Creature from Jekyll Island (The Fed’s History)

Posted on August 20, 2013 | 3 Comments

U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called the printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” –Ben Bernanke

The problem is that, as the 2007-2008 experience teaches, the lag between financial turbulence and economic damage may be fairly long, of the order of a year or more. In the meantime, the economic indicators may remain positive.” –Stephen Lewis.

The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved. — Confucius (551 BC – 479 BC)

The Gold and Debt over the next decade chart shows the projection of U.S. debt, assuming gold will continue the same close relationship with debt as demonstrated in the historical gold and debt chart discussed earlier.

Conclusion

Gold’s price is directly proportionate to the massive amount of debt that is being created to keep the current fiat system alive. This will likely continue until a crisis, such as a severe global recession or hyperinflation, strikes one of the major developed economies. Either event will be bullish for the gold price, but for different reasons. The price is being driven by the physical market in the developing countries, especially India and China. China has to continue buying as much physical gold as possible if they expect to eventually compete for world reserve currency status.

CSInvestor: Do you see any problems with the above analysis?
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