September 2010

Thursday afternoon precious metals rebounded near nominal highs after early profit taking prompted dip buying. $1,309/oz. gold, up 5.7% for the month, silver at $21.74/oz. jumped 13%!

* "Euro gains helped push the dollar index to an eight-month low against a basket of currencies on Thursday....Analysts and traders said the market focus remained on the prospect of further quantitative easing measures in the United States and possibly in the UK. In contrast, the ECB appeared to be on a gradual path towards removing policy stimulus," reports Reuters.

* World Monetary Earthquake: "Within a single week 25 nations have deliberately slashed the values of their currencies. Nothing quite comparable with this has ever happened before in the history of the world. This world monetary earthquake will carry many lessons. Murmurings of such 'beggar-thy-neighbor' currency devaluations have once again sprung up amongst the financial literati and rightly so," reports KingWorldNews.

* Enjoying the Weak Dollar? You Could Live to Regret It: "The dollar's plunge has fueled worries of a global trade war as weak economies race to the bottom in devaluing their currencies. The dollar, though, seems to be taking the hardest hit as belief fades that US policymakers will defend it. 'We are witnessing a full, frontal, material and joint assault upon the dollar and sadly it appears that the best the dollar can do is 'bounce' for a day or two or three before the assault shall begin anew,' wrote hedge fund manager Dennis Gartman," reports CNBC.

* "The U.S. dollar is one step nearer to a crisis as debt levels in the world’s largest economy increase, said Yu Yongding, a former adviser to China’s central bank. Any appreciation of the dollar is 'really temporary' and a devaluation of the currency is inevitable as U.S. debt rises, Yu said in a speech in Singapore today. 'Such a huge amount of debt is terrible. The situation will be worsening day by day. I think we are one step nearer to a U.S. dollar crisis," reports Bloomberg.

* "The ratio of gold to silver dropped below 60 for the first time since October. Silver has outperformed the yellow metal since June 30, advancing 17% against gold’s 5.5% increase, as investors bought the commodity because of its comparative cheapness," reports Bloomberg.

* Pension Funds Could Give Boost To Gold: "Gold could get a further boost if pension funds begin to diversify into the metal. This trend looks set to continue and is significant as pension-fund assets are very large versus the small market that is gold. The entire global gold supply is worth less than $200 billion a year while the largest 300 pension funds collectively hold about $6 trillion in assets. Therefore, even a small allocation of 3% to 5% to gold would contribute to higher prices," reports GoldCore.

* Gold Bubble?...Not By This Fiat Measuring Stick: "If blind allegiance is pledged to a faith based currency, and unswerving trust is bestowed upon its guardians, than gold must appear to be trading at absurd levels. Conversely, if the actions of the Fed, Treasury, and Congress continue as they have, and no credible indication to the contrary has been remotely telegraphed yet, than history may prove the most astute forecaster. In such an environment, gold may not only not be in a bubble, but in the preliminary stages of a monumental bull market leading to the unthinkable. And the last point may be that when priced in future dollars, as when measured in Zimbabwe dollars or Weimer Republic Mark notes, whatever price level gold ascends to could be a point of permanence," reports Chris Blasi of NeptuneGlobal.com at GoldIRAs.

* "Barrick Gold, the world's number one miner of the precious metal, said on Monday gold prices could 'easily' outperform recent record highs to rise above $1,500 an ounce in the next year. Demand for gold has soared in recent years as the financial crisis boosted the precious metal's appeal as a haven from risk, while concerns quantitative easing may debase paper currencies have fueled buying of bullion as an alternative asset," reports Reuters.

