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There are just an
overwhelming amount of bullish factors for gold and silver that are still
cleverly being camouflaged so that the fewest possible can see them. From
this point forward; remember the words of former Fed Chairman Paul Volker
from the 1970’s, “the one mistake that I made was in not capping
the gold price.” Do not forget that statement because they did
not forget this time and that has created the most incredible investment
opportunity for those that see through it that has ever existed. Control
and manipulation in precious metals markets has reached a new level of
transparency this year in an effort to discourage interest in the precious metals
for their traditional investment merits.
A key event
awakening the world to the continuing decline to worthlessness of fiat
currencies led by the dollar; was when China was disallowed from spending
some of its stockpile of reserves to purchase Unocal. China has amassed close to $1 trillion in reserves and has been instrumental in prolonging the
viability of the U.S. dollar by recycling trade surpluses into U.S. bonds despite massive trade and budget deficits that can be traced to Americans
consuming far in excess of what they are producing. The most basic of
economic principles has been totally lost on the American public. Due
to being led by feeble economic minds such as Ben Bernanke and Alan Greenspan,
the American public has to be among the most economically illiterate empires
in history. We have been on the verge of bankruptcy for so long that
most don’t even have slightest hint that we would have crashed long ago
if not for the arm twisting of other Central Banks by the U.S. to run similarly irresponsible monetary policies worldwide. The problem is right
here in the United States and it starts with a lack of savings. (By the
way, define saving as: that left over from the rewards of production that has
not been totally consumed rather than the more commonly accepted; borrow
money or extract equity to flip into the nearest asset bubble.) Yet our
fearless financial leaders, (clowns), Helicopter Ben or Mr. Magoo would have
you believe we Americans are bravely shouldering the world’s burden
because we are more willing to consume with money we are borrowing from our
trade partners and buying things we have not yet earned and taking rewards
that others have earned and that we will be unable to repay. This is
another form of the Adolph Hitler style of truth: say it often enough and
they will believe it.
A debt-based fiat
currency system that has now fully expanded worldwide has only one way to go
and that is toward final collapse. Now that the U.S. has bought some
time by convincing other countries to increase their money growth rates even
higher than the U.S., we are at such high rates of growth worldwide, (on the
order of 15%) that we are literally hurtling toward either hyperinflation or
economic devastation. The U.S. is in a box and seriously at the mercy
of other countries’ decisions because inflation is rising and we can
not raise rates due to the leverage, particularly in housing, and we can not
lower rates for fear the dollar will rapidly implode. Thus with money
compounding worldwide at a 15%+ clip annually led by Russia at a 57% annual
rate, inflation will be too obvious to even the biggest economic
dullards. Even by holding rates constant the Fed would, in effect be
easing aggressively as real rates would become even more negative than they
already are. If you can not feel the walls closing in then you
haven’t noticed the many countries that have spoken of diversifying
their foreign exchange reserves or increasing their commitment to gold.
Syria and Kuwait are the latest examples of countries that have had enough of
the excessive money creation in the U.S. and have moved to de-link their
currencies from the dollar. Our foreign policies have been heavy handed
economically, militarily and financially. We are failing on all fronts
and stand ready to slap China in the face with trade sanctions even while
they have been most instrumental in keeping our currency from
plummeting. We should fear the risk of a military aggression on our
part is a bigger and bigger risk as our other two methods of control are
weakening considerably. This would be an even bigger mistake. The
U.S. dollar is on the way out and just because officials have convinced other
countries to wreck their currencies at a faster rate does little to salvage
anything except perhaps a little more time.
The U.S. continues to bleed enormous trade and budget deficits, has lost its industrial base,
finds fewer takers of its oversupplied currency, and can’t even
manufacture borderline positive economic statistics despite massive
fraudulent manipulation. The World Gold Council earlier this month said world
gold demand is running 31% above a year ago while supply continues to
decline. The world’s largest producer, South Africa, saw gold
production fall 7.5% last year to an 84 year low and continued declining in
this year’s first quarter at an even greater rate despite an almost
tripling of the gold price in the last five years. Gold production
peaked in 2001 at 2645 tonnes and fell to 2470 tonnes by last year. Five
of the top producers: South Africa, Canada, Australia, Peru, and the U.S. produced more than half that total in 2001 with 1330 tonnes and saw that drop off
to only 1095 tonnes in 2006. These stats make a pretty compelling
bullish case yet gold is trashed in the press, the TV, financial advisors,
and especially the bullion banks and the gold cartel. They have
resorted to an especially incredible tactic of late; instead of smashing down
gold when negative news for gold is released, they especially whack it when
gold positive news is released. Despite these attempts gold has held up
even with heavy Central Bank sales, heavy shorting in the futures markets,
double leasing of the same gold, and attacks on the gold ETF which has been driven
down with dollars being thrown at these paper markets. Meanwhile,
jewelry sales are up 17% and physical demand was high on any sell-offs.
The tide is turning
as gold as a percentage of global currency is now down to 10% from a high of
84% back in 1950; so the Central Banks are running out of ammo to cap the
gold price. Of course, those investors that continue to make their gold
investments in the paper markets of the futures markets and the gold and
silver ETF’s are helping to cap the price because the gold cartel will
someday run out of gold but they will never run out of paper. These
instruments are what help them to crush the charts of the stocks and the
metals causing chartists and technical players to pile on downswings. There
is more technical analysis on the major gold websites than ever…forget
them, they do not matter. First of all 99% of them are trying to chart
gold and the stocks in dollars and that is a totally frivolous effort. The
dollar is a measure of nothing with unlimited supply at any point in
time. Technical analysis is another tool being used to cap gold and
gold stocks, nothing more at this point. Don’t listen to
technical analysis and don’t listen short term price explanations of
the days action. If you do, you will notice: higher interest rates are
bad for gold; lower interest rates are bad for gold; high oil prices are bad
for gold; lower oil prices are bad for gold; get it?...EVERYTHING IS BAD FOR
GOLD! That’s what they have to get you to believe for the
currency system of the world to make it through one more day. When that
one more day doesn’t come if you listen to these people you will be
left far behind and in an incredibly short timeframe.
Since 1970 the money
supply of the world has increased more than 20 times the industrial
production of the same period. This IS inflation. There is now
more paper money added to the existing pile of money in the world EACH YEAR,
close to $4 trillion, than the value of all the gold mined in human history
and the pace is accelerating to the point that the paper money is beginning
to be selectively rejected. Do you not believe that holding gold and
silver will not go up more in value than paper nothing? This is all you
ever have to know about gold and silver. PERIOD!
There is a favorite
saying that I like very much attributed to Sidney Greenberg: “A
successful man is one who can lay a firm foundation with the bricks that
others throw at him.”
They are throwing
bricks at you right now and they are made of gold and silver. GRAB THEM!
Richard J. Greene
Managing Partner, Portfolio
Manager
Thunder Capital Management
More articles by the author can be accessed by the
"Research Articles" choice at: www.thundercapital.com
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