patrick.net

I personally do not have any stocks in gold. But markets right now look unstable so I'm tempted. If US goes into another recession gold will be the only safe investment. Guns gold and food will be stuff to hold on to.

I do think there is a bit of a bubble since if economy will survive and recover there will be no point to have all this gold.

Yes it's a bubble. Yes, there is a parabolic rise there. Yes, it will crash some. The question is when and will it go higher before it does. I think I read somewhere that the rise in 1979 during all that inflation in US to $820 oz would be $2200 / oz in today's dollars. Now it's at $1400/oz. I think it'll go up more but I'm not so sure that I'd buy anymore. My husband and I bought gold to diversify further and for security. I have a little but my intent is to hold - as in forever.

Time will tell. I predicted on another thread that it is not going to crash in 2011 but many investment gurus out there are writing articles and blogs are predicting it will crash this year. Another camp is pushing gold as salvation.

Is the dollar a bubble?

It really depends on how stable the dollar is. If you believe the dollar is basically a sound currency, then yes Gold is a bubble. But if you feel it's only a matter of time before people realize how over leveraged the dollar really is, than no, not even close.

I would lean towards the second situation. Honestly I really don't see how the fed expects to finance it's self over the next few years. Not sure who is going to lend them the trillions of dollars they need to run the government in the future. They have demonstrated there inability to control spending. Obviously the only way to make ends meet is by printing more money. They can hide the fact they are printing more money by coming up with mysterious buyers for there government debt, but in the long run people are going to notice and inflation will spiral out of control. Then Gold prices today will look cheap in comparison.

The average investors exposure to gold is still non-existent. Gold has a lot more to run. Once all the fund managers who have been behind the curve for 10 straight years start buying, you'll know when to sell. None of them have yet.

theoakman says

The average investors exposure to gold is still non-existent. Gold has a lot more to run. Once all the fund managers who have been behind the curve for 10 straight years start buying, you’ll know when to sell. None of them have yet.

The majority of people I know want to invest in metals, but:

1) It's too expensive
2) They are afraid

That's pretty much the sentiment of everyone I know. My director wants to dump his 401k for metals, but won't because of the penalty... Relatives say it's too expensive now, and would have gotten in at $900 - but at the time, that was even too much.

Anyhow, I think most people are well aware of gold/silver, but have cold feet. It's not the "norm," because everyone has been herded into the 401k camp - which makes all other investments/stores of wealth look foreign.

But are most people aware of the current trend ? I'd say heck yeah.

joshuatrio says

theoakman says

The average investors exposure to gold is still non-existent. Gold has a lot more to run. Once all the fund managers who have been behind the curve for 10 straight years start buying, you’ll know when to sell. None of them have yet.

The majority of people I know want to invest in metals, but:
1) It’s too expensive

2) They are afraid
That’s pretty much the sentiment of everyone I know. My director wants to dump his 401k for metals, but won’t because of the penalty… Relatives say it’s too expensive now, and would have gotten in at $900 - but at the time, that was even too much.
Anyhow, I think most people are well aware of gold/silver, but have cold feet. It’s not the “norm,” because everyone has been herded into the 401k camp - which makes all other investments/stores of wealth look foreign.
But are most people aware of the current trend ? I’d say heck yeah.

Being aware of the trend means nothing. It won't be in a bubble until too many people get in on it. The fact that so many people think its too late to get in on it only leads me to postulate that it still has more room to run. Even you said it. They felt the same way at $900. They felt the same way at $600. The same people who have been calling the gold price movements unjustified have been doing so all the way up. Once the dumb money rushes into the metals, its time to call it quits.

dumb money?

who do you think Glen Beck has been selling it to for the past year?

toothfairy says

dumb money?
who do you think Glen Beck has been selling it to for the past year?

That's where you are wrong. The people who watch Glen Beck and call up gold line have enough cash to buy a single gold coin and the company they buy it from sells it to them at 200% melt value. The dumb money is the money that comes from the herd mentality. Once you see pension funds, mutual funds, and all the Johnny come lately's pile in their life savings, that's when gold bubbles. It will be no different than tech stocks in the 90s. The lionshare of these fund managers are always behind the curve and they always jump in at the wrong time. They haven't even dipped their feet into precious metals. Once they do, that's when its time to start selling to the suckers.

