Saturday, November 10, 2007

Gold Bull Train

The gold bull train has definitely left the station, while many are still standing on the platform. The sentiment indicators are still awful, meaning this gold train has a long trip in front of it.

Using realistic measures of inflation, the gold train has to reach about $3,000 in today's dollars to equal the old high of $887.50. As the years of this ride pass, from this point in time, (there are still years left to this gold bull train ride) that price just keeps getting higher as the Fed increases the rate of devaluation of the dollar by increasing the US dollar supply. It has been over a year now since the Fed stopped publishing M3 dollar supply numbers. They knew it is going to get embarrassing.

This is one powerful gold bull train.

Consumer prices in the US are increasing about 10% per year now. Never mind the government's rigged statistics. They are virtually useless.

Shadow Government Statistics' M3 to be updated within days from now. M3 has shot up to about an 18% annual rate of increase of the dollar supply, which is what inflation really is. Inflation causes/effects rising prices. No systemic inflation, no systemic rising prices, like during most of the 1800s in the US. Inflation did not start for real, in any systemic sense till the Fed was started in 1913. It has been up, up and away since.

Money (gold, silver, packs of cigarettes), Currencies (silver and gold certificates), and tokens (government fiat paper and digital bits) have 3 things in common:
1.) Medium of exchange
2.) Store of value
3.) Unit of measure/account

A. Money does not have any liability attached to it.
B. Currencies have liabilities attached to them. They are redeemable in something specific.
C. Government fiat paper and fiat digital bits while not redeemable in anything can not be created without debt/credit being created at the same time.

Inflation, depending on the degree of:
1. Causes people to shy away more and more from using it (US dollar loosing its reserve status amongst central banks).
2. Steals/robs stored value.
3. Shortens the yard stick (unit of measure) while people still use it as a full measure, screwing up their financial and economic calculations for the future (mal/bad investments).

So, what is the no-brainer protection from what is going on at central banks and their treasuries? Or is it treasuries and their central banks?

Gold and silver.

The more they create government fiat paper and fiat digital bits (most US dollars are just digital bits on a hard drive, and that hard drive sure as heck is not yours), the higher in price gold and silver go.

Here is something to think about. If you deposit dollars in a bank, where exactly are those dollars once you have deposited them in the bank?

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