*Greenspan on gold: “Fiat money has no place to go but gold,” said Alan Greenspan at the September meeting of the Council of Foreign Relations. According to economist David Malpass, who quotes the former Fed Chairman, Mr. Greenspan was responding to the question of why gold was hitting new highs. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “ simply don’t pan out.” Mr. Malpass characterized Mr. Greenspan's statement by saying, “He’d concluded that gold is simply different.” Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.” NY Sun

*Gold is the final refuge against universal currency debasement.
States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s. Former Fed chair Paul Volcker says, "We are no longer talking about a single country having a big depression but the entire world." Telegraph

*White House: Economic Recovery "Is Going To Take an Enormous Amount of Time" At the press briefing on September 21, White House Press Secretary Robert Gibbs said that the economic recovery “is going to take an enormous amount of time,” and when asked to clarify that, he said, “It’s going to take several years.” Gibbs’s dim projection comes more than 20 months after Obama’s top economic advisers predicted that if Congress enacted the president’s economic stimulus package, the national unemployment rate (7.7 percent in January 2009) would drop to 7.0 percent by the fourth quarter of 2010. Today, the national unemployment rate is 9.6 %. CNSnews.com

* 30% of Americans Call Themselves 'Supporters' of Tea Party -Gallup: "The number of Americans who say they identify with the Tea Party has remained remarkably consistent -- and not declined as the liberal media had predicted. A recent Gallup Poll finds that 30% of Americans say they are supporters of the Tea Party movement, while 27% say they are opponents – a 2% increase in support since March," reports CNSNews.

*"Right now there are very few reasons why anyone should expect improvement in the U.S housing market any time soon. But there are a whole lot of reasons why we could be looking at a very serious downturn in the U.S. housing market in the near future," according to endoftheamericandream.com. For 15 signs that part two of the double dip housing crash has begun, Click here.

* Are gold prices really rising, or is the dollar's value falling? Does $1,250/oz. gold represent true value or ... ? Discover six reasons why $1,200 gold is a better value than $600 gold in this free special report.

* Gold new record nominal high: "Gold futures surged as much as 2.4% to $1,276.50 an ounce, while the Dollar Index, which gauges the U.S. currency against six major trading partners, slumped 0.9% as investors pursued assets believed to be the safest. Gold, heading for the 10th straight annual gain, has offered insurance against fluctuations in the dollar and the euro, and the metal has outperformed most stocks and bonds this year," reports Bloomberg.

*Brett Gallagher, chief investment officer at Artio Global Investors, says “The U.S. market is in for a long, long spell of just-barely-there economic growth that will make the past few months of 'Are we double dipping?' an ever-present concern. That, and the specter of deflation, makes a strong case for more gold bullishness, on the theory that financial instability sends investors to the yellow metal. On the flip side, the market’s other fear — rampant inflation — plays to gold’s traditional strengths. Either way, gold wins, ” reports WSJ.

* "Gold prices got a lift Tuesday on inflation worries out of the U.K. and a weaker-than-expected eurozone industrial production report. U.S retail sales for August rose 0.4% vs. the 0.3% expected but didn't seem to dampen gold's rally. Investors, trying to protect themselves against more negative news, were buying gold as a safe-haven asset," reports TheStreet.

* "One by one, central banks are amassing major gold positions, proof positive that they want to participate in the world's most glamorous asset class. Think central banks taking investment advice from global hedge funds. Think about it, the price of gold has gained 12% in the past 30 days, 24% over the last six months and 192% over five years. Does that seem like a fad, a fluke?," asks Forbes.

*“Picking” their Protection! The poor economy and a record price of gold have renewed interest in prospecting in Western states where public lands are rich with deposits and small-scale operators are all but free from government regulation. Susan Elliott, geologist with Humboldt-Toiyabe National Forest in Nevada, said the rush is on in a state that is the fourth largest producer of gold in the world. Elliott linked a 75 percent increase in mining activity on the 6.3 million-acre (2.5 million-hectare) forest to the rise in gold prices in recent years. "We've got all types: individuals out there with pick and shovel and companies with heavy equipment," she said. "When gold goes over $1,000 an ounce, everybody becomes a miner," said Russ Bjorklund, minerals manager with Salmon-Challis National Forest in Idaho, reports Reuters.

* Our Debt Is More Than All the Money in the World: "We are in trouble. I have argued that the real national debt is about $130 trillion. Let's say I’m being pessimistic. Forbes, in a 2008 article, came up with a lower number: $70 trillion. Let's say the sunny optimists at Forbes got it right and I got it wrong. For perspective: At the time that 2008 article was written, the entire supply of money in the world ('broad money,' i.e., global M3, meaning cash, consumer-account deposits, checkable accounts, CDs, long-term deposits, travelers' checks, money-market funds, the whole enchilada) was estimated to be just under $60 trillion. Which is to say: The optimistic view is that our outstanding obligations amount to more than all of the money in the world," reports NatReview.

