by John Galt
March 30, 2012 05:00 ET
The world is on fire, the banking system in total confusion and preparing for another great consolidation, Europe is teetering, and what does the Federal Reserve Chairman, aka “America’s Financial Academic,” decide to speak on during some collegiate lecture series?
(click on the title to read the story in full)
Any of my readers can click on the link above to watch the series or read the program in detail, but to save everyone the heartburn of RBS (Real Boring Stuff or Real Bull KaKa; circle either one), here is the executive summary:
1. If there is a major war, print money.
2. If the banks order it, print money.
3. If the American people talk poorly about you, print money.
4. If the economy gets too hot, print more money; gets to slow? Print even more more money.
5. The cure to cancer, war, and toe fungus is to print more money.
Needless to say, that is not only inflationary but eventually this path the Federal Reserve has chosen will lead us to a bifurcated currency with paper monetary systems becoming useless and magnetic strips glowing like Fukushima from over use to just buy a gallon of milk as hyperinflation sets in. The current situation is as dire as it was in 2001 when the Greenspan expansion of our money supply entered warp speed and the deleveraging postponed since that era keeps creeping back into reality, scaring the banksters at the Fed into new programs with various names to confuse the innocent and dupe the delusional.
Monetary printing by any name is pure inflation. The Fed has ended “Operation Twist” and claims it was a huge success but evidence of a new round of deflationary deleveraging is appearing in the economy with each report. The consumer has finally reached the Solar Maximum on their pet’s credit cards and now has to figure out how to pay for two years of binge spending on the promise of a recovery and improving economy while their earnings stagnated.
This conundrum of a dead construction industry, tapped out consumer, contracting government, and massively overinflated real estate debt threat is beginning to rear its ugly head again and the Fed has hinted at more debt monetization instead of a responsible course of action. This irresponsible thought process is nothing new for central banks as throughout the history of fiat currencies, eventually all bankers either hyperinflate, bifurcate with an internal and external monetary system, or outright default on the debt the society in question has incurred with a total currency replacement. It would appear that Mr. Bernanke has elected to attempt a new round of “controlled” hyperinflation where bank assets are monetized and a little cash is redirected to the consumer and small business owners in a weak attempt to maintain a theoretical 3% GDP annual growth rate.
This is the primary driving factor behind the coming explosion in gold prices and since gold has already doubled twice in the last decade, to witness another 100% increase is not insane. The history of 100% increases in gold recently is not a surprise:
1999-2005: $252 to over $500 aka, the Greenspan Double
In the Bernanke Era, which is our current focus:
2005-2008 Just over $500 to $1000
2009-2011 Correction back to $900 range then up over $1900 as the chart demonstrates below (click on thumbnail to enlarge):
This begs the question, what is next? First, look at the previous double from the high $900 range up to over $1900 and the extremely rapid pace of the move above. Then, in the chart below, notice the concentrated correction and consolidation in the $1500 to $1800 range which usually indicates a base for a new move is building to the upside as worldwide central bank intervention indicates further inflationary policies.
Should the world erupt into any type of major conflict creating severe damage to international commodity infrastructure, there is no upside limit to this next move in gold but based on the instability in Europe, the Americas, and the Middle East, odds are the projection of a 100% price increase in gold by the end of 2013 might be conservative at best. Unfortunately for the unprepared, there will be little if any time to react and settle financial issues before this monetary deluge hits the average soul without warning.