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If you ask John Williams, he will reply…

Lately, the big question affecting the price of gold is will the Fed continue QE or will they cut back, fearful of inflation?  Inflation, by their definition is running around 2%.  But, as you can see in the graph above, inflation is really running over 9%.  Which inflation number are they afraid of?  Since the beginning of the financial market turmoil in August 2007, the Federal Reserve’s balance sheet has grown in size and has changed in composition. Total assets of the Federal Reserve have increased significantly from $869 billion on August 8, 2007, to well over $2 trillion, much of it being near-worthless mortgage bonds.  That is the engine of inflation and it is increasing to the tune of around $80 billion per month, as they continue to create new money, with the stroke of a keyboard, to purchase toxic mortgage bonds from the too-big-to-fail banks, and Treasuries on the open market.

If they aren’t afraid of inflation they should be.  Jim Sinclair and John Williams say they cannot and will not cut back.  They “jawbone,” but don’t act.  How can they stop?  If they abandon the Treasury market, interest rates WILL rise – actually they are already starting to rise.  Remember, for every 1% rise in the interest rates, we add $160 billion in new interest to the annual deficit and the debt.  And, rising interest rates are toxic to the stock market and deadly to the already sickly real estate market.

Simply put, we can’t afford to let interest rates rise and that is what QE is all about, plus clearing worthless assets off the banks’ balance sheets.  Why would the Fed do such a thing?  Because the Fed (which is not Federal) is owned by the banks and is in business to protect the banks, not the people.  We will be thrown under the buss to help the big banks stay solvent.

If you side with the “they can’t stop QE” or, as Jim Sinclair says, “QE to infinity” view, then off your dollar holdings while they still have buying power and take advantage of the current low prices of gold and silver.

Funny how I call $1,650 gold and $31 silver LOW.  I have been touting gold since it was $275 and silver since it was under $5.  But we can’t roll back the clock and today’s prices are cheap if the Fed continues to print, print, print.  And I believe they will.

The following video, We Are Going To Kill The Dollar, courtesy of our friend Bob U.

We Are Going To Kill The Dollar
In 1986 I had several phone conversations with John Exter.  He was a real gentleman and I would ask his advice on the economy and the dollar.  I was very familiar with his inverse pyramid and have invested accordingly, for the last two plus decades.  Exter wasn’t just another pseudo economist or newsletter writer – he was the real deal and came from the bowls of the Federal Reserve.  He was one of the few Fed bigwigs who dared to speak the truth. And I listened.  And now, so should you. – be sure and read his The Central Banker Who Made A Fortune In Gold, written by Darryl Robert Schoon.