* Doomsday warnings gain ground: "Economists peddling dire warnings that the world's number one economy is on the brink of collapse, amid high rates of unemployment and a spiraling public deficit, are flourishing here. And the view that America is on a decline seems rather well ingrained in many people's minds supported by 65% of people questioned in a Wall Street Journal/NBC poll published last week. 'It is true: Today's economic problems are structural, not cyclical,' argued New York Times editorial writer David Brooks. He said the United Sates is losing its world dominance much in the same way the British Empire began to crumble more than a century ago," reports AFP.

* Regulators Back New Bank Rules to Avert Crises: "The world's top bank regulators agreed Sunday on far-reaching new rules intended to make the global banking industry safer and protect international economies from future financial disasters. The new requirements will more than triple the amount of capital that banks must hold in reserve," reports NYTimes.

* Kitco Metals eConference News: "Two veteran analysts say gold and mining shares remain among the better opportunities available to investors, given the continuing economic clouds. 'The old maxim of holding....anywhere from 3% to 10% of your portfolio in gold has taken hold again,' said David Coffin, co-editor of Hard Rock Analyst. Doug Casey, chairman of Casey Research, said the economic problems are not just a 'period of turbulence, but the most serious thing since the industrial revolution.' He foresees 'the greater depression' with a period of time when most people’s standard of living drops significantly," reports Kitco.

* Last week gold prices hovered near $1,250/oz, while silver prices rose 1% near a two-year high of $20/oz. Silver prices are now up 11% over the last three weeks, while gold prices are up 2.5%.

* Dollar's declining role in global trade: "China and Russia plan to start trading in each other's currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar's role in global trade. 'Gradually the dollar is being eliminated from the foreign-trade settlement flows,' said Dariusz Kowalczyk, a Hong-Kong based senior economist at Credit Agricole CIB. 'People are beginning to trade Asian currencies without intermediation via the dollar.' China may start trading its currency against the ruble within weeks, three bankers told Bloomberg.

* The era of economic illusion is over: "There is a superficial allure to printing money, while spending more than we earn. It is the course preferred, in one way or another, by all the candidates... They pretend to offer a softer option, a more agreeable way out of the chaos. There is none. After too many years of living an economic illusion, we must confront our uncomfortable reality. It was J K Galbraith, the American economist and diplomat, who concluded that there are two classes of forecasters: 'Those who don't know – and those who don't know they don't know.' He was right, but only partially. In today's febrile (feverish) financial environment, a third class of forecaster has emerged. Those who thought they knew, but now know they didn't," reports Telegraph.

"In the first 19 months of the Obama administration, the federal debt held by the public increased by $2.5260 trillion, which is more than the cumulative total of the national debt held by the public that was amassed by all U.S. presidents from George Washington through Ronald Reagan. The CBO predicted this week that the annual budget deficit for fiscal 2010, which ends on the last day of this month, will exceed $1.3 trillion," reports CNSNews.

* "People are just really going after the physical metal," says James Turk, founder of GoldMoney.com, who attributes gold's recent rally to supply and demand constraints. The World Gold Council said in its second-quarter Gold Demand Trends report that the supply of gold grew 17% from a year earlier while gold demand grew 36%. Turk is looking for $1,800 to $2,000 gold this year," reports TheStreet.

* "The United States slipped from second to fourth in the latest World Economic Forum competitiveness survey, behind Switzerland, Sweden and Singapore. It had fallen from first place the year before. Large deficits and a weakened financial system have made the U.S. less competitive in the global economy, the World Economic Forum said in its annual review of the competitiveness of countries. In the U.S., the entrepreneurs cited access to credit and government regulation among their chief concerns," reports WashPost.

* "Gold prices were gunning for their record intraday high of $1,264/oz. Tuesday as investors feared eurozone banks might be in worse shape than previously thought. The Wall Street Journal reported over the weekend that the eurozone bank stress tests were lenient and that 91 banks used slack guidelines to avoid revealing exposure they had to sovereign debt. James Moore, analyst at thebulliondesk says gold is continuing to "erode overhead resistance as investors turn towards safe-haven asset classes. Gold requires a close above $1,254 to confirm a challenge of the all-time highs," reports TheStreet.com.

