No Economic Recovery; Prepare For Inflationary “Meltup”

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

Your government is lying to you. We are not in economic recovery. We are merely experiencing a cash bubble through printing—inflation—and every day that bubble is in greater danger of bursting. When it does, the American people will face national bankruptcy.

The following video comes to me on the recommendation of Gerald Celente, director of the Trends Research Institute, and The Trends Journal. For those of you who have not already subscribed to his journal, he is one of the best economic forecasters in the world.

To my friends in the Tea Party, this is why you are marching. Simply getting Republicans elected will not be enough to save this nation from economic collapse. Any politician, Democrat or Republican, who does not understand what is in this video must go.

In addition to Mr. Celente, this documentary, "Meltup," features some of the best economic experts available including:

• Peter Schiff, Austrian School economist, bestselling author of Crash Proof, owner of Euro Pacific Capital, former economic advisor to Ron Paul, and current candidate for U.S. Senate in Connecticut
• Dr. Ron Paul, Congressman from Texas , former presidential Candidate, bestselling author and voice of the Austrian School economists on Capitol Hill
• Marc Faber, renowned Austrian School economist.
• Jim Rogers, investor, author, and financial commentator
• Tom Woods, historian, bestselling author, and senior fellow at the Ludwig von Mises Institute.
• And several others.

The National Inflation Association has done a fine job in producing "Meltup." Our liquid fuels crisis, the manipulations and fraud in the precious metals markets, the debt problems and the looming threat of dollar collapse through inflation are all covered in detail. As Celente points out, we are on the verge of the second American Revolution. This video will give you a better understanding of what we face, and what the Tea Party and its supporters MUST achieve if it is to be successful.

The Rise of Gold and Fall of The Dollar

By Julian Dunraven, J.D., M.P.A.

Honorable friends:

Last month I wrote that the bailout total, which has now reached more than $8.5 trillion, with another $850 billion stimulus to come this year, will eventually force us into dangerous levels of inflation. I thank the Bangor Daily News and Bridget Johnson at The Rocky Mountain News for picking up on that post. Since then, although the Fed printing presses have been running at a frantic pace, nearly doubling the money base, much of it has not yet reached the money supply. That is about to change.

As the credit crisis hit and companies began to deleverage in earnest, selling anything they could to obtain dollars and pay down debt, U.S. treasury bonds sold very well. Our people, seeing the credit crunch and falling prices, began to fear a deflationary trend and flocked to treasury bonds as well. Truly markets are psychologically driven—and often insane. More rational heads have reminded us that real deflation requires a contraction in the money supply—which the Fed’s printing has made all but impossible. It seems, however, that reason is beginning to reassert itself.

U.S. treasuries are now selling at almost zero percent interest rates. As a result, $1 million invested into a one month treasury bill, rolled over each month, will earn you only a meager $100 annual interest. A one year treasury bill for $1 million will earn you only $4,300. No one can live off such pathetic returns, certainly not our retirees. As for other governments, such returns offer little incentive to continue financing our debt, which increasingly looks to be utterly unmanageable. As a result U.S. Treasury sales are beginning to decline.

As the Ludwig von Mises Institute points out, our biggest creditor nations are unlikely to increase their investment. Japan has been a net seller of U.S. Treasuries and it has its own problems to deal with from demand destruction affecting its exports. OPEC nations are suffering from falling oil prices and their own resulting economic woes render them unable to finance more of our debt. The Caribbean banks are suffering from the credit crunch forcing liquidity and in no position to offer help. That leaves China, which is passing its own $585 billion stimulus, of which the government is providing only $170 billion, leaving the rest to be financed out of its foreign exchange reserves—such as U.S. treasuries.

To further complicate the matter, Chuck Butler’s Daily Pfenning yesterday picked up on news that Chinese officials are now contemplating selling U.S. Treasuries in part out of retaliation that the U.S. government has cast blame on China for the global financial crisis. Yu Yongding, a former member of the People's Bank of China's policy board, also warned that “supply of Treasuries may far exceed demand in the future.”

Thus, as the Fed finds itself unable to sell sufficient treasury bonds to finance all the government spending, it will have no choice but to begin quantitative easing, a polite term for printing money and injecting it directly into the money supply. In other words: massive inflation.

As part of their efforts to accomplish this enormous monetary expansion and devaluation in a vain effort to stimulate the economy, the Ludwig von Mises Institute points out that the central banks have finally abandoned their attempts to artificially suppress the price of gold through naked short selling and dumping. Slapstick Politics discussed this inevitability back in October.

As I predicted last month, the result of all of this has been a drop in the value of the dollar and a precipitous rise in the price of gold as people try to find a way to preserve their wealth. The other major fiat currencies of the world are no better, as James Turk of Gold Money illustrates. The central banks of the world have all embarked on this strategy of bailouts and spending together, and they are all devaluing their currencies together. That trend is likely to continue for some time, and gold remains the best protection against it.

