The gold price
The Paper Deluge - Friday 26th June 2009
The strongest reason to Buy Gold in one simple chart...
FOR ANYONE STRUGGLING to explain to his broker, spouse or friends why he's been hoarding gold or Buying Gold stocks, this chart may help you, writes Porter Stansberry, publisher of Daily Wealth.
The chart accompanied a recent article at the Wall Street Journal written by economist Art Laffer. Please make sure you read it. The article is the best analysis of our money supply problem I've seen anywhere.
This amazing chart shows just how much money the government created in the past year... it's a visual everyone can understand.
Says Laffer about the massive expansion of the country's monetary base:
No matter what your political persuasion, no matter how little you may know about money or finance, Laffer makes crystal clear what is happening right now to the value of our money.
The more dollars are printed, the less each one is worth. You don't really need to know what role the monetary base plays in our system. You don't even need to know that an increase to the monetary base of this magnitude could be catastrophic. All you need to know is the government has created over 100% more of it than existed a year ago – the fastest increase of all time, by a huge amount.
I saw this beginning last fall... and warned readers of my investment advisory it would lead to what I call The End of America.
The coming great inflation will destroy America's economic leadership. It will lead – eventually – to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects.
By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the US government. The price of gold will be well over $2,500 per ounce.
We are the first nation in history to enjoy unrivaled control of a global, paper-backed reserve currency. This allowed us a nearly unlimited financial privilege: We could effectively pay for all of our debts with money that we simply printed. This power led our politicians to believe deficits don't matter and our consumers to believe they could never go broke...Some bank would endlessly refinance their mortgages.
The lack of market discipline led to too much money and credit. Debts expanded at a far faster clip than savings, resulting in an inevitable credit collapse. Now, the second part of the crisis is beginning: the paper deluge.
Most people understand intuitively that when inflation increases, the price of gold increases, too. The reason is simple: It's much easier to print money than to mine gold.
The supply of gold grows at about 1% a year and almost never any faster. Gold is unique. It has few industrial applications. Almost all of the gold that has ever been mined is still in use, as jewelry or in coins or bars. Thus, the total supply doesn't change much.
But here's the big question for US investors right now: How long will it be until this ocean of paper causes a severe decline in the Dollar and a massive run-up in gold?
We can't know for certain. Nobody has seen anything like this, ever. But I believe it will take at least two years before the inflation that's been put into the system starts to roil the real economy. (Of course, it might not take that long...oil prices have already nearly doubled from their lows.)
As I've said before, I'm not happy to be the one to tell you all of this. I hope I'm dead wrong. But, while I don't believe we're in immediate danger of inflation, it's paramount you own some gold to protect yourself from what today's chart shows.
FOR ANYONE STRUGGLING to explain to his broker, spouse or friends why he's been hoarding gold or Buying Gold stocks, this chart may help you, writes Porter Stansberry, publisher of Daily Wealth.
The chart accompanied a recent article at the Wall Street Journal written by economist Art Laffer. Please make sure you read it. The article is the best analysis of our money supply problem I've seen anywhere.
This amazing chart shows just how much money the government created in the past year... it's a visual everyone can understand.
Says Laffer about the massive expansion of the country's monetary base:
The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless...
To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5%...
No matter what your political persuasion, no matter how little you may know about money or finance, Laffer makes crystal clear what is happening right now to the value of our money.
The more dollars are printed, the less each one is worth. You don't really need to know what role the monetary base plays in our system. You don't even need to know that an increase to the monetary base of this magnitude could be catastrophic. All you need to know is the government has created over 100% more of it than existed a year ago – the fastest increase of all time, by a huge amount.
I saw this beginning last fall... and warned readers of my investment advisory it would lead to what I call The End of America.
The coming great inflation will destroy America's economic leadership. It will lead – eventually – to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects.
By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the US government. The price of gold will be well over $2,500 per ounce.
We are the first nation in history to enjoy unrivaled control of a global, paper-backed reserve currency. This allowed us a nearly unlimited financial privilege: We could effectively pay for all of our debts with money that we simply printed. This power led our politicians to believe deficits don't matter and our consumers to believe they could never go broke...Some bank would endlessly refinance their mortgages.
The lack of market discipline led to too much money and credit. Debts expanded at a far faster clip than savings, resulting in an inevitable credit collapse. Now, the second part of the crisis is beginning: the paper deluge.
Most people understand intuitively that when inflation increases, the price of gold increases, too. The reason is simple: It's much easier to print money than to mine gold.
The supply of gold grows at about 1% a year and almost never any faster. Gold is unique. It has few industrial applications. Almost all of the gold that has ever been mined is still in use, as jewelry or in coins or bars. Thus, the total supply doesn't change much.
But here's the big question for US investors right now: How long will it be until this ocean of paper causes a severe decline in the Dollar and a massive run-up in gold?
We can't know for certain. Nobody has seen anything like this, ever. But I believe it will take at least two years before the inflation that's been put into the system starts to roil the real economy. (Of course, it might not take that long...oil prices have already nearly doubled from their lows.)
As I've said before, I'm not happy to be the one to tell you all of this. I hope I'm dead wrong. But, while I don't believe we're in immediate danger of inflation, it's paramount you own some gold to protect yourself from what today's chart shows.
Porter Stansberry, 26 Jun '09
Porter Stansberry is founder and publisher of Stansberry & Associates Investment Research, a private financial publishing company based in Baltimore, Maryland, and editor of the monthly Porter Stansberry's Investment Advisory.
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