* "Bloomberg's the most accurate gold forecaster tracked in the last three quarters, UniCredit SpA’s Jochen Hitzfeld, raised his estimate for the metal’s average price next year by 12% to $1,400/oz. Bullion will average $1,600/oz. in 2012, Munich-based Hitzfeld said," reports Bloomberg.

* "Markets go through 17.6-year alternating cycles where investors can either throw darts at the wall and everything goes up during the fat years — or wait until the market bottoms out during a lean cycle, like the current one. We’ve got about 7 more years to go on the lean cycle," said Art Cashin, director of floor operations at UBS Financial Services to CNBC.

* Gold entering a virtuous circle: "Fundamental and technical factors for gold are now in total harmony and gold is entering a virtuous circle that will drive the price up at its fastest pace since this bull market started in 1999. We expect gold to start a substantial rise now which will continue for 5-10 months before any major correction. We are now entering a period when most major asset classes and in particular stocks, bonds and currencies are starting a major decline. Physical gold and possibly other precious metals directly controlled by the investor will be a vital part of a wealth preservation portfolio," reports Egon von Greyerz at Goldswitzerland.

* $1,500/oz. gold in coming quarters: "The technical picture for gold again turned positive. Strong physical demand...allowed the metal to find a bottom...we think most economic factors are in place to drive the price towards $1,500/oz. in the coming quarters. Investors are likely to realize that more fiscal and quantitative easing is needed to keep the economy in the developed world going. This should fuel enough paper money concern to render price support," reports analysts at UBS AG.

* Silver prices are up 10% over the last two weeks, gold is up nearly 3%. "Friday investors cheered as unemployment rose to 9.6% but only 54,000 jobs were lost, which was much better than expected. The private sector added 67,000 jobs. The Wall Street Journal reported that the local Muslim government in Kelantan, a Malaysian state, unveiled a gold coin as a substitute currency in August," reports TheStreet.

* 'Recovery Summer' Ends With Economic Pothole: "This was supposed to be the season the economy heated up, thanks to a wave of public works projects, funded by the government's stimulus program. But summer is coming to an end, and the recovery has not taken root. 'There are still 15 million people looking for jobs. There's still a great deal of uncertainty,' said White House political adviser David Axelrod," reports NPR.

* "Economic Terror Alert", Glenn Beck: 9.1.10 Watch ~ FOX Transcript
Fox News superstar Glenn Beck graphically laid out the logic for his belief that owning gold is urgent crisis protection, like seeking shelter under a door frame in an earthquake. He explains brilliantly why gold is our only insurance against a complete collapse of confidence in stocks, bonds, real estate, and the dollar, as secured by U.S. Treasuries. He views this "golden doorway" as the threshold, beyond which lies cultural and economic "insanity". He concludes by calling Americans first to turn back to God, then to gold.

* September Song: "The time has come. Look to the skies. The price of gold is on the rise. In bullish years, on Labor Day, The price of gold becomes in play...The socialists, they shout "unfair." They’re falling with Obamacare. We see the rise of Party, Tea. It's on the side of you and me," writes Howard Katz of thegoldspeculator.com.

* In August gold prices rose 5.5%, while silver jumped up 7%. "Will gold continue to shine?" asks CNBC, as a decade-long bull market continues to climb a wall of worry. "Yes!" says veteran gold bug Frank Holmes, for more reasons than his short TV segment allowed him to cover. Thankfully the gold bears still have a following, as the London Telegraph story Gold: is it really a safe haven? outlines. Without these gold bears prices would already be $1,500-$2,000/oz.

* Gold Rallying to $1,500: "Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds. Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21," reports Bloomberg [Ed. Note: Gold's Future Bright -80 experts.

* How will gold perform in a double-dip recession?: "As the U.S. economy heads for a double dip it will likely try and inflate itself to avoid a depression. Meanwhile major economies are already diversifying out of the dollar. The big picture for the long-term could not be better for gold, than it is now. Gold has proved capable of performing well in deflation, in uncertainty, in fear. Internationally it is liquid in all parts of the world. It is internationally acceptable cash. More than that, it is an effective counter to the devaluing of currencies through quantitative easing or currency devaluations," reports Mineweb.

