Skip to comments.More Upside For Gold As Government Spending Continues Unabated
Posted on 12/16/2011 4:51:46 PM PST by blam
More Upside For Gold As Government Spending Continues Unabated
By Bill Bonner
12/16/11 Baltimore, Maryland Have yourself a merry little depression.
Dow up 45 points. Gold down $9.
Were still waiting for a major correction in the gold market. Each time one begins, it seems to run out of steam before doing any real damage. At yesterdays closing price, $1,577, gold is still solidly ahead for the year.
So, wheres the soft spot? Wheres the test? Where will it come from? When?
Dont worry, dear reader, Mr. Market will test us. Hell throw his curve ball. We have to be ready.
instead of testing us on the downside, he tests us on the upside? This is not a prediction. Just a thought. What if gold suddenly shot up and looked like it was going to the moon. What would we do?
Citigroups metals expert puts a $3,400 price on gold in the next year or two.
Jim Rogers makes a similar forecast.
What if theyre right? We only mention it because The Trickster has more than one trick up his sleeve. And hes perfectly capable of running the price up to $3,500 BEFORE testing us.
We could get giddy, watching the price of gold hit record after record. And then, just when we think it is ready to scale its final peak, gold could turn tail and run for the valley. We wouldnt believe it. We would hold on. We would wait for it to go back up.
And then wouldnt we feel stupid, if wed taken that ride all the way to over $3,000 and then rode it all the way back to todays level? Wouldnt we be put out with ourselves, if we sold out then thinking gold had put in its final top and we missed it?
According to the 50% principle it could hit $3,000 collapse to barely $1,500 and then soar again possibly going to $5,000 or even $10,000. Thats what well get in the final crack up boom that is coming.
But what we see is more upside than downside for gold. Because the motor pulling gold up still has a lot of gas in the tank.
In the US the feds spend $1.60 for every dollar they raise in taxes. In Europe, the euro-feds prepare to bail out their banks and sovereign debtors.
And guess how much the feds have already spent? They were so desperate to avoid a debt crisis or a depression that they threw the throttle wide open on the biggest rescue effort the world has ever seen. Bloomberg calculated that $7.7 trillion were put to work. Our estimate was higher about $10 trillion, we guessed.
Well we were both way off. Heres the news report:
As part of the Ford Foundation project A Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis, Nicola Matthews and James Felkerson have undertaken an examination of the data on the Feds bailout of the financial system the most comprehensive investigation of the raw data to date.
The extraordinary scope and magnitude of the recent financial crisis of 2007-09 required an extraordinary response by the Fed in the fulfillment of its lender-of-last-resort function.
The bottom line: a Federal Reserve bailout commitment in excess of $29 trillion.
Whoa! The feds put at risk an amount equal to 200% of US GDP. And for what? So that a depression wouldnt knock 5% off GDP? Even the Great Depression of the 30s only set the US back by 30% of GDP. A similar setback today would cost the economy less than $5 trillion.
Do you see what we see? Even if it worked which it didnt the feds efforts would have been a disaster. Who would spend $29 trillion to save $5 trillion?
But wait. Theres more. This assumes that a depression is unnecessary or that it doesnt do any good. We know thats not true. A depression does a lot of good. It wipes out bad investments and eliminates bad speculators. It forces capital into more productive, more profitable uses. It kills off zombie industries. It retires worn-out industries and reduces costs so that new industries can arise. Its the destruction that Schumpeters creative destruction needs.
The more we think about it, the more were beginning to like depressions. After scammy bailouts and bogus recoveries, a depression would be something to look forward to.
You forget that the Federal Reserve Bank has money to burn.
Regrettably, much of it is in our 401K’s and saving accounts.
I have found this website to be a very useful source of information on the economy, gold, and silver.
There is a run on EU banks and these banks need to come up with paper currency for the customers. The only way banks can do that is liquidate all assets that made money but are forced to keep bad assets to prevent losses. Precious metals are the few assets that made money in the last ten years, thus banks are forced to sell off gold and silver investments/holdings for paper currency to pay withdrawing customers. Once this wave is over, gold and silver will rebound. Also as gold and silver drop in price it will hit a level where buyers with cash will rush in to buy at bargain prices. Why? Well gov deficit spending has not gone away, debts have not gone away. In fact gov debt is growing each year. Until debt is resolved and interest rates rise to encourage savings, gold and silver will rebound and make new highs. Short term technical may encourage drop in prices but big picture is still the same, debt and money printing.
they committed $29 TRILLION???
all that will do is deflate the dollar even more
driving gold, silver, everything... up. way up. 3x? 4x?
who knows. i’ll be hanging onto my hard assets for a while (while during up the bunker)
and yes, this kind of irresponsible spending leads to war. especially if you’re deliberately doing it to decrease the amount you owe
If he doesn't, he's not very smart.