… which is what you get when you read Mr. Noland reporting that “The M2 (narrow) ‘money’ supply surged $39.8bn to a record $8.343 TN (week of 3/9)” which means, “Narrow ‘money’ has now inflated at an 18% rate over the past 25 weeks and $766bn over the past year, or 10.1%”! Yikes!

The “yikes!” comment at the end is chosen specifically to indicate that the preceding section is “Bad, but I’ve seen worse, and we will see a lot worse over time as the treacherous Federal Reserve will continue to be required to create more and more money so that the moronic, desperate Congress can borrow it so that they, their parasitic entitlement friends and more and more desperate people can merely survive at this point, and who are all more and more destitute from the huge inflation in the money supply, that produced the higher prices, that produced the bubbles in stocks, bubbles in bonds, bubbles in houses, bubbles in derivatives and bubbles in size of government, that has now produced the bursting of the aforementioned bubbles that were caused by the foul Alan Greenspan, insane chairman of the despicable Federal Reserve from 1987 to 2006, creating all the mountains of excess money and credit that made it all so, so horribly possible.”

Actually, this $766 billion increase in the M2 money supply, normally staggering and enough to send me dialing “9-1-1” on the phone while gobbling nitroglycerine pills so that when the police dispatcher answers “Nine one one, what is your emergency?” I say “Hebba ah uh mmmba!” – now seems quite mundane compared to the loathsome Obama administration and the despicable Congress plumbing the depths of stupidity born of desperation with their new $1.9 trillion budget deficit for next year!!!

Not surprisingly, then, the Economist magazine shows that our federal governmental budget balance, as a percentage of 2009 GDP, is already a NEGATIVE 13.7%, which can be interpreted to say that just the borrowing to finance the stunning deficit-spending by the federal government for the next year constitutes almost 1/7th of the total value of every good and service (GDP= $14 trillion) that this whole freaking country produces in a Whole Freaking Year (WFY)!

And this humongous 13.7% of GDP is just the BORROWED part of one year’s federal government spending!!! Astounding!

What can one say except “We’re freaking doomed to death by inflation, and that means that anyone not buying gold Right Freaking Now (RFN) either has something very, very wrong with them, or they are more victims of the Mealy-Mouth Mainstream Media (MMMM), who are not “reporters” or “investigative reporters” anymore, whose original purpose was to expose corrupt government and pursue justice, but they are now all girly “journalists” who wish to discover the painful emotional traumas suffered by tragic “victims” of various kinds, yet turning it into a heroic story of hope, renewal and redemption.

So, even more embarrassing, America used to strut around the world, scolding countries that got into this deficit-spending-gone-kaput mess, sanctimoniously preventing them from increasing their government deficit-spending as a condition of getting bailout loans from the U.S., the International Monetary Fund, the World Bank, miscellaneous secret government slush funds and terrorist goon-squads, and instead we insisted that they increase taxes and cut government spending! Hahaha!

Now, in a spate of irony, the tables are turned, and we smug Americans are doing what we tried to prevent other countries from doing when their economies fell apart after their stupid governments overspent, over-borrowed, over-leveraged, over-estimated and over-enacted a lot of overly-stupid legislation that forever changed the economy for the worse.

And not only are we doing what we wouldn’t let anyone else do, but we now have a much larger negative budget-deficit as a percentage of GDP than all the others in the list of top-30 major countries, by size, of the world! We’re the absolute worst! Hahaha!

And although I can hear you whining and complaining about how this is sure to make me launch a Screaming Mogambo Bellow Of Outrage (SMBOO), I am still going to make it all worse by noting, during the SMBOO, that industrial production around the world is getting hammered, too, being down 11% in the USA, down 11% in Britain, down 9% in Germany, down 4% in France, a terrifying 24% in Spain, (in the whole euro area, industrial production is down a hefty 12%), down a scary 31% in Japan, and down a terrifying 43% in Taiwan! Yikes!

It’s a good thing that we have gold, silver and oil to protect ourselves! Whee! This investing stuff is easy!

Source: U.S. Government Buys Hypocrisy With Fiat Currency

Can sound money really bring about peace?  Actually, it plays a big part in peaceful international relationships.  Money based on commodities, rather than paper, is not subject to government manipulation, and is a key component to free and honest trade.  History shows that if countries engage in trade with each other, their governments tend to find ways to get along for the same reason you do not kill your customers at your place of business, even if they occasionally annoy you.  If someone outright cheats you, however, you may engage in “war” by taking them to court, for example, and the relationship will sour.  Governments and central banks with unfettered power to manipulate currency also have the ability to cheat their creditors.  One way they do this is to simply create enough currency to pay off debts.  This devalues the currency and “cheats” the recipient out of what they are owed.  It would not be fair if you watered down your product the way our government waters down its currency, so it is not hard to understand, in these simplified terms, why loose monetary policy contributes so much to ill will and war around the world.

Sound money, on the other hand, simply is what it is.  Removing governmental power to manipulate money, removes the temptation for government to spend, print and cheat.  Sound money ensures that our government’s spending priorities would be brought into sharp focus and reduced to only what we can afford.

Sound money also limits the ability to wage wars of aggression.  Imagine how much more careful Washington would have to be about starting a war if they did not have this financial sleight of hand at their disposal!  Fiat currency allows government do expensive things they should not be doing while paying the bills with cheap money.  The Federal Reserve has lately been auctioning off large amounts of treasury bills as a way to finance the wars in Iraq and Afghanistan, and our crushing entitlement burden.  The resulting devaluation of the dollar is quickly eroding our image as a good trading partner in the world.  As a consequence, there is therefore more talk of economic isolation and war.

This vicious cycle of spending, fighting and inflating is not what Americans want.  It is what the government wants, and it has had to deceive the citizens into allowing and supporting it.  Sound money curbs the government’s ability to engage in these shenanigans and reduces the wars we fight to only truly defensive ones, for which Americans are more than willing to stand and fight.  So in these ways, sound money is very conducive to peace.

Another benefit of sound money is financial security.

Can sound money give you financial security?  There is something very comforting in knowing that what you earn today will retain its purchasing power in the years to come.  Indeed, the same silver dime that bought a loaf of bread in the 1960’s can still buy a loaf of bread with its precious metal content – which is worth about $1.00 today.  An ounce of gold has always been about evenly exchangeable for a finely tailored men’s suit, which these days is roughly $800.  And in these days of fluctuating gas prices, when priced in gold, oil has been stable.  Meanwhile, since the creation of the Federal Reserve, the fiat dollar has lost 94 percent of its purchasing power.  The erosion of purchasing power rapidly accelerated when it was completely uncoupled from gold in 1971.  This sort of fluctuation in the medium of exchange creates a lot of uncertainty in the marketplace and necessitates that you either take extraordinary defensive maneuvers, or face financial ruin.  Trusting in government for financial security in retirement is not a safe option.  Indeed, a recent study by the Consumer Bankruptcy Project shows that bankruptcies among those 75 and older has more than quadrupled since 1991.  This represents wealth and savings that have been eroded by inflation, and trust in entitlement promises that were more fantasy than reality.  Even with the pittance that social security pays to seniors, it is bankrupt and bringing the economy to its knees.  It is no wonder that many in the younger generations want no part of it, and they should not be forced into a failed system.

