Monday, May 11, 2009

Gold, US Dollar and US Treasuries

The upside down right hand shoulder of the price of gold is coming along just fine.

M3 is growing at a slower pace but still growing. The more there is of something, the less value it has. Part of the decrease of the growth rate is default on debt which contracts the supply of dollars. A dollar's worth of debt has to be created first before a dollar can be created in today's world of a credit "money" financial system. Since 1971, the world has never been in this situation. It is going to be really something to see how this plays out. We should see some big time changes to the world's "money" system in a few years.

US Treasuries (30 year) do not like what they see. The yield on US Treasury bonds have recovered the dive that they took recently, meaning the price of these bonds is going down along with the US dollar. Probably the end of an up trend that started in the early '80s. The "Fed" has already announced that it will buy new US Treasury debt by creating dollars out of thin air and sending them over to the US Treasury after the Treasury sends them an I.O.U. which they put on their books as an asset which (through magic) enables them to say that their "reserves" increased, which enables them to create more USD out of thin air.

If the money center banks will not lend dollars out into the economy, the last resort is for the federal government to do it (lend or simply spend). This is the first time in the US's history that government executives and legislators are openly and brazenly saying / showing that they are stealing from the poor and the middle class to give/lend to the rich. At least FDR was smart enough to lie.

The federal government steals a dollar's worth of value from what would be normally spent / invested in the general economy, and spends it on the politically connected. Somehow government spending/lending is supposed to be more knowledgable/effective/smarter than that in the normal economy. Not only is it ***impossible*** for governments to make the right spending/lending decisions in an economy (communism proved that command economies implode on themselves), the US government and the Fed have to add debt to the financial system/economy to do it when too much existing debt is the problem. Thus government spending will make the economy do even worse and for a longer period of time.

No wonder, finally. The US dollar tanked on Friday, May 8, breaking below the March low. Ominous.


More than 32 million Americans receive food stamps and 13 million are unemployed.

The Dow made an outside reversal day last Thursday, is into a heavy resistance level and may have topped out here at this level:


Mostly, the things to own are unleveraged stuff, molecules, atoms (real estate involves molecules but is usually highly leveraged therefor not on the list although there are some exceptions in some places in the world), particularly gold and silver.

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