Are the Glenn Beck listeners dumb? Absolutely. I wasn't referring to them. Most of them have no money. It takes a lot more than a bunch of red necks to get a market to go into the bubble.

so investing in Gold sounds a bit like playing Roulette. There may be more upside It's not my preferred choice.
other investments will see similar returns that aren't a crash waiting to happen.

i think you are safe for now. At least until the FED starts talking about raising interest rates. As that time approaches the dollar will start to rise.

Tenouncetrout says

The long haul of Gold is $300 oz.
I’ll give you a pre “I told you so”, now.

I dare you to buy some long dated put options in the GLD. You'd be rich if you were right.

MAybe the momentum can be explained by producers who sold futures, but then decided to cover and sell higher because they saw prices going higher (joking). If there is time to bring enough new mining on line before your bubble hits, then it's going to have to be later (the bubble that is).

I don't follow it, but aren't there people or mining companies that are rich enough to arb this situation ? That is, sell far out calls, and futures, and then start new mining operations ? Good time to be a geologist specializing in gold.

How much does it cost now, to take an ounce of gold out of the ground ?

Here’s an interesting question. How long does it take, to get a mining operation up and functioning, if done in a relatively expedited way ? I don’t mean by a newbie, but rather if it’s done by an experienced mining company ?

marcus says

MAybe the momentum can be explained by producers who sold futures, but then decided to cover and sell higher because they saw prices going higher (joking). If there is time to bring enough new mining on line before your bubble hits, then it’s going to have to be later (the bubble that is).
I don’t follow it, but aren’t there people or mining companies that are rich enough to arb this situation ? That is, sell far out calls, and futures, and then start new mining operations ? Good time to be a geologist specializing in gold.
How much does it cost now, to take an ounce of gold out of the ground ?
Here’s an interesting question. How long does it take, to get a mining operation up and functioning, if done in a relatively expedited way ? I don’t mean by a newbie, but rather if it’s done by an experienced mining company ?

It takes years to set up a mining operation. On top of that, you have to worry about governments getting into your business like they are currently doing in Australia. The cost of taking out an oz. of gold from the ground varies based on extraction process. On average (and this is a rough rough rough estimate), the large caps pull it out at $600. Other small caps who use less cost effective techniques can pay as a high as $900 per oz. That's where it gets interesting. When gold goes up $100, the profit margin on the junior miners explodes to the upside. In 2008, all these companies were literally selling at a price of 1 years expected earnings because so many people believed gold was going to fall to $300 and silver was going to $4. As far as gold production, I wouldn't worry too much. The mining sector hit peak production a few years back and has not been able to increase production. If skyrocketing gold prices were going to ramp production up, we would have seen it start to materialize already. It hasn't.

As far as Silver goes, Silver is mined as a byproduct of other metals like Copper. No one is going to be opening mines to cash in on Silver because its a small fraction of the profits of the mine itself.

Most of the people posting here about precious metals have zero clue what is actually happening because they do not read past the media headlines or their favorite trendy financial blog. Read this recent document from the International Monetary Fund --
http://www.imf.org/external/np/pp/eng/2010/041310a.pdf

You will find within this document that the World Bank and IMF (the two financial arms of the United Nations) have concrete plans to get rid of the US dollar, to dilute it gradually over time and then replace it with the Bancor, a new world reserve currency. The US govt has no choice but to continue to dilute the US dollar to cover our debts as a nation. An intelligent individual does not ignore documentation such as this in favor of other sources of information.

This is the primary reason to own PHYSICAL SILVER BULLION. Ignore gold, as it pales in comparison as a long-term hedge against a significant US dollar dilution.

The Bank of International Settlements (BIS), which is the most powerful corporation in the world, is also on board with the plan for the removal of the US dollar as the world's central bank reserve currency.