On the other hand, holding physical gold can defend against aggressive government monetary policies that threaten to inflate away the value of your life savings.  During the hyperinflation in post WWI Germany, what used to be a comfortable nest egg was suddenly the value of a postage stamp.  If one held just a portion of their savings in precious metals, the crisis was greatly softened.   Gold will never be worth nothing, even if the exact price fluctuates.  There is a famous photograph, however, of a German woman during this time period burning piles of tightly bound banknotes to keep warm.

Imagine if the money you earned had honest, stable value, or even appreciated like an investment!  No such special measures, like converting dollars to gold, would be required to ensure that your savings would sustain you in your golden years.  That is the way it could be and is supposed to be.  However, the government’s thirst for power will not be easily, or cheaply, quenched.  Fiat currency is one tool governments have to extract wealth quietly from the working class.  It is time for the people to wake up to this ruse and look to the Constitution to restore sound currency.

Sound money keeps government spending in check, keeps trade fair and honest, which reduces the temptations, and many underlying causes, for governments to wage wars.  It also gives you the peace of mind of knowing that your savings will be able to sustain you in your retirement.

So if sound money is such a good thing, what is stopping people from simply trading with each other in gold and silver?  Why are you still being paid in fiat dollars, and why can’t you pay for gas in gold?  The answer is that the government has enacted policies that provide considerable stumbling blocks to such transactions.

One of the main stumbling blocks is Federal legal tender laws, which state that government-controlled fiat currency MUST be accepted for many kinds of monetary transactions.  In light of this, Gresham’s Law takes effect.  Gresham’s Law states that bad money drives out good money.  Meaning, if someone is forced to accept your bad money, it is to your advantage to pass it off, like a hot potato, in exchange for something of value.  Any good money you have, you will hoard.  Eventually, real money is driven out of circulation and under people’s mattresses, so to speak.  In the absence of legal tender laws, people are free to accept the medium of exchange of their choice, and are likely to insist on payment in something of real value.

Related to legal tender laws, contracts in gold are not enforced.  Meaning if two parties agree to exchange goods or services for gold, and end up in a dispute, the courts will simply settle the dispute in Federal Reserve notes. While gold clauses have been legally enforceable since the late 1970’s the fact remains that disputes over gold clauses might well be resolved in court with a dollar figure calculated in terms of Federal Reserve Notes.  In the recently decided case of 216 Jamaica Ave v. S&R Playhouse, which reversed a district court decision, the court upheld the enforceability of a gold clause, but sent the case back to the district court to decide what obligations the gold clause imposed on the defendant.  It is not inconceivable that this will result in a decision that the value of the “gold coin” referred to could be valued by the court in terms of Federal Reserve Notes, not in terms of ounces of gold.  Furthermore, given the federal government’s actions against Robert Kahre (the Nevada businessman who paid his employees at the legal tender face value of gold bullion coins) it is obvious that the government is still waging a war on gold.  Whether either of these cases establishes a precedent remains to be seen.  Additionally, because 31 USC 5103 establishes Federal Reserve Notes as legal tender, it would likely take a court challenge to determine whether a gold clause or legal tender law takes precedence.

Governments should do very little, in my estimation, but it should enforce contracts and property rights through the courts.  But in this instance it shirks this basic duty, when it comes to gold, as one way to keep control of our economy and the medium of exchange.  One is also expected to pay sales tax on the purchase of gold.  This is as ludicrous as if you paid sales tax at the bank when you converted dollars into quarters!  The IRS also expects you to pay capital gains tax on gold, which is so backwards, since gains on gold really represent decline in the value of the dollar!

Legal tender laws should be repealed at the Federal level.  Congress has the Constitutional duty to protect the integrity of our money.  However, since it has passed this duty off, and the Federal Reserve has only debased our currency, Congress should no longer force Americans to do business in dollars if they would prefer to transact in gold, or silver, or cigarettes or seashells, for that matter.  Free people should be free to associate and do business in ways that benefit them.  Instead they are forced to use the unstable dollar to their own detriment, and the benefit the government.

Source: In Government We Trust?

The insanity on Wall Street sent investors fleeing to safe-haven investments such as gold, which has benefited overall from the market’s volatility.

After meltdowns in banking, housing and commodities gold became the investment of choice because of its intrinsic stability compared with fiat currency. But what many investors may not know is that the decline in gold production over the past few years is expected to continue, potentially propping up gold prices for years to come.

In November 2008, the South African government said its gold production dropped by 8.7% compared with same month a year earlier.

As the world’s second largest gold producer behind China, the November drop in production remains indicative of the long-term energy and labor problems that show no sign of abating.

The crisis knocked South Africa out of the number-one gold producer spot in 2007, which it held for more than a century, when it was overtaken by China. Without a steady source of electricity, it’s unlikely that South Africa will be able to reclaim its crown.

South Africa’s public electricity company Eskom operates a feeble infrastructure unable to keep up with demand. Power failures have caused South African mines to shut down for days.  The power crisis is expected to persist at least until 2012.

Compounding South Africa’s dilemma is that experts believe all the easy gold has already been mined – meaning that the producers have to dig to record depths. While this certainly increases the cost of doing businesses, deeper mining means more power requirements.

The downward trend in South Africa’s output saw a 15% decline in production last year alone.

Supply has now tumbled by more than 75% from the all-time peak of 1,000 tonnes mined in 1970, when South Africa supplied 80% of the world’s gold.

Yes, gold is always subject to fluctuations, but the long-term prospects make it almost a sure winner.

“Obviously, no. A gives something to B in exchange for something else and both get what they bargained for. No deficit is possible.”

“So how is it that when the farmer, or the migrant worker, or the Chinese shirt maker trade their goods and services for money, that suddenly the deficit problem pops up?”

“Because when individuals trade real goods, the exchange is complete. But when one half of an exchange is for money, the government enters the picture. Individuals create real goods and services with labor and capital, while governments create the money by “fiat” (i.e., by law), simply pushing computer keys and running printing presses. The newly created money, which cost next to zero to print, buys up real goods and services. And as the money percolates through the economy, it leaves a swath of destructive imbalances, including such things as inflation and trade deficits. Governments then step in with more laws and restrictions that purport to solve the economic problems that their fiat money policies spawned.”

