A concern people often convey when taking possession of physical gold in the United States is the possibility that it may be confiscated by the government. The main reason this concern is legitimate is that has already happened! Per www.wikipedia.com:

Executive Order 6102 is an Executive Order signed on April 5, 1933 by U.S. President Franklin D. Roosevelt “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates” by U.S. citizens.

The Order required U.S. citizens to deliver on or before May 1, 1933 all but a small amount gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 per troy ounce. Under the Trading With the Enemy Act of October 6, 1917, as amended on March 9, 1933, violation of Executive Order 6102 was punishable by fine up to $10,000 ($166,640 if adjusted for inflation as of 2008) or up to ten years in prison, or both. The price of gold from the treasury for international transactions was thereafter raised to $35 an ounce; this had no lasting effect on the value of the dollar, which thenceforth was determined by its value relative to other world currencies.
Order 6102 specifically exempted “customary use in industry, profession or art”–a provision that covered artists, jewelers, dentists, and sign makers among others. The order further permitted any person to own up to $100 in gold coins ($1,664 if adjusted for inflation as of 2008; a face value equivalent to five troy ounces of Gold valued at $4800 as of 2009).

The limitation on gold ownership in the U.S. was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373 [2] [3] which went into effect December 31, 1974.

Essentially, Executive Order 6102 allowed individuals to keep a maximum of five troy ounces of gold, any more and they were subject to greater than a $166,640 fine plus potential jail time. Suffice to say, it was a significant penalty which clearly speaks to the inherent importance of the metal itself. Did you catch the part where thereafter the price of gold was raised by ~70% to $35? This was ideal for corporations who simply relocated their holdings offshore and brought them home once the revaluation was complete – obviously, for the general public this was an extremely raw deal. Only 42 years later, beginning the first of January, 1975, were citizens of the United States once again legally able to purchase and hold significant quantities of gold.

So, since there is a valid claim that the current economic landscape mirrors the Great Depression of the early 1930s, what is the probability of confiscation this time around? The probability is extremely low for two simple reasons:

1. Citizens of the United States don’t hold anywhere near the amount of gold they did during the 1930s.
• Even though many US citizens did not abide by Executive Order 6102, many did, and during the 42 years that ownership continued to be illegal, for a generation, and perhaps two, the mindset greatly shifted away from intrinsic money via precious metals.
• This was assisted by the removal of silver from US coinage in 1965. While it is difficult to locate accurate numbers, it is assumed largely that today the US public owns orders of magnitude less gold that it did during that time.
2. Confiscation in this modern era would immediately yield the exact opposite reaction the US Government would be attempting to stifle.
• If the United states were to confiscate its citizens gold as it has done in the past, foreign governments and central banks would instantly read this as an imminent, if not immediate US Dollar devaluation.
• More than likely, foreign entities would begin dumping US Dollars on the open market, causing gold to spike in other currencies regardless of what events transpire within the US.
• A gold confiscation would only be performed if it could be properly managed, and since the world holds such a large amount of US Government debt, it would be impossible to manage this properly due to its global and not US specific reach.

Of course, market predictions and the actions of government are always difficult to forecast, but with a bit of rationale, the probability of confiscation appears to be extremely low.

Update: Gold

Gold is continuing to make new highs and rightly so – check out this image from one of Karl Denninger’s recent posts:

The line that starts in the upper left at 89.71 and ends in the bottom right at 75.025 is the USDX. The line that starts in the bottom left at 666.79 and ends in the upper right at 1101.36 is the S&P 500 Index – there is a near perfect inverse correlation between the increase in the S&P 500 versus the decline in the US Dollar. Should this trend continue, bear this in mind if the Dow Jones Industrial Average (DJIA) hits 20,000 by the end of next year!

A www.drudgereport.com headline from November 9, 2009:

A www.drudgereport.com headline from November 11, 2009:

UPDATE: Audit the Federal Reserve

http://www.auditthefed.com

• H.R. 1207: Federal Reserve Transparency Act of 2009 now has 311 co-sponsors, up from 309 last week.
• S. 604: Federal Reserve Sunshine Act of 2009 now has 30 co-sponsors, flat from 30 last week.