To hedge against the loss of your wealth, metals should make up a significant portion (25% to 50% or more) of your long-term investment portfolio. Best places to buy are APMEX.COM, MONEX.COM and BULLIONDIRECT.COM.

Remember to focus on silver, and not gold. Silver will experience much greater gains than gold, and will experience less manipulation from the Plunge Protection Team (PPT) and the BIS's Financial Stability Forum.

Buy the next significant dip and then hang on for the ride as the powers that seek to shake you from this investment are very strong and determined -- this helps to float the US dollar and prevent a massive transfer of wealth over to metals. Metals are a long-term (5 to 20 years) hedge against US dollar dilution/inflation, which is already here... as reflected by the big increases in precious metals over the last year.

Stop listening to the mainstream news and Internet blogs and pay attention to search engine news with the words "Bancor SDR" and "BIS Bancor" in them. Otherwise, you will be conflicted, disinformed and stand to lose your wealth based on bad information.

No one in their right mind ignores the BIS, IMF and World Bank in favor of other sources of information.

M8R-8eneeq,

That is a very interesting document.

Specifically this statement: "U.S. monetary and fiscal policies directed at domestic priorities proved inconsistent with the maintenance of the dollar’s real value and hence the long-run link to gold, and triggered the move to floating rates. "

As a corollary to this statement, if there is a finite supply of gold, then there is only a finite supply of debt, which would mean that growth is also finite. By removing this constraint, there was no limit on what can be borrowed and the exponential increase in debt stands as a testimony to this. True?

You say "Ignore gold, as it pales in comparison as a long-term hedge against a significant US dollar dilution." Curious as to what you are basing this on?

sundarrajan.b says

M8R-8eneeq,
That is a very interesting document.
Specifically this statement: “U.S. monetary and fiscal policies directed at domestic priorities proved inconsistent with the maintenance of the dollar’s real value and hence the long-run link to gold, and triggered the move to floating rates. ”
As a corollary to this statement, if there is a finite supply of gold, then there is only a finite supply of debt, which would mean that growth is also finite. By removing this constraint, there was no limit on what can be borrowed and the exponential increase in debt stands as a testimony to this. True?
You say “Ignore gold, as it pales in comparison as a long-term hedge against a significant US dollar dilution.” Curious as to what you are basing this on?

I interpreted that specific statement the same way you did -- that the debt limit needed to be unencumbered in order to support "domestic priorities" or rather, some central banker's plan.

I own both gold and silver physical bullion. I have also traded these ETFs (GLD and SLV) since they began. Silver always generates higher profits (and deeper losses) than gold. Since we are expecting USD dilution, silver will be more profitable than gold.

The intrinsic physical properties of both metals also ensure they will always be a suitable currency hedge against USD dilution. In addition, silver is in high industrial demand and is expected to be in short supply in the next few years. Finally, silver is more attractive to the consumer since the price is still relatively low as compared to gold.

Regarding manipulation of prices by the PPT and the BIS's Financial Stability Forum, gold appears to be under heavier manipulative influence than silver. Silver is more difficult to control as the central banks do not hold as much % of the world silver supply as they hold in gold. I would need to look up the estimated % numbers... I do not have this available offhand.

Gold was confiscated in 1933 by the US government, to provide financial support to the economy. Silver has never been under such a confiscation, punishable by prison time and a fine.

M8R-g4a0dt says

The intrinsic physical properties of both metals also ensure they will always be a suitable currency hedge against USD dilution

really? To which intrinsic physical properties do you refer? Their shiny appearance?

TechGromit says

It really depends on how stable the dollar is. If you believe the dollar is basically a sound currency, then yes Gold is a bubble. But if you feel it’s only a matter of time before people realize how overleveraged the dollar really is, than no, not even close.

Bullseye, in my estimation. For me and many others, a purchase of gold is a vote of no confidence against the USD.

tatupu70 says

M8R-g4a0dt says

The intrinsic physical properties of both metals also ensure they will always be a suitable currency hedge against USD dilution

really? To which intrinsic physical properties do you refer? Their shiny appearance?