“Money creation is a form of theft (and, as my friend Richard Maybury once said, theft is just a nice word for taxation), albeit so subtle that the public never seems to catch on. In a world where individuals and not governments were sovereign, the marketplace couldn’t have trade deficits or inflation, as the marketplace has feedback mechanisms to deal with anyone who creates irredeemable money. But when governments usurp the freedom of individuals by passing laws defining legal money as the money printed by the government, all manner of economic evils follow.”

“What can a sovereign individual do? Forget futile efforts to influence the politicians, and assume everything they do to ‘solve’ the trade deficit will reduce your freedoms even more. Go to the root of the problem, which is fiat money. Historically, gold and silver have been the free-market’s choice for trade, and the ultimate refuge from fiat monies. You can regain some sovereignty in the monetary arena by holding and dealing in real money whenever possible. Gold and silver, whether held as assets to defend against depreciating currencies, or as mechanisms for trade through free-market exchanges like GoldMoney.com, or LibertyDollar.org, are real money. Hold and use real, free-market money whenever you can.”

Source: Trade Deficit = Freedom Deficit

The front of a recent issue of Barron’s asks, “Are Treasury Bonds Safe?” which is actually a really stupid question since every doofus knows that Treasury bonds are perfectly safe because a fiat currency and a lapdog Federal Reserve means that they can print up all the money the Treasury needs with which to pay bondholders!

So… Safe? Hell yes they are safe! You’d think that Barron’s would know that! Jeez! If I had been there at Barron’s, I would have suggested using this week’s cover for what I actually suggested for the cover of the employee newsletter.

At the meeting, I floated the idea of suggesting a splashy cover page with words in blazing red letters that read, “That Creepy Lowlife Mogambo (CLM), the same CLM that you plot against behind my back, was actually right! Hahaha! In fact, consumer price inflation is higher than interest rates – even the yield on the 30-year Treasury bond is less than 3 percent!”

In a second area on the cover, we put, “This means that anybody who is buying any debt – when the central banks of the world are creating more and more money and credit at such astronomical rates – is a real moron, or lunatic, or both, because bond prices will fall when interest rates rise in response to the inflation in prices, because that is the only response to the massive inflation in the money supply from all that excess money and credit being created Every Freaking Where (EFW) around the freaking globe!”

I interpreted their silence as thoughtful meditating on my terrific copy idea, and so I went on to further suggest that, in smaller letters, sort of in a power-packed subhead, “So buy gold now, you drooling morons, unless you think that you are So Freaking Special (SFS) that you, and America, will be totally unique in the last 4,500 years of various moronic governments creating excess money and credit to satisfy their gluttonous, insatiable appetites for spending, spending, spending, and then they all failed so miserably that their entire economies were, for centuries, sometimes forever, in decline, and everybody was ruined, and everybody was bankrupted, and Bad, Bad Things (BBT) happened for a long, long time!”

“Then,” I said triumphantly, “we add the teaser hook! We say, ‘How do you like them apples, morons?’”

Well, apparently their silence was not due to consideration and contemplation, but to communicate with each other telepathically to gang up on me as, instantly, almost in unison, it was moved, seconded and (against one lone dissenting “nay” vote) otherwise unanimously decided to throw me out the meeting and, if I understand the terms “And never come back!” correctly, ban me forever! How rude!

Well, Barron’s was no more receptive to my editorial suggestions than my co-workers were, although Barron’s then suggests, in smaller print, just like I had recommended earlier, that the real reason is exactly what I have been saying! They say, “Long-term Treasuries, now yielding less than 3%, could fall 25% in value as the recession ebbs and rates rise. If they’re held to maturity, the principal is secure, but you’d be stuck with today’s low rates for years.”

At this, I laugh, because every doofus knows this, too! Hahaha! What every doofus does not understand, however, is that every day, of every week, of every month, of every year, every one of those dollars will, by virtue of the Federal Reserve continually creating so much excess money and credit so that Congress can continue to borrow it to fund its outrageous deficit-spending to Somehow Save America (SSA), be continually worth less and less in terms of buying power, just like the dollar has suffered at the hands of the idiotic Congress and the Federal Reserve since 1913, so that they dollar has now lost about 96% of its buying power since 1913, and about a quarter of its remaining buying power was lost in the last few years alone!

And this, together with the economic disaster that is already out there, only proves the utter, utter failure of the Federal Reserve to “preserve the value of the dollar”, which is their freaking mission in life. Morons! Morons who should be in prison, along with the Congress-morons who let them get away with it! Vengeance! We want vengeance!

To illustrate this very point with a little comedy instead of seething hatred and homicidal revenge, Junior Mogambo Ranger (JMR) Rebecca H. sent a humorous image of the “new” $100,000 bill, which has the face of Ben Bernanke on it, and is called, right on the front so you know exactly what it is, a “Federal Reserve Thingy”. Hahaha! Perfect!

Mark J. Lundeen, independent market analyst, apparently has no time for comedy, and traces the real problem back to “The problem ‘monetary policy makers’ were having from 1954 to 1981″, which was that “their liquidity was flowing into CPI, consumer cost of living price inflation”, which was running somewhere around, ummm, a terrifying 10% or so and everybody was all freaked out and angry.

As a result, Paul Volker, chairman of the Federal Reserve at the time, “raised Fed Funds to 21%,” which is “6% higher than the US long bond yield” which, in 1981, meant that “the US Treasury was forced to offer a 15% coupon for its 20-year bond.” Wow!

This was also, as explained in the Mogambo’s Investing Made Easy (MIME) home study course, the exact time to switch from gold, which was setting a record of $850 an ounce at the time, into bonds, which were yielding a juicy 15%, and then make a fortune when those bonds zoomed in price as inflation in prices fell and thus interest rates fell to, today, less than 2%! Wow!

Unfortunately, Mr. Volcker wringing ruinous inflation from the economy at a terrible cost was not to last. Things soon went back to normal, the difference being that inflation in prices, he says, “stopped flowing into consumer prices”, and started going into financial assets.

I think that this was hugely aided by Congress authorizing the Individual Retirement Account in 1982, along with many other tax-advantaged investment vehicles over the years, which accidentally touches one of my sore spots, which is that this whole stupid idea of “investing for the long-term” is a Load Of Hooey (LOH), and I am embarrassed for this country that we turn out so many diplomas conferred on graduates who are supposedly thus certified as literate in basic math, but yet they are all completely clueless that “investing for the long-term” is obviously a huge freaking scam since it is mathematically impossible for the majority of people to take more money out of something than they put into them! Hahahaha! But nobody saw this! Hahaha! What morons!

