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If 1+1 still equals 2 then gold will explode.
It’s really that simple!
Once you tune out the white noise of the main stream
media, recognize Keynesian economics for the claptrap it is, and come to
terms with the painful reality that policymakers and financial elites
navigate the ship of state to their benefit, not yours, the basic truth of
this premise should resonate with you.
Every Action Has a Consequence
The masses have been incessantly conditioned for
decades to believe that the current reality and all those quaint "laws
of nature" can be disregarded and managed away by the enlightened. As a result
of such false beliefs personal and public finances have been (and continue to
be) managed with an attitude that any actions or pursuits, no matter how
reckless or patently unsustainable, can be taken without concern for
consequence. The lie was sold easily to, and embraced wholeheartedly
by, a populace that delighted in the underlying subtext that one could really
get something for nothing.
Paper Currencies vs. Precious Metals
This modern episode of popular delusion, and
its’ inevitable outcome playing out before our eyes, is not unique to
man. The basis behind the numerous cycle theories and the notion that
history repeats lies in the fact that the desires, actions and reactions of
humanity do not change. That being the case, we can surely expect that
all things temporal and frivolous - such as paper currencies managed by
corrupt men - will eventually "flame out" as compared to the
timeless elements as represented by gold and silver which have continued to
“burn brightly” over the ages.
Global Liquidity and the Price of Gold
A key driver to the price of gold is money supply.
As such, when gold is correctly understood as a monetary metal one can
confidently disregard the mainstream media’s “chicken
little” warnings about a supposed gold bubble and realize that it is
the excessive extent of global liquidity that is supporting the price of
gold.
Governments’ Responses to Crises Propelling
Price of Gold
I think you would agree that there is no need to
editorialize yet again regarding the Fed's constant flooding of the market
with liquidity in order to spare the economy from the pains of economic
contraction - or how this action has caused each successive downturn to
increase in intensity at shorter and shorter intervals. Nevertheless, we gold
investors should never lose sight of the fact that this never ceasing policy
of monetary and fiscal reflation is adding to the
supply of money which, in turn, is supporting gold and silver as global
stores of wealth in a naturally limited supply.
Each crisis that has emerged, be it the dot.com
crash, the housing bust, the derivatives melt down, the sovereign debt
debacle, etc., has been, and continues to be, met with the same remedy
– another bailout and even more liquidity.
One of the ironies of peoples’
misunderstanding of gold is the belief that gold's price rises because of a
crisis or disaster. Such is not the case. It's the official
response to such crises – the creation of cheap credit and
the subsequent flood of bad money - that drives the price of gold higher.
What Does the Future Hold?
Can gold investors count on continued loose and
destructive monetary and fiscal policy? That is most likely, in my opinion,
when the following is considered:
- Federal budget deficits are projected into the
future, with no end in sight
- Mortgage defaults are still increasing and
Fannie/Freddie are holding hundreds of billions in bad paper
- Union pension funds (think militant voting block) are short hundreds of billions of dollars
- Many states are insolvent and will be in line
for hundreds of billions of dollars in bailout money (think public
sector workers and their militant voting block)
- Social Security is underfunded
- Medicare is
insolvent
- Medicaid is
insolvent
- National health care has yet to start
Conclusion
Unfortunately for the Nation as an entity, these
crises will continue and the same remedies will continue.
The magnitude of the problems are so immense and
intractable I believe one should seriously consider converting more than a little
of one's hard earned wealth from paper-backed-by-nothing to that
"barbaric relic."
Chris Blasi
Chris Blasi is President of Neptune Global Holdings LLC (www.NeptuneGlobal.com)
and a guest contributor to both www.FinancialArticleSummariesToday.com and www.munKNEE.com.
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