The International Forecaster: IF Issue: Wednesday May 25, 2011

We believe that for the past 2-1/2 years the price of gold has been mainly driven by a flight to quality, as gold vied with the dollar for supremacy, as the world’s reserve currency. As we have witnessed gold has won that battle. The only way the dollar or any other world reserve currency can compete is by being backed 25% by gold. The elitist’s royalty of Wall Street and the City of London are quite upset with these developments, because they want all currencies to be fiat, so that they would not have to have a gold backed international monetary unit. Over the last six months another historic factor has come into play in evaluating gold versus currencies, and that is the interconnectivity of gold’s relationship with inflation. In the late 1970s this was the underlying factor for the rise in the prices of both gold and silver. At that time they never had the luxury of strength also coming from recognition of being monetary units. We hear the manic claims that gold and silver are bubbles or are manias. That cannot be because gold is and always has been the only real money. Every time the major media makes these bogus claims they always fail to mention that both gold and silver have appreciated in value in excess of 20% annually versus nine major currencies. They refuse to point out gold and silvers’ 11 years track record having risen from $260.00 and $3.80 respectively to more than $1,500 and $50 per ounce. This shows you the massive deception by the major media, which is totally controlled by the elitists from behind the scenes.

When QE3, or something akin to it, is implemented during the summer, it will give the stock and bond markets one last boost. Most of the gains from a future QE3 have already been reflected in the market place. On the other hand such recognition by investors, not as yet discounted, will give a very large boost upward to gold and silver. As this takes place downward pressure will begin to appear in the stocks, bonds and the dollar. Those events will make it even more difficult to sell US Treasury and Agency bonds. Efforts will have to be added by the Fed to cover up the again ongoing losses of banks and brokerage houses – the financial sector – under the concept of too big to fail. The greater the effort needed to save these bankrupt institutions and the government the greater heights gold and silver will rise too. Adding fuel to the fire most other nations will have their own versions of QE3 compounding world inflationary problems. Even if a nation is not causing inflation they are forced to absorb foreign nation inflation whether they like it or not.

You have to look at the terrible fundamentals America is facing. The Fed has a balance sheet close to $3 trillion that could be $5 trillion in a year and one-half. If they purchase 80% of Treasuries and Agencies and bolster the declining economy. There is no end in sight for zero interest rates. Both the increases in money and credit and low interest rates will continue to send inflation into orbit. Monetization is the name of the game and the Fed and other central banks are playing it to the hilt. The ECB raises interest rates ½% and expects miracles. That could happen after they raise them 5% to 6%. Talk about misdirection as they continue to increase money and credit. They must think fellow Europeans and others are dumb and that is not the case. They knew as well as we do that what the Fed and ECB does causes monetization and inflation. Americans are used to inflation and heretofore they have been able to adjust for it. Other nations have not had that luxury in the past. Foreigners are far more sophisticated when it comes to propaganda and do not as easily fall for it as Americans do.

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Wednesday, May 25, 2011

IF Issue: Wednesday May 25, 2011