In early to mid-2007 I wrote how the Fed was in the process of “blowing out” the bank multiplier system and the next move would be debt monetization (QE) to continue the aggressive Dollar printing. I also laid out the expected waterfall decline into the 4th quarter of 2008 based on the fractal work on the Gold chart. No Black Swans, it was just “The paper currency cycle in progress.” I coined the term “Deflation Scare” as I described how the waterfall decline in asset prices would come at the juncture between Dollar printing via the loan multiplier system and a new more aggressive round of printing via pure debt monetization- the outright default of the US Debt. The “scare of deflation” would be overcome with the next round of more aggressive Dollar printing via debt monetization. So, the 4th quarter of 2008 with its waterfall decline in asset prices came, the Fed and the Treasury Secretary went to Washington, and sure enough Congress gave the Fed what Mr. Paulson announces was “the right to inflate their balance sheet TO INFINITY under certain circumstances- the continued deflationary debt crisis you read about every day.
Greenspan orchestrated massive asset price inflation in the face of K-Winter Deflation by aggressively printing and devaluing the US Dollar. Many look to see “where the Dollars are going”, but it is the effect of Dollar Devaluation on Price Inflation that is most important. The Dollar Devaluation will grossly devalue the debts while driving key asset prices like Gold sharply, higher. With the US Dollar being aggressively devalued- you cannot sell everything and move to Dollars when the Stock market panic comes because your Dollars quickly lose value due to the ongoing printing– the exact opposite of the 1929 era.
The price charts of today for most assets mirror the inflationary 70’s almost perfectly. The Fed has reduced the deflationary backdrop of huge debt deflation to a period of “Stagflation”- high inflation with a weak economy, much like the 70’s. Yet, we have nothing like the deflationary price decline like in the 1929 period.
We are now entering an important period as the Fed ramps up the Dollar printing via debt monetization (QE). Going forward, the price charts off of the late 70’s show that Gold went parabolic as the Dollar was heavily devalued a further 65+%. Today, it could be more like 90% as the Fed prints to pay all of the US debt that is off- balance sheet. This will erode the value of any Dollar based asset that you own that does not appreciate more than the Dollar is devalued! Examples are Dollars saved in a savings account, life insurance policies, Stocks that you own, Bonds that you own- practically any asset that you own unless that asset has true intrinsic value that will make its price rise as much or more than the Dollar is devalued. Examples of assets that gained as much or more than the Dollar losses in the late 70’s were things like Gold, Silver, and good quality Gold and Silver Stocks. There is a “gradient of intrinsic value” to assets. For instance, general Stocks did not come close to keeping pace with the loss in value of the Dollar in the late 70’s, but once the economy recovered so earnings and dividends rebounded- general stock eventually climbed by 10 times their price- but over many years. That leaves you worried about paying your bills for the next, say, 10 years, though.
I am sorry to say that “fixed incomes” will lose value along with the Dollar Devaluation. Interestingly, “fixed loans” will be devalued, too. Historically like the 1929 Era, debt must be reduced about 90%. The Fed is devaluing the Dollar to devalue the debts. If they devalue the Dollar by 90%, they will simultaneously devalue the US Debt by 90%. These guys are not stupid. They know that devaluing the Debt, combined by the huge coming rise in Gold like the late 70’’s that will increase the price of Gold held by the US, and “balance the US Balance sheet.” Then, the huge price inflation will start to generate outsized income for the US Government based on eventual sharp increases of income tax flows created by higher prices created by lower valued Dollars.
You can protect yourself from the above by owning Gold, Silver, and Gold and Silver Stocks; and by owning other assets that will perform more than the Dollar is devalued. Yet, we are dealing with the devaluation of the Dollar- the denominator in the US price equation so as the Dollar falls the effect on price is logarithmic-not arithmetic.
The above is a general overview of the reality of the situation. Thank you for reading.
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A much more extensive writing on Gold and Gold charts, where Gold might be going, and when; is linked, below, to Jim Sinclair’s site. You will have to scroll about half way down the page, but the article is there in its entirety.
PRICE VERSUS VALUE
My article on THE SILVER ROCKET is linked, below
The Gold version.
And finally, if you need a break from all of the negativity, you might want to take time out to read the following story to a younger loved one in the family.
Goldrunner maintains a subscription site that covers Gold, Silver, and the Gold and Silver Stocks that can be found at GOLDRUNNERFRACTALANALYSIS.COM
Goldrunner is also starting a new and free public newsletter that will review some of the fractal work and be delivered via e-mail, called “Goldrunner’s Fractal Corner.” If you would like to receive this newsletter, you can send an e-mail to Goldrunner at [email protected]
For the moment,
Please understand that the above is just the opinion of a small fish in a large sea. None of the above is intended as investment advice, but merely an opinion of the potential of what might be. Simply put: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. In the interest of full disclosure, GOLDRUNNER is personally invested in the Precious Metals sector including various Precious Metals and other individual stocks. GOLDRUNNER reserves the right to modify or eliminate any or all positions at any point in time.