Why Toilet Paper is Worth More Than USD
I’d like to personally thank the gold cartel for bombing the gold market this week because it gives everyone the opportunity to buy more precious metals with fewer Federal Reserve Notes. The gold cartel is fighting a loosing battle. Every fiat currency in the history of mankind has gone to zero value and Federal Reserve Notes are no exception. People think they are rich because they have a bank account that has a large number in the account balance. However, when you consider that the intrinsic value of digits on a computer hard drive is zero, I would make the argument that toilet paper is more valuable than your bank account. At least toilet paper serves a useful purpose. Digits on a bank account serve no useful purpose and have no value regardless of how large your account balance is.
The gold cartel can manipulate the price of gold down on any given day but they can especially push the price down on Friday because on Friday afternoons gold trades exclusively in New York. This allows the gold cartel to push the price down without any intervention from other world markets. This is why we often see large drops in the gold price on Friday afternoons. This past Friday we saw the price of gold start to drop when the markets opened in New York and it continued its plummet throughout the day.
For anyone who doesn’t think that the gold market is manipulated I encourage you to take a look at daily gold charts dating back for the past six months. Nearly every violent drop on these charts has taken place during New York trading hours. I have never seen a violent price drop take place during Asian trading hours. Statistically the odds of these being random events are virtually impossible unless the price is willfully manipulated.
As of January 5th 2007 gold is trading for $605 an ounce and silver is trading for $12.12 an ounce. All the fundamentals for gold and silver continuing its long term price rise remain. Through 2007 we should see continued value destruction of Federal Reserve Notes. Independent estimates of the M3 money supply based upon available information indicate that the M3 is rising at about 10% to 11% each year. The only way the game can continue is if they create more and more credit. Federal Reserve Notes as a currency has already lost a good deal of credibility around the world. Many countries are trying to diversify out of them and into gold or other currencies like the Euro. A recent example of this is seen with the United Arab Emirates who just a few weeks ago announced that they would be diversifying some of their holdings out of Federal Reserve Notes. Then of course there was the infamous Bernake/Paulson meeting over in China which from all indications did not go well for them. There was no reason for China to submit to any of our demands and I still laugh at the fact that the mainstream financial media spun the meeting like our financial A-team was going over there to tell them how things need to be. China has a huge trade surplus with us and they hold over a trillion Federal Reserve Notes. Our financial team went over there to plead with them as they were in no position to make any demands. China is basically being used by the globalization crowd as an economic war machine to weaken the economies of first world industrialized nations such as the U.S.. Multinational corporations setup shop over in China to take advantage of cheap labor and sell all of their goods to us. This trade deficit will be a huge factor in the ultimate demise of our currency.
Long term there is no question that Federal Reserve Notes are going to lose value. On a shorter term basis (weeks and months) it is difficult to predict where it could go considering that the gold cartel has some very smart people who manipulate these markets. The important thing to note is that no matter how smart these people are they are fighting against a historical precedent. I am sure those who controlled fiat currencies of the past thought they were smart enough to keep their pyramid schemes running. Of course, they were all proved wrong.
I still have a short term price target of $700 for gold and $15 for silver. When you consider the recent drop in the oil price, gold and silver have actually held up very well against oil. Despite the drop, long term I’m still confident that we will see $100 for a barrel of oil. Iraq is completely out of control and Bush is crazy enough to make it even worse with an invasion of Iran. I still believe there is a strong possibility that the U.S. will invade Iran considering the presence of U.S. warships in vicinity of the country. It is very possible that this proposed troop build up plan for Iraq might be part of the overall preparation for an invasion of Iran sometime in 2007. Iran has also started trading oil in Euros which I believe was one of the main reasons we went into Iraq to begin with. If I was correct on why we went into Iraq, than it might just be a question of when and not if the U.S. invades Iran. There is not much of a question that the neo-cons are desperately looking for some way to justify an invasion of Iran to the American people. Of course if they do invade, it will be a complete disaster for the U.S. and the oil markets will react accordingly. The U.S. simply does not have the means to fight an Iran that will be supported by Russian and Chinese interests.
For 2007 I am most bullish on gold, silver and uranium. Long term I believe all hard assets are going to go up in value simply because of the problems our currency is going to have. The Federal Reserve cannot continue to expand the money supply without causing further currency destruction. Copper and oil are weak right now and I’d wait for these sectors to form a technical base before considering making any additional investments in either sector.
8 January 2007
Funny Money Report