There were two major pieces of economic news yesterday that are directly connected:
#1) Gold Closes at Highest in 25 Years on Comex as Dollar Declines.
#2) Iran oil bourse will be launched next week.
The two items are really two sides of the same coin. The same shiny, American, dollar coin.
Most people are asking either "Will there be a crisis?" or "When will the crisis happen?". Both questions are wrong.
The crisis is already here. We are mearly in the early stages of it.
The correct questions are "How long?" and "How deep?"
The
Medical Journal of Australia lists four stages of a crisis (it's for an "emotional crisis", but it still applies here because human emotions so directly effect economics).
* Stage I: Mounting tension
It is characterized by: habitual problem solving responses in an attempt to maintain the person's steady state.
This is the stage that we are currently at. We haven't gotten to Stage II where people beging to feel "at sea", or "chaotic".
How do I know we are in an economic crisis? Several reasons.
"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
-Henry Ford
Reason #1
The official organizations that run the world's economy say so.
The International Monetary Fund called for a significant dollar devaluation last week.
The Bank of International Settlements called for a "radical overhaul" of the global economic system.
European Union bankers were told to get ready for a "sudden financial shock".
Reason #2
The people who know the most about how to profit from the world's economy say so.
Bill Gross says "the dollar as a currency is doomed".
Warren Buffett says that we are heading for a "sharecropper society".
Now both of those reasons can be interpreted in many ways. That's why I rely on a third, more important reason - hard numbers.
Reason #3
I think it is reasonable to say that when a steady line on a company (or country) chart collapses (or goes parabolic, when it is measuring things like liabilities) then something is wrong. Something is out of balence.
There is a crisis going on.
By every measure, the American economy is in crisis.
Prov 22:7 "The rich ruleth over the poor, and the borrower is servant to the lender."
But what does this all mean? What can we expect?
Ahhh. That's the trick. To understand that you need to see a couple other charts.
"Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless."
Ludwig von Mises
Dollar Purchasing Power
It's also important to understand what the definition of "inflation" is.
Inflation: A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.
In other words, more currency chasing fewer goods produces price inflation.
Price inflation is a symptom of monetary inflation, in the same way that a high temperature in a person is caused by a virus infection.
As you can tell from the charts above, the M3 is going parabolic...at least until they stopped publishing it last month.
In response, the dollar's purchasing power has declined in almost exactly the same proportion in the inverse way. Meanwhile, the government
changes the way it measures price inflation in order to hide how much they are stealing from you every month.
I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.
If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.
-Thomas Jefferson
How are they stealing from you? As the definition states, there is only one institution that can steal from you with inflation - Bush's Federal Reserve. They are the only ones that can't print money.
Which brings us back to gold.
"Gold is money, and nothing else is". - JP Morgan, 1913
About six months ago I posted this diary about the significance of gold and its bull market, and the history of gold's success and fiat's failure as money. I detailed why bankers hate gold (i.e. because gold is the competition to the only product they have to sell - fiat currency), and why gold will continue to rise in price for much longer. Some people listened, some didn't. Since that time the price of gold increased $125 an ounce.
Gold is going up not because its value is rising. It's going up because the dollar is falling apart. Every dollar bill is someone else's debt. Debt levels are skyrocketing while the amount of dollars in the system are also skyrocketing. Yet the government and Federal Reserve thinks they can print their way out of this crisis.
That's why we are still in Stage I of this crisis. They haven't even tried to do anything different yet, and they won't until they are forced to admit that simply printing money isn't going to solve the crisis. When they finally start trying you can bet Da' Boyz are going to try and find the easy way out. You can also bet that their early attempts will fail. That's why this crisis is going to be long and painful, and the dollar will suffer because of it. You should prepare yourself now. You should buy gold.