CNBC – Dollar Will be Utterly Destroyed, Global Currency, New World Order… (11/8/09)

http://www.youtube.com/watch?v=c0DJZvsBaBs

Peter Schiff at Harvard University 11/07/09

Part 1 – http://www.youtube.com/watch?v=6G35tEBno74
Part 2 – http://www.youtube.com/watch?v=5VRo3BjVpM8
Part 3 – http://www.youtube.com/watch?v=LVRsvv6rp4k
Part 4 – http://www.youtube.com/watch?v=2L-1IQsB9R8
Part 5 – http://www.youtube.com/watch?v=rQsRmZamBfE
Part 6 – http://www.youtube.com/watch?v=w5Gw8vBIffY
Part 7 – http://www.youtube.com/watch?v=nFkUv08n5oo
Part 8 – http://www.youtube.com/watch?v=AIk7OPgx1MM
Part 9 – http://www.youtube.com/watch?v=p-hPudmKGrQ
Part 10 – http://www.youtube.com/watch?v=R0kCr0PBaEA

Congressman Ron Paul on Morning Meeting w/ Dylan Ratigan (11/5/09)

http://www.youtube.com/watch?v=MXryud9FUgQ

Ron Paul on Fox Business “Nightly Scoreboard” 11/04/2009M

http://www.youtube.com/watch?v=r_fkKf0PUlg

Report: 10 states face looming budget disasters (11/11/09)

Pew report says 9 states face budget deficits, economic challenges similar to California’s

http://finance.yahoo.com/news/Report-10-states-face-looming-apf-1219382684.html?x=0&sec=topStories&pos=4&asset=&ccode=

• California’s ongoing fiscal crisis has attracted national attention, but a study warns that nine other states are barreling toward similar economic disaster.
• A report released Wednesday by the Pew Center on the States says Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin also are at risk of fiscal calamity.
• That could mean higher taxes, more layoffs of government employees, increasingly crowded classrooms and fewer services in states that account for more than one-third of America’s population and economic output.
• Most of the states face rising unemployment and high home foreclosure rates, and their revenues have dropped by double-digit percentages.
• The analysis urges lawmakers and governors to take quick action to prevent economic catastrophe.

Dollar May Fall on ‘Dovish’ Fed Policy Makers, BNP Paribas Says (11/11/09)

http://www.bloomberg.com/apps/news?pid=20602081&sid=ajI8DUtOpEMY

• The dollar may extend its decline after Federal Reserve speakers delivered “dovish” statements yesterday, indicating they are concerned that unemployment will continue rising, according to BNP Paribas SA.
• “Any effort to stabilize the dollar in the short term can only come from the Fed via verbal intervention, threatening to hike interest rates early if required,” BNP Paribas analysts led by Hans-Guenter Redeker in London wrote in a research note today. Yesterday’s speeches indicated that “Friday’s release of the weak October labor-market report impacted Fed thinking.”
• U.S. economic growth and inflation may persist below ideal levels into 2011, making the central bank’s current interest- rate stance “appropriate,” Federal Reserve Bank of Dallas President Richard Fisher said in a speech yesterday in Austin, Texas. Richmond Fed President Jeffrey Lacker said in an interview with CNBC that U.S. consumer spending should rise at “modest” pace in coming months.

China Signals That It May Allow Currency to Rise Against Dollar (11/11/09)

http://www.cnbc.com/id/33850971/

• China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.
• “Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism,” the central bank said in a 46-page monetary policy report.

Exclusive: Chilton sees decision in December on position limits (11/10/09)

http://www.reuters.com/article/ousiv/idUSTRE5A95K220091110

• The Commodity Futures Trading Commission is moving toward adopting a proposal in early December to rein in excessive speculation in energy markets by setting hard limits on positions investor entities can hold in a contract.
• Bart Chilton, one of five CFTC commissioners, said until a draft is completed it will be difficult to determine where the commission stands as an entity, but there is a broad understanding “that there are issues that need to be addressed and that doing nothing is not an option.”
• “I think there will be” position limits, Chilton told Reuters in an interview.
• “I don’t want to prejudge where we’ll be specifically but if I had to guess where we’ll come out ultimately I believe that there will be hard position limits … for energy commodities and for other physical commodities” such as metals, he said.

