Observations on the market action and the implications of the gold and silver markets.
Sunday, July 26, 2009
Trillions and Trillions of US Dollars
The Big Grin admits it:
"We're seeing numbers - trillions here and trillions there. And so I think legitimately people are saying, 'look, we're in a recession. I'm cutting back, I'm having to give up things - and yet all I see is government spending more and more money'."
It was just a few years ago that the word "trillion", never mind "trillions", was never mentioned regarding government spending. Now it is getting to be the norm. Right out of thin air is where they are coming from. Don't you wish you had a racket like a government protected private monopoly supplying US dollars; or any other government fiat token? There is one heck of a huge transfer of wealth going on.
"It is a sad fact of life that when you try to "run" a country on bread and circuses as the Imperial Romans did or on the modern equivalent which is the welfare state - it is hard to go on selling tickets to the circus when you run out of bread." - Bill Buckler, The Privateer
If you don't get the above, replace "real wealth" for "bread".
The way it used to be:
(right click on graphics to open in new tabs for larger view and read carefully)
Back then, the government could not get away with the type of spending it is doing now because people would demand the underlying asset of the currency (certificate). They would redeem the currency (upon demand) for the silver or gold. It was the limited supply of the redeemable asset that kept a lid on the supply of the certificates/currency. Now a days, what is keeping a lid on the supply of dollars? Nothing much except for politics.
"The strain is starting to tell, though. While individual Americans wilt under the economic and financial burdens now being imposed upon them and as governments at all levels below the Feds in Washington hit the spending wall and start actually CUTTING, Mr Obama proposes to spend yet more "trillions here and trillions there". Once the governments and central banks of the world STOP lending to the US - and they literally cannot afford not to - the jig is well and truly up. Washington DC can then emulate the state governments, notably the one in California - or they can make use of what they have that the states do NOT - a central bank. If they choose this route, it will be outright printing and the US Dollar will dive off a cliff. If they cut spending, it will be a horrendous depression and the entire system will crumble. Either way, the US and the rest of the world is going to need a functioning money. And that's Gold."
Keep in mind that according to the BIS (Bank for International Settlements, the central bank for national central banks) there are about $1.4 quadrillion worth of derivatives (until they changed the way they count derivatives to get the total down to about $800 trillion) that still have to be dealt with. A lot more "shake rattle and roll" to come.
A nice collection of gold and silver:
(right click on graphic to open in new tab for larger view)
Got gold? Got silver?
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