Silver properties which help explain why it will ALWAYS be a valuable currency, no matter what --
http://en.wikipedia.org/wiki/Silver

Same goes for gold --
http://en.wikipedia.org/wiki/Gold

And yes, they are pretty to look at, too. Note that you never hear mainstream media educating anyone about these properties. All the media seems to be capable of doing is telling us gold is in a perma-bubble and not to buy it at all costs, even if the most powerful people in the world have well-documented plans for diluting the US dollar endlessly and ultimately replacing it with an entirely different currency.

So, instead of just saying what the properties are, you direct me to the wiki page for gold and silver? I'll assume that means you don't know and were talking out of your ass.

My problems with gold is that it varies in a ten-fold range of real value, independent of inflation. I saw a great graph of that I think in Ron Paul's book "End the Fed". And now it's near the high end of that historical range.

So I agree it will always be worth something, but maybe that something is only 10% or 20% of what it is worth now.

tatupu70 says

So, instead of just saying what the properties are, you direct me to the wiki page for gold and silver? I’ll assume that means you don’t know and were talking out of your ass.

Silver

is a very ductile and malleable (slightly harder than gold) monovalent coinage metal with a brilliant white metallic luster that can take a high degree of polish. It has the highest electrical conductivity of all metals, even higher than copper, but its greater cost has prevented it from being widely used in place of copper for electrical purposes. Despite this, 13,540 tons were used in the electromagnets used for enriching uranium during World War II (mainly because of the wartime shortage of copper).[1][2] Another notable exception is in high-end audio cables.[3]

Among metals, pure silver has the highest thermal conductivity[4] (the non-metal diamond and superfluid helium II are higher) and one of the highest optical reflectivity.[5] (Aluminium slightly outdoes silver in parts of the visible spectrum, and silver is a poor reflector of ultraviolet light). Silver also has the lowest contact resistance of any metal. Silver halides are photosensitive and are remarkable for their ability to record a latent image that can later be developed chemically. Silver is stable in pure air and water, but tarnishes when it is exposed to air or water containing ozone or hydrogen sulfide, the latter forming a black layer of silver sulfide which can be cleaned off with dilute hydrochloric acid.[6] The most common oxidation state of silver is +1 (for example, silver nitrate: AgNO3); in addition, +2 compounds (for example, silver(II) fluoride: AgF2) and the less common +3 compounds (for example, potassium tetrafluoroargentate: K[AgF4] ) are known.

Gold

is the most malleable and ductile of all metals; a single gram can be beaten into a sheet of 1 square meter, or an ounce into 300 square feet. Gold leaf can be beaten thin enough to become translucent. The transmitted light appears greenish blue, because gold strongly reflects yellow and red.[2] Such semi-transparent sheets also strongly reflect infrared light, making them useful as infrared (radiant heat) shields in visors of heat-resistant suits, and in sun-visors for spacesuits.[3]

Gold readily creates alloys with many other metals. These alloys can be produced to modify the hardness and other metallurgical properties, to control melting point or to create exotic colors (see below).[4] Gold is a good conductor of heat and electricity and reflects infrared radiation strongly. Chemically, it is unaffected by air, moisture and most corrosive reagents, and is therefore well suited for use in coins and jewelry and as a protective coating on other, more reactive, metals. However, it is not chemically inert.

Common oxidation states of gold include +1 (gold(I) or aurous compounds) and +3 (gold(III) or auric compounds). Gold ions in solution are readily reduced and precipitated out as gold metal by adding any other metal as the reducing agent. The added metal is oxidized and dissolves allowing the gold to be displaced from solution and be recovered as a solid precipitate.

High quality pure metallic gold is tasteless and scentless; in keeping with its resistance to corrosion (it is metal ions which confer taste to metals).[5]

In addition, gold is very dense, a cubic meter weighing 19,300 kg. By comparison, the density of lead is 11,340 kg/m3, and that of the densest element, osmium, is 22,610 kg/m3.

My problems with gold is that it varies in a ten-fold range of real value, independent of inflation. I saw a great graph of that I think in Ron Paul’s book “End the Fed”. And now it’s near the high end of that historical range.
So I agree it will always be worth something, but maybe that something is only 10% or 20% of what it is worth now.

