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Re: Spot gold blows through $1,200

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  • Tue, Dec 08, 2009 - 01:44am

    #33
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Re: Spot gold blows through $1,200

FinPro wrote:

Why don’t we reconcile how we can believe severe inflation is coming and at the same time why the big banks would do it to themselves, if they are in so much control?   

I am not sure what you mean by this.  Clearly the big banks are not in control because they nearly all needed to be bailed out.

The answer is If they are in control, we’ll have less inflation, higher unemployment and an eventually stable currency. 

Big banks or any debt owners love low inflation as long as the interest rates they are charging are greater than inflation.  High unemployment is not ideal but it does tend to keep inflation down so the banks would certainly prefer the people to suffer with high unemployment than to risk their own existence.  As for the stable currency, it will remain stable as long as problems don’t get so bad as to create civil unrest.

If they aren’t and the Fed acts with autonomy, we will have higher inflation, lower unemployment and an eventually stable currency. 

This is where I completely lose you.  I agree with the higher inflation but at this point I don’t see how unemployment gets permanently lowered.  Sure the FED MAY be able to fake prosperity for one more cycle and get the unemployment down to 7-8% but they are running out of tools and time.  Rates can’t get much lower which only leaves two other options, higher rates or money printing. 

Higher rates may work for the FED but they are suicide for the US government due to +1 trillion $ deficits as far as the eye can see and 10’s of trillions $ of unfunded liabilities.  Can you explain how any of these numbers ever be repaid once we start rasing rates?That then only leaves money printing (QE or whatever you want to call it).  Once that begins in earnest, I would like to know how the dollar survives. 

Either way, the dollar survives and it might be another 70 years until something like this happens again. 

For my children’s sake I hope you are right but I just don’t see any way it works out that well.

This, and when Chris Martenson rejects more common ratios, is a disturbing trend because it hides the fact that this country has managed high debt in its past and gets us to form more radically negative conclusions about our future.  I’m not into that.

I assume the debt you are referring to is post WWII.  At that point we had a few things going for us that I don’t think will apply this time.  First most of our world wide competition was in fairly bad shape.  Second we could switch our war economy to a smaller cold war economy.  Most importantly, the government budget was not dominated by social programs and untouchable entitlements.

Do you really think that America is just going to walk away unscathed from that smoldering wreckage called our economy?