Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway

Lumi

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Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway

<CITE class=byline>By John Hathaway - Oct 28, 2010 </CITE>
Bloomberg Opinion
The world?s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.
The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.
Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.
It?s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren?t worth the paper on which they are written.
Telltale signs of future trouble aren?t hard to spot. Only a few months ago, Federal Reserve Chairman Ben Bernanke and a chorus of other high-ranking Fed officials were talking about exit strategies from the U.S. central bank?s bloated balance sheet and the financial system?s unprecedented excess liquidity. Now, those same officials are talking about pumping more money into the system to stimulate growth.
Risky Targets
And they?re not alone: Six months ago, the chief economist of the International Monetary Fund, Olivier Blanchard, suggested that raising inflation targets to 4 percent from 2 percent wouldn?t be too risky.
This sort of talk must grate on the nerves of our trading partners, China, India, Russia and others, who have accumulated pyramids of non-yielding Treasury debt. No haven there. Return- free risk may be a better way to put it. And bickering among central bankers over currency manipulation and rising trade tensions doesn?t exactly reinforce one?s confidence in a scenario of sustained economic growth and a return to prosperity.
The prospects for an orderly unwinding of the extreme posture of global monetary policy are zero. Bernanke, Jean- Claude Trichet and Mervyn King, his counterparts in Europe and the U.K. respectively, are huddling en masse upon the most precarious perch in the history of monetary affairs. These alleged guardians of monetary stability, in their attempts to shore up the system, have simply created the incinerator for paper money. We are past the point of no return. Quantitative easing may well become a way of life.
No Freak Occurrence
The consensus investment view seems to be that the credit crisis of 2008 was a freak occurrence, unlikely to repeat. That is wishful thinking. Monetary policy has painted itself into a corner. Based on our present course, there will be more bubbles and more meltdowns.
Financial markets and institutions sense trouble, as reflected in the flight to supposedly safe assets such as Treasuries and corporate-debt instruments with paltry yields, as well as the reluctance to lend by commercial banks. We are stuck in an epic liquidity trap. The irony is, if global central banks succeed in creating inflation, the value of these safe assets will be destroyed. It is a slaughter waiting to happen.
In the pedantic mentality of central bankers, their playbook creates just the right amount of inflation. As inflation accelerates, consumers will spend to get rid of their dollars of diminishing value and spur the economy. Once consumers start spending, it will be time to raise interest rates because a solid foundation for prosperity will have been established, they say.
Slender Thread
But whatever the playbook promises, the capacity of financial markets to overshoot can?t be overestimated. The belief among policy makers and financial markets in the possibility of this sort of fine-tuning is preposterous, but it is the slender thread on which remaining investment and business confidence rests.
The breakdown of the monetary system will be chaotic. When inflation commences, it will be highly disruptive. The damage to fixed-income assets will seem instantaneous. Foreign-exchange markets will become dysfunctional. The economy will become even more fragile and unpredictable.
Gold is an imperfect, but comparatively reliable, market gauge for the extent of current and future monetary destruction. The recent acceleration in the dollar price of the metal to $1,381, a record high in nominal terms, coincided with talk of a new round of quantitative easing and highly visible discord among major nations on trade and currency-valuation issues.
Naysayers? Bubble
Naysayers point to gold?s price and see a bubble, without understanding that the only acceleration that is taking place is in the rate of decline of paper currency. The Fed is organizing an attack on the dollar?s value, believing that this is the most expedient way to defuse deflationary market forces. The man in the street is unaware, a perfect setup. Inflation can only be successful when the public doesn?t see it coming.
The sudden torrent of commentary on gold isn?t the sign of a bubble. Anti-gold pundits provide a great service to those who grasp this historical moment: They facilitate the advantageous positioning of the one asset most likely to be left standing when the dust settles.
 

Duff Miver

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Sell your gold today. As soon as interest rates increase, gold will go down, and interest rates cannot get any lower than they are now.
 

Lumi

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what indicators do you have to show that it is going to $600?

The dollar is dead !

Signs Hyperinflation Is Arriving

The scary actual U.S. government debt

French protesters call for bank run Dec. 7 2010
Pravda
Oct 29, 2010
FULL ARTICLE HERE?IT IS IN FRENCH:
http://sos-crise.over-blog.com/artic?-59578657.html <SUP>[1]</SUP>

Facebook groups all over Europe springing up.German, Italian, Greek groups getting big support.

Certainly a thing to watch. Hot debate in EU-forums about this.

Dutch lawmakers have already considered laws to outlaw calls for bank runs.
It could devastate the economy, but more importantly it could make clear to the banks that we have them by the balls. It?s just that so few people know we do.
 

Duff Miver

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Jul 29, 2009
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what indicators do you have to show that it is going to $600?

George Santayana: Those who do not remember the past are condemned to repeat it.

The price of gold moves inversely to interest rates.

Interest rates are now below 1%. They cannot go lower.

Perhaps you remember the Hunt Brothers, two smart guys who thought the price of silver would increase forever. They managed to lose almost $2 billion when interest rates went up.

By your own admission, your long term investment in gold hasn't done half as well over time as the DJIA.

Right now you have $1300+ invested in your gold. Would you buy today at that price? If not, then why would you hold at that price?

You can trade gold for dollars and dollars for gold anytime you like.

Gold is high. Sell now, take the profit and run.

Buy low, sell high. You already got the first half wrong buying near an earlier peak. Don't compound that mistake mistake not selling near a peak.

Just a piece of friendly advise. As I told you, I sold out at $1200, almost 3X what I'd paid.

Do I care if it goes to $1300, $1400, $1500?

Of course not. No one can predict the absolute top or bottom. I bought low and sold high, and that's the goal, isn't it?

It's your money, do as you please.
 
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