Mr. Lundeen obviously does not want to get into a discussion where we are calling people morons and laughing at them, making crude jokes about their parents for siring such a mental defective mutant, all the while ordering round after round of alcoholic beverages and putting them on his tab so that I can drink and insult people until I finally pass out in my own vomit, and instead says that the effect was less than stellar, as “The bull markets returns in financial assets from 1982 to 2007 were mostly inflation”, which is, unfortunately true.

And inflation in the prices of something, or all things, will get worse and worse from here, as the Fed is on record as saying that they will not let deflation happen, and the European Central Bank is vowing to never let inflation fall below 2%, which is such terrible news that the fact that Germans are not rioting in the streets shows that they are now as stupid as the rest of us.

Which is one more reason to buy gold, as if one needed any more reasons to buy gold after already having hundreds of perfectly good reasons to buy gold already, and especially now that Obama and the Fed have pledged trillions and trillions of new reasons to buy gold! Whee! This investing stuff is easy!

Source: The U.S. Dollar: A Federal Reserve Thingy

This from The Daily Reckoning:

Global financial markets are acting as though the world is about to implode. Over the past four months, the investment community has dumped all assets; regardless of their underlying economic fundamentals. We have seen unbelievable wealth destruction on a global scale and trillions of dollars have evaporated and returned to monetary heaven.

The rate of decline has been astonishing and in the past twelve months, the Dow Jones Industrial Average (Dow) has seen its worst one-year performance – ever! It is interesting to observe that the Dow’s recent plunge has been even worse than the 1929 decline which preceded the Great Depression of the 1930’s (Figure 1). So, are we really witnessing the end of the world as we know it?

Regardless of the Armageddon fears prevalent today, I would argue that this slump may turn out to be a fantastic buying opportunity for the patient, long-term investor.

Now, the mainstream media seems to be convinced that our planet is headed into a permanent global depression and investor-sentiment certainly reflects this thought process. The same cheerleaders who, only a few months ago, were gleefully shouting about the emergence of a new global economy are now forecasting eternal disaster. Furthermore, investors are liquidating all assets as images of their children living in shanty towns fill their fearful minds. ‘Demand destruction’ and ‘de-leveraging’ have replaced ‘liquidity’ and ‘global growth’ as the new buzz-words. Stocks are down significantly from the highs, corporate bonds have taken a beating and even commodities (including precious metals) have joined the bear parade. And those who naively bought structured products from private banks have seen total losses. So, where do we go from here?

The best way to begin is by reiterating that global markets are now extremely oversold and undervalued, hence attractive. This may sound counter-intuitive but it is vital to understand that a decline of 40% in US stocks (and even more in some countries) has set the stage for fantastic long-term gains. If my assessment proves to be correct, investors who buy the unimpaired sectors today should make a fortune over the coming decade.

Remember, the best time to buy is when everyone is despondently selling. As John Templeton (founder of Templeton Funds) often said, “bull-markets are born on pessimism, grow on scepticism, mature on optimism and due on euphoria”. And you can be sure that the investment community is feeling extremely pessimistic and fearful today.

At present, a lot of ‘gloom and doom’ and ‘deflation’ chatter is doing the rounds in the mainstream media. The recent selling panic is frequently being described at the worst crisis since the Great Depression. However, this hype does not imply that the economic outlook is similar to the 1930’s. One of the biggest reasons why the Great Depression occurred was due to the failure or inability of the money-supply to expand in line with the need for this money.

Furthermore, the failure of roughly 5,000 banks did not help the situation either as millions of Americans lost their savings! In the current situation, however, various central banks and governments are throwing trillions of dollars into the monetary system and all bank deposits have been guaranteed. And if need be, the authorities will print money until the world runs out of trees. So, in my view, a prolonged deflationary phase or a global depression is not likely to happen.

The recent sharp declines in the markets can be attributed to the fact that two separate negative events caught the public’s attention at roughly the same time – depth of the financial crisis and fears of a US recession. Now, as far as the first issue is concerned, it is my belief that the worst is behind us. For sure, we may hear of sporadic bank busts in the months ahead, but the recent government guarantees prevented a total collapse of the banking system. For the record, I do not agree with the recent bail-outs because they are immoral and are going to cause huge inflation in the future. However, we all have to deal with reality and for now, it seems that the credit markets are starting to function again.

Our research reveals that currently US$3.5 trillion is sitting on the sidelines, waiting to be invested. And when investors deploy this cash into the markets, it will flow towards sectors which have been unharmed in this financial crisis. Now, I do not know about you, but apart from natural resources (where supply and demand imbalances persist) and industrials (which may benefit from massive government-sponsored infrastructure projects), I cannot find any other sector which has strong fundamentals. Housing faces severe over-supply, autos are struggling, banks will suffer due to over-regulation and consumer discretionary stocks will also fare poorly as the over-stretched public in the West tightens its belts.

The one sector of the economy which remains in excellent condition is commodities. Demand is holding firm, supplies of key resources are still tight and the ongoing credit crisis will only delay many projects which were previously meant to come online. This will create additional supply shortages in the future, thereby leading to much higher prices.

As far as precious metals are concerned, it is worth remembering that our world’s financial system has been hijacked by money-printers. Whether it is the Federal Reserve, Bank of England or the European Central Bank – they are all creating money ‘out of thin air’ and inflating the supply of paper currencies.

As this rampant inflation continues, what is astonishing though is that so many investors are being hoodwinked into believing that our world faces a genuine deflationary bust. These days, opinion is divided as to whether we will witness continuing inflation or gut-wrenching deflation. In my view, this discussion is absurd and deflation (or a contraction in the supply of money) is out of the question.

Banks are in the business of lending money and debt creation is essential for their very survival and prosperity. So, you can be sure that the modern-day money lenders will find a new way to further expand the supply of money and debt.

Whilst paper currencies (cash) regained some purchasing power in the past few months due to forced liquidation in the asset markets, there is no chance that they will maintain their value over the medium to long-term. History is littered with numerous paper currencies which became totally worthless and I suspect many of the current ones will also disappear. In fact, a remarkable study confirms that only 23% of paper currencies ever issued have survived the test of time! The vast majority were destroyed due to hyperinflation and are no longer in circulation.

Accordingly, I would urge investors to sit tight with their positions in hard assets (precious metals, energy and agriculture) and add more capital at such depressed levels. Under the best-case scenario, global markets bottomed out over the past two months and even if they did not, at the very least, we should get a multi-month rally in commodities and related stocks.

Source: The End of the World…Or the Right Time to Buy?

More from The Daily Reckoning:

The late November rally in gold prices wasn’t quite as spectacular as mid-September’s gain, but it was still impressive. There was good follow-through too, though the momentum softened as bulls knocked on resistance near $850.

The rally was a no-brainer. There is a strong line of support at $700, which was resistance during 2006 and the first half of 2007. Moreover, the market was, and is, oversold.

