Wednesday, June 09, 2010

Lookout!  The US Fed Vacuum is Switched "ON".
Can you hear the giant vacuum "Whoooosh" sound?  That is the Federal Reserve sucking digits of value out of every paper promise in all of their various forms, from bills, to stocks to bonds to funds to currencies... all of it devaluing at an accelerated rate starting fairly soon.  This year and next will see a massive shakeout, a meltdown of paper values, a transfer of wealth to the printers from everyone else.  This is just a continuation of where paper has been and a historical perspective on where all paper goes... to Zero value all the time and without exception. 
The beneficiaries to THIS paper devaluation (as with the LAST paper devaluation) will be few. 
All of those who hold physical gold and silver at home or in a non-bank vault will be among those few.
The dollar bust is coming soon.  Eric King puts it into concise perspective below...
- Tate Ulsaker

We are in a depression, the first one in over 70 years, and the main stream media is still trying to sell the public on a recovery in order to keep them in stocks. In the midst of all of this, gold has rallied over five fold in less than a decade and the Dow/Gold ratio has fallen from a peak of roughly 43 to 1 to around 8 to 1. The next leg of the depression will see a change in lifestyle and an acceleration of the lowering of the standard of living for Americans.

When the last depression happened it was like a thief in the night and it dragged on until people began to believe there was a certain permanence about it. This depression is a bit more of a slow motion event in the early stages. Unfortunately it will accelerate. If you are upset lately that people who have been irresponsible have not been paying for their sins be careful what you wish for. People were literally starving to death in the last depression and that is not something you will want to see with your own eyes. People wanted to work who did not have jobs, but there was no work to be had.

When I was speaking to Eric Sprott last Friday he commented on the phony nature of the US stock market and how the advances are on low volume. Included above is a chart which shows the Dow is bumping into resistance at the 50 month moving average, and volume on the advances has been minimal. The declines, however, have been accompanied by large volume. Big money is exiting the stock market, and it has been accumulating gold and other hard assets.

I think the end of Eric Sprott's most recent piece, "A Busted Formula" sums up the situation nicely. In it he writes "Gold's recent strength in lieu of seemingly 'deflationary' economic data confirms the market's doubts over government intervention in the financial system. Needless to say, we remain bearish."

What is the lesson here? The lesson is that it is much easier to invest in bull markets. So if you have not already made a decision to own gold, what are you waiting for? Simply pick out your entry point, be patient and accumulate like the big money is doing. There is nothing wrong with buying the major pullbacks. It's just that most human beings do not have the stomach for it, so it is probably better for most to simply dollar cost average and make purchases once or twice a month. And yes, the Dow/Gold ratio is on its way to 1 to 1 again, so the stock market should be avoided at all costs until that time.

I do not believe that this depression will end in deflation. I believe it will end with the destruction of currencies as Felix Zulauf said in his interview on this network last week. A wealth transfer is in process. Make sure you are correctly positioned.

Eric King

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