Notice that John Williams says, “Gold Remains the Most-Solid Hedge Against Looming Dollar and Inflation Crises,” and, “Central Banks Dumping U.S. Treasuries at Fastest Pace Since 2011 Budget Crisis.” Boy that sure cuts directly to the heart of the issue. The only way for the Fed to support the bond market is to continue QE. The mere mention by Bernanke that the Fed was “considering” easing slowly in the future caused pandemonium in the global markets. QE is with us “to infinity.” If you believe that we are facing a “Looming Dollar and Inflation Crisis.” This will be the result of a falling dollar, which is the result of continuing our policy of QE, then your “Most-Solid Hedge” is GOLD. He isn’t discussing “price,” or “timing.” He is stating that we all NEED GOLD.
But if you aren’t worried about a “Looming Dollar and Inflation Crisis,” then you don’t need gold regardless of the price. It’s that simple. If you are not concerned that endless QE and that “Central Banks Dumping U.S. Treasuries at Fastest Pace Since 2012,” then you don’t need gold regardless of the price.
If you are not very concerned that the Fed is buying up most of the U.S. Treasuries, you should be. That amounts to the purest form of Monetization.” If you don’t know what the word means, check it out on Google. How bad is it?
Fed Has Monetized 85.7% of Net Issuance of Gross Federal Debt Issuance with QE3. Separately, the Federal Reserve’s own holdings of Treasury securities increased by $9.7 billion in the week ended June 26th. That brought the total Fed holdings of Treasury securities to $1.928 trillion, where the net increase under QE3 of $268.3 billion accounts for 85.7% of the Treasury’s net issuance of gross federal debt coincident with expanded QE3, which began early in 2013.
Your interest in gold should be based on these facts and not on timing a market bottom, or trading gold for profit. Gold is your “Hedge,” your insurance policy, not your trading vehicle.
Williams opens his most recent commentary as follows:
Gold and Silver Selling Has Not Been Fundamental. Central banks were dumping U.S. Treasuries last week at a record pace (see Central-Bank Bond Selling section), yet, contrary to cash moving into gold, which commonly is seen in such circumstances, the rout in gold prices continued. Equity, credit and currency markets also have been unstable, but not of the magnitude seen with the precious metals. Global sentiments are shifting; something is afoot, and it likely is not good news for the broad financial system and markets. Whatever is unfolding could involve liquidity issues within certain markets, corporations, financial institutions and/or countries. It also could involve central bank efforts to pummel the precious metals. There already has been extensive jawboning aimed at pushing gold and silver prices much lower.
What has not happened here is a negative shift in the basic fundamentals that pushed gold and silver prices higher in recent years. There have been some misperceptions that briefly held sway over the markets, such as recent hype of imminent Fed tightening or “tapering” (see Commentary No. 535 and Commentary No. 536, in particular). These issues have been discussed broadly in numerous recent missives, particularly No. 527: Special Commentary and also Commentary No. 516 and Commentary No. 517, included here by reference. Once whatever underlies the current systemic turmoil breaks to the surface, look for the fundamentals supporting gold prices to regain dominance in the factors driving the market for the monetary precious metals.
In particular, the longer-range solvency issues of the United States, including the budget deficit and the debt ceiling, are likely to come to ahead in early September. As the economy slows anew, talk of the Fed reversing QE3 should shift to anticipating increased accommodation.
If the recent selling in gold and silver, as seen in the preceding graph, were fundamental, those same fundamentals should be driving parallel sell-offs in oil and the Swiss franc. As seen in next two graphs, that is not happening.
Irrespective of the sharp decline in the price of gold, physical gold—held for the long term—remains the primary hedge against the U.S. dollar debasement ahead. Yet, it has to be in place, and it has to be held through the developing crises—irrespective of short-term market volatility—in order to provide the desired asset protection. Whether gold is purchased at $250, $2,500 or $25,000 per ounce, it preserves the purchasing power of the dollars invested. Someone looking to take profits at $100,000 an ounce is missing what has happened. Those “profits” are just the preserved purchasing power of the invested dollars. Another way of assessing that is to consider the implied proportionate amount of dollar purchasing power lost with those dollars that were not invested in the hard assets
-ShadowStats.com (see Commentary No. 516, Hyperinflation 2012)
I have often suggested that all of our readers should subscribe to Shadowstats. It’s not just me – Jim Sinclair also urges his legions to subscribe to Shadowstats. Williams’ information is not only interesting, it is vital. Vital for your financial survival in the hyperinflation that he expects to descend upon us by 2014.
This still-forming great financial tempest has cleared the horizon; its impact on the United States and those living in a dollar-based world will dominate and overtake the continuing economic and systemic-solvency crises of the last eight years. The issues that never were resolved in the 2008 panic and its aftermath are about to be exacerbated. Based on the precedents established in 2008, likely reactions from the government and the Fed would be to throw increasingly worthless money at the intensifying crises. Attempts to save the system all have inflationary implications. A domestic hyperinflationary environment should evolve from something akin to these crises before the end of next year (2014).