The catalyst was news that the U.S. government had to bail out Citigroup (NYSE:C), the world’s largest bank by revenues. The event has given way to new concerns about the economy, which weighed on stocks and gold this week, or at least provided an excuse to take some profits in the latter.

The big question now is whether it was just a retracement rally that ultimately gives way to new lows or whether we have seen the bottom in gold, with this rally being only the first of many to come.

I don’t think the chart can answer that question alone. Technically, the structure of the market is healthy now, and as far as the fundamentals go, gold should not remain under $1,000 for very long.

Indeed, I sense the market is building up for a very bullish move.

Allow me to touch on some of the bullish factors coming into play.

“Notwithstanding the many developments on the bailout front during the past six weeks, The New York Times, like other media outlets, continues to quote Wall Street insiders who report” [that] “‘You have a market that is frozen.’ What planet do these guys live on? It certainly is not the same one to which the Federal Reserve’s data apply. I’ve been singing this song for many weeks, but I’m going to keep singing it until somebody in the news media wakes up and realizes that these ‘frozen credit market’ tales are pure hooey. Look at the data, for crissake.”

- Robert Higgs, author of Crisis and Leviathan, in a recent essay on the bailout programs

The fundamentals are significantly bullish for gold. I’d like to say they are bearish for the dollar, but in truth, they are increasingly bearish for all paper currencies. Outside of the Bank of Japan, everyone is inflating madly. In the G-7, narrow money (M1) is growing at 7-10% on a year-over-year basis in the U.S., Canada, the U.K. and Australia – more in developing countries like China. And this rate is picking up now.

October’s data are not in yet for the ECB. Its balance sheet increased by some 400 billion euros during the month, which is the first big change since the second quarter, and will probably reflect in M1. The Bank of Japan started inflating M1 again in September too, after holding it steady for most of the year.

The broader monetary aggregates (i.e., those determined by the banking system at large) are growing briskly everywhere but in the U.S. and Japan, though even the latter are still growing.

Broad money in the U.S. is growing between 5-10%, depending on whether you rely on TMS or MZM or higher, if you like M3 (I don’t).

The U.S. data are good through October. Up till the end of September, as far as we are updated, the year-over-year growth rate in broad money approached 20% in Australia, its highest rate in almost 20 years. In the U.K., the broader monetary aggregates are growing at close to 14% on a year-over-year basis, which is its highest growth in almost a decade.

These growth rates are almost as bad as China’s, which is approaching 20% year over year too, again. Given these numbers, it is no surprise to me whatsoever that the yen is the strongest currency, followed by the U.S. dollar, or that the Aussie and the pound are taking the greatest beatings, along with all the other riskier currencies.

The actions governments are taking now are bearish for stocks and bullish for inflation. But they are not just bullish for inflation – they are remarkably bullish.

I don’t mean to sound happy about it. It’s just an observation that the market has yet to come to terms with. Since September, the Fed has expanded its balance sheet a total of $1.3 trillion. Of that total, it has created about $600 billion in reserves out of thin air.

Most of that is not counted in money supply, because it excludes deposits held by depository institutions. Total money supply is about $6 trillion, if you rely on the Austrian School definition (I do). It has, nevertheless, translated into growth of about $100-200 billion in new money created by the banking system since September already. Deflation is a no-show so far, and I don’t think it will arrive at all. I think history will see this as just another scare.

The Federal Reserve just announced two new programs that commit it to another $800 billion, and that is even before President-elect Obama puts his stimulus package together.

Reuters cited  Wachovia’s (NYSE:WB) chief economist:

“Some, however, are worried the mounting costs of the measures, which have the potential to reach several trillion dollars, could eventually fuel a troubling inflation.

“‘It may mean (a) longer-run issue with inflation and inflation concerns,’ said John Silvia, chief economist at Wachovia Securities in Charlotte, N.C. ‘It may be too much of a good thing is a bad thing.’”

Ya think?

Even more inflationary, in my opinion, is the fact that the talking heads think the Fed’s latest facilities are simply not enough. They are complaining the programs do not include direct purchases of credit card debt and mortgages in the secondary market and that the Fed isn’t going to buy mortgages with maturities of more than one year. Not long ago, the Fed never bought anything but Treasury notes.

Gold bulls are going to attempt to raid Comex’s vaults by forcing delivery on their December futures contracts (Dec. 19). Who can tell how that will go? I can’t. But it’ll be interesting to watch.

Facts: The open interest in futures contracts on the Comex has fallen to its lowest level since summer 2005, breaking a general uptrend in place since 2001. From a contrarian standpoint, the short-term bottoms in these data tend to favor the buyers over the sellers. However, the statistic went into orbit during the last half of 2007 – it broke away from the upper channel on the charts, creating a bubble in appearance. The current extremity could simply be a symmetrical reaction to that extreme.

Nevertheless, this is a bearish fact, technically speaking, if it represents a lasting new trend.

It is tempting to suggest that the threat of a raid in futures contracts is causing a short squeeze.

It is true that the commercials are liquidating their short positions promptly. But the funds are increasing their short bets, and the liquidation of longs is such that the net short ratio has hardly budged off its mid-September low – which, incidentally, is a level that has coincided with strategic buying points at seven other junctures since the bull cycle began in 2001.

However, the record of this statistic in gold is unique in that during bear markets, the commercials tend to be net long (wrong) most of the time.

So the fact that they are covering their short interests on net does not necessarily presage a rally if a bear market has set in. A bear market would mean that gold prices could fall as far back as US$500.

Fundamentally, the conditions just don’t look ripe for a bear.

I don’t believe the COTs (Commitment of Traders report published by CFTC) have any real predictive value. They tell us only whether the market is too much extended one way or another; they don’t tell us how long those conditions will last. Right now, the structure of the market is healthy. The commercials are covering their shorts, the funds are getting short and the numbers basically favor the bulls. The contraction in open interest worries me a little, but it could be explained in terms of a collapse in spread trades linked to various index products.

In its most recent report on gold demand, the World Gold Council said as much in trying to explain the drop in the gold price in the context of soaring physical demand. In its third-quarter report on gold demand, the WGC noted growth in both jewelry and investment demand across the spectrum relative to both the last quarter and the year-ago quarter. I don’t want to go into a critique of the method here, except to point out that it chronically understates investment demand and overstates jewelry demand.

The inclusion of ETFs all but proves the point.

