|
Forget what you think you know about currency prices, equities, bonds, real estate, and commodities. Once you have cleared your mind take a deep breath and read the only story that matters today:
“Analysts are now calling for a test of the 850 usd historic high…” Thomson
With Wall Street and CNBC barely paying any attention to gold you may ask why record gold is that important. Here is the answer:
If investors head to safety of gold en masse during a major financial crisis the global financial system as we know it ceases to exist.
This statement is not meant as melodrama, but instead to warn the unaware that there exists the possibility for a global meltdown in the financial markets if investors start to run out of USD and into gold. As a quick example, say investors wake up tomorrow and Citigroup and Merrill are insolvent, the U.S. dollar is crashing, and a full point Fed rate cut is simply fanning the flames...game over, gold to the moon! (to borrow a popular phrase from goldbugs).
While the odds of the nightmare scenario for fiat backed markets is never high, the possibility does exist. It exists generally because history has proven that all unbacked (by gold) fiat money eventually fails, while more specifically the armageddon threat is present today because the U.S. dollar is in terrible fundamental shape.
Panic Button Could Soon Be Pressed
The logical response to surging gold that there is a little more inflation in the system than desired and/or that precious metals prices (silver too!) are high simply because of a crude/war premium. Forget logic and instead focus on the fact that the U.S. dollar is declining rapidly and the U.S. bailout masters are twiddling their thumbs. To be sure, Paulson is wasting his time backing a pitiful bailout plan for Citigroup and others, Bernanke is content to walk around sporting his ‘I Am Not Greenspan’ T-shirt, and President Bush is, well…
If record gold is not enough to spark a (more) concerted attempt by central banks to stop the U.S. dollar’s slide I am not sure what is. As for whether the U.S. dollar can be saved from a hyperinflated death roll, longer-term probably not, although no one really knows what will happen when central bankers start drawing lines in the sand.
|
|