For those of you who still have yet to purchase gold and are cringing at its current price surge to around $900 per ounce, there are some hopeful signs to watch for. Although I do not think the bailouts and stimulus packages will be at all effective at solving the financial crisis in the long run (a topic Slapstick Politics will continue to address), I do expect them to produce a short term boost in confidence in the near future. The strange aura of hope that the Obama administration has coming into office will assist this as well. There may also be another period of deleveraging in the near future. In either scenario, several investment specialists speculate that the price of gold could plummet back down to $650-700 per ounce. If that happens, it would be a wonderful time to purchase. Before the central banks have completed their efforts at quantitative easing, most gold investment experts are estimating the price of gold could rise to anywhere from $1,500-5,000 per ounce. The Ludwig von Mises Institute goes quite a bit further, speculating that gold could climb to almost $10,000 per ounce. While I tend to lean toward the more conservative estimates, gold continues to provide the best possible protection against the inflation and devaluation the central banks of the world are now foisting upon us in what is perhaps the greatest theft of wealth in history.

All That Glitters Is Not Gold: Our Government’s Lies and Manipulations in the Gold Market

By Julian Dunraven, J.D., M.P.A.

Honorable friends,

We have all heard the old adage that when the market is down, gold is up. Well, the market is most assuredly down . . . but so are gold prices. Yet, strangely, demand for gold and other precious metals is skyrocketing, while supply is so low that people are being told they may have to wait six months or more for delivery. Even stranger, on eBay, prices for gold and silver coins and bars are well above the price they are being traded at on the commodities exchange in New York. So what is going on? That is the question some of my clients wanted answered as they fretted about their hedge investments. To answer quite simply, our government is actively working to suppress the gold market, and defrauding investors in the process. Now I will tell you why and how.

In the 1930s, we abolished the gold standard. Instead, we now have a fiat currency where money has value only because we say so. This allows the Federal Reserve to adjust the money supply without regard to a set amount of gold. Unfortunately, the Fed abused its power. Thus, every time we faced an economic hurdle, rather than allowing for market corrections, the Fed simply cut interest rates, printed more money, and inflated the problem away. It worked as long as people had faith in the currency.

As this behavior repeated itself over time, the central bank managed to encourage the unrestrained spending and overleveraging that has caused the economic crisis we face today. This time, though, the problem is not going away.

We are facing the accumulation of years of bad policy. People are beginning to see that the nation is so deeply in debt that the only way out is massive inflation and devaluation of the dollar. In an effort to preserve their wealth and hedge against this inflation, they turn to gold. This causes problems for the Fed and the other central banks.

Although our money is no longer backed by gold, the Fed cannot ignore gold entirely. If the value of the dollar drops too fast against gold, people begin to lose faith in the system. They buy gold instead of treasury bonds and the Fed and other central banks would be forced to stop their meddling in the markets and allow the money supply to readjust to the level it should be at. Thus, the Fed and other central banks have coordinated their efforts to prevent this.

First, as gold begins to rise, they release some of their own gold reserves into the market. The flood of new supply pushes down prices and allows them to continue with their operations. Of course, there is a danger. If they do this too often or too openly, people begin to see the manipulation and lose faith in the system. In recent years, as the increasing activity of the central banks has required more extensive manipulation of gold, the central banks have kept their hands clean by turning to private bullion banks. They have actually started paying these banks to lease gold and then sell it short on the market to keep the price down. Naturally, as an attempt to manipulate the currency, this is illegal for private entities — yet it is happening every day at the expense of investors.

Obviously, even the central banks do not have unlimited supplies of gold and cannot keep this up forever. The U.S. government, though, keeps its gold reserves a closely guarded secret and Fort Knox has not been audited since Eisenhower’s time. Yet, given the long waits for delivery and the high price of physical gold on eBay, we know that physical supply is short. So how do they continue to keep the price of gold futures contracts down on COMEX? They use naked short selling.

Few people ever demand delivery while trading on COMEX. Thus, it is remarkably easy to sell off more paper contracts than there is gold to back it. As long as few people demand delivery, the deception works. This, too, is criminal, but the law has not been enforced. We may see that begin to shift soon though. The manipulations have become so extensive that the difference in price between paper trading on COMEX and physical trading on eBay is becoming severe. People are beginning to notice. As early as December, we may see people demanding delivery on their COMEX contracts. When delivery cannot be met, this house of cards the Fed and other central banks have created will crash down.

So the government has fed us gilded lies while poisoning our market and actively undermining our hedge protections against inflation they created. Angry? You should be. But it will continue until we demand that it stop. Do so. First educate yourself. There is no better place to start than with the people at GATA. Then vote with both your money and your ballot. When you buy gold or silver, demand delivery. When you cast your ballot, vote against candidates who have fostered these manipulations and promised more. Vote against candidates who have benefited from the corruption through huge donations from the perpetrators. Vote against Barack Obama.