U.S. dollar depreciation orderly so far: Fed’s Fisher (11/10/09)

http://www.reuters.com/article/gc04/idUSTRE5AA09N20091111

• The U.S. dollar has so far had an orderly depreciation, Federal Reserve Bank of Dallas President Richard Fisher said on Tuesday.
• “Thus far the dollar has not been in a disorderly depreciation,” Fisher told reporters, when asked about the carry trade.
• In a speech earlier, Fisher warned that the Federal Open Market Committee would craft an appropriate response if the carry trade proved disruptive to currencies and securities.
• He said he was aware of risks the FOMC ran of fuelling the trade by stating the Fed would hold its funds rate at exceptionally low levels for an extended period.

Under Attack, Fed Chief Studies Politics (11/10/09)

http://www.nytimes.com/2009/11/11/business/11fed.html?hp

• With the Federal Reserve under more intense attack than at any time in decades, Ben S. Bernanke, the professorial chairman of the central bank, was schooled last month in how to handle the increased political demands of his job.
• For months, he had warned – without anyone on Capitol Hill appearing to listen – that a seemingly innocuous bill to let Congress “audit” the Fed would gravely threaten the central bank’s independence.
• It was alarming enough that the bill’s author was Representative Ron Paul, the quixotic Texas Republican whose new book, “End the Fed,” had just landed on the best-seller lists. Despite vigorous protests by Mr. Bernanke, nearly 300 House lawmakers and 30 senators had endorsed Mr. Paul’s bill.
• Voters had become suspicious and unnerved by the Fed because of its trillion-dollar efforts to bail out the financial system, Mr. Frank warned. If the Fed really wanted to survive the disgruntlement in both parties, he continued, Mr. Bernanke would have to step back and let him devise a compromise.
• Mr. Bernanke initially reacted to the bill in almost apocalyptic terms. The G.A.O. audits, he told a House hearing in late June, could lead to a Congressional “takeover” of monetary policy that would be “highly destructive to the stability of the financial system, the dollar and our national economic situation.”

Economists Seek to Fix a Defect in Data That Overstates the Nation’s Vigor (11/9/09)

http://finance.yahoo.com/banking-budgeting/article/108116/economists-seek-to-fix-a-defect-in-data-that-overstates-the-nations-vigor

• A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.
• The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.
• American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

Which will come out on top: paper or gold? (11/9/09)

Printing presses have been pumping out dollars and pounds. Little wonder many are seeking a more trusty store of value

http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article6908789.ece

• Last week the price of gold rose to $1,100, the highest ever recorded. Gold is still an important measure of the world economy. The theory of the 19th-century gold standard was that gold was “real money” in the same way as landed property was “real estate”. All types of paper money are capable of being created by banks or governments, so the supply is potentially unlimited. It was observed that gold holds its purchasing power over centuries, whereas paper money tends to depreciate towards the value of zero.
• The immediate cause of the rise was a purchase of 200 tonnes of gold bullion by the Reserve Bank of India from the International Monetary Fund. The Indian purchase is quite large in terms of the gold market, but not particularly large in terms of the Indian reserves. India’s reserves now amount to $277 billion, of which this new purchase of gold amounts to only $6.7 billion.
• The significance of the purchase is that it may be the start of a new phase in the struggle between gold and paper. Since 1971, when President Nixon ended the convertibility of the dollar into gold under the Bretton Woods Agreement, the world’s central banks have tended to be net sellers of gold and net buyers of dollars. Now the Indians have decided that they have more dollars than they want.
• This new logic extends outside gold and outside currencies. The real struggle between gold and paper is a struggle for power. If paper money is the dominant form of currency, as it is at present, then the ultimate governors of the world economic system are the bankers who have the power to create money.
• If, however, gold is regarded as the ultimate standard, as “real money”, then the market decides the valuation. The floating rate system which emerged after 1971 depends on relatively stable relationships between different currencies. If countries develop a preference for gold over paper, then paper currencies will have to demonstrate that they have a stable value in gold, as they did in the years before 1971.

