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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Richard Russell
February 23, 2009
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Fed Chairman Bernanke knows that if you create enough money, in fact, "too much money," you can halt deflation. An ocean of money washing over a deflation-beset economy should "drown out" deflation and turn it into inflation. At any rate, that's the Bernanke concept, and Bernanke is acting on his theories. "You can't have deflation in the midst of an avalanche of money creation."

Therefore, the Fed is going to double up on money creation, and if that doesn't halt deflation, then the Fed will double up again -- and again. But what if this frenzied creation of currency sinks the dollar? Then, thinks Bernanke, "So be it," but a sinking dollar is preferable to Great Depression II. If the dollar has to be devalued, then that's the penalty we'll have to pay to avoid a horrendous deflationary depression that would be out of the control of the Fed. Besides, if the dollar is devalued, that might not be such a bad thing, since a devalued dollar would render all dollar-denominated debt easier to handle, easier to pay off. Ben Bernanke says "go for it," and to hell with the dollar.

All this is not lost on true money -- gold. There's a very slow-growing amount of gold in the world and a rapidly-growing amount of dollars. Money creation is in a bubble. Gold is now choking on an ever-greater pile of dollars, and gold's reaction is to cost more, since the dollar-to-gold ratio is climbing higher almost daily. Up to now, the public doesn't "get it." The public has been living so long with faith in fiat money, that it hasn't dawned on the American public that dollar-creation is a Ponzi scheme that dwarfs anything that Bernie Madoff ever dreamed up.

Here's the Fed theory -- Keep the money supply climbing by a itty-bitty 2% a year, and the ignorant US public will never notice the "stealth" inflation. But gold will notice the inflation of the currency, so every once in a while, the Fed will boost interest rates, set off a recession, and watch gold swoon. But ultimately the game comes to an end. Blow up real estate into a bubble and you're playing with fire (thanks, Alan Greenspan). The great danger in a real estate bubble is that real estate is collateral for everything. The idiot banks (frantic for yield) gobbled up billions of dollars worth of fraudulent mortgages, and then, without a warning, the giant real estate bubble collapsed. It tumbled over. Result -- the banks and Wall Street giants, up to their necks in worthless mortgage paper, struggled with mass bankruptcy. Loaning froze from New York to California, and dreaded deflation set in. All asset classes except gold headed south.

Currently, the greatest economic correction since World War II is in progress. Sixty-four years of inflation and overpriced real estate is in the process of correcting. Toxic real estate paper (mortgages) is everywhere, and banks struggle to survive. The toxic paper is in money market funds, 401K plans, banks, pension plans, insurance companies. The giant inflated economic balloon has sprung a leak and the balloon-bubble is sinking toward earth. Debt is everywhere, and debt must be paid off. Which is why I wrote, years ago (and I was ridiculed when I wrote it), that "huge debt is a synthetic short against the dollar." Suddenly, everybody now needs dollars to pay off their debts and avoid bankruptcy. Debt became a short against the dollar. If you have debt and you want to remain solvent you NEED dollars. Suddenly, there is a shortage of dollars. Against everyone's expectations, the dollar has rallied.

There's only one form of wealth that is free from debt and is no one else's liability. As such it represents PURE WEALTH. I'm referring to gold. Gold is the ultimate essence of wealth, because it needs no government to back it, it needs no guarantee from a central bank to state that it is money. Gold is money ITSELF. But the central banks object -- "No, we make the money. Gold is a relic of the past, it's only WE who make the money." Governments back us, the Fed insists "we make the money," and we're captivated by the power of government fiat.

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