The Federal Reserve’s Explicit Goal: Devalue The Dollar 33%

This is very troublesome for those planning to live on a fixed income long term.  This type of planned devaluation is a structured default on government obligations like social security payments.  It is also a blatant  transfer of wealth(ie tax) from the savings and wages of the people  to the Federal Reserve and the government.  What is worse, is the the planned 2% rate of inflation is based on Core Inflation, which omits the impact of food and energy, where most inflation frequently occurs.  This type of systemic criminal behavior on the part of the Federal Reserve is another reason to own gold, silver and other commodities as a way to opt out of this insidious transfer of wealth and it’s destructive impact on the middle class. 

JT

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.

An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.

But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.

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via The Federal Reserve’s Explicit Goal: Devalue The Dollar 33% – Forbes.

Why Our Currency Will Fail

The idea that the very same economic forces that are currently plaguing Greece, et al., are somehow not relevant to the United States’ circumstances does not hold water. As goes the rest of the world, so goes the US. When we back up far enough, it is clear that money and debt are there to reflect and be in service to the production of real things by real people, not the other way around. With too much debt relative to production, it is the debt that will suffer. The same is true of money. Neither are magical substances; they are merely markers for real things. When they get out of balance with reality, they lose value, and sometimes even their entire meaning.This report lays out the case that the US is irretrievably down the rabbit hole of deficits and debt, and that, even if there were endless natural resources of increasing quality available at this point, servicing the debt loads and liabilities of the nation will require both austerity and a pretty serious fall in living standards for most people. Of course, the age of cheap oil is over. And as Jim Puplava says, the oil price is the new Fed funds rate, meaning that it is now the price of oil that sets the pace of economic movement, not interest rates established by the Fed.

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via Why Our Currency Will Fail – Blogs at Chris Martenson.

Foreigners Sell Record $85 Billion In Treasurys In 6 Consecutive Weeks – Time To Get Concerned? | ZeroHedge

Last week, when we pointed out what was then a record $77 billion in Treasury sales from the Fed’s custody account, in addition to noting the patently obvious, namely that contrary to what one hears in the media, foreigners are offloading US paper hand over first, there was this little tidbit: “The question is what they are converting the USD into, and how much longer will the go on for: the last thing the US can afford is a wholesale dumping of its Treasurys. Because as the chart below vividly demonstrates, the traditional diagonal rise in foreign holdings of US paper has not only pleateaued, but it is in fact declining: a first in the history of the post-globalization world.” Well as of today’s H.4.1 update, the outflow has increased by yet another $8 billion to a new all time record of $85 billion, in 6 consecutive weeks, which is also tied for the longest consecutive period of outflows from the Fed’s Custody account ever. This week’s sale brings the total notional of Treasurys in the Custody account to just $2.66 trillion (down from a record $2.75 trillion) and the same as April of last year. And since the sellers are countries who have traditionally constantly recycled their trade surplus into US paper, this is quite a distrubing development. So while the elephant in the room could have been ignored 4, 3 and 2 weeks ago, it is getting increasingly more difficult to do so at this point, especially with US bond auctions mysteriously pricing at record low yields month after month. But at least the mass dump in Treasurys explains the $100 swing higher in gold in the past month.

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via Foreigners Sell Record $85 Billion In Treasurys In 6 Consecutive Weeks – Time To Get Concerned? | ZeroHedge.

More Deficits, More Debt

December 19, 2011 – In the first two months of the current fiscal
year that began on October 1st, the US national debt has grown $320
billion. That is $21 billion more than the same 2-month period last
year, which illustrates that the growth of the national debt continues
to accelerate. The reason of course is the federal government’s huge
operating deficit, which is not getting any smaller. This point is
illustrated in the following chart.

Hyperinflation is always the outcome of unchecked government
spending. The spending leads to ever greater deficits, which requires
the government to borrow ever greater amounts of money. Eventually a
point is reached when the government needs to borrow more money than
lenders have the capacity – or willingness – to lend. Thereafter the
government can take either of two alternative paths.

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via More Deficits, More Debt.

Gold is on the Verge of Moving into Bubble Phase of the Bull Market

By Toby Connor, GoldScentsI know that during a correction of the magnitude we are seeing right now it seems more like the gold bull is dead than on the verge of moving into what I expect will be one of the greatest parabolic moves in history.However, all of the conditions necessary to launch the bubble phase are now in place. Gold is in the process of putting in an intermediate degree bottom. That bottom, which is only days away if it didn’t already happen today, is going to be the single greatest buying opportunity, probably of the decade. Gold sentiment is at multiyear lows. Retail traders that bought at $1900 have gotten wiped out. The media is full of stories calling for the death of the gold bull. Institutional traders from John Paulson, George Soros, and Dennis Gartman have all gotten knocked off the bull. Breadth in the universally hated mining sector is back down to levels that have only been exceeded during the crash in 2008.

