Home >> United States & Canada >> Economics & Trade  Email  Print 2008 - Time to pay the piper! Denis Petit - 1/8/2008 The year 2008 will be a year for the history books. All of the events since the creation of the FED and the Bank of Canada in 1913 which led to America’s first default in 1934 when the US government removed the convertibility of the US dollar into gold bullion for US citizens, then up to the US default in1971 when Nixon took America off the gold standard and officially put the US and because of the Breton Wood agreement of 1944 the rest of the world on a fiat (money back by nothing but empty government promises) monetary system has led us to where we are today. Anyone who has studied the works of the Austrian School of Economics knows that the moment the US went off the gold standard and onto a fiat monetary system in 1971 that the clock was ticking until this fiat monetary system collapses.
No one in 1971 could tell you exactly when it would collapse, but its collapse was guaranteed because fiat monetary system work against human nature which is why their collapse is always guaranteed.
When the metals of gold and silver are used as money they remove the human emotions of greed, fear and lust for power out of the equation which is why they are the 2 substances on this planet that are ideal for the use as money. The fact that gold and silver cannot be created out of thin air and the amount of new metal available every year is not determined by any one person or central bank is why they have kept their purchasing power for thousands of years while no paper fiat money has ever held it purchasing power for even a few decades before they become worthless. There is simply no limit on how much fiat money can be created at any given time so when something bad happens (war, financial collapse, or natural disaster) the Central Bank or a King or a President or who ever is in charge of the money supply can always be counted on to create to as much money as is needed to try to stop the bad thing from happening which always eventually destroys the purchasing power of the money which always eventually make whatever bad events that were happening much much worst.
ALL FIAT MONETARY SYSTEM COLLAPSE IN HYPERINFLATION
The collapse of the OTC market that began in 2007 is the catalyst that is forcing the world central banks to hyper-inflate the world money supply which will lead us into hyperinflation by 2012-13 and maybe even sooner. If central banks do not hyper-inflate the world money supply in 2008 we will be in a depression much worst then the 1930’s by the end of 2008. By hyper-inflating the world money supply to keep the world’s financial institutions a float, the world’s central banks will be able to prevent a depression that begins in 2008 but they will set us off on a path to hyperinflation. Expect the price of oil, foods, commodities, and eventually consumer goods to begin to rise in price in 2008 and their prices will rise exponentially at we move into 2009 and beyond. Price inflation will really begin to show its ugly face in 2008 as the world’s central banks hyper-inflate the world’s money supply to try to prevent the collapse of the OTC market.
This is what I meant when I said that it’s time to pay the piper. Up until now most of the inflation experiences so far has been in asset classes like stocks, bonds and real estate. As our stock and bonds and real estate moved up we all felt like we were getting richer so most of us did not mind that we were experiencing this type of inflation. As of now and into 2008 most of this inflation will go into real things like food, energy, commodities and eventually into consumer goods. In 2008 the cost of living will rise for all of us and our wages will not keep up with the real inflation rate. We will become poorer in 2008 and inflation will become much more noticeable for the general population as 2008 moves into 2009. Owning physical gold and silver and their stocks will be the only way to make sure that inflation/cost of living does not make us poorer. Since most of the general public will never buy physical gold and silver and they will only buy precious metal stocks when they are priced at much higher levels they will lose as the cost of living rises to much higher levels.
There is no free lunch, while inflating the money supply sometime gives the illusion that prosperity is continuing the fact of the matter is, all that inflating the money supply does is push the day of reckoning off until a future date. 2008 is the beginning of this reckoning.
Hyperinflation is not a cure to the collapse of the OTC market; all it does is buy the central banks a few more years before we end up in a much worst depression after hyperinflation. There is no stopping a major depression from happening, all central banks can do is delay it for a few more years by destroying the purchasing power of our money. Unfortunitly, the price we pay for these few extra years is a much worst depression when it finally does happen.
Owning physical gold and silver will do more to protect your wealth during this hyperinflation stage that we will see the beginning of in 2008 then anything else you could do. There is no other investment that is safer then physical gold and silver over the next 5 years or so.
Precious metal stocks in 2008
As of Dec 26 2007 the price of gold is up 32.03% since the beginning of 2007. The price of silver is up 16.27% in the same time period yet most gold and silver stocks are down for the year and are near their lows for the last 2 years. If someone would of told me that gold would rise 32% and silver 16% in 2007 yet gold and silver stocks would lose value during that same time period I would of told that person that they were nuts! Yet that is exactly what has happened this past year. I can try to find some logical reason why this has happen but I think I will be wasting my time and yours. As far as I’m concern there is no logical reason why gold and silver stocks have performed so badly over the last 18 months while the physical price of gold and silver moved up as much as it has. Even the Canadian price of gold is up over $100.00 Canadian in 2007 yet Canadian gold stocks are down hard for the year. This is simply how markets work sometime, logic be dammed!
Will the price of gold stocks ever move up again?
Yes!
I believe that it is impossible for the price of gold and silver to rise hard in 2008 without precious metal stocks eventually following them up. In fact I believe that it is just a matter of time before precious metal stocks vastly out perform physical metal and rise much more in percentage terms then physical gold and silver will. As of today gold and silver stocks are cheaper against the price of gold and silver then at any other time since 2001 which was just before precious metals stock exploded up by more then 1000% in less then 2 years.
For all the reason I wrote above about why we are headed into hyperinflation this guarantees that physical gold and silver will move to incredible prices over the next few years and gold and silver stocks WILL eventually follow their physical metal higher. In fact, over the next couple of years the world will experience stagflation that is much worst then what we experienced in the 1970’s until we move into hyperinflation sometime between 2011 – 2013. During the stagflation years of the late 1970’s precious metal stocks were the best performing asset class between 1975 -1980 offering investors some incredible rates of return on their investment during that time. I am convinced that it is only a matter of time before precious metal stocks again supplies their investors with incredible rates of return over the next 2 – 3 years. This does not mean that gold and silver stocks will move up tomorrow or even in the next month or even the next 6 months but they will someday reflect the fact that gold is going to $10,000 an ounce and higher and silver is going to $1000.00 an ounce and higher.
I know that some of you are quite disappointed with the performance of your precious metal stocks portfolio over the last 18 months, please don’t give up on them yet. There is no stopping the collapse of the OTC market without hyper inflating the world money supply which guarantees that gold and silver are going to move much higher in price over the next 5 years which will also move the price of gold and silver stocks to much higher levels. It is not a matter of if precious metal stocks move up but a matter of when they move up.
Owning precious metal stocks at this time means that you own the right investment at the right time and all you have to do is be patience enough to wait for the profits to come to you.
Got Gold?
Got Silver?
Got gold and silver stocks?
|
