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August 18, 2006

Congress has spent far too much, running up budget deficits year after year. And Congress has promised the American people far more than the US can ever deliver. 

One thing is certain. The US must continue on the inflation path. A second thing is certain. With this much debt imbedded in the US economy, deflation would be deadly; thus the Fed will do absolutely anything rather than deal with or allow deflation

In the face of these facts, Americans have only one true defense against this depressing long-term picture. And that's to own gold or real money. I say this because the dollar is doomed as is every fiat paper currency that has ever been created. The question is not a matter of whether, it's simply a matter of timing. The fundamentals which will lead to the dollar's demise are already literally set in stone. 

What about protecting oneself in another currency? The problem is that the reserves of every nation are largely in US dollars. If the US dollar goes, it will take down every other paper currency with it. Despite the logic of this picture, many central banks are now diversifying by adding other currencies to their mix. Some such as China and Russia are increasing the meager gold portion of their foreign reserves. 

My guess (prediction) is that somewhere ahead as the bull market in gold reaches it's third or final phase, we'll see a worldwide panic to own gold. The panic will include holders of fiat paper from around the world as well as the various central banks of the world. The panic for gold lies a few years to perhaps ten years ahead. 

Holders of gold can relax in the knowledge that the only money that cannot go bankrupt is the intrinsic money that we call gold. This is the fact that no government and no central bank will admit to or deal with. It's the reason why, over the ages, nations and wise men have always opted to accumulate gold. Gold has always gone to the most powerful nations and the wealthiest individuals. These nations and individuals were not concerned with profits -- they were concerned with power and wealth…..

More and more fiat paper will flood the global economy. The greater the sum total of the world's debt, the greater the amount of paper needed to service those debts. The totals of debt in the US are far too great ever to be paid off. At least they will never be paid off in dollars which have anywhere near today's purchasing power.

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