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Tuesday, November 25, 2008

US Printing Press

Americans want their stocks to revalue back to their levels a year ago. The world wants deflation to end. Be careful what you ask for.

The US government is creating money anyway it can. So far, it cannot "create" money quick enough to counter the deflation. However, this won't stop the government from trying.
In the history of the USA, the last deflationary collapse was in the 1930's. At that time, the US dollar was backed by gold. Now, its a "fiat" currency.

America has NEVER had hyperinflation. Some bad inflation in the 70's, but not hyperinflation.
Hyperinflation is what brings governments down, revolution.
Deflation brings economic depression, but in a reasonably controlled manner. (Those in debt fail, those with solid financials survive)

As of now, there is no hint of hyperinflation, just deflation. In any event, keeping in pure bonds or cash is a losing proposition if inflation begins. This shouldn't be even possible for 6 months or a year, but its time to start keeping an eye on this ball. I predict in the months and year to come, more disinformation will be generated to explain away any signs of inflation. Just like the market collapse in Sept-October, there will be little warning except to those of us paying close attention.

Article on how US is attempting to flood the market with US dollars
Goldman to issue 600 BILLION dollars in bonds "Backed" by the FDIC. (More US taxpayer backed debt)
Combined with no one caring how much debt the US is generating daily, this is a true recipe for disaster.

GDX rose further from Thursday/Friday of 18-19 to almost 26, closing at 24.63. I expect GDX to pullback between now and next week. If it does, take a close look at purchasing, it may be the last time you see it near 20 dollars.

It would not surprise me at all that Gold may collapse before inflation takes hold, but I have a hard time imagining the miners returning to these historic low levels.
And there is still the random element of which direction does Obama take the US in once in office, I can hope that the printing presses will get some rest.


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