Can you justify owning no precious metals at all? Many people try to hold 25% of their portfolio in precious metals in crisis times like these. If you advocate no precious metals at all in a portfolio, how do you then justify owning other investments? Do you put those through the same filter process, or is it an emotional decision when it comes to precious metals only?

In fact, what investment would you suggest owning long-term, other than gold or silver? Cash? Care to put that investment through a screening process for us, so we know how thorough you are with your analysis process, and that you are not emotionally biased against precious metals?

M8R-xyv4db says

For you, you lazy ass –

OK--you listed all of the properties of gold and silver from wiki. My question was which specific properties enable gold and/or silver to "always be a suitable currency hedge against USD dilution"? Can you be specific and explain why?

Nomo is correct. Gold and silver don't have intrinsic value.

tatupu70 says

M8R-xyv4db says

For you, you lazy ass –

OK–you listed all of the properties of gold and silver from wiki. My question was which specific properties enable gold and/or silver to “always be a suitable currency hedge against USD dilution”? Can you be specific and explain why?
Nomo is correct. Gold and silver don’t have intrinsic value.

Nomo is correct and ancient civilizations and most of the rest of mankind and industry across the planet is wrong. Sure, malleability and electrical conductiveness are completely useless to mankind. You really know your stuff!

Who would have known? Maybe all the gold and silver mines worldwide should be shut down immediately, because Nomo has spoken.

Maybe the next generation of solar panels will find another metal besides silver to keep energy efficiency high. Maybe they will use the tin that Nomo speaks so highly of.

M8R-o0xte2 says

Sure, malleability and electrical conductiveness are completely useless to mankind.

Malleability and electrical conductiveness are useful properties. But other metals also have these properties. And I'm not sure how these properties help the ability to be a useful currency hedge against the US dollar.

M8R-o0xte2 says

Nomo is correct and ancient civilizations and most of the rest of mankind and industry across the planet is wrong.

Oh I forgot. Ancient civilizations prized gold because of its decorative value. Certainly not because of it's electrical conductivity...

tatupu70 says

M8R-o0xte2 says

Sure, malleability and electrical conductiveness are completely useless to mankind.

Malleability and electrical conductiveness are useful properties. But other metals also have these properties. And I’m not sure how these properties help the ability to be a useful currency hedge against the US dollar.

You seem to believe gold and silver must be "perfect" in all ways for them to be commonly accepted forms of stored value. This is not the case.

Mankind has been using these metals as currency for 5,000+ years. Name another currency that has that kind of longevity.

In fact, name another feasible store of value to hedge against the US dollar dilution. You have land, and other currencies to choose from, ultimately. Other currencies will be affected by a US dollar dilution, and already have.

Land is not liquid enough, and you can't fit it in your pocket or barter with it easily.

Convenience is what it comes down to. Something easily recognizable that people know from around the world, instantly upon seeing it. It's popular enough that it is liquid to trade with.

That's why you are left with gold and silver. And their intrinsic qualities certainly does not hurt. Other metals are used as currency and those are also good stores of value -- rhodium, palladium, platinum and copper are also good for the same reasons.

Perhaps we could have replaced gold and silver with another material early on in human history, but this where we are at now. That cannot be denied, or easily changed.

You would need to hire thousands of individuals to go on to blogs like this one, and have them propose that precious metals should be replaced with something else. Continue this for 10 or 20 years and maybe you will get somewhere.

tatupu70 says

M8R-o0xte2 says

Nomo is correct and ancient civilizations and most of the rest of mankind and industry across the planet is wrong.

Oh I forgot. Ancient civilizations prized gold because of its decorative value. Certainly not because of it’s electrical conductivity…

Silver also used in mirrors, which were prized possessions at the time. If you have ever been in an old Catholic church or similar religious structure, you will notice that gold leaf is spread all over the place. Only gold could be used to decorate in this fashion, back in the day. Silver also has anti-bacterial properties.