* Get Ready, Get Set, Gold! - the best months are just ahead: "Looking at more than four decades of seasonality, September has been the best month of the year for gold and gold stocks. The gold price has climbed an average of 12.4% during the 2001-09 seasonal rallies even as the price steadily moved into four digits. Based on the long-term record, this may be a good time for investors to consider establishing or adding to a gold or gold-stock position in advance of seasonal demand growth," reports Mineweb.

* Last week silver lead the worldwide rush into hard money, rising 6%, while gold inched up 1%. "Gold is its own money, and no government can print or inflate it. Historically when paper money's value evaporates, gold rapidly gains in relative value," writes Swiss America Chairman Craig R. Smith in a new special report.

* Last week "Fed Chairman Ben Bernanke said the Fed will consider making another large-scale purchase of securities if the slowing economy were to deteriorate significantly and signs of deflation were to flare. Bernanke's remarks, prepared for delivery to a conference here, came 90 minutes after the government said the economy slowed sharply in the second quarter to a 1.6 percent pace," reports AP.

* Snapshot of economy bleaker: "Consumers can't be sure their jobs are safe, with unemployment so high. Business executives don't know if sales and profits will grow enough to justify adding jobs. And potential changes to tax laws at the end of this year and other policy reforms also make it hard to plan ahead, economists say. 'People have been overwhelmed by uncertainty,' said Ethan Harris, an economist at Bank of America Merrill Lynch," reports AP.

* "The World Gold Council's latest quarterly recap of the gold market: demand is strong (up 36% from a year earlier), supply (up 18%) is not keeping pace, and global economic worries are driving investors toward gold as a safe haven. Investment demand in the second quarter of 2010 more than doubled compared to the same period in 2009," reports Frank Holmes at Kitco.

* Silver `Looking Cheap': The ratio of gold to silver dropped to a three-week low after gold's rally to the highest level in eight weeks prompted some investors to buy the white metal. An ounce of gold bought as little as 64.96 ounces of silver today, the lowest amount since Aug. 5, according to Bloomberg. Silver has outperformed the yellow metal since Aug. 23, gaining 6% compared with gold's 1.4% gain, as investors bought the white metal because of its relative cheapness to gold. Silver is unique in that it is a precious metal and an industrial metal," reports Bloomberg.

* Global Economic Fears Push Investors Out of Stocks: "If people had confidence, they wouldn't be pouring money into Treasury securities yielding nothing, and paying more than $1,200 for an ounce of gold," said Morris Mark, president of Mark Asset Management. "There's a concern here that the strength of the world economy is not going to be able to get us out of this," reports WSJ.

* Housing weakness stalling economic recovery: "New U.S. single-family home sales unexpectedly fell in July to set their slowest pace on record, government data showed on Wednesday. The Commerce Department said sales dropped 12.4% to a 276,000 unit annual rate, the lowest since the series started in 1963. Meanwhile, sales of previously owned homes dropped 27% in July to their slowest pace in 15 years. While the end of the tax credit is distorting the housing data, a 9.5% unemployment rate is also worsening the situation. Continued housing weakness is holding back the broader economic recovery, reports CNBC.

* Economy Caught in Depression, Not Recession: "Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression," Gluskin Sheff economist David Rosenberg told CNBC on Tuesday. "The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed. "False premise," Rosenberg said. "And guess what? We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%. Gold is operating on its own particular set of global supply and demand curves and should be an out-performer, especially when the next down-leg in the U.S. dollar occurs."

* "With the trillions of dollars in government spending and stimulus will come higher taxes and a higher cost of living in 2011. Government-induced monetary inflation will, like locusts, reduce the value of our life-savings dollars to mere pennies, unless our dollars are converted into something that political fakery can't destroy. Smart money has snapped out of the political trance and begun exchanging paper dollars for gold, the world's best anti-dollar!" writes Swiss America Chairman Craig R. Smith.