China’s Premier Warns Obama to Get America’s Deficit to an “Appropriate Size” (11/9/09)

http://finance.yahoo.com/tech-ticker/article/368426/China%27s-Premier-Warns-Obama-to-Get-America%27s-Deficit-to-an-%22Appropriate-Size%22

• As President Barack Obama prepares to depart Thursday for his first Asia trip, Chinese premier Wen Jiabao is urging the U.S. to keep its deficit to an “appropriate size,” a clear message to the leader of the world’s largest debtor nation from its largest creditor.
• China is the largest holder of U.S. government debt and has invested an estimated 70% of its more than $2 trillion stockpile of foreign-exchange reserves (the world’s largest) in dollar assets, Reuters reports. Further dollar weakness, brought on by enormous U.S. deficit spending and near-zero interest rates, would erode the value of China’s huge U.S. holdings, as Henry and Aaron discuss in the accompanying clip.
• In contrast, the best strategy for the U.S. may be an inflationary stance. We need stimulus spending to jump start our economy and reduce the real value of our record budget deficit of $1.42 trillion in the fiscal year that ended Sept. 30. An improved U.S. economy also would mean more Americans buying up Chinese-made goods.

Gold price hits record high as dollar wanes (11/9/09)

http://www.breitbart.com/article.php?id=CNG.38d1a363d5a9d9eb7392a4a7058ff210.1d1&show_article=1

• Gold prices hit a record above 1,100 dollars on Monday with the dollar weakening after a pledge by G20 countries to keep economic recovery pumped up with easy money.
• Last week, the US Federal Reserve decided to hold rock-bottom US interest rates for “an extended period” and to keep trillion-dollar stimulus measures in place to support the United States’ fragile recovery from recession.
• “Unless there’s a turn in US interest rates, gold will be well bid,” Ronald Leung, director at Lee Cheong Gold Dealers in Hong Kong, said on Monday.

G20 leaves door open for fresh pressure on dollar (11/8/09)

http://www.reuters.com/article/ousivMolt/idUSTRE5A71XS20091108?sp=true

• The U.S. dollar may come under renewed pressure from emerging market currencies and the euro after a meeting of the world’s top finance officials failed to take concrete action on rebalancing global money flows.
• Finance ministers and central bank governors of the Group of 20 major countries, meeting in Scotland at the weekend, launched a “framework” in which they will discuss how to reduce trade and savings imbalances between nations.
• But their communique talked only in general terms about rebalancing economies, and implied they might not agree on specific policies for individual countries to adopt before the end of next year at the earliest.
• The result may be a continuation of heavy fund flows into emerging markets, boosting currencies there. And central banks intervening to slow currency appreciation may keep investing much of the money they obtain in the euro, pushing up that currency too.
• “We’re probably looking at fresh dollar weakness in the short term” in the wake of the G20 meeting, said Kenneth Broux, senior markets economist at Lloyds TSB.

Inside the Global Gold Frenzy (11/7/09)

http://www.nytimes.com/2009/11/08/business/global/08gold.html?_r=2

• Amid a global frenzy fed by multibillion-dollar hedge funds, wealthy speculators and governments all rushing to stock up on the precious yellow metal, the price of gold briefly surpassed $1,100 an ounce on Friday, a record high.
• Even the most bullish of gold lovers were surprised last week when the Reserve Bank of India stepped in and bought 220 tons of gold from the International Monetary Fund for $6.7 billion, a sign that other central banks might move away from dollar-denominated assets like Treasury bonds in favor of the precious metal. India’s huge purchase means that gold will now account for about 6 percent of India’s $285.5 billion of foreign exchange reserves – up from the previous level of about 4 percent.
• Adjusting for inflation, gold would have to top $1,885 to set an all-time record.
• “I have never been a gold bug,” Paul Tudor Jones, the prominent hedge fund manager, told his investors last month. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”

