Observations on the market action and the implications of the gold and silver markets.
Monday, October 27, 2008
Another Screamingly Good Gold Buy Point
Gold is at another screaming buy point, almost right at the bottom of the downward sloping channel. Plus, Friday was an almost outside reversal day to the upside. Plus gold has broken up through its downward short term trend line (not drawn in on the bottom chart) in October.
Point and Figure chart:
Long-Term $US 5 x 3 Gold Chart - Since The 1982 Low
US credit market debt is $US 51 trillion while $US GDP is 14.3 trillion. That's 356% of GDP. It was 260% of GDP during the Great Depression that lasted from 1930 to about 1945.
This means a reduction in debt level of 14-15 trillion dollars to get it back to where is was during the 30s-40s relationship. And about that amount again to get debt down to more saner levels.
Politicians and the powers that be are trying to create US dollars out of thin air to "print" (fingers dancing on a key board re-arranging bits on hard drives, really) their way out of this predicament, devaluing the US dollar.
Yes, there is debt being paid off. Yes, there is or will be debt being defaulted on. Both of these things are deflationary, contract M3. The Treasury/Fed are increasing debt in order to increase the supply of "money", in order to counter affect the contracting debt (supply of dollars) going on out there in the private sector, not that government sectors are not involved.
Remember a dollar's worth of debt/credit has to be created and accepted before a dollar can be created.
Roughly speaking, a good chunk of the debt out there in the private sector is being transfered to the government sector, particularly the US government, thus to tax payers and dollar holders where ever. The dollar being backed by the full faith and credit of the US government is a bunch of subjective poppycock/gobbledeegook because its credit and any faith that people have in it is rapidly going down the tubes. This means holding any form of US government death is the opposite of a safe haven, even the shortest term. That goes for the Fed, too, looking at the increasing amounts of garbage that it has and calls assets/reserves. And that is just as of May.
Re-constructed M3 is about 14 trillion now. Creating another 30 trillion or so to get debt down to manageable levels could devalue the dollar around 70-75%; and that doesn't take into account velocity of "money".
The big question is: can the Treasury/Fed inflate enough debt away before being over taken by a credit crash? Maybe they won't be able to create debt fast enough and will stop trying if a big time economic crash sets in. Either way, what ever happens, it will get ugly inside the US.
Why is it illegal for people to counterfeit government fiat tokens, again? If the average Tom, Dick and Harry do it, it's a bad thing. If a treasury and a private bank do it, in outrageous quantities, it's ok. Huh???
"Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion -- when you see that in order to produce, you need to obtain permission from men who produce nothing -- when you see that money is flowing to those who deal, not in goods, but in favors -- when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you -- when you see corruption being rewarded and honesty becoming a self-sacrifice -- you may know that your society is doomed." … Ayn Rand -- circa 1959
All this has nothing to do with the creation of wealth, but with the theft of wealth. Thus the importance of owning gold and silver. They are outside this wild and crazy, "pretend", "let's play make believe" government / gangster bankster, non-free market, non-capitalistic financial / economic system. The whole point of which is theft. Theft by the movement of digital bits. What is amazing is that many people don't like atoms (gold/silver) but love "their" digital bits and plastic cards. No wonder Henry Ford said "Thinking it the hardest work there is. This is probably why so few people do it."
Don't be fooled by the US dollar rally. It seems that most of this is margin calls and debt payment calls on USD denominated obligations because of the contraction going on in the world economy and USD denominated OTC derivatives obligations blowing up. The amount of OTC derivatives that exist being the really scary of the two.
Iceland: the Mini Me of the UK and the US. The bull market in gold, silver and other atoms (wheat, etc) is anything but over.
GEAB N°28 is available! Global systemic crisis Alert - Summer 2009: The US government defaults on its debt - Public announcement GEAB N°28 (October 16, 2008) -
This is a great buy point / level for US dollar priced gold and silver.
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