The Secret of Oz

   I just saw an informative and inspiring documentary about monetary reform called 'The Secret of Oz'. I'm sure many people have seen it or heard of it before. The guy who made it, Bill Still, also made 'The Money Masters'. Both films are available on YouTube.

   This blog, of course, advocates investing in gold and silver (among other things), but Bill Still makes the argument that we should not have a gold standard - rather we should have our money created and issued by the government, not borrowed from international bankers. Instead of being comprised of debt, it would be backed by the good faith and credit of the state.

   I've become convinced he is right, and the litany of historical luminaries (Jefferson, Lincoln, Jackson) who have argued for this monetary system makes it extremely compelling.

Some Basic Investment Advice from Dr. Faber

If you follow Marc Faber in the news you quickly notice that he has the habit of repeating himself. That's what someone with a good point tends to do. One of the overriding themes in his commentary is that governments (namely the American one) are printing like there's no tomorrow (maybe there isn't).

It's not a complex concept to understand. Even the caveman economist can explain it : Print lots of green paper + economy not grow = inflation.

2 + 2 = 4.

Lots of inflation = gold good.

Forget US Stocks-Buy Gold Every Month 'Forever': Marc Faber - CNBC

Currencies and Rumours of Currencies

There has been a lot of talk about a new currency for the world, something to act as an alternative to the dollar. The article I am linking to today is just one out of countless articles now swirling around the net where some official person or bureaucracy calls for a new currency.

The one thing I can say on all this is that we should not get ahead of ourselves. By that I mean : Yes the US dollar is and will continue to decline into insignificance, but that is a long process. The world has been using the greenback for oil and other things for quite some time now and you don't just switch over to something else in one fell swoop. Moreover, China and others have significant dollar holdings and though they would like to get out of them, that too cannot happen instantaneously.

I'm sure many gold bugs are pleased as punch to see gold now well over 1000$ but this process we have been predicting will happen over years.

UN calls for new reserve currency

Interview with Byron King

This fellow worked as a geologist in the exploration and production division of a major oil company, so he has some views on gold from a 'geological' point of view. I never looked into the concept of 'peak gold' that much but it is something I've heard before. Byron King brings it up in this interview. In response to a question about why gold would go to 2000$ he said :

"Because we're in a world that appears to have encountered peak gold as well as peak oil. If you look at historical production, worldwide gold output reached a top right around the year 2000–2001. Overall output has declined and we're not replacing output from the big mines of the past. Despite discoveries here and there, miners have to dig deeper and deeper into the reserves."

He also mentioned inflation and interest in gold from China as reasons for being long gold.

His opinion on silver is that it should outperform gold percentage wise, an opinion I agree with. In fact I think many of us overlook silver, perhaps because decades of watching the Olympics have conditioned us into thinking gold is somehow better. I think everyone should have at least a sock full of coins stashed somewhere in their house.

Endless Stimulus and 2000$ Gold

Mark Faber on How to Trade the Dollar : "This is the short of the century ..."

Some comments of note include Dr. Faber's belief that stocks will rise by about 7% per annum but any gains will be eaten by inflation. Also he repeated a criticism he has made of Bernanke and Greenspan numerous times in the past; that they have succeeded in creating a bubble in everything (that doesn't sound good).

He likes Asian equities and of course, commodities. He advised people to buy physical gold and to store it out of the country.

On the subject of inflation, it seems to me that the 'lame-stream' media is becoming more accepting of the view that the dollar is going to lose significant value over the coming years. I suppose there will be a bubble in gold at some point, when everyone will be running to it, but I'm sure that day has yet to come.

Marc Faber Takes on Krugman, Links Bernanke and Mugabe

Meltdown 2.0?

An article like this on a main-stream site like Marketwatch.com is worth a look. Mr Farrell argues that we are getting set up for a bigger meltdown in the near future. (Here is the article, it has two pages).

I have heard the argument made that we will have a big bull run as a result of all this money being created and all the CNBC types will pump it as the return of good times. Then we will have an even bigger crash. Based on the enthusiasm with which the powers that be have provided more dope to the addict rather than let the bastard sweat the junk out of his system, I concur.

I also think that the social mood has a significant effect on the stock market. And this article is one example of the darkening of that mood. I think Obama will be a 'one-termer'.

Mr Farrell also writes about how this will happen :

"The culprit? The Fed, Ferguson says: "Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks." So the next bubble (and meltdown) is virtually certain, thanks to Washington's $23.7 trillion explosion in debt."

It is too damn easy for people to get credit these days - too easy to go into debt. This does not make for a sound economy (though I imagine it makes certain parties quite rich).

I wish I knew exactly how to trade gold in light of all the inflation vs. deflation debate going on. No one can say for sure how it will play out. (Marc Faber has said there will be deflation first - then inflation through the roof). I think he's right and I would have no problem putting 5-20 % of my net worth in gold and silver and leaving it for 5 or 10 years. But he also has predicted volatility in all asset classes, just as a natural part of navigating the rough seas we find ourselves in there days.

For many of us, the best advice is probably to try not to figure out the short term and focus on the fundamentals : FUBAR.