Is the Dollar Dying a Slow Death? (11/6/09)

http://www.time.com/time/business/article/0,8599,1935868,00.html

• The U.S. dollar seems to have as many lives as a cat. Even before 2008’s financial crisis, as the dollar slumped against other major currencies, countless pundits and economists predicted its demise as the global economy’s No. 1 currency. The doomsayers seemed vindicated when the U.S. economy descended into the worst recession since the 1930s, with its financial sector in tatters. How could an already weakened greenback maintain its value as American economic prowess withered? But then – surprise! – investors around the world decided the good old greenback was a safe haven in a time of great uncertainty. The dollar was resurrected, reversing years of slow decline.
• That strength turned out to be temporary. A ballooning U.S. budget deficit and escalating government debt has made the dollar currency non grata in many quarters once again. An index that measures the greenback’s value against a basket of major currencies, including the euro and yen, has fallen about 15% from a three-year high reached in March and is now hovering near a 14-month low. Economists and analysts expect the dollar to lose a lot more ground. Daisuke Uno, chief strategist at Japan’s banking giant Sumitomo Mitsui, believes the Japanese currency could strengthen to 50 yen to a dollar by 2011 (from around 90 today) due to continued weakness in the U.S. economy. Harvard historian Niall Ferguson says the dollar could slide by as much as 20% on a trade-weighted basis over the next 12 months. The process may be protracted, he argues, but the dollar is dying. In 10 years’ time, he said in October, “it won’t be such a dollar-dominated world. I’m sure of that.”

Reed Says ‘I’m Sorry’ for Role in Creating Citigroup (11/6/09)

http://www.bloomberg.com/apps/news?pid=20601087&sid=a.z4KpD77s80&pos=7

• John S. Reed, who helped engineer the merger that created Citigroup Inc., apologized for his role in building a company that has taken $45 billion in direct U.S. aid and said banks that big should be divided into separate parts.
• Lawmakers were wrong to repeal the Depression-era Glass- Steagall Act in 1999, Reed said. At the time, he supported overturn of the law, which required the separation of institutions that engaged in traditional customer banking services from those involved in capital markets.

Gold breaks $1,100 (11/6/09)

The precious metal rallies after the U.S. government says the nation’s unemployment rate surged to 10.2% in October.

http://money.cnn.com/2009/11/06/markets/gold/index.htm?postversion=2009110610

• Gold powered through $1,100 an ounce Friday after the U.S. government said the nation’s unemployment rate rose more than expected last month, fueling demand for the metal as a safe haven.
• Gold rally to continue. Gold is benefiting from a “flight to quality,” said Adam Klopfenstein, senior market strategist at commodities brokerage firm Lind-Waldock.
• Gold could come under pressure as investors book profits following the push above $1,100, but the market has a “bullish fundamental case,” Klopfenstein said.
• “The gold market is something a lot of speculative and institutional investors are looking at,” said Adrian Ash, head of research BullionVault.com. “You’ve got low interest rates and horrible economic data, for a lot of institutional investors gold is a no brainer.”

What recovery? Unemployment shoots past 10 percent (11/6/09)

Joblessness at 10 percent for 2nd time since WWII; millions of unemployed feel no recovery

http://finance.yahoo.com/news/Jobless-rate-tops-10-pct-for-apf-563122944.html?x=0&.v=8

• Just when it was beginning to look a little better, the economy relapsed Friday with a return to double-digit unemployment for only the second time since World War II and warnings that next year will be even worse than previously thought.
• Economists had not expected the 10 percent mark to come so quickly and immediately darkened their forecasts. Mark Zandi, chief economist at Moody’s Economy.com, and Joshua Shapiro, chief U.S. economist at MFR Inc., predicted the rate will peak at 11 percent by mid-2010. They earlier had projected 10.5 percent.
• Unemployment at 11 percent would be a post-World War II record. Only once since then has joblessness hit double digits in the United States — from September 1982 to July 1983, topping out at 10.8 percent.

Bank of England expands quantitative easing, holds rates steady (11/5/09)

http://www.reuters.com/article/ousivMolt/idUSTRE5A41VM20091105

• he Bank of England said on Thursday it would expand its quantitative easing program by 25 billion pounds ($41.5 billion) to help kick-start Britain’s recession-hit economy.
• The increase brings the central bank’s total asset-buying program to 200 billion pounds, the equivalent of more than 14 percent of Britain’s economic output.