* "The Dow Jones Industrial Average will lose about half of its value over the next couple of years as it follows a Nikkei-like pattern of several sharp rallies in an overall decline, according to Charles Nenner of Charles Nenner research. Stocks are currently in a bear-market rally...leading indicators suggest the Dow will drop to 5,000 in the next two to two-and-a-half years, Nenner told CNBC. Nenner is bullish on gold and silver over the longer term and expects the precious metals to start a new leg higher by the end of the year."

* Rethinking Gold: What if It Isn't a Commodity After All?: "For a long time, we've all heard that gold is a commodity — no different, really, from silver or wheat or pork bellies. The implication [of the long-term opposite correlation between the dollar and gold prices] is that gold isn't a commodity — at least not one that hews to the definition of something that people and industry consume. Instead, "gold is a currency" whose daily price is a gauge of the market's concern about the "potential diminishment" of the purchasing power of the dollar and other paper currencies, says Paul Brodsky, a principal at New York's QB Asset Management. If he is correct, it is the potential longer-term weakening of the dollar that is the real issue for the gold market, not inflation or deflation," reports WSJ.

* Groundwork Being Set for Major Gains in Gold and Silver: "While gold has outperformed all other asset classes in the past ten years, an analysis of our current economic and financial environment indicates that the ongoing increase in precious metals has only just begun and should ensure a sustainably positive environment for gold and silver, gold and silver shares and warrants in the years to come. Bull markets end in euphoria, and this substantiates our argument in favor of an imminent transition to an accelerated trend phase to somewhere between $3,000 and $10,400/oz. for gold, between $75 and $650/oz. for silver and in excess of $250 per barrel for crude oil," reports Ronald-Peter Stöferle, CMT, Erste Group Bank AG, Vienna, Austria at Munknee.

* Gold prices closed up 1% last week, while silver prices dipped 1%. Ongoing economic worry is supporting precious metal prices as the summer draws to an end. September has been the best month of the year to buy gold, averaging 12.4% growth during the seasonal rallies, according to researchers at Mineweb.com.

* Small Investors Flee Stock Market: "Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market. Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute. People have lost a lot of money over the last 10 years in the stock market...In the financial markets, there is one truism: flow follows performance," reports NYTimes.

* Getting Ready For A Dollar Collapse? "Could the Federal Reserve's decision to restart its quantitative easing program trigger a dollar collapse? That's what John Hussman, a fund manager, argues in his latest weekly note to investors. And the case he makes is strong ... as long as one ignores that other central banks don't want and are unlikely to accept a big dollar devaluation. The result will benefit borrowers at the expense of savers worldwide. But, then again, maybe given the state of global imbalances–too much debt in the U.S. and other Anglo-Saxon economies; too many assets held by Chinese, Japanese and oil-producing countries–maybe a massive bout of global inflation is the only way forward," reports WSJ.

* "Last week's jobless claims rose to a nine-month high and manufacturing in the Philadelphia region contracted. The Conference Board said its index of leading economic indicators climbed 0.1% in July, with the lackluster rise pointing to slowing growth. The reality of the current recovery is that more sectors of the economy remain weak than are expanding," reports Marketwatch.

* Western Economies Face Hyperinflation: "There will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park. The world financial system has temporarily been on life support by trillions of printed dollars that governments call money. But the effect of this massive money printing is ephemeral since it is not possible to save a world economy built on worthless paper by creating more of the same. The hyperinflationary depression that many western countries, including the US and the UK, will experience is likely to mark the end of an era that has lasted over 200 years since the industrial revolution," reports Egon von Greyerz of Matterhorn Asset Management.

* The Federal Reserve began buying U.S. Treasuries, as part of a plan recently announced to help pump money into the economy. The global macro data will set the stage for a supportive gold buying environment as more money in circulation can lead to devalued currencies," reports TheStreet.

* Hot money in inflation mode: "The government reported producer prices rose for the first time in four months in July, while industrial production rose more than expected. The Fed's cheap money, or near-zero interest rates, after having failed to inspire much lending and borrowing from banks and consumers, is for sure leading investment banks and hedge funds to make big bets on such things as gold. Eton Park Capital Management LP, a hedge fund, revealed it took a big stake in the SPDR Gold Trust ETF on Monday with a regulatory filing," reports Marketwatch.