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via Gold is on the Verge of Moving into Bubble Phase of the Bull Market.

European Bank Runs And Underestimated Physical Gold Demand

The demand for gold is vastly underestimated. About 18 months ago I wrote about Euro Gold and the Euro Zone and Euro Evaporation Leading To Credit Default Swaps and IMF Gold. One key excerpt was:

The Euro is broken. This was its destiny. This is the destiny of all fiat currencies. These bureau-rats cannot stop this anymore than Cnut the Great could command the tide to halt.

And here we are.

THE GREAT CREDIT CONTRACTION

The Great Credit Contraction has been in relentless advance for years. This is a massively deflationary period as capital, both real and fictitious, burrows down the liquidity pyramid into safer and more liquid assets. The fictitious capital that does not move fast enough evaporates. Poof goes trillions of wealth!

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via European Bank Runs And Underestimated Physical Gold Demand.

James Turk: Expect A Violent Move Higher In Precious Metals, Especially Silver

Dominique de Kevelioc de Bailleul: While the silver price (NYSEARCA:SLV) moves higher with the gold price (NYSEARCA:GLD) during this latest consolidation phase in the bull market for precious metals, Goldmoney’s James Turk expects another violent move higher for the metals, especially the price of silver.

“This move [in the silver price] is going to catch a lot of people by surprise as evidenced by the extremely low sentiment readings,” Turk told King World News, Monday, pointing to the lack of overall enthusiasm in the precious metals market of late, with a relatively steep contango in the silver futures market chain serving to support his thesis. “Those low readings are a clear indication that there is a lot of money on the sidelines that is waiting to jump on board.” Get my next ALERT 100% FREE

Such low sentiment readings and steep contango prices in the silver futures haven’t been seen since the first quarter of 2010, when problems in the Greek sovereign debt market first emerged. At that time, fears of another Lehman event, this time from Europe, took the DJIA sharply lower from its intermediate post-crash peek of 11,250, down to 9,600, a nearly 15 percent correction in the 30 Industrials.

In contrast, after trading between the $15 and $18 range during a nine-month period of September 2009 and June 2010, the silver price climbed higher in the face of a risk-off-then-risk-on-again trade in stocks of 2010 as the white metal never looked back, soaring to just shy of $50, from the $15 base of the previous flagpole pattern.

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via James Turk: Expect A Violent Move Higher In Precious Metals, Especially Silver.

How to Position Yourself for the Future: Step 1 – Financial Security

By Chris Martenson

What we care about most here is helping people adjust and adapt — happily, profitably, and safely — to what is likely to be a very different future.

Our framework centers on the idea that humanity is facing a set of predicaments quite unlike anything else in the history books. Because this time there are no borders to cross in search of safety; the entire world is involved. On a global basis, we’ve never experienced collective debt loads of this magnitude. Never before has an entire set of intertwined currency systems — all debt-based money — collectively been backed by nothing more than the hope of a larger future, and never before have this many people had to figure out how to move from more-concentrated to less-concentrated energy sources (from fossil fuels to sun- and wind-based alternatives).

The convergence of exponential trends in population, energy depletion, debt accumulation, and an economic model that is hooked on growth will combine to produce quite an interesting, if not challenging and disruptive, future. The funny thing about complex systems is that they are unpredictable, and therefore preparing for what may come is a non-trivial (yet absolutely essential) task.

All of this is spelled out in the Crash Course and more recently in a succinct presentation that I gave at the Madrid Gold Conference in November.

The immediate question for most people is What should I do? We break down the intelligent responses into three big buckets: financial, physical, and emotional. In this report, I detail the financial steps that everyone should undertake right now to manage future risks using the framework that I use to assess and understand the financial world and markets.

My approach is founded as faithfully as possible on facts and data. But my views on how the markets operate are formed from personal experience, observation, and connecting a few dots that rely on opinions and sometimes beliefs. Therefore, this financial and investing framework is something that you should only accept if it works for you — and reject if it does not.

The Basics

I am of the opinion that we are in a gigantic structural bear market. The role of any bear market is to get the most people to lose the most wealth. And so our first goal is to help you be among those who lose the least, as they are the ones who win the most.

This bear market, however, has more to it than the usual bust the follows a typical period of irrational exuberance. Where past bear markets could always count on the natural world helping to induce a recovery by providing more natural resources (especially energy) in whatever quantities and qualities that were necessary, it seems that this time oil will be playing a spoiler role.

Because this bear market has the additional complicating factor of being global in nature, mauling a global financial edifice saddled with the most debt and liabilities ever recorded in addition to stubbornly high oil prices, it is my view that the economy will not respond in the same ways as it has in the past. Further, we need to be mindful of the idea that the risks are large (derivatives, anyone?), they are actively and collusively hidden from view (what are banks really holding?), and where they are concentrated is mostly unknown — something I spell out in greater detail in Part II of this report.