In just one year, investment demand has grown in importance from under 15% to over 30% of total gold demand, causing the deficit (supply shortfall) to grow nearly tenfold. The WGC interprets this deficit as supply coming from speculative sources, like futures trading or changes in inventories at the various exchanges – like at Comex. Thus, it calls it “inferred investment.” Formerly, it called this the “balance.” But as it grew, the WGC decided it meant something. What is causing it to grow, aside from growing demand in general, is that while the WGC is “identifying” new kinds of demand, it has not kept up with the various sources of supply. Gold bugs have argued for years that the supply of gold is not limited to mine production, officialdom or scrap…that it is not like other consumable commodities.

It is more useful to assume that most of the gold ever produced is held as a reserve, or store, aboveground. And if this is true, then investment demand must be much larger than the WGC calculates, or the price would, frankly, never go up. If the WGC is smart enough to include producer hedging (or dehedging) in the equation, it should also include a measure of demand that expresses itself through all the exchanges and bring itself up to speed on all the sources that supply the market. It assumes that jewelry demand dominates the market, which is incorrect, but even if it were, it still has the wrong idea.

Jewelry demand may be price sensitive in the short term, yet it has grown every year, at successively higher prices, since the bull market began. Despite my objections, however, I am in total agreement with the council’s explanation why gold prices have fallen despite the evidence of soaring gold demand:

“Notably, the selling captured by the [inferred] investment category was mainly by investors with a short-term focus. It largely reflects the fact that gold was caught in the downdraft of other commodities and other assets – it does not reflect a questioning of gold’s value or role as a safe haven. The strong buying in the ETF and bar and coin markets during the quarter, which reflects investors with largely a longer-term focus, suggests that investor belief in gold’s role as a safe haven and store of value is stronger than ever.”

No wonder the commercials are covering. The establishment is getting hot for gold.

JP Morgan’s gold analysts “urged” investors to stock up on gold this month, citing counterparty risk and tight supplies.

Citigroup’s foreign exchange group also put out a bullish tout.

Well, that’s an understatement, actually. “[Gold] continues to look like a bull market to us. We continue to believe that a move of similar percentage to that seen in the 1976-1980 bull market can be seen, which would suggest a price north of $2,000,” Citigroup’s FX group said last week.

What I found particularly intriguing, besides the timing of these calls, was that they both discounted the dollar. That is, they noted, as I have in the past, that the foreign exchange value of the dollar may not be important at this stage. Morgan said, “It is not an absolute given that a rally in gold means a falling U.S. dollar,” while Citigroup pointed out, as I also have, examples of just such a situation during the 1970s.

Anyway, it’s not a sure thing yet, and it all makes great fodder for the bull market in gold.

Source: Gold Looks Bullish as Dust Settles

This from Money Morning:

Of late, I have read a number of analysts, Jim Rogers even, who have expressed the view that gold could dip to the mid- to low $600 level.

It could happen, but I think not. Already, buyers of physical gold are finding anything near $700 to be cheap and are helping to build a floor under the monetary metal. On that topic, a friend sent this item along recently:

(Gulf News, Nov. 12) Riyadh: There has been an unprecedented demand for gold in the Saudi market recently, with over 13 billion Saudi riyals ($3.47 billion) being spent on the yellow metal during the prior two weeks.

Demand is expected to rise still higher as more investors turn to gold as a safe haven in the midst of the global financial crisis, according to market sources.

Sami Al Mohna, an expert on the gold market, said the trend had resulted in a substantial rise in the gold reserves of Saudi investors.

Since soaring to an all-time high of $1,033.39 per ounce in March this year, gold has plummeted 30%.

Gold for December delivery on Monday rose $8.60 to settle at $726.80, roughly the same level at which it traded a year ago.

“Many Saudi investors see this as the right time for making investments in gold as its price is the most reasonable one at present,” said Al Mohna.

Needless to say, the Saudis have a lot of money. Not just a lot… but a really, really, big, stupendous mountain of the stuff.

And like you and me, they’re human. The urge to buy gold this cheap is a pining all gold bugs around the world are feeling.

We are getting regular reports that, at these prices, demand is soaring in India (where price inflation is now running around 11%), and brisk sales have pretty much wiped out physical supplies of small coins and bars in the United States and Europe – among other corners of the world.

On that score, a few days ago, correspondent Jim G. sent along the following:

Most of you are probably aware that there’s a shortage of gold bullion coins at the retail level.

What does that mean?

Today I decided to purchase some gold bullion coins. So I called the Northwest Territorial Mint, one of the larger operations in the country, or at least the Northwest, so I’ve been told.

I called to see what the availability was. The operator put me through to sales, where I sat for 30 minutes. I finally got in my car and drove 40 minutes there, all the while still on hold. When I finally got there, a woman went in the back to see about bullion coin availability. She was told they were back-ordered with 30,000. Not dollars, orders. If I placed an order today, they thought they could fill it in 16 weeks.

To sum it up, I’m buying – if you happen to know a seller.

While we already know $750 is no magic number below which gold cannot fall or below which it cannot loiter, I take no small comfort in the fact that there is a clear increase in demand at that price. In time, as the dollar continues to participate in the fiat currency race to the bottom, that number will ratchet higher and higher still.

Maybe not overnight, but in the next six months to a year, certainly… or as certain as anyone can be about anything these days.

One thing that could get the show on the road – pronto-like – has to do with the continuing presence of the other 900-pound gorilla in the room: Foreign dollar holders.

[A Money Morning investigative analysis back in September demonstrated the muscle these overseas-dollar holders have, by showing how they forced the U.S. government to step in and take control of foundering mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).]

Those foreign-dollar holders are at work in the gold market, as well. For proof, just look at China. Like their Saudi counterparts, Chinese investors have at their disposal a lot of greenbacks. Actually, not just a lot, but enough to remake the Great Wall, for China’s currency reserves are currently estimated at $2 trillion.

China’s investors face the same worries that we face. They’re watching the daily financial news and are realizing that this crisis is getting much, much worse. With that realization comes the desire to add gold their holdings.

On that front, here’s some news from Hong Kong…

(The Standard, Hong Kong. Nov. 14):  The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves “in a big way,” the source said.

China’s fears about the long-term viability of parking most of its reserves in U.S. government bonds were triggered by Treasury Secretary Henry Paulson’s US$700 billion (HK$5.46 trillion) bailout plan, which may make the U.S. budget deficit balloon to well over US$1 trillion this fiscal year.

The U.S. government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing’s reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

In another article from Bloomberg News, the head of China’s gold association commented that he thought China could triple its reserves. The Bloomberg report featured this quote.

China has the world’s biggest foreign-exchange reserves at $1.9 trillion, according to data compiled by Bloomberg. It is also the largest overseas holder of Treasuries after Japan. China’s demand for gold jumped 23%  in 2007, making it the world’s second-largest consumer.

The Asian nation may buy more gold for its reserves on concern the $700 billion U.S. bank bailout will cause declines in the dollar and Treasuries, The Standard newspaper in Hong Kong reported today, citing an unidentified person.