* "Renewed concerns over the growth of the U.S. and global economies.... and safe-haven plays are likely to continue to lift gold prices. Barclays Bank said gold is comfortable wearing its 'currency hat' because of a return to worries over macro economic fears, so investment demand should support prices in the months to come," reports KitcoNews.

* Obama tax increase would be 'bullet in the head' of recovery: "U.S. Chamber of Commerce economist Martin Regalia on Monday said the tax increases advocated by President Obama would essentially kill any chance for an economic rebound. "That's what you're suggesting, is a corporate bullet in the head," Regalia said. "That is going to be a bullet in the head for an awful lot of people that are going to be laid off and an awful lot of people who are hoping to get their jobs back," reports TheHill.

* Economists Want Policy Makers to Back Off: "30 out of 48 economists.... said the economy doesn't need any more fiscal or monetary stimulus. Six economists said more fiscal stimulus is necessary, while five want more monetary stimulus from the Fed and seven said the economy could use both. The survey was conducted prior to the central bank's announcement last week that it would reinvest proceeds from its mortgage-backed securities and agency debt portfolio into Treasurys, essentially boosting monetary stimulus. 'The economy needs government to get out of the way,' said Stephen Stanley of Pierpont Securities," reports WSJ.

* The End of American Optimism: "There seems to be a structural change in the American economy. The relationship of household debt to income has proven unsustainable. The ratio is normally established somewhere below 100%, but in 2007 the debt ratio hit 131% of income. It has now fallen to 122%, but at this pace it would take another five years to bring it under 100%. The pre-bubble norm was 70%. To get to this ratio again, debt would have to be reduced by about $6 trillion. In the meantime, we may well be looking at a vicious cycle of defaults that in turn would produce credit tightening and still more economic weakness," reports WSJ.

*With gold attaining a new nominal high, Martin Murenbeeld, chief economist for Dundee Wealth Economics gives nine bullish arguments for the yellow metal. 1) Global fiscal and monetary reflation - The world's major economies have taken on extensive amounts of debt to keep their economies afloat. The struggles of Greece and other nations in Western Europe haven't gone away. The U.S. has spent hundreds of billions of dollars in stimulus money and is still losing jobs. 2) Global imbalances - The dollar has benefited from the troubles in other countries in its role as a relative safe haven. "Relative" is the key word - roughly $10 trillion is expected to be added to the U.S. federal debt burden through 2019 and the U.S. trade imbalances are huge. These trends stand to weigh on the dollar and support gold's safe haven status over the longer term. 3) Global foreign exchange reserves are "excessive" - Global foreign exchange reserves have expanded exponentially in just the past few years reaching $8.17 trillion in April 2010. Meanwhile, the gold reserve ratio has dropped significantly since 1980. For his other six reasons, see Mineweb.

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Introduction

"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice."
- George Washington
Letter to J. Bowen of Rhode Island, January 9, 1787

"Today was Presidents' Day. Congress commemorated George Washington throwing a dollar across the Potomac by throwing $780 billion down a rat hole."
- Jay Leno
The Tonight Show

The United States is digging the biggest economic hole in human history.

This hole of debt is now so deep that, if you listen carefully, you can hear the voices of Chinese creditors asking one another if they will ever get back the $900 billion they have lent to us.

This hole of debt is so wide that it threatens to collapse the foundations not only of the U.S. Dollar and economy but also of other major currencies and economies around the world.

The global danger from this is so dire that even formerly free-spending European welfare states are responding with austerity measures and huge government spending cuts.

At the summer 2010 gathering of G-20 nations, Germany, the United Kingdom and other American allies urged President Barack Obama to join them in reducing spending.

President Obama refused. He instead has chosen to steer the United States in the opposite direction, away from austerity, time-proven prudence and government belt-tightening.

This is ironic because Mr. Obama and the congressional leaders of his party have been moving as fast as they can to remake the United States in the image of high-tax Eurosocialist cradle-to-grave (or should we say abortion-to-euthanasia-for-granny?) welfare states.

But at the same time Obamacrats are moving America to the left, several of the biggest European countries, seeing the error of their past ways, are moving right. They are now shrinking socialist aspects of their societies, reducing government spending and the tax burden on their citizens and companies, and moving towards free enterprise.

