In Jim Cook's Archive


John Williams starts out his March 23rd newsletter alert with this warning: “With a still-intensifying U.S. economic downturn, with the Fed moving as rapidly as it can to debase the U.S. currency, and with the outlook for the U.S. fiscal condition spiraling out of control, the outlook and timing for a massive U.S. dollar sell-off and eventual U.S. hyperinflation have taken turns for the worse.”

It’s hard to know for sure what’s going to happen on the inflation front. Certainly the government is practicing currency debasement on a grand scale. The degree of price inflation will probably hinge on what foreigners do. If the dollar rolls over, commodity prices will soar. The Russians and Chinese are pushing to knock out the dollars as the world’s reserve currency. Were that to happen, we would be in a world of hurt. Inflation would soar and business stagnate. National bankruptcy would be inevitable.

The Fed prefers a mild inflationary outcome. This “reflation” diminishes the government’s unmanageable debt. That way Americans can continue to borrow and live beyond their means. Asians will have to play ball and, if they won’t buy any more of our debt, at least they may not sell any. The Fed, however, has cleared the way to repurchase and monetize debt from foreign sellers. And if China and Japan won’t buy any more, the Fed will monetize (create money) to buy newly issued government bonds in place of the Asians. This is hyperinflationary.

Under any circumstances, events of the past few months can’t be good for the dollar. Temporarily, it has risen because of dollar purchases by investors to pay back dollar denominated loans. When this deleveraging process slows a bear market in the dollar will likely ensue. It’s shocking to see the degree of confidence and optimism in purveyors of bonds. Today’s buyers of munis, treasuries and corporates are fearless indeed. What new economic data exists to promote confidence in the U.S. dollar? A much better bet appears to go the other way.

One of the best ways to wager against strength in the dollar is with silver and gold. If the dollar falls, silver and gold should rise. With the economy still contracting, and with the rising possibility of inflation we can’t think of anything better to own in the face of this budding stagflation, which, if the monetary authorities and politicians are not careful, can turn into the worst of all worlds – hyperstagflation!

If you could hear me I would scream at the top of my lungs, “put 10% of your net worth into silver.” If you prefer gold, that’s fine. We just think silver can go up many more times than gold. It’s imperative you get these assets into your control. If you’re without silver or gold, I can only liken it to standing on a railroad track with a runaway freight rolling down the tracks towards you.

Please remember when you’re comparing our advice to what you hear from Wall-Streeters on financial TV, we’ve been right. We predicted this whole mess time and again. No regular guests on financial TV had a clue. They are still saying the same things. It’s time to get off the tracks.

Get the silver and gold into your physical possession. Buy a large home safe. Keep it at home or in a bank box. If you must store silver because of its bulk, then use HSBC, an approved commodity warehouse. We have arranged for you to store the bars in your name with the serial number of the bars on your storage certificate. Your assets have no connection to the bank’s assets. They’re yours.

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