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Check out the KWN interview with Gerald Celente.  He is accumulating physical gold and silver now and tells you why.  He says:

The only thing holding it up is this cheap money.  Why aren’t gold and silver prices going up?  They should be.  Everyone knows that game is rigged.  I believe that the Federal Reserve and the other central banks are manipulating the prices to keep interest rates (artificially) low.

Here is the link to the interview:

Celente – Gold, Silver & the Frightening “Next Great Trend”

Backwoods Jack was excited.  He found out that the Dow was 60 during WW2, and look at it now.   He thinks it can continue the trend.  So I ask, “Can we expect more of the same in the future?”  My answer is NO, unless the dollar is so badly debased that everything goes up in price by multiples (also known as hyperinflation).  Then, nothing has really gone up, it just costs more shrinking dollars to buy the same thing.  Come to think of it, that’s exactly what’s been happening since I got out of college in the mid 60s.

The reason I am so certain that the stock market can never duplicate this performance (sans inflation) is because of demographics and debt.  Today, they are nothing like they were 60 years ago.  Let me explain.

At the end of WW2, America was the only major economy whose industrial base was not in shambles.  We had the factories, the world’s reserve currency (courtesy of the Bretton Woods Conference in 1944), and millions of GIs were coming home and they needed jobs, a house, car, appliances, and a TV of course.  (I remember in the late 1940s, sitting in a small room at the neighborhood community center watching a TEST PATTERN on a 6” TV screen for hours at a time. A thrilling new technology).  Many of the returning GIs took a wife and then produced the post-war Baby Boomer generation.  Business was about to thrive.

We re-built Japan, Germany and the rest of Europe.  We were the electronics and automotive industry for the world.  We were exporting everything to the rest of the world and the US job market was exploding.

We also had by far the world’s largest gold reserves (probably half the world’s gold at the time) and a gold-backed currency.  We had a mammoth positive balance of trade.  Money was flowing INTO American, not OUT, as it has been for the last couple of decades.  It was a once-in-a-lifetime perfect storm for growth.

Massive new industries flourished: commercial airlines, the automotive industry, housing industry, the real estate industry, both commercial and residential. We manufactured lawn mowers, snowmobiles, air conditioners, and every possible convenience.  New wealth-creating industries exploded in the 90s – computers, and the internet.

We rebuilt our infrastructure (the Interstate Highways, new bridges, new schools for the baby boomers). There were good jobs for anyone who wanted to work.

And then throw in the military-industrial complex and the jobs it created.  (The Korean War, Vietnam War, and the endless War on Terrorism)… Yes, the 50s, 60s, 70s, 80, and 90s led to record profits and record growth on Wall Street.  The brokerages and banks thrived.  The stock market SOARED from 60 to over 14,000.  And there it sits, at the exact same number once again today, over a decade later.  You could say that we experienced more than one full decade of no growth, the 2000s.  Quite different than all the decades that preceded it from the end of the war to 2000. Do you wonder why it all stopped?

My friend Bill Fleckenstein wrote a book about Alan Greenspan and laid the blame on his shoulders – his expansive monetary policies and low interest rates led to bubbles (the stock market and the real estate market) and as all bubbles do, they collapsed and took jobs and capital – and the stock market – down with them.  Bernanke replaced Greenspan and he continued to expand money and further lower interest rates, fearful that we may experience another Great Depression.  The result was the real estate bubble and the near-collapse of global banking.  That was followed by TARP and QE to infinity.  Although Bernanke succeeded in holding OFF the depression, his policy threatens the viability of the dollar.  That is a story yet to be told, but it will be told.  The opening chapters are chronicled by the rise of gold from $250 to $1675 for starters.

Now here we are in 2013 – relative to our enormous money supply, we have little (if any) gold.  God help us if the government has sold and leased our gold out.   The scary part is in spite of Ron Paul’s numerous requests, they refuse to allow an audit – so draw your own conclusions.

We run the world’s largest trade deficits; our population is aging; most of our citizens have virtually no savings; our middle class (the same middle class that accounts for most of the retail consumption in America) is rapidly shrinking, both in size and in earning capability.  There simply are far fewer middle class jobs out there and we have exported our manufacturing base to Asia. The internet is taking away millions of retail jobs (which can be witnessed in the loss of some 3,000 big-box store closings proposed for this year).  “Real” unemployment (see John Williams Shadowstats) is running higher that at any time since the Great Depression (over 24%) and we are in the early stages of run-a-way inflation, which could make itself know at any time.  Come to think of it, $4 a gallon gasoline, $4 a gallon heating oil, $4 milk and $4 for a loaf of bread should already be a wakeup call.

Yes, it is different this time.  There is no comparison to the Dow’s growth potential from 2013 forward to what we experienced in the five decades that followed WW2.  Whatever growth we get going forward will be a result of inflation, also known as currency debasement and an interest rate policy that makes it impossible to earn a fair return on bonds, CDs and money market funds. That will change as soon as interest rates start to rise, which sooner-or-later they must.  Adding a trillion or more new dollars a year to the economy lifts the stock market, but the yardstick cannot be (debased) dollars; it should be ounces of gold, which is real non-dilutable money.

So, although the Dow has eclipsed its all-time closing high of 14,164.53 on Oct. 9, 2007, and its all-time intraday high of 14,198.10, it took five years, four months and 24 days to get back to break-even (if you’re keeping count).  Gold was $1000 five years ago, and in spite of the current takedown, gold is still up nearly 170% while the Dow is back to even.  I guess it all depends on your point of view, and the yardstick you use to measure progress.

As for me, I price the Dow in ounces of gold.  In 2000 it took 42 ounces of gold to buy the Dow. Today it takes 8.5 ounces.  So, before you start dancing in the street, check out your yardstick, and if it’s the US dollar, your measurement is flawed.  And if you continue to measure the Dow’s performance in dollars, what you will call growth will be anything but.

John Williams “REAL” inflation number, calculated exactly like it was in the 70s, is around 9%.  If you use that number, and subtract “real” inflation from the growth of the Dow (which you should) then since the bottom in 2008, the Dow is closer to 7,100 (inflation adjusted) than to 14,164.

And truth be told, gold is not keeping up either, but it is very close.  I expect gold will top $2,000 maybe even this year, and get back to even, after inflation, while the Dow would still have to double.  Remember, gold is NOT an investment, it is sound money and all it should do is stay even to inflation.  Too much math for you?  Just go back to the gold/Dow ratio – from 42 to 1 to 8.5 to 1 and you should get the picture.