OK--so now it's not their physical properties, it's the 5000+ years of history. Fine. I'll probably agree that gold is valuable because people believe it to be valuable.

Just realize that people's attitudes and beliefs change over time. One day gold may be as useful as Indian beads or seashells as a currency.

For all the "gold is useless people", the same logic cannot hold a candle to Silver. Silver is an industrial metal with incredible amounts of irreplaceable applications. As far as metals go, Silver is where its at for electronics. You won't make an alloy or discover a new metal to replace it. You also have its reflectivity properties and catalytic properties. It's never going away. We'll always need it and the best kept secret is that we are running out of it.

Silver is unique in that it is the only commodity that has had a giant stockpile to pick from to sell into industry. Gold would apply here too, but it's not used nearly as much and exhibits different supply/demand dynamics. Most metals are pulled out of the ground and sold into industry (like copper). If we need more, we mine more. If we need less, we mine less. Others, like Aluminum, are consistently recycled.

Silver, while it is mined, is almost always in supply shortfall. The annual mining consistently falls short of meeting the demand deemed by the marketplace. Fortunately, we have that 2000 year stockpile that we have been grabbing from. At some point, that supply shortfall will eat into the remaining stockpile that we've had for 2000 years. Most estimates say we've ate into about 80% of it already but there is no way to be entirely sure. What is definite is that, at some point, the demand for Silver, which never seems to go down based on its superior physical/chemical properties, eat into the remaining above ground stock pile of Silver and we will be forced to rely almost exclusively on mining operations to supply the Silver demanded by industry. There is going to be a supply squeeze. In my opinion, this guarantees some sort of parabolic rise in price either in anticipation of that shortfall or as a result of it. When it comes, nobody knows for certain. It could come in 5 years, 10 years, or 20 years. Regardless of anyone's opinions on gold, any bashing of Silver completely ignores the reality of the supply/demand fundamentals for Silver. It's a good investment and has already paid off to anyone who bought into it this decade.

The most promising potential replacement for Silver in electronics resides in the work that your most recent Nobel Prize Winners in Physics worked on. They took Graphene (a form of carbon just like Graphite, Diamond, or Carbon Nanotubes) and rearranged it so that the molecular structure, which is usually quite unstable, but showed remarkable stability. They created a structure which has more strength than iron and better conductivity than copper. If you ask me, it's decades away before they perfect their findings and bring this stuff to the marketplace. Their work was really accidental, but it shows amazing potential. I'm willing to bet that it does revolutionize the electronics industry at some point.

Normally I would think this looks like a bubble, but all the stuff I hear on the news I really don't know anymore.
If we are going to have a currency war with China, might as well buy gold or Euro's.

Anyone who trades regularly may use the COT (Commitment of Traders) report each week to determine the direction of gold and silver.

This is like riding the coattails of the big speculators who tend to be right most of the time. The COT measures put vs. call volume for a wide variety of commodities.

The COT has shown that gold has been nothing but a long (up) trade for several months, with a high ratio of calls to puts for all precious metals, for large speculators specifically.

I receive this report in my inbox for free... visit http://www.commitmentsoftraders.com/

When the large speculators begin moving into more puts than calls, that's your sell signal.

Gold won't dump overnight as the central banks of China, India and Russia have been buying gold reserves for the last few years in a row. All of them are still underweighted in gold, based on their own reports. The Chinese middle class have been buying gold like crazy, as their government has directed citizens to begin making these purchases.

Nomograph says

theoakman says

For all the “gold is useless people”, the same logic cannot hold a candle to Silver. Silver is an industrial metal with incredible amounts of irreplaceable applications. As far as metals go, Silver is where its at for electronics. You won’t make an alloy or discover a new metal to replace it. You also have its reflectivity properties and catalytic properties.

The industrial uses for silver would put it at a few dollars per pound, max. The other 99.9% of it’s price comes from people selling it back and forth among themselves (i.e. speculation and jewelry).
If all the silver and gold in the world disappeared instantly, life would go on more or less unchanged. After a couple of years, nobody would even notice. It has virtually no intrinsic value to humans.

