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"[E]normous dosages of monetary medicine continue to be
administered and, before long, we will need to deal with their side effects.
For now, most of those effects are invisible and could indeed remain latent
for a long time. Still, their threat may be as ominous as that posed by the
financial crisis itself." -- Warren Buffett
Some might believe that we have reached a culmination of sorts for the
financial crisis that began in 2008 and that from here things are going to
get better. This study draws the opposite conclusion. The bail, rescue and
print formula being employed by the federal government and central bank today
is simply a continuation of policies that brought about the crisis in the
first place. Only now, as you are about to read, they are being conducted on
a far grander scale. The repercussions, I might add, are likely to arrive on
a far grander scale as well.
From time to time I update this Disturbing Trends table which first
appeared in my book, The ABCs of Gold Investing: How to Protect and Build
Your Wealth with Gold (1997). The table's purpose is to isolate and
monitor key economic data that have had an impact on gold demand in the past,
and likely to affect it (and investor psychology) in the future. I use 1970
as a start date because that was the year just before the United States
officially detached the dollar from gold and launched the new era of fiat
currencies -- the era in which we still find ourselves today. From 1971 on,
the monetary system behaved differently than it had under the gold standard.
Simultaneously, individual investors began to include gold in their portfolio
planning as a defense against the profligate policies that they feared would
follow. As such, 1971 serves as something of a demarcation point for students
of the contemporary gold market.
The numbers in the table below speak for themselves and do not require
a great deal of embellishment. They describe a monetary and financial system
in crisis. I last researched and prepared this table in 2007. Much has
changed over the past two years, and I could not help but note that the
numbers had begun to take on a distinctly Weimar-like* feel.
- Foreign-held debt up 26,347%.
- One-year addition to the national debt up 12,681%.
- Adjusted monetary base up 2701%.
- A $12 trillion national debt.
- $592 trillion in derivatives positions.
- A nearly $700 billion trade deficit.
- And, last but not least, a currency that has depreciated by 82%.
At the end of each one of those examples I could have added ". .
.and counting." This is not the kind of report card that generates a
great deal of faith, or even sympathy, but rather some nagging questions
about how it all happened.
Disturbing Trends is simultaneously one of the least and most popular
pieces I have written. Whenever it is updated, I get numerous requests for
reprint. I also get complaints about its bleak view of the future. As the
saying goes though, the turtle never got anywhere by keeping his head in his
shell. Likewise, today's saver/investor stands a greater chance of staying
out of harm's way by understanding the problem rather than ignoring it. So
bleak though this study may be, it also serves a positive purpose as an
unambiguous call to action.
Please keep in mind that the first wave of investors who reacted to
the message in Disturbing Trends paid between $250 and $300 per ounce for
their gold. These early buyers have emerged from the latest round in the
on-going financial crisis with their wealth relatively intact (assuming they
achieved the recommended 10% to 30% diversification). Also, be aware that
none of the conditions that induced those initial purchases has changed,
except that they have decidedly worsened.
 
*The Nightmare German
Inflation (Weimar Republic, 1922-1923) "The many parallels between 1924
Germany and present-day United States are cause for concern. Though the U.S.
has not yet reached the depths to which Germany descended in that era, few
can look at the constant depreciation of the dollar since the early 1970's
and fail to be alarmed. It seems contemporary America differs from 1924
Germany only in the duration between cause and effect. While the German
experience was compressed over a few short years, the effects of the American
inflation have been more drawn out."
An expanded, in-depth version of this study is available free of charge
by registering here.
Registration includes free membership to the USAGOLD NewsGroup - gold-based
news & opinion by e-mail.
Michael J. Kosares
USAGold -
Centennial Precious Metals, Inc.
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