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With gold's price increase of $50 on June 19, I thought I would take some time to ponder wherefore. After years of waiting and waiting, the sentiment among bullion investors had seemingly reached multi-year lows. Thus, few were expecting this week for gold to make a $50 run. Certainly betokening of the coming multi-hundred dollar days that will likely be seen in the physical market within a decade, it did anyway. But why!?
First things first, your eyes might be glossing over at this point. You might be thinking, "He's trying to make a pitch." So it might seem, but I think even more so I am merely describing something that's a sure thing. The world is getting crazier and crazier, and increasingly is being driven by fear. Under these circumstances it might be sensible to see why gold has a certain allure.
Mainstream media, however, can't touch upon why. Pundits will give you silly answers such as short-covering, which is merely a side-story in the overall story for gold at the beginning of the 21st century.
For an answer, follow the money. When we do this, we find quantitative easing programs which have throughout history rendered tenders useless. The US has followed a textbook example, having debased the money of precious metals before ultimately resorting to creating money out of thin air based on the ideas of some men and women with graying beards.
Over the past couple of months the Fed has indicated it would slow its money printing and that it would soon be out of the money printing business. Federal funds rates are expected to move up to 1.13% and by the end of 2016 to 2.5%. Why? Because inflation is in our future. The Bureau of Labor Statistics reported prices in the US economy increased 0.4% in May after going up 0.3% in April. (Source: Bureau of Labor Statistics, June 17, 2014.)
Assuming this will be the new normal, over the next 12 months we can expect 3.6%-4.8% inflation. Bankers are beginning to lend again as last month commercial and industrial loans at all commercial banks in the US economy reached $1.69 trillion, the highest amount in years. (Source: Federal Reserve Bank of St. Louis web site, last accessed June 17, 2014.)
For now, the Federal Reserve will keep interest rates low to aid the economy. But these coming events have big implications for the gold market. Consumer interest will only continue and grow, and so therefore demand will do the same, especially by nation-states, led by China, and perhaps Russia, which now has a very public interest in de-dollarization.
What's interesting is that oil has not increased in price just yet. Once it internalizes geopolitical stirrings taking place in the world – namely in Iraq which has devolved into Civil War – expect it to abet gold's current making of a bottom.
Could we see more war? Surely not with a Democrat in office, you might think…
Unfortunately, not true, as Democrats controlled the house in 2003 leading to Iraq and Democrats are the one's campaigning for "principled" bombings in Iraq.
With this so, expect more of this:
As we preach here at The Dollar Vigilante (TDV), there is no better way to own gold than in a diversified manner. That is why Vin Maru and Jeff Berwick compiled Getting Your Gold Out Of Dodge, the investor's source for internationalizing your gold holdings now. Also available to subscribers at TDV Newsletter.
Any comments or questions on the gold price or related manners? Join us at The Dollar Vigilante!
Before we get to the review, here’s a quick look at what we wrote about in the June edition of our subscriber-only TDV Issue.
First off, in my “Memory Hole” I looked at ISIS. Next, Jeff Berwick had a look at the 5 Killer B’s that will change your life. Then, Ed Bugos had an in-depth look at the markets. Jeff checked in with his weekly look at the absurd in “Other News from TEOTMSAWKI and TDV Related Tidbits”. Next, was a look at beach side expat business opportunities with Jeffrey Maxim and Justin O’Connell provided us a primer on darkcoin. Finally we had an update from Get Your Gold Out of Dodge, a look at your portfolios, and profiled Rose Wilder Lane.
If you’re interested in receiving articles beyond what you read here everyday, consider our weekly subscriber-only publications, like our Issue, Dispatches, and Homegrown. You may subscribe here.
On to the review…
Monday June 16
THE BOOK OF SATOSHI: BITCOIN HAS CHANGED EVERYTHING
An excerpt from the Berwick-penned foreword to the recently released The Book of Satoshi.
“Bitcoin has changed everything. Its importance as an evolution in money and banking cannot be overstated. Notice I don’t use the word “revolution” here because I consider Bitcoin to be a complete “evolution” from the anachronistic money and banking systems that humanity has been using—and been forced by government dictate to use—for at least the last hundred years.
One of the biggest issues that newcomers to bitcoin have is that it is “shrouded in mystery”. This is not totally true, as this important book shows. While the true identity of Satoshi Nakamoto may never be known for certain— despite those like Dorian Nakamoto, whom the mainstream media say is Satoshi—what we do know, in very prolific and historical detail, are the underpinnings and design of bitcoin from its earliest days.”
Tuesday June 17
WHERE IN THE WORLD IS LINDA LOCKE/TANNEHILL?
Jeff Berwick on the under-celebrated pioneers of free market theory.
“Many who care about freedom know names like Murray Rothbard, Ayn Rand and Ludwig von Mises. However, one name that does not get the attention it deserves is Linda and Morris Tannehill.
More than 40 years ago they wrote an exquisite work called The Market For Liberty that was decades ahead of its time (you can download and read the entire book here). It has gotten eminent praise from modern day anarcho-capitalists such as Jeffrey Tucker and Doug Casey and it was the book that turned on the lightbulb in my brain to libertarianism/anarchism.”
Wednesday June 18
SKYWAY ROBBERY & THE DANGERS OF TRAVELING THROUGH THE UNITED STATES
A startling tale from TDV’s Jayant Bhandari.
“On 5th March 2014, I was detained at Detroit airport, just before I was to board the plane.
‘I will decide if you will go on this plane or not,’ shouted a US custom official with a stress on ‘I’, while keeping an eye on a young female official, perhaps in his continual attempt to impress her. In an instance I was reminded that I was in a warped space in ‘the land of the free’ where the rule of law or even the rules of nature did not operate. Four ‘invincible and immortal’ custom officials of the States [often spoken with stress and extreme tribal-pride] were to decide what was right and what was wrong.”
Thursday June 19
WHAT DO YOU GET WHEN YOU MIX GOVERNMENT EMPLOYEES WITH DISRUPTIVE TECHNOLOGY?
Jeff on the lethal combination of government workers and tech.
“What do you get when you mix government employees with disruptive technology?
A disaster. Two events in the last week underscore this.
The US Marshals had to wrap their head around the disruptive digital currency bitcoin this week, but it was e-mail, that artifact from the 1990s, they would fail to use correctly, exposing many personal e-mails on accident. Similar happened to the Internal Revenue Service (IRS), as that government agency apparently lost Lois Lerner's e-mails, e-mails which might have implicated her in a new Watergate-type scandal.”
Friday June 20
Mark E. Jeftovic on cronyism and the monetary system.
“So let's do something different here and accept a core premise of Capital, and say that wealth inequality is increasing, and that it's a bad thing. Where the point is completely missed is in what causes it (ostensibly "free market capitalism") and what to do about it (increase government control, induce more inflation and raise taxes).
The point of this essay is to assert that it is not unchecked capital or runaway free markets that cause increasing wealth inequality, but rather that the underlying monetary system itself is hard-coded by an inner temple of ruling elites in a way which creates that inequality.”
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