Using the same reasoning, paper currency would have no value, either. But it does, because it's backed by the ability of taxpayers to pay government debts. Unfortunately, taxpayers of developed countries are being hit with a massive wealth redistribution effort by central bankers (purportedly for the purpose of creating economic stability and world peace). Gold and silver are backed by their history of 5,000 years.

Seems a few people here may be interested in erasing that history, for some reason though.

Nomograph says

Incorrect. The value of paper currency is derived exclusively from it’s use as a medium of exchange for goods and services. It has no other use. Paper currency was not designed as a store of wealth; only a fool would use it as such.
Economies run on the exchange of goods and services, not gold or paper. Focus on what actually has value to human life.

Perfectly said Nomo. Now what if this medium of exchange (whatever it may be) is under the control of a government that is already well steep in debt. This government decides to monetize its debt by 'quantitative easing', literally translated as printing more money. That would be debasing the currency, so people need to fall back on something that has lesser likelihood of getting debased.

Patrick - you're right that the price of gold is near the historical high, but where is the dollar debt headed and what is the likelihood that there'll be more quantitative easing?

I think you guys will enjoy reading this article then...

http://michael-hudson.com/2010/11/dollar-war-in-detail/

An excerpt for the lazy ones here who can't click on a link properly --

"The Bank of Japan has fought to stabilize its exchange rate by keeping its foreign-currency repayments into dollars, recycling $60 billion into U.S. Treasury bills. It is doing this in order to protect Japan’s export competitiveness by preventing the yen’s exchange rate from being forced up. But in the last few weeks U.S. officials have accused China and other countries of being aggressive currency manipulators indulging in “competitive non-appreciation,” when they simply are trying to keep their exchange rates stable in the same way that Japan is doing. This only infuriates other countries by accusing them of “manipulating” the currency, when they are simply trying to defend themselves against the $2 trillion onslaught of QE from the United States already, with up to a trillion dollars more threatening to be poured into the world’s foreign exchange markets.

This trillion dollar injection of dollar liquidity is a base for being multiplied ninety-nine times by putting down just 1%. So finance ministers are beginning to ask themselves what is to stop the United States from creating enough credit to buy up all the real estate, all the companies and every bit of stock in the world – and make the currency gain to pay off the loans in devalued dollars. Without isolating the dollar by imposing currency controls, U.S. banks have an infinite capacity to create credit and buy up foreign resources.

Sellers of foreign real estate, companies, stocks and bonds turn the dollars they receive over to their banks, which turn them over to the central bank – which tries to hold down their exchange rate by buying U.S. Treasury bonds that yield only 1% interest. So the U.S. is betting that it can flood the global economy with easy dollar credit and achieve what used to require an army to conquer: to obtain ownership of foreign land and property, mineral rights and other assets. This is now done by financial aggression, without the expensive overhead of an armed invasion. It is like a neutron bomb: it doesn’t destroy property; it keeps it in place for the financial aggressors to appropriate."

Hence, the true purpose of owning a world reserve currency. I think Nomo helped make my point here. Gracias amigo.

Typical bait and switch. Make a killing, destroy the dollar in the process, then switch over to a new world reserve currency. Who ever said central bankers were stupid?

theoakman says

We’ll always need it and the best kept secret is that we are running out of it.

We're not running out of anything except easily exploitable energy. That's mostly what mining is: using energy, in huge amounts, to find, extract, and purify raw resources. The smarts go into where and how to efficiently apply that energy for maximum gain, but the driving factor is energy. Given inexhaustible energy supplies, the supply of raw elements is inexhaustible. On the flip side: no exploitable energy source; no raw materials, and it doesn't matter how smart you are. The days of discovering oil in you backyard in Texas are long gone, and so are the days of just sticking a straw in the sands of Saudi Arabia and oil gushing up.

theoakman says

Silver, while it is mined, is almost always in supply shortfall. The annual mining consistently falls short of meeting the demand deemed by the marketplace.

As far as I know, there is no such thing as "falls short of meeting the demand deemed by the marketplace" in the silver market. That only happens when some force like a government intervenes with price controls. Where are the price controls?

