G&G Associates Tax & Financial Consulting
Most Investors Can't Handle This Truth (About Gold & Silver)
Imhotep (Wisdom To You) G&G Readers,
Get ready for a domino effect and the next market crisis. I warned G&G Readers in 2007 to move your money out or reallocate your 401K’s and Government retirement accounts before the stock market crashed in Sep-Oct of that year. Those who listened saved thousands, those who didn’t still haven’t recovered.
Well, I’m alerting you again and hopefully, those who didn’t listen then will do so this time. At that time I told people to Buy Gold & Silver. Gold was at $700 and ounce, Silver $9 an ounce. (See end of newsletter for today’s Spot Price).
The reason for the next downturn can be blamed on all the highly indebted sovereign borrowers around the globe. Even after all the bailouts, these debtor nations are all still looking to secure financing. But every day, the deflationary noose tightens just a bit more.
Sooner or later, all these debt-ridden sovereign borrowers will spark a domino effect that causes the next financial panic.
In fact, Greece and Dubai are just small examples of what lies ahead if governments fail to reduce spending and control their finances. And gold smells trouble.
In fact, gold & silver will soar far and beyond what most analysts think, that it’s not if…but when this financial panic hits the market.
Next Crisis? Look at the Governments
The next global financial crisis will likely happen in the sphere of government financing.
That’s where the most financial leverage is building up right now.
So it seems plausible that some sort of major dislocation will rattle major market government bonds in the years ahead.
If you think the U.S. is immune to all this, you’re wrong. Just because the U.S. has the world’s reserve currency and has the deepest and most liquid financial markets does NOT mean it can continue to write blank checks to finance its bloated spending.
No nation, not even a reserve currency, can continue to spend into oblivion without any savings or a plan to reduce deficits.
The CBO (Congressional Budget Office) estimates the budget deficit will hit a record $1.6 trillion dollars in the year ending September 30 and total $5.1 trillion over the next five years. Also, please keep in mind that the CBO is a government entity, so they may be rounding down when they report these figures.
The $1.4 trillion dollar deficit in 2009 was equal to 9.9% of GDP – the largest share of the economy since the end of WWII.
Uncle Sam’s Worst Nightmare
Deficits are literally exploding and nobody seems to care.
At some point, the United States, like other sovereign borrowers, will face limits on how much cash they can raise from international creditors. In other words, the U.S. won’t be able to sell enough bonds to foreign investors to finance this ever-growing debt.
When that happens, quantitative easing will probably return. It is the Fed’s primary weapon to secure capital whenever the Treasury can’t sell bonds to foreigners.
Interest rates will rise, bond markets will crash and inflation will surge. Now I’m not saying these events are inevitable. But these developments are certainly in the cards if the United States doesn’t change its financial doomsday flight-plan.
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You’re Saving Grace in This Debt Disaster
Gold & Silver, of course...As a surrogate currency, gold & silver also are sensing the ongoing struggle among sovereign nations and weak national currencies representing debt-infested government IOUs.
When I say “senses,” I mean that you can see all the debt disasters in the world playing out in the gold market. Investors are rushing for safety, and the gold prices show it.
For years, I’ve made the case for gold and silver. There are good reasons for that.
With each passing year, it’s very clear to me that the global exchange rate system is becoming hostage to out-of-control fiscal deficits in the West. I also know that it will be hard to reduce those deficits when unemployment is high and civil strife increasing – especially in Europe.
Greece will eventually be joined by Spain, Portugal and goodness knows whoever else. Europe is now suffering from its own version of subprime as economies start to fall like dominos. The EUR has dropped almost 600 pips against the USD in less than two weeks.
Germany and the EU (European Union) at large advise Greece and other troubled Eurozone members to cut spending right away. Yet this sets the course for more social and economic discord as austerity measures come at a stiff price – deflation.
The IMF or International Monetary Fund isn’t a distressed nation’s friend either. The IMF forces borrowers to dramatically cut deficits at a steep price. Just ask Franklin D. Roosevelt in 1933 when he did it and the US instantly depreciated it’s currency by over 30%.