In the final analysis, we can’t say with certainty what path gold will take between now and the time this crisis is over. But until I can see some tangible evidence that it has lost its value as money, I’m a happy holder and – at less than $750 an ounce – a buyer.

Source: Gold is a “Buy” at $750 or Less … But in the Low $600 Range, it Will be an Absolute Steal

This from Taipan Daily:

Today I want to talk about the concept of monetary velocity. (I know, I know… monetary what? You’ll see the importance by the time we’re done.)

Let’s start with some background. In Wednesday’s Taipan Daily we noted that short-term interest rates have fallen to multi-year lows. The flip side of falling interest rates is rising bond prices. When bond prices rise, interest rates fall and vice versa.

This means investors and traders have an impact on interest rates through their buying and selling decisions. When investors pile into bonds, for example, they push bond prices up – and interest rates down.

We can see this by looking at a chart of the 2 year treasury note, which went into lift-off mode in mid-2007 (right around the time the credit crisis began).

As you likely know, investors are piling into U.S. treasuries now (particularly short-dated ones) because they are scared out of their wits and don’t know where else to go.

And right now they are scared of deflation.

The Dreaded “D” Word

For the month of October, the Wall Street Journal reports the Consumer Price Index (CPI) saw its largest single-month decline since World War II.

This dramatic drop has the word “Deflation” on everyone’s lips.

It’s quite the switch, actually. As recently as this summer, everyone was worried about Inflation.

Now, according to some estimates, use of the word “inflation” in the popular press has dropped by nearly a third… and use of the D word, deflation, has more than tripled in the past two months.

This is a head scratcher, especially in light of what we’ve been hammering on this past week. How can the markets be worried about deflation when the Fed is printing money like there’s no tomorrow?

Better still, how is it even possible to see the specter of deflation on the horizon when trillions of dollars are being pumped into the system?

To answer those questions, let’s delve into the concept of “monetary velocity.”

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Run, Rabbit, Run

Everyone knows about the basic concepts of inflation and deflation. They are often described in terms of supply and demand: inflation is “too much money chasing too few goods,” deflation is “not enough cash to go around,” and so on.

But it’s important, too, to recognize that the inflation/deflation equation depends not just on the quantity of money in the system, but also how fast that money is moving through the system. This is where monetary velocity comes in.

It’s a slightly challenging concept to explain – the best analogy I’ve found is a bit goofy, but it works. So here we go…

Imagine you’re standing in front of a large tree trunk. There is a brightly colored marker on the trunk, and there are rabbits running in circles around the tree itself. Every time a rabbit passes the marker on the trunk, you note it down on your clipboard: one X per pass.

Now let’s say you tally up your results and note you made twenty X’s in the space of 60 seconds. Assuming you had your reasons, how could you double the number of X’s in the same amount of time?

There are two ways you could double the number of X’s on your clipboard (to forty per minute in this case). You could increase the number of rabbits running around the tree… or you could go with the same number of rabbits and try to make them run faster.

(Remember, you don’t care if it’s the same rabbit or a different rabbit when you jot down your X. You’re just counting the number of passes.)

As you might have guessed, the rabbits are analogous to money in the system. Money that’s just there is inert… In order to have an affect on the economy, the money has to move.

So when money is “hot” and the rabbits are running at top speed, fewer rabbits are needed to fill up the clipboard with X’s. The rabbits speed around the tree very quickly – analogous to high turnover, or money changing hands very quickly.

When money is “cold,” on the other hand, the rabbits are lethargic, and you need more money (i.e. more rabbits) to get a decent number of X’s on the clipboard. If money stops changing hands entirely – as it seemed to have for a brief span in late September and early October – it’s like the rabbits coming to a dead stop. They aren’t moving at all.

So when the Fed pumps the system full of money, it’s the equivalent of dumping more and more rabbits into the equation. As the Fed gets desperate, maybe they round up dozens or even hundreds of rabbits.

But if all the rabbits are half comatose, the clipboard stays blank (or fills up much too slowly). The Fed’s efforts fail to have the desired effect.

So the upshot is that the Fed can have a direct impact on the quantity of money in the system, but not the velocity of money in the system. It can’t make the rabbits run.

You’re a Rabbit, I’m a Rabbit

The “rabbits” can also be thought of as entities that buy and borrow and lend – banks and businesses and consumers (like you and me). When banks refuse to lend and consumers stop buying and borrowing, monetary velocity goes down – even as the dollars in the system pile up.

Over the years you may have heard comments like, “The Fed has absolute control over the money supply.” That is misinformation. The Fed has zero control in some very important areas. What’s more, they don’t even have the tools to properly measure many of these areas.

When we talk about the velocity of money, for example, we’re not just talking about visible dollars. We’re talking about abstract concepts like people’s willingness to borrow and lend. That kind of thing is impossible to measure on any kind of precise basis.

For example, if five million Americans wake up tomorrow with a sense the world is okay and an urge to go buy something, then that cheery mindset will positively impact the velocity of money in the system – even though you can’t put “optimistic mindset” on a balance sheet.

Conversely, if five million Americans wake up fearful for the future and determined not to borrow another dime if they can help it, that translates into a negative impact. Again, there’s no way to precisely gauge these moods. We can only make rough guesstimates.

So why do we have a grim outlook for deflation right now, even as the printing press money piles up? Because monetary velocity has crashed. Bank balance sheet woes and consumer debt overhang are such that the new attitude towards buying, borrowing and lending – creating turnover, moving cash through the system – is “Thanks, but no thanks.”

Simply put, the rabbits are tuckered out.

So Why Buy Gold?

Okay, some of you may be thinking now, so the dollars are piling up because the velocity of money has crashed. The Fed’s stimulus remains untapped, like an idle oil tanker filled with cash. But if that’s the case – and if deflation worries could worsen – then why buy gold?

It’s a good question. Most of the talking heads don’t bother thinking the answer all the way through. They stop at step one without progressing to steps two or three. “Gold’s no good in a deflationary environment,” they say. “Prices are going down and that’s that. So why would you want gold?”

Well, let’s see.

First recall that deflation is every central banker’s worst nightmare. (Particularly central bankers who spent the bulk of their academic lives studying the Great Depression.) That’s why Fed Chair Ben Bernanke gave a defining 2002 speech titled, “Deflation: Making Sure ‘It’ Doesn’t Happen Here.”

If you’ll indulge this quick recap, here is the key paragraph from Bernanke’s deflation speech:

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost… We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

The underscore emphasis is mine. What Bernanke believes amounts to this: The printing press is an irresistible force. There is no deflation so immovable that the printing press cannot smash through it.

An irresistible force sounds most impressive. When we think back to the velocity problem, though – recall the lethargic rabbits – the printing press starts looking like the wrong cure for the wrong ailment.

