Sunday, March 16, 2008

Another Reason for Higher Gold and Silver Prices - Part 2

The Fed's Z-1- or "flow of funds" - report (plus stupid government rigged stats) are another reason for higher gold and silver prices, much much much higher.

Total US credit: up a record $US 3.998 trillion (8.9%) from a year ago to $US 48.808 trillion.
US GDP: about $US 13.2 trillion.
US economy debt load: 370% of annual GDP.

$3.998 trillion of $US 13.2 trillion GDP was new credit, not the creation of real economic goods and services.
So the **real** US GDP economy is $9.2 trillion.
So the **real** US GDP economy is carrying a debt load of 530% or $US 48.808 trillion.

To stabilize the US economy, the credit (debt) expansion ($US 3.998) would have to stop cold, which would mean a GDP contraction of 30+%. This will happen at some point as more and more lenders do not want to lend and more and more borrowers do not want to borrow. Either because both do not want to or simply can not. The longer the credit expansion goes on, the more the GDP contraction could be.

Thus the panick going on right now in mostly the western world's banking/financial system, but also to some extent among businesses and workers.

Political systems in control of financial systems will naturally fight such a looming contraction to put it off into the future as long as possible, which will make the final contraction even worse than it potentially is now.

The build up of debt can not climb to infinity when the **rate** of real value creation (production of real economic goods and services), that supports that debt, is holding steady or declining.

Tidbit from Z-1:
US bank credit is up $US 1.270 TRILLION (13.8%) over the fourth quarter of 2007 for a total of $US 9.163 trillion. Over a trillion bucks in just a lousy stink'in quarter!!!!!!! Where's the reality in that? Boy! There are a lot of people that do not know, at this point, what is going on and will pay a terrible price. Some will have their very survival threatened because these games of "Make Believe" that central bankers and other financial entities have been playing and continue to play. Of course a lot of these people have gone out of their way not to know or not to tune in. Ignorance is bliss, for a while, till The Piper says it's time to pay up.


Huh, maybe there's a disconnect in the works:

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Notice that Mexicans do not bother putting a stupid stink'n nominal amount on their government minted 1 ounce Libertads. They know that an ounce of silver is worth what the market says it is worth; not what some political currupted government says it is worth.

Central banks with the help of other financial institutions will try (are right now) to create credit/debt faster than it contracts.

It's getting nutty, unreal out there. The western world's financial system, and a large percentage of those people who live in these legal jurisdictions, has gotten too heavy into playing little children's games of "Make Believe", "Pretend". The end is going to be ugly.

Many people are going to have to relearn what Robinson Crusoe economics is all about.
Or Google "Robinson Crusoe Economics"

Tidbit from Bill Buckler:
"Oh, and by the way, remember all the comparisons made by us and many others that $US 850 Gold in January 1980 equates with a figure of $US 2200-2500 Gold today using official US Government CPI figures? ... Somebody has now calculated the equivalent of January 1980 Gold today - using the formula which the US Government calculated the CPI back in January 1980.

Stripping out all the "alterations" and "fine tuning" which has been done over the past three decades is an eye opening exercise. Using the January 1980 "CPI formula", $US 850 Gold then equates to (just over) $US 6000 Gold now."

Now do you see why the Fed's Z-1- or "flow of funds" - report (plus stupid government rigged stats) are another reason for higher gold and silver prices?

"Gold still represents the ultimate form of payment in the world....(May, 1999)" - Alan Greenspan.

Anything about gold change since 1999, or since 5-6,000 years ago? Gold and silver are not promises to pay. They are payments in full.

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