I suspect the IMF already has tentacles spread out across several European countries since 2008, including Iceland, Hungary, Ukraine and possibly, several more in Western Europe.
I also believe that gold and silver can rally sharply even amid a deflationary market IF central banks fail to rescue the financial system.
Mark my words: The credit crisis has entered a new phase as sovereign debt markets grow increasingly unstable. More importantly, there isn’t a single central bank in the world that isn’t attempting to inflate the money supply or trying to grow bank credit.
The problem is that both of the world’s largest currency areas – the United States and Europe – have failed to grow their money supply over the past 12 months.
Bank credit is still contracting for industrial and commercial loans over the last 3, 6 and 12 months. How can you have a sustainable economic expansion without bank credit? Simple: We can’t!
It’s Not Just the Dollar: All Paper Money Is Declining vs. Gold & Silver
The fact is that most investors, especially institutions, have no clue what’s happening to paper money. Institutions and Investors are fixated on the S&P 500 Index and other benchmarks. They simply don’t understand that all fiat money has been declining in value versus gold & silver since 2005.
Now as a currency investor, does that mean you should dump all your foreign currencies? Absolutely not! You should hold stronger currencies than the dollar in your portfolio especially currencies from surplus nations. If you are a GGIS member, you already know which currencies to hold. If not, become a member and I’ll tell you which ones to hold in your portfolio.
And by all means trade currencies for profits in the Forex market in the short-term (after all you may as well profit off all these nations that keep deep-sixing their currencies).
For more details on how to take advantage of this investment and others…
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But when the rubber meets the road, you’ll want to have gold & silver in your arsenal too. Investors know that. That’s why investor demand for gold & silver is rising so fast. Don’t miss out this time folks if you did the last time.
In fact, investment demand for gold has clearly overwhelmed fabrication demand since gold passed $800 or so ounce in late 2008. This trend will only intensify as more investors climb aboard the bull market, including hedge funds and pension funds.
The Average Investor Can’t Handle the Truth
I imagine that most investors still fail to appreciate what’s really happening here. They simply don’t know what’s happening to the global exchange rate system or their respective purchasing power.
They also have no clue how the endgame is likely to be played out in Washington.
Here’s the truth: Gold & Silver are not in a bull market only because of inflation or inflation fears. Gold & Silver prices are rising because the big money knows that high levels of government debt can’t last forever.
There’s only one solution here for governments around the world. They must devalue their currencies if they want the global economy to expand. That’s bad news. Currency devaluations reduce purchasing power and produce long-term inflation.
Also, major central banks in the United States, Europe and Japan will not raise interest rates fast enough. They simply can’t when consumers aren’t buying and unemployment is still high.
That’s why I believe all these central bank mistakes will feed gold & silver’s already high price for the foreseeable future.
The smart money is buying gold & silver. This is likely to continue until the next financial crisis erupts, which typically occurs in the areas where leverage is growing the fastest, currently in government finances. Make sure you follow their lead.
If you need help about how to purchase Gold & Silver, please contact G&G Associates and we’ll provide you some direction to help you find the best place to purchase your Gold & Silver based on the amount you want to purchase.
Today’s Spot price for Gold ($1233 per ounce); Silver ($19.21) per ounce. I’m sure you can at least afford to buy Silver at this price.
Now, go back at the beginning of this newsletter and see what the price was in 2007 and let me know if you missed the bus. If not, you are smiling from cheek-to-cheek…if you did miss the bus you are smacking yourself in the back of the head because you know I told you so back then.
FYI, you can buy gold coins at the following denominations (1/10, 1/4, 1/2, and 3/4 ounces) as well to help reduce your cost.
If you missed a past G&G article, click on the link below to visit G&G Associates archive:
Until the next time!
Asante Sana (Thanks)
Tax & Financial Consultant, RFC
866-361-3872 toll free fax
"Your mind is like a parachute, it only works when it is open."
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