This is because as far as money in the system goes, a velocity problem is different than a quantity problem. The printing press speaks to quantity, but on the question of velocity, it remains mute.

Going back to our tree trunk analogy: Bernanke could round up a thousand rabbits, he could round up ten thousand rabbits, or he could round up fifty thousand rabbits. If the rabbits don’t feel like running around the tree, quantity does nothing. If banks and consumers cannot be goaded into the old patterns of buy, spend, borrow and lend, then it just doesn’t matter how much the Fed pumps in.

Except for one thing: To say it “just doesn’t matter” is not wholly correct. The Fed’s stimulus-pump actions do matter in one particularly awful way. The more money a desperate Fed pumps into a non-responsive US economy, the closer we edge to systemic breakdown for the fiat currency system as a whole.

Breaking Down the Breakdown

My use of “breakdown” in this case refers to the point at which the world loses faith… the point at which investors realize in dawning horror that the world’s reserve currency is doomed.

The trouble lies in the fact that the Federal Reserve has staked its whole crisis-response plan on the power of the printing press. The Fed, in other words, has but one play in the playbook… the play outlined in Bernanke’s deflation speech.

If deflation’s grip is not broken soon, then Bernanke will double down on the printing press strategy… and then double down again. The Fed will pump and pump until the total pool of dollars in the system makes the United States look like a banana republic.

It is this scenario, by the way, that keeps Jerome Whitehead awake at night. Whitehead, now 86 years old, is a former chairman of Goldman Sachs.

“I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America,” Whitehead says. “Before I go to sleep at night, I wonder if tomorrow is the day Moody’s and S&P will announce a downgrade of U.S. government bonds… Eventually U.S. government bonds would no longer be the triple-A credit that they’ve always been.”

Mr. Whitehead is right to worry.

Wake Up and Smell the Bullion

Recall too, in case you’ve forgotten, that in times of crisis gold serves a proxy for cash. And in times of deflationary crisis, gold is the only form of cash not subject to the ravages of a printing press. (This might explain why there is a run on gold coins taking place. The U.S. Mint has been forced to ration them out.)

It may take a bit longer for Wall Street (and the world) to wake up and smell the bullion. But as to what happens in the medium to longer term, the distribution of outcomes is pretty cut and dry.

If deflation is vanquished and money starts to move again, interest rates will stay low for a good long stretch of time (so as not to cripple a convalescing economy). In this scenario inflation returns, much to the Fed’s relief, and gold resumes its upward climb.

If, instead, the Fed fails utterly, Bernanke will not go gentle into that good night. He will print his way into spectacular oblivion (as all but promised in his 2002 speech)… and Mr. Whitehead’s bad dream will be realized… and gold will respond accordingly.

Source: Run, Rabbit, Run! The Importance of Monetary Velocity

Then the article gets right in our American faces and keeps hammering at us: “Statistics show that America’s internal and external debt exceeds $60 trillion, over 400% of the country’s annual GDP of a bit over $14 trillion. Of that total, family debt (including mortgages), financial and non-financial firms’ debt, and municipal and national debt come to about $15 trillion, $17 trillion, $22 trillion, $3.5 trillion, and $11 trillion, respectively, though it is hard to tell how these debts have been split up among foreign governments, financial firms, companies, and individuals.”

Naturally, as a proud American, I take the aggressive approach and sneer, saying, “So? Tell us something that we don’t know! Hahaha!” ??

In an apparent response, he goes on, “To relieve the crisis, the US must repay its debts, and to do that it needs to live a more frugal life instead of asking others to continue lending it the money to maintain its over-consumption.”

So, still being a smug American, I say, “Says who? You? Hahaha! We’re Americans, and we have a fiat currency, and we can just print up all the money to pay you off! And everybody else, too, suckers! How do you like them apples? Hahaha!”

Apparently, Xiang is unimpressed with my typically American solution to the debt problem, as with all problems, and continues, “The first thing the government needs to do is reduce spending and the deficit. Correspondingly, the US needs to cut military disbursement, stop its global expansion and the robbing of oil resources from other countries.”

Again, I am instantly indignant, and my anger shows through when I say, “Hey! Deficit spending like profligate morons while running around the world taking what we want and killing anybody that gets in our way characterizes The American Way! You are proposing to destroy our native culture, you insensitive, genocidal, racist bastards! I’ll sue you all!”?

Apparently, even Chinese people know that I am just a big blowhard, and instead of insulting me and calling my bluff, we are given some sinisterly interesting advice – namely, “Families and individuals should stop anticipating their income to buy houses and travel globally. Instead, they should warmly welcome foreigners to travel to and spend money in the US. “

Boinggggg! Proving once again that being a paranoid lunatic has its upside, I am able to instantly decipher this to mean that the “Secret Chinese Plan” is for us to sell them everything we have to pay our debts, and then act as courteous hosts and hostesses as they travel the country, inspecting their vast holdings and indulging in various, ummm, indulgences involving our women-folk and enslaving us all on vast rice and pig farms where we will be given pork-fried rice to eat, as much as we want, which is the only upside to this whole mess, as far as I can see.

And these Chinese may be onto something with this commodities thing, because I am betting that commodities will be soaring from here on out, as Dailytech.com reports that “All four major global temperature tracking outlets (Hadley, NASA’s GISS, UAH, RSS) have released updated data. All show that over the past year, global temperatures have dropped precipitously.”

The article goes on with the specifics, namely that “The total amount of cooling ranges from 0.65C up to 0.75C – a value large enough to wipe out most of the warming recorded over the past 100 years. All in one year’s time. For all four sources, it’s the single fastest temperature change ever recorded, either up or down.”

This explains the subhead: “Twelve-month long drop in world temperatures wipes out a century of warming”, although it does not explain why such a momentous piece of news does not have at least one exclamation point! Hell, I’d give it two, and I don’t know anything about it!

The Bad, Bad News (BBN) is not just that this kind of poor punctuation is rampant, but that this abrupt dropping of global temperature has a nasty habit of portending “little ice ages”, and this, along with the mysterious and ominous disappearance of sunspots, has me running outside, yelling at some kids playing down the block, “Hey! You stupid kids! Run home and tell your parents that they should be buying gold, silver, oil and commodities of all kinds because crop yields in the future will be catastrophically low, and if they don’t, then they are stupid! And when they don’t follow your advice, you can remind them a few years from now about how you warned them, but they were too stupid to listen to you, which is what all parents like to hear from their teenage children! Hahahaha!”

Well, I hope they do, not that it will do any good, but at least I made their children a little more obnoxious, which makes me smile in smug satisfaction.

And I bought some more commodity plays, which made me smile ditto! Whee! This investing stuff is easy!

Source: Finance…the American Way