The Future Of The Dollar

September 29, 2009 Physical Gold, Physical Silver, Predictions No Comments

The future of the dollar is the inverse of gold. According to Jim Rickards, the dollar’s value will be reduced by half within the next 14 years, if we are lucky. Gold is set to reflect this devaluation of the dollar as it is inexorably tied to the future of the dollar.

I have said on many occasions that gold and the dollar’s futures are inexorably tied together at the hip. It is so obvious that it troubles me that we are not hearing any of this from the financial media. It seems that political expediencies are determining what the little people are allowed to hear.

Just when I was beginning to think that all hope was lost, CNBC has the intestinal fortitude to ask Jim Rickards about the future of the dollar. This piece is MAJOR in it’s implications and should be taught in economics classes, but don’t hold your breath. Jim Rickards, the Sr. Managing Director of Market Intelligence at Omnis, lays out the case for the future of the dollar and gold with precision and clarity.

Walking Wounded Dollar1 The Future Of The Dollar

This Is The Dollar As It Is Today. What Is The Future Of The Dollar?

It is so easy to understand what lies ahead when you lay out the truth in plain English and quit trying to conceal events in Fed speak and government obfuscation. This interview is hard to find on the CNBC site, but it is still available on Youtube. My hat is off to CNBC for putting it out there in the first place, but I wish they would do more interviews with Rickards on this subject. Take a look and I will discuss it further when you are done viewing.

Jim Rickards’ analysis of Kevin Warsh’s Fed speak is spot on and deserves a point by point rundown of the implications.

1. The Fed will use asset prices as the gauge to trigger rate increases.

Warsh is telling the markets, indirectly, that if the dollar’s move down is not orderly and gold rises too rapidly, then the Fed will raise rates in order to protect the dollar. This is the crux of the gold versus the government conundrum, but it should not deter you from investing in gold, but rather move you to increase your investments in physical gold and select gold stocks. Government will insure gold’s rise, because it is so inept that it will do the wrong thing at exactly the right time! Result: GOLD Positive!

2. The Fed admits it wants the dollar to go down by half in the next 14 years!

The U.S. government’s total liabilities are roughly 60 Trillion Dollars! Add up all of the off budget and on budget items and there it is staring future generations in the face. Our economy cannot support 60 trillion no matter how Washington politicos try to spin it. $30 trillion is doable, hence the need to reduce the liabilities by 1/2. Result: The dollar’s purchasing power will be reduced by 1/2, if all goes according to plan, within the next 14 years! GOLD Positive!

3. The IMF is becoming the Central Bank of last resort.

The IMF has issued debt for the first time in its history and has been promoting SDRs (Special Drawing Rights) as an alternative to the dollar. This approach pushes the day of reckoning down the road for a time. The SDRs will fuel the global economy while the dollar is taken out behind the woodshed and cut in half. Result: The American public suffers while their hard earned money is devalued! GOLD Positive! 4. Gold is Double! Not too much need for an explanation on this one. Result: GOLD Positive!

Review the video again if you have any doubts. The logic is impeccable! If you keep these points in mind when you are looking at the fluctuations in the gold price, I am sure that you will relax when you consider the big picture. The day to day fluctuations are not what you want to be considering, but rather the long term outlook and how it effects both gold and the dollar.

The Federal Reserve, GATA And Ron Paul

The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. (GATA) that it has gold swap arrangements with foreign banks which it has been denying since 2001 when Alan Greenspan was the Fed Chairman. GATA believes that the Fed is very much involved in secretly manipulating the price gold in particular and the currency markets in general. This disclosure adds more fuel to the fire for passage of Ron Paul’s bill to audit the Fed. The Fed should be audited annually, instead of never. Exercise your rights while the almighty government still allows you to!

Gold Ends Week Above $1,000!

It is great to see gold back over $1,000 where it belongs, but the reality is that this is still small picture stuff and gold will be looking back on $1,000 soon enough. All pullbacks in the price of gold should be viewed as buying opportunities, with the caveat that at some point, the central banks will really try to hammer it in order to keep the game going.

If you have done your homework you will be into cash as the larger moves down occur, sitting in cash and waiting for the next oversold signal to come up. Knowing what is coming for gold, makes it easier to sit through the weekly ups and downs in the price of gold. I am only selling 1/3 of my positions into strength because I don’t want to be caught out when the big one happens. Core investments should be limited to the 1/3 rule, while marginal stocks can be closed out on big up days in order to put the money into better performing stocks.

One last note, because I tend not to mention it enough. When I am talking physical gold and gold stocks, you can lump silver right in their with gold. The coming tide is going to lift both boats. It is becoming ever so clear that gold is tied to the future of the dollar

Till next time, good luck and good trading!