Williams finished his article with the following quote of gold:
The rise in the price of gold in recent years was fundamental. The intermittent panicked selling of gold has not been. With the underlying fundamentals of ongoing dollar-debasement in place, the upside potential for gold, in dollar terms, is limited only by its inverse relationship to the purchasing power of the U.S. dollar (eventually headed effectively to zero). Again, physical gold—held for the longer term—remains as a store of wealth, the primary hedge against the loss of U.S. dollar purchasing power.
Subscribe to ShadowStats for more excellent commentary.
The following letter appeared on the Motley Fool discussion boards. It is of such high quality and value that I think you should read it here. Boy does this go right to the heart of many of the issues we discuss in our newslette
April 3, 2013
Senator Patty Murray
Senator Maria Cantwell
Washington, DC, 20510
I have tried to live by the rules my entire life. My father was a Command Sergeant Major, U.S. Army, who died of combat related stresses shortly after his retirement. It was he who instilled in me those virtues he felt important – honesty, duty, patriotism and obeying the laws of God and of our various governments. I have served my country, paid my taxes, worked hard, volunteered and donated my fair share of money, time and artifacts.
Today, as I approach my 79th birthday, I am heart-broken when I look at my country and my government. I shall only point out a very few things abysmally wrong which you can multiply by a thousand fold. I have calculated that all the money I have paid in income taxes my entire life cannot even keep the Senate barbershop open for one year!
Only Heaven and a few tight-lipped actuarial types know what the Senate dining room costs the taxpayers. So please, enjoy your haircuts and meals on us.
Last year, the president spent an estimated 1.4 $billion on himself and his family. The vice president spends $millions on hotels. They have had 8 vacation so far this year! And our House of Representatives and Senate have become America’s answer to the Saudi royal family. You have become the “perfumed princes and princesses” of our country.
In the middle of the night, you voted in the Affordable Health Care Act, a.k.a. “Obama Care,” a bill which no more than a handful of senators or representatives read more than several paragraphs, crammed it down our throats, and then promptly exempted yourselves from it substituting your own taxpayer-subsidized golden health care insurance.
You live exceedingly well, eat and drink as well as the “one percenters,” consistently vote yourselves perks and pay raises while making 3.5 times the average U.S. individual income, and give up nothing while you (as well as the president and veep) ask us to sacrifice due to sequestration (for which, of course, you plan to blame the Republicans, anyway).
You understand very well the only two rules you need to know – (1) How to get elected, and (2) How to get re-elected. And you do this with the aid of an eagerly willing and partisan press, speeches permeated with a certain economy of truth, and by buying the votes of the greedy, the ill-informed and under-educated citizens (and non-citizens, too, many of whom do vote ) who are looking for a handout rather than a job. Your so-called “safety net” has become a hammock for the lazy. And, what is it now, about 49 or 50 million on food stamps – pretty much all Democrat voters – and the program is absolutely rife with fraud with absolutely no congressional oversight?
I would offer that you are not entirely to blame. What changed you is the seductive environment of power in which you have immersed yourselves. It is the nature of both houses of Congress, which requires you to subordinate your virtue in order to get anything done until you have achieved a leadership role. To paraphrase President Reagan, it appears that the second oldest profession (politics) bears a remarkably strong resemblance to the oldest.
As the hirsute first Baron John Emerich Edward Dalberg Acton (1834 -1902), English historian and moralist, so aptly and accurately stated, “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” I’m only guessing that this applies to the female sex as well. Tell me, is there a more corrupt entity in this country than Congress?
While we middle class people continue to struggle, our government becomes less and less transparent, more and more bureaucratic, and ever so much more dictatorial, using Czars and Secretaries to tell us (just to mention a very few) what kind of light bulbs we must purchase, how much soda or hamburgers we can eat, what cars we can drive, gasoline to use, and what health care we must buy. Countless thousands of pages of regulations strangle our businesses costing the consumer more and more every day.
As I face my final year, or so, with cancer, my president and my government tell me “You’ll just have to take a pill,” while you, Senator, your colleagues, the president, and other exulted government officials and their families will get the best possible health care on our tax dollars until you are called home by your Creator while also enjoying a retirement beyond my wildest dreams, which of course, you voted for yourselves and we pay for.
The chances of you reading this letter are practically zero as your staff will not pass it on, but with a little luck, a form letter response might be generated by them with an auto signature applied, hoping we will believe that you, our senator or representative, has heard us and actually cares. This letter will, however, go on line where many others will have the chance to read one person’s opinion, rightly or wrongly, about this government, its administration and its senators and representatives.
I only hope that occasionally you might quietly thank the taxpayer for all the generous entitlements which you have voted yourselves, for which, by law, we must pay, unless, of course, it just goes on the $17 trillion national debt for which your children and ours, and your grandchildren and ours, ad infinitum, must eventually try to pick up the tab.
My final thoughts are that it must take a person who has either lost his or her soul, or conscience, or both, to seek re-election and continue to destroy this country I deeply love and put it so far in debt that we will never pay it off while your lot improves by the minute, because of your power. For you, Senator, will never stand up to the rascals in your House who constantly deceive the American people. And that, my dear Senator, is how power has corrupted you and the entire Congress. The only answer to clean up this cesspool is term limits. This, of course, will kill the goose that lays your golden eggs. And woe be to him (or her) who would dare to bring it up.
–Motley Fool Discussion Boards, Posted 6/26/2013