You seem a bit starry eyed by silver. Then again maybe I'm just kicking myself for selling for a small profit in Sept. before it really took off.

M8R-0dxnlp says

I think you guys will enjoy reading this article then…

http://michael-hudson.com/2010/11/dollar-war-in-detail/

An excerpt for the lazy ones here who can’t click on a link properly –

Ah, yes, Eric Janszen, AKA iTuilp. My God, that article is completely absurd, I don't even know where to begin. Pick a random sentence:

"So finance ministers are beginning to ask themselves what is to stop the United States from creating enough credit to buy up all the real estate, all the companies and every bit of stock in the world – and make the currency gain to pay off the loans in devalued dollars"

This is so mind blowingly stupid. What was to stop it from doing this 10 or 20 years ago? And who is "the United States"?

M8R-0dxnlp says

It is doing this in order to protect Japan’s export competitiveness by preventing the yen’s exchange rate from being forced up.

M8R-0dxnlp says

So finance ministers are beginning to ask themselves what is to stop the United States from creating enough credit to buy up all the real estate, all the companies and every bit of stock in the world – and make the currency gain to pay off the loans in devalued dollars.

You and the author have it completely backwards. Japan, China, et. al have been manipulating their currency to keep it weak so their exports remain cheap in the US. That is the root of all the problems. The dollar needs to fall to bring the trade deficit back to par. And it would without the manipulation by other countries... Further, if they let the dollar fall, then there would be no fears about the United States buying up all the companies and stock in the world--the purchasing power of the dollar would be severely reduced, making it impossible.

Other countries crying foul is the height of hypocrisy.

tatupu70 says

M8R-0dxnlp says

It is doing this in order to protect Japan’s export competitiveness by preventing the yen’s exchange rate from being forced up.

M8R-0dxnlp says

So finance ministers are beginning to ask themselves what is to stop the United States from creating enough credit to buy up all the real estate, all the companies and every bit of stock in the world – and make the currency gain to pay off the loans in devalued dollars.

You and the author have it completely backwards. Japan, China, et. al have been manipulating their currency to keep it weak so their exports remain cheap in the US. That is the root of all the problems. The dollar needs to fall to bring the trade deficit back to par. And it would without the manipulation by other countries… Further, if they let the dollar fall, then there would be no fears about the United States buying up all the companies and stock in the world–the purchasing power of the dollar would be severely reduced, making it impossible.
Other countries crying foul is the height of hypocrisy.

Well, given Michael Hudson's track record as an economist and advisor to countries that are being financially ransacked by the IMF, I have to think he knows what he is talking about. He is in the middle of the action, unlike most armchair economists. He helped Iceland recently by convincing their government to tell the IMF to phuck off. Iceland is rebounding quite nicely now (unlike Greece, Ireland, etc.). Check out the public's posted Michael Hudson's videos on Youtube for easy access to more information about what he does and why he does it.

Your response seems to be a regurgitation of the financial media's explanation of things, which is usually propaganda or a flat out lie. I've been daytrading for more than 12 years and I can tell you from direct experience that the explanations that appear in most (corporate-owned) financial news is an outright fabrication or lie. To defend such explanations is absurd.

Most financial bloggers in fact appear to be paid-for propagandists whose job it is to further the agenda of the central bankers. Very few of them ever openly discuss the Bank of International Settlements, for example, or the BIS's Financial Stability Board. In fact, if you do discuss these things in a neutral tone, you will be banned from their forums.

Of course, I don't expect you to have this type of direct experience. The tendency of such an individual will be to defend their beliefs at all costs without ever examining where these beliefs originated from, or who funded the source of the information.

Given that the mainstream media is now owned by five corporate conglomerates that all participate in the same privately-owned pro-communist thinktanks, I'd think you might think twice before going down the propaganda regurgitation path and then defending it.

Unless, that is, you are on the payroll.

By "United States" I believe Hudson is referring to the central banking oligarchy, which owns several powerful institutions in the US including the US Federal Reserve.