Friday - November 05, 2010

death of the dollar

Looks like the price of gold is going to kiss $1400/toz today. That’s an increase of $100/toz since September 24 2010; 7.6923% in just 42 days. That’s an annual rate of about 67%, far higher than the $100 increase from $1200 on December 1, 2009 to late September’s $1300 ; but perhaps not as steep a jump from early October 2009 when it was $1000/toz to last December’s $1200. That $200 jump was 20% in 60 days, a nearly vertical climb of 120% per year. But whether temporarally steep or shallow, the price curve has swung upwards 40% in 400 days. That’s a helluva return for those flush enough to sink a large part of their assets in it. Heck, for the folks who had the cash on 9/12/01, the returns have been awesome. $75,000 invested then will buy you a very nice $400K house now. And that’s a house that will sell for $400K now, which means it was a $575K house just a couple years ago. A McMansion Deluxe with extra tomato.

Oh well, that’s another bubble I missed. Not to play the coulda-woulda-shoulda game too much, but the left edge of this chart is almost coincident with the peak in AOL stock ... which means that the $75K needed then would have been about $500 back in 1993. And that’s after taking out a whacking great chunk for Capital Gains, if you had the smarts to get out just before Y2K and bought into gold at $240. That’s not a cockamamie idea; we all saw Y2K and Millenium Madness as an End of the World scenario. And that means it’s time to buy gold. Are we there again?


The Federal Reserve is doing another round of Quantitative Easing, QE2, which is their fancy way of saying they are trying to devalue your cash another 20% as fast as they can. Part of that effort involves them printing up another $900 BILLION to buy up some government bonds between now and next June. The idea is to make money cheaper, and encourage borrowing. But money is already so cheap that it’s nearly free, at least at the bank-to-bank level. Mortage rates are hovering around 4%. But a cheaper dollar will also drive up commodity prices; you’ve watched the price of gas jump since August, I’m sure.

Michael Pence, a top Republican in the House of Representatives, said the Fed was taking an “incalculable risk.”

Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, who described the move before the meeting as a “bargain with the devil,” was the lone dissenter in a 10-1 vote of the Fed’s policy committee. He said the risks of additional government bond purchases outweighed the benefits.

But Fed officials are betting that inflation is still being pushed strongly in the other direction because there is so much spare capacity in the economy—including an unemployment rate at 9.6%, a real-estate landscape littered with more than 14 million unoccupied homes, and manufacturers operating with 28% of their productive capacity going unused.

I can’t talk about this. Our futures are evaporating just as fast as our savings. The dollar is more worthless every day. The States are in debt way over their eyeballs, and it’s only getting worse.

Go watch or listen to Glenn Beck, then go and spend as much as you can at the grocery store. Food prices are about to leap, so try and stock up for several months if you can.

Sorry, but Obanomics is failing. And while our hero Zero Nero is off in India with his out of tune violin, the sparks are falling here in New Rome.

Aww fuck it Dude. Let’s go bowling.

Posted by Drew458     on 11/05/2010 at 10:30 AM   
Filed Under: • Economics •  
• Comments (1) • Trackbacks(0)  Permalink •  

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