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Here is some very important information about our Precious Metals Storage program with Brinks in Canada:  We just received information that Silver Eagles are allowed outside the jurisdiction of the Custodian (outside U.S. in an IRA) according to the IRS code.  For more information call 877-375-1365.

Here are the links to two YouTube videos that you should watch.  They feature Jim Sinclair and James Turk:

Disclaimer: David has found this particular video to be of interest, however Miles Franklin Ltd. does not endorse GoldMoney as a source for purchasing precious metals.

James Turk's presentation on the gold price and the US dollar
James Turk’s presentation on the gold price and the US dollar
Ellis Martin Report with Jim Sinclair
Ellis Martin Report with Jim Sinclair “Consolidate Your Holdings and Save Your Money”

I am still on vacation through Saturday, but after missing three straight newsletters, I couldn’t stand it anymore and had to get writing again. Funny thing is, Laura, my editor, told me the same thing. She said she missed the routine of doing them too.

I spent eight straight days with Backwoods Jack. We didn’t kill each other, but tempers did flair. Even when you use facts and logic with people like Backwoods Jack, is doesn’t do any good. They have their minds made up beforehand and the fool in the argument is the one beating their head against the wall – me! The sad thing is that “they,” the Backwoods Jacks of the world, out-number us 100 to 1. They won’t see the light a year from now, with gold north of $2,000 and monetary insanity all around us.

I listened to a well-reasoned argument from the owner of a medical device firm in Boston who I know, that concluded we were headed for deflation; the problems were now too big to fix; the price of gold may hit $2,000 but then it would fall, and he would never own it. At least he understood the issues and the political impossibility of fixing them, which gives him a leg-up on most of the public. I figured I’d ambush him from the start, and asked him “what is the definition of Deflation?” I expected him to say “falling prices.” That would have been too easy. He replied, “When the money supply is shrinking.” He added, “We can’t have inflation with a shrinking money supply and a slowdown in the velocity of the dollar.” He was referring to the collapse in bank loans, which was causing NEGATIVE money supply growth. I told him that the information I have clearly shows that the money supply has NEVER contracted and MZM, the broadest form of money, is rising rapidly. He said I was wrong! Was I? (See chart below)
From investopedia.com:
Definition of ‘Money Zero Maturity – MZM’
A measure of the liquid money supply within an economy. MZM represents all money in M2 less the time deposits, plus all money market funds.
Investopedia explains ‘Money Zero Maturity – MZM’
MZM has become one of the preferred measures of money supply because it better represents money readily available within the economy for spending and consumption. This measurement derives its name from its mixture of all the liquid and zero maturity money found within the three “M’s.”

Or, we can look at M2

Here is a chart showing M2, the supply of money which is controlled by the Federal Reserve. Rarely is money growth below 5% on an annualized basis. What’s more, there is no natural check on the increase in dollars as there is with gold, which has to be mined out of the ground.

He is correct about Velocity, now, which is falling as people are cutting back on purchases and paying down debt, but that can (and will) change very quickly – as soon as dollar inflation causes the price of commodities to rise, which is starting to happen.

Essentially, velocity measures how fast money changes hands, providing a gauge of economic activity. In basic terms, when velocity declines sharply even as supply is being introduced at an unprecedented rate, the implication is that the added liquidity is not engendering economic activity. This is what “pushing on a string” looks like.  I say this is like the argument of which came first, the chicken or the egg?  Will a rise in velocity cause inflation or will the emerging inflation cause an increase in the velocity of the dollar?  I suspect the latter will occur.  This is especially true since the inflation that we face will NOT be driven by retail demand, but rather by an increase in commodity prices resulting from the debasement of the dollar.

The coming (hyper) inflation will be a Currency event (not an economic event) and will be caused by the undermining of the dollar with further QE and the resulting massive money creation.  As foreigners avoid the dollar and dollar-denominated US Treasuries, the price of oil, copper and all dollar-denominated commodities will rise.  Then, watch the “Velocity” speed up.   Most people do not understand that the coming Inflation (not Deflation) will not be the result of economic events.

From the minute Bernanke recently announced that the Fed would keep interest rates at Zero, at least until 2015, it became a no-brainer to start buying gold .My trader friend, Trader David R sent me a short Email that said “Bernanke just did us a favor.  Be long gold for the next three years!”  He didn’t need to add a word to the sentence.

In his interview by Ellis Martin, Jim Sinclair will tell you that not only is it “politically impossible” to stop QE, but if the politicians did actually stop Quanitative Easing, the sound of the collapse of the economy would be heard on the moon.  (The link to this interview can be found in today’s Jim Sinclair section, or at the very beginning of my comments, above.)

I can wrap this up very simply.  All you need to know are the following two things:  (1) Zero interest rates for three years, and (2) QE to infinity – which is guaranteed by political realities.   Knowing just these two things will give you all the information you need to know, all the reasons necessary to motivate you to  buy gold and silver now – at prices that will make you a lot of money.  Oh yes, I almost forgot, you will also have to stop listening to the “other side” of this argument, and boldly think outside the (establishment) box.  Hey, I just made it easy for you.  Now all you have to do is ACT.

Next, Andy Hoffman presents two “Tea Cup and Handle” charts.  I was first introduced to this technical pattern in the early 2000s by Jim Sinclair.  They usually result in a spectacular break-out to the UPSIDE.

Wednesday Afternoon Wrap-Up 2/8/2012, Ranting Andy Hoffman