HI Rob,
The following from my friend, Dr DeCosta, pretty much sums it. The problem, as I see it, the markets will go higher as where else will the massive amounts of dollars that are being printed going to go? Into a 10 year treasury yielding 1.5%? Into a CD? Of course not. It has to go into the stock markets in order to manufacture a decent return. As we've already seen with the previous QEs, gas has doubled, the cost of food is up approx 50%, clothing and basic needs are up almost 40%. All this during the last 3.5 years. Factor in that home prices are still dropping. Personal wealth is down by a stunning 35%. Personal family income is down almost $4500/year. All that in just the last 3.5 years. Sure, the markets will have to move higher, but as the dollar is diluted into worthlessness, many will continue to cheer on this absolutely ridiculous current fiscal policy as the US barrels down the path to bankruptcy and hyperinflation. I believe we are beyond the tipping point. Therefore, it was no surprise to me to see gold jump almost $50/oz in 20 minutes after the Fed diluted the dollar even further. You all don't like it when your stocks are diluted? Well welcome to the current fiscal policy..... print, print, print or in other words, dilute, dilute, dilute. But owning a lot of gold mining shares with some physical gold and silver, I suppose watching the gradual destruction of our middle class with this idiot spending isn't as bad as watching the nightly news of the 99% that's getting pooped on. Unfortunately, too many have very little concept of biz101 or econ101 to understand what they are cheering for.
Big Tuna
This is from my friend which I believe nails it!
I think it’s important to grasp what has happened in the last 24 hours in the gold market and the implications for future moves in the price of gold (POG). Yesterday the German high court said that they’re not going to block the European Union’s bailout mechanism (the ESM) which is basically firing up the printing press. Today Bernanke tied the new QE 3 program ($40 billion per month) to developments in the employment stats. QE 3 is essentially “open-ended” while focusing on those employment stats. This admitted “open-ended” aspect is a very big deal. This is translated by Jim Sinclair as “QE to infinity”.
Our employment stats are not going to get any better if Europe is cranking up the printing press as the German high court just approved. Everybody is now incentivized to absolutely trash their own currency in order to bolster their own economies via increasing exports. The race to the bottom is now on! The fate of the politicians seeking re-election is much closer tied to employment stats than deficits. Eventually the path chosen in the last 24 hours has to lead to hyper-inflation and gold going nuts.
In order to prevent total collapse somebody, possibly the Chinese, will peg their currency to gold. All other currencies will totally fall out of bed at that second and the borrowing costs for these countries that never pay their bills will go ballistic. Who in their right mind would buy a bill, note or bond from a country whose currency is not pegged to gold when currencies pegged to gold are available? The day the pegging occurs gold will probably go up 2 to 3-fold.
If you start with the premise that politicians and central planners will do whatever it takes to get re-elected or reappointed i.e. overspend tax dollars (other people’s money) in search of votes then the writing has been on the wall for a very long time. When a variety of countries guilty of profligate spending all run into a brick wall AT THE VERY SAME MOMENT IN TIME (like over the last 24 hours) then a “currency war” (beggar thy neighbor) has to break out and the race to the bottom is on. Gold is the only form of currency with no counterparty risk.
From James Turk:
"There is no discipline on US government spending. If there were, there would not be a string of trillion dollar deficits nor forecasts for trillion dollar deficits as far as the eye can see. These deficits mean the US government has to borrow money to fund its operation.
It is actually borrowing about 40% of the dollars that it is spending. These dollars can come from two places. It can come from savings, meaning people use accumulated wealth to buy the US government's debt, or the dollars can come from the printing press, and that leads to hyperinflation.
If we look back at monetary history, eventually people run out of money to buy government debt. They have used up all their savings. Also, some people simply run out of patience waiting for the government to fix its finances and lower the risk of default. So they just choose not to buy the government's debt.
When that moment is reached, or in other words, when the government can no longer sell its debt, it has two very stark choices: It can stop spending, because it no longer has the currency it needs, or it can force the central bank to give it the currency it wants."
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