Money From Nowhere

Mr. Obama has said that he plans, in effect, to tax and spend America back to prosperity with yet more trillions of dollars - with more than four of every ten of them borrowed - in stimulus funding.

Economists are concerned about this for many reasons:

One is that this risky policy has never before been attempted on so large a scale, with the economy of the entire planet and the well-being - even the survival - of billions of people at stake if Obamanomics fails.

Another is that such redistribution of wealth is unjust, immoral, riddled with Chicago-style corruption, and inefficient. After destroying a society's wealth, it redistributes poverty - but not equally; government-favored fat cats will get fatter.

But the most immediate reason economists are concerned about Mr. Obama's policies is that the United States is already bankrupt.

We have no more money to spend, and even if government expropriated every penny earned or owned by the rich, this would not provide enough to bankroll the ambitious agenda of Obamanomics.

We no longer have enough genuine wealth to buy our way out of the trap of debt that we continue to dig deeper and wider every day.

Few Americans fully understand where we are, how we got here, how today's economic crisis puts humankind's future at risk, and how with the information in this book individuals can survive and even thrive after the dollar crash and world economic system cave-in that is coming.

Go Ask Alice

Warning: what you will discover by reading this book is disturbing, even frightening.

To paraphrase the movie "The Matrix," if you prefer not to know the truth, put down this book now and you will awaken tomorrow morning to your usual bewildered view of a mysterious world economy.

If you read this book, you will never again be able to see the world in that old way.

Keep reading and you will discover, level after level, just how deep the Obamanomics rabbit hole goes, and how this is key to President Obama's apparent master plan for what he calls a "fundamental transformation" of America.

President Obama has only one way he can carry out his big spending plans.

Because the United States lacks the money needed to pay our debts, the United States and its Federal Reserve Board will simply print more.

Lots more.

Mr. Obama apparently intends to create enough paper money to build an escape ramp out of the debt hole that is devouring us, and perhaps enough to fill the hole completely.

Does this sound crazy?

Governments have done this before, and in this process that economists call "monetizing the debt" have almost always crashed their own currency and economy.

Despite - or perhaps because of - this risk of fatally crashing the dollar, President Obama's printing of an almost-limitless supply of money out of thin air has already begun.

In 2009 the U.S. money supply effectively doubled, and this is only the beginning.

The amount of such fiat money - a term economists use to describe money whose only value comes from a government command, a fiat - needed to pay America's already-existing debts is literally astronomically large.

Buy Me to the Moon

$4.4 Trillion is a lot of money.

A tightly-packed stack of 4.4 Trillion $1 bills would reach from the Earth to the moon 238,857 miles away.

This stack of money would then continue for an additional 59,753 miles, enough to travel around Earth's equator 2.4 times.

Since 2007, when Democrats took control of the U.S. Senate and House of Representatives, in a mere 31 months the Congress increased the Federal Government's 10-year spending baseline by more than $4.4 Trillion.

Congress has no revenue to pay for this additional spending. The Federal Government already borrows 41 cents of every dollar it spends.

By August 2010 Uncle Sam had already run up on this year's unpaid bar tab, our annual deficit, more than $1.47 Trillion so that politicians could stay intoxicated with ideological power and give vast stimulative spending to their cronies and campaign contributors and to buy votes.

The rest of us will sooner or later be paying the government's bills, of course, in one way or another. $4.4 Trillion is equivalent to more than $57,000 for every family of four in America.

Since only approximately 53 percent of us actually pay federal income tax, you should figure that you and your children and grandchildren will be paying at least $110,000 in today's dollars in taxes, higher prices, lost opportunities and social deterioration just for this $4.4 Trillion spending spree.

The total price we will pay for Obamanomics, however, will be immeasurably higher than this.

President Obama, his party, and his predecessors of both parties have done more than loot America's piggy bank.

They have broken the bank and the U.S. Dollar itself, as will soon be evident to everyone.

They have wounded our national currency so badly that it will almost certainly die.

Because of this, the world economic system built on the dollar is already beginning to tremble.

Read the rest of the Introduction of Crashing the Dollar at crashingthedollar.com
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