Highlights from “The International Forecaster” newsletter (11/11/09)

Published and Edited by: Bob Chapman

Check out or Subscribe to The International Forecaster

• The American journey that began on 8/15/71 is going to end over the next several years. The problems that have manifested themselves over the past few years signal the final stages of a destructive process that has stifled production and innovation and encouraged fraud in Wall Street and banking. The injection of money and credit into the financial system via the Fed and the Treasury has almost exclusively benefited the wealthy financial sector and has spread only crumbs to American citizens. The residential housing sector is dying, as now is the bubble in commercial real estate. It is now only a matter of time that the stock markets new bubble is broken. Insolvency in insurance, banking and on wall Street has been temporarily papered over. These are the culprits who created our problems along with their mentor the Federal Reserve. These are the same people who created fraudulent CDOs and MBSs, which caused the credit collapse. For that they have been rewarded.
• Free trade, globalization, offshoring and outsourcing have ripped the heart out of our industrial base and now are shredding our service sector unabated. At the rate of our present decline we will be a second tier nation in five years. The loss of 8 million jobs over the last nine years is staggering. What has been done to our economy is criminal. Every month we hear of revelations of insider trading scams, Ponzi schemes, front running by 16 major market makers led by Goldman Sachs, naked shorting by major brokerage firms and market manipulation by the Treasury and the Fed and nothing is done to stop it. Billions of dollars are being stolen daily from American investors.
• It is now quite obvious that the Illuminists have decreed that the dollar is to be abandoned as the world reserve currency and it is to be replaced by either a new international trading unit or a one-world currency. The US banking system and the dollar are being taken down slowly so that the public won’t catch on to what is being done to them. Again, we return to 8/15/71. That is when the dollar demise began and the end of the American empire began. We have been delivered into the tentacles of corporatist fascism. Big business, Wall Street, banking and insurance are being merged with government. Both entities are controlled by the same personages. The charade of solvency continues until the designated moment when the Illuminists have decided to pull the plug. The demise of the US is just another episode in the long history of this cabal that has brought us misery for more than 1,000 years, not to mention the continuous wars to cull world population and the greater concentration of wealth and power over the centuries. After the purge the new currency will have gold backing and the process will begin again anew. That is why gold and perhaps silver will be the only refuge from the changes in fiat currencies worldwide. The changes we are witnessing are going to be permanent-short of changes via revolution, which now is the only avenue left open to citizens of our country and many others. The time we see being borrowed is an artifice to fit a well laid out timetable. Remember your only salvation is gold and silver related assets. They are the only way to preserve your assets.
• The second stimulus package has been a failure. The third package, as we predicted last January, will go to debate early next year. Our guess is a congressional package of $400 to $800 billion and a bank lending increase of some 14%. That is the amount they cut lending over the past year. More money will be thrown at the system. It won’t work, and in 2010, we should see official inflation back at 5% and unofficial inflation at more than 14%. The housing credit will be extended, as will unemployment benefits and seniors will get another $250 check. Yes, we will also get another clunker Car program. This should send the economy sideways into mid-2011 or perhaps to 2012. Unemployment will reach a real U6 figure of 23% by the end of the year. Give or take two points unemployment should stay at this level for about two years. In 2011 inflation will pass 30%. We will have a better figure later. In other words, a delaying action, but no real recovery. Thousands of financial institutions will fail and that will lead to consolidation and nationalization. The minute stimulus increases in money and credit, monetization and low to zero interest rates end deflationary depression will begin having graduated from hyperinflation. There will be neither reform nor any real recovery, because the elitists are again destroying the system to obtain even greater power over the inhabitants of the world. We are on a difficult journey and you had best prepare yourself for it. This time there is no turning back.
• As we wrote in 1971, the departure of the dollar from the gold standard on 8/15/71 was the beginning of the decent of imperial America, but, of course, few were listening. Now 38 years later the end is in sight. The collapse of the dollar and the financial and economic system, due to the interconnectivity every nation in the world will be affected in varying degrees. Some nations will suffer greatly, especially the US, UK and Japan. As a result there has been in process a flight into real assets such as gold and silver and commodities.