Even more troubling, it is no longer unthinkable that one or more major currencies will lose some or all of their value over the next few years.

The conclusion I draw from all of this is that this is a period of time to be concerned with return OF capital instead of return ON capital. Maximum safety has its own rewards these days, not least of which is the value of having a good night’s sleep.

Our basic advice has changed little over the years.

Gold (and Silver)

The first step is to have physical gold in your possession. By this we mean bullion coins or bars stored somewhere very secure that does not place you at risk. I keep mine in vaults and safe deposit boxes, mainly because I lead a very public life and find it too risky to store it in my home. You may wish to protect yourself similarly.

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via How to Position Yourself for the Future: Step 1 – Financial Security.

The Dollar is Done – Deal with It

(5 Stages of Grief over the Loss of the Dollar!)

Silver Stock Report

Psychologists tell us that there are five stages of grief over loss of whatever kind, usually death, or breaking up with a loved one, which are: denial, anger, bargaining, depression, acceptance. I’ve applied these to the loss of the dollar, as I see most people today are still stuck in denial, and here’s how to deal with that.

Denial. Most people in America are in total denial. But the dollar is done. Most probably don’t think it’s done, because we all still use dollars to buy things. But do you notice prices going up? That’s the key sign that the dollar is done. The dollar is abandoning you, the dollar does not care about you, and you have to deal with it. People in denial will repeat the many lies taught to us all by the media and schools. The most popular of these delusions are, in order, “gold is too high now,” “how would I sell it,” “gold bugs are crazy,” “I’m not sophisticated enough to invest in gold,” and the classic denial line, “I don’t want to hear anymore about gold.”

I’ve actually researched over 100 gold bashing nay sayers, and gathered together all the most popular statements of denial, which you can see, here: http://silverstockreport.com/2009/bashers-say.html

Back in Dec. 2009, the most popular statement of denial was “gold is too high now”, and that was when gold was $1200/oz. Today, almost two years later, gold is $1785, and climbing. Clearly, everyone who thought gold had topped out were simply in denial.

To get past denial you must accept the truth of sayings such as, “democracy is two wolves and a sheep voting on who to eat for dinner”, and realize that our founding fathers never gave us a democracy, but rather, a republic, because they hated democracy, which is nothing more than mob rule. Democracies are inherently unstable, because when the people understand that they can vote for themselves benefits out of the public treasury, then it’s over. Why is it over at that point? Because with socialism, eventually you run out of other people’s money to redistribute. And then, to pay for things, the only way to do that is to print money, which will destroy the dollar. America hit all those points back in 1933. That was a long time ago, and that’s when we abandoned the gold standard. You should also realize that Obama is not as scary as the electorate who voted for him in the first place. Obama may come and go, but the stupidity of our fellow Americans is probably still with us, don’t deny it. Acknowledge reality, accept it, and deal with it. Best way to cope? Start buying silver, or work past the next stages of grief. First step, visit your local bullion dealership, or place an order with http://www.jhmint.com or call (530) 273 8175.

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via The Dollar is Done – Deal with It – SilverSeek.com.

US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?

Is it any wonder why our economy is in dire straits?  Printing money to keep the economy afloat is no substitute for real economic growth, it’s simply more smoke and mirrors that results in a wealth transfer from the poor and middle classes to the wealthy, the political class, and government.  JT

US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?

— Posted Friday, 21 October 2011 | Share this article | Source: GoldSeek.com

Gold is trading at USD 1,623.80, EUR 1,177.95, GBP 1,027.01, JPY 124,535.72, AUD 1587.39 and CNY 10,354/oz. Gold’s London AM fix this morning was USD 1,623.00, GBP 1,027.02 and EUR 1178.14 per ounce. Yesterday’s AM fix was USD 1,629.00, GBP 1,033.24 and EUR 1,180.17 per ounce.

U.S. M2 Money Supply: Accelerating Sharply in 2011

Gold prices are mixed today as markets remain on edge due to increasing divisions amongst European leaders on how to solve the intractable Eurozone debt crisis. There continues to be very strong demand for physical bullion globally and support is strong at the $1,600 level due to this demand.

The sharp fall of copper yesterday, by 6%, is an indication that the US, Chinese and indeed global economy is very fragile and may soon begin to contract.

Physical demand in Asia, mainly India and China, has entered the traditional peak season with Indian festivals and the increasingly important Chinese New Year.

This is reflected in premiums in Asia which remain good. There are reports of massive physical buying out of China on gold’s fall close to $1,600 yesterday. The most active Shanghai gold futures traded at a premium of more than $10 over spot prices earlier today. The contract stood at 335.22 yuan a gram, or $1,634 an ounce, at a premium of $3.

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via US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?.