Richard Russell
continues:
“The world is now producing far more goods (and more
competitively) than ever before. I think deep in his heart, Bernanke knows and
understands this. As a result, he does not want to use all the possible
anti-deflation ammunition that the Fed can muster. The reason -- it is dawning
on Bernanke that the Fed cannot defeat the powers of deflation and the primary
bear trend.
The result is that the sinking economy is actually
producing signals ahead of the Fed, and Bernanke knows it, but cannot talk about
it - it's too frightening. Now Bernanke is playing for time. He's hoping that
somehow, some way, the US economy will not get worse and that it might even
improve slightly. Bernanke is worrying about the Fed's bulging balance sheet.
It's so huge, how will he ever contract it?
In the meantime, the stock market is more puzzled
than ever. With uncertainty looming large, the market backs off. It is giving
up on QE3. In the absence of QE3 the market does what it always does to protect
itself, it backs off.
Sadly, the whole world is searching for income and
safety, and the fact is that there is no income and there is no ultimate
safety. Then how does one build wealth? The Asians know the answer to that --
YOU BUY and HOLD GOLD -- and exercise a lot of patience.
Stocks can declare dividends, but they can omit their
dividends during hard times. Furthermore, stocks can go broke. But gold
represents indestructible wealth. Gold rises in terms of fiat money, and gold
declines in terms of fiat money.
Gold possesses some properties that are beyond the
scope of other investments. Gold can't go broke, because gold does not derive
its purchasing power from the edict or control of any sovereign power or central
bank. Gold has no counter-parties. Gold is tangible and is accepted everywhere
-- in good times or bad. Gold exists outside the world's banking system.
Unlike fiat money, gold is wealth on its own.
It's tangible and not the fantasy-creation of central
bankers. Gold does not need a sponsor or the acceptance of an expert (such as
pricing a Picasso painting), because all gold is intrinsically the same. Gold
does not tarnish nor does it degenerate -- the gold in your watch may be the
same gold that Cleopatra wore around her neck.
The supply of gold, unlike paper money, is limited.
Alchemists have tried for centuries to turn other metals into gold -- but have
never succeeded. Gold is a beautiful metal on its own and the lust for gold
seems to be built into the DNA of mankind. If you own ten thousand ounces of
gold, you can say that you will ALWAYS be wealthy.
I have said before that China intends to be THE world
leader. In order to make that happen, China has decided to defeat the US on
economic terms. And that means -- first, replacing the US dollar as the world's
reserve currency, and establishing the renminbi as the world's new reserve
currency. For the last two years, China has encouraged its people to accumulate
gold on their own.
It is clear that China intends to be the world center
for buying and selling gold. China is also placing vending machines in various
strategic areas, which will allow people to buy small quantities of gold at
their leisure, just as if they were buying chewing gum.
The plus in all this for Americans is that the price
of gold will be out of the grip and manipulations of the Federal Reserve and the
Comex. It is well known that the Fed despises gold, because gold is out of the
of the Fed's control. Furthermore, gold competes with the Fed's own fiat
currency. The value of gold never changes. What changes is the number of
dollars that are required to purchase a specific quantity of gold.
Note on the chart below (from Google) that China is a
minuscule holder of gold compared with Western powers. For instance the US
holds 8133 tons of gold while China holds a mere 1054 tons of gold. China means
to change this ratio. Actually China's ratio of gold to currency is a tiny 1.7%
while the US ratio is above 74%."
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