• The falling dollar will require that Americans produce more, reduce credit and cut their standard of living. That means consumption as a percentage of GDP will fall from 72% to the long-term mean of 64.5%, which we predicted six years ago. The Fed has not as yet decided when to raise interest rates. We believe they have no intention of lowering rates for at least a year and perhaps they’ll keep them at zero for a long time. That plan could be interrupted by official dollar devaluation and debt default in conjunction with other nations. That is in spite of unemployment that could be 35% two years from now. The elitists believe reflationary dynamics worldwide will provide the momentum to pull the US and the world out of depression. We have news for them; it is not going to work. This so-called new paradigm will only create more bubbles, which will soon appear in China, Brazil, Asia and India. China has spent $1.8 trillion and already has bubbles in their stock and property markets.
• 2010 will be a difficult year for the US. Toward the end of the year real inflation should be over 14% and 10-year should be ½% to 1% higher at 4% to 4-1/2%. As a result the dollar should be selling at 60 on the USDX and gold should be $2,500 to $3,000 and silver over $50. The second stimulus plan will have carried the economy for the year, but only just that. The problem cannot be solved by throwing money at it.
• Washington and Wall Street now tell us there is recovery, but we fail to see it. Zero interest rates worldwide are close to that level and only two countries have revised rates; Australia and Norway, and they, due to their economies being resource based. This doesn’t show strength; it reflects weakness. Zero interest rates and monetization, along with money and credit creation, continue unabated. It has become so obvious that gold hits new highs daily in spite of government manipulation. All the talk of an exit strategy is just that – talk. There cannot be such a strategy. If rates are raised and money and credit and monetization curtailed the entire system will collapse and deflation will assume command. As each passes the elitists try to use new strategies to extricate themselves from the problems that they deliberately created. As a result the dollar cannot establish any upside momentum and decends to new lows weakly. At each Treasury auction the Fed has to supply funds to foreign governments to make it appear foreigners are buyers when in fact in fact in good part it is monetization.
• Banks continue to fail at a record pace and the FDIC is out of money. Some 120 banks have failed this year. Congress presently is in no condition to lend against the FDIC’s $500 billion line of credit, especially with debt limits being approached. As a result of these policies we are in an interlude as inflation wells up in the bowels of the economy. In 2010 it will erupt in all its fury and those not invested in gold and silver assets stand to lose much of their purchasing power.
• The basic challenge for the Fed is to solve the housing crisis, which is as bad as it has ever been. Suppressing interest rates and making subprime loans only extends the problem. Then we have the banks hidden inventory. Once FASB guidelines are met in 1-1/2 months, banking problems will be there for all to see. It won’t be a pretty sight as the world finds out that foreclosed inventories are far higher than we have been led to believe.
• Then we have the burgeoning commercial mortgage problem, which most of the public is completely unaware of. Most of these loans are interest only and the banks do not have the funds to renew them. Then, of course, is the underlying problem of ghost malls and other commercial real estate nationwide. These problems are going to cause many, many banks to fail.
• We ask how can taxpayers pay $15 trillion for US government debt over the next ten years? That does not count state, county and state debt. Then there is personal and corporate debt. The problem is that the debt cannot be paid. As a result the US will copy Argentina’s policies of the late 1990s. That is to print money until you can’t anymore, causing hyperinflation. This is the only way the debt can be dealt with. This approach, instead of purging the system and getting it over with in a few years, has already dragged on six years with five to ten years to go. Today’s tactics by the Illuminists will guarantee 30% plus inflation in 2011 and 30 to 40 percent unemployment, before the dollar crashes and gold hits $6,700 an ounce. It shows you how desperate these people are to hold onto power and to loot American taxpayers. It should be noted that over and over again Keynesianism has been a failure. Anyone who does not advocate the Austrian school has to be blind or a total opportunist. Changes will only come to America and many other countries, when it is forced upon it, not because people do not want change, but those entrenched in power will have to be led away kicking and screaming in order for change to take place. There will be changes when it comes over the next few years; it will now be violent and those now in power will pay a terrible price.