devaluation we are witnessing is the only salvation, the only cure for the cancerous debt. The devaluation is by design. "

I agree.

Inflating/defaulting is the only way out of this mess.

It's a way to tax everyone without the need for legislation.

As always, the poor and middle-class will be hit the hardest.
(They may revolt though)

26 posted on 04/11/2011 9:39:37 AM PDT by blam
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To: bert

Yep, you speak truth. I agree with every word you wrote. The currency devaluation is by design. It is the only politically palatable form of default. We just have no clue if they can navigate the minefield and pull it off per plan. There will be unintended consequences - we just don’t know what they will be whether we lose reserve currency status, initiate hyperinflation, whether it fails and we deflate, or what.

But yes, this is strictly by design. They want 10% inflatino for several years to re-inflate housing prices and to shrink the relative scale of the national debt.


27 posted on 04/11/2011 11:23:18 AM PDT by Freedom_Is_Not_Free (Don't confuse Obama's evil for incompetence.)
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To: Terry Mross
And the press made him out to be some kind of paranoid loony bird who went around drooling all over himself.

I always thought the threats to disrupt some family event were real, just because they were outrageous enough to be denied and portrayed as paranoia. What better way to take Mr. Perot down? It was a lesson in media perception games, and they've been roundly attacking Sarah Palin and Michelle Bachman and others and trying the same Alinsky tactics on them that were used on Ross.

Now, if people would just pay attention and apply their lessons for a change, maybe this whole mess can be straigntened out with a minimum of blood in the streets.

28 posted on 04/11/2011 11:32:01 AM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: Prokopton; blam

-——but the citizens will be much poorer———

I will agree to poorer. Much poorer, perhaps not.

Here is Bert’s unified theory of inflation......

The union clamor is for raises. During the period of low/no inflation, the complaint has been “ we get no raises”. Those who excel get raises. Those who plod along do not. The plodders want raises. They will get raises because in addition to dealing with increased material and energy costs, if companies do not provide raises, the good people holding jobs will move. Even in an economy with excess labor, the good and the plodders will be more valuable than the mediocre.

The unions I think welcome inflation because they will claim credit for a breakthrough that finally raises wages albeit across the board.

Then there is the health care problem. I don’t know how it is affected but my gut tells me that inflation will sweep some of the problems under the inflation rug. I don’t know which problems or how, but suspect it will happen.

The same is true for housing in spades. A general inflation will float the underwater loans back to the surface. The inflation might not end the spate of foreclosures, doomed in any event, but it will save many in the areas where prices declined precipitously. At least, the very least it will provide a faint light way down at tunnels end, and believe it or don’t, hope that the situation is improving.

One really terrible problem is state retirement benefits. If they are not inflation adjusted the burden will dissipate and maybe become tolerable. The removal by law of the inflation adjustment factor can be made politically palatable.

Finally, and proof of malice aforethought, those who will lose are the creditors, lets call them the banks. The banks will be the losers as their loans are repaid in $$ that are devalued. Not to worry for the bankrs......... they were compensated before the inflation. They are already whole. The TARP and the stimulus loans took care of them at the outset.

I do not believe there will be national economy killing hyperinflation in the USA. I think there will be a world epidemic and there will be revisions to the current status quo but it will not be terminal.


29 posted on 04/11/2011 11:39:20 AM PDT by bert (K.E. N.P. N.C. D.E. +12 ....( History is a process, not an event ))
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To: Jack Hydrazine
ORDO AB CHAO. The puppetmasters create “disorder” so the people will demand “order”. The price of “order” always entails a handing over of control and loss of freedom on the part of the citizenry. Out of “chaos” comes “order” - THEIR order - their new WORLD order.

Yep. They're going to 'break eggs and eat omlettes'.

Unfortunately, the eggs that are getting broken are 'nest eggs'.

Orwell described it as Reality Control.

It only takes a little chaos, really, the 'reality control' is done by the media, which can portray one city block of unrest as an entire city in flames and pipe it into your living room, with full hyperbole about how there is 'widespread unrest', 'looting', and 'lawlessness', and how 'the death toll may reach the thousands' (note: may is the key word, in case anyone considers them liars). Perception is key.

OTOH, if the 'trains keep running on time', no one will believe there is a problem until it is too late.

30 posted on 04/11/2011 11:44:35 AM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: bert
The devaluation is by design.

I've been expecting this for a while.

The only way to meet the numbers pledged in obligations such as Social Security for the Baby Boomers after buying votes wholesale with the welfare teat (and slaughtering 45,000,000 other contributors via abortion) is to inflate the currency so the numbers can be met.

That and a C-note will get you a cup of coffee, soon (maybe).

I keep a quadrillion dollars (Zimbabwe) on my desk as a reminder that currency is only worth what you can get for it.

Maybe when the Caliphate attacks we'll have the war, too. Unfortunately, we're running out of other places to fight it.

31 posted on 04/11/2011 11:51:06 AM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: MrB

True, Soros may glory in it, but it is the political and business powerbrokers of America that are responsible, aided by a foolish electorate.

In a nutshell, we beat ourselves.


32 posted on 04/11/2011 11:59:38 AM PDT by MichaelCorleone (Sarah Palin is America's Margaret Thatcher)
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To: Smokin' Joe

An excellent example of reality control is watching the BBC reporter report on the collapse of WTC 7 about 20 minutes BEFORE it collapsed and can see in the video in the background.
http://www.youtube.com/watch?v=PNK1V6S2cbo


33 posted on 04/11/2011 12:28:07 PM PDT by Jack Hydrazine (It's the end of the world as we know it and I feel fine!)
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To: bert
Lynne Tilton: "I Believe There Will Very Well Be Violence In The Streets In America"
34 posted on 04/11/2011 2:03:21 PM PDT by blam
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