BullionBuzz eNewsletter December 12, 2012

"What are you going to do about inflation? Print more money! We can't do that sire, there's no more gold to back it up! Whew! For a moment there I thought we were out of paper!" 

- The Wizard of Id

CHART OF THE WEEK

To download chart

To download chart

The above two charts compare the projected budget deficits from 2009. In the earlier chart, the deficit of about $1.4 trillion was projected as a one-time event with future annual deficits reverting back to about $300 billion/year.  Now, deficits exceeding a trillion are projected for the foreseeable future.  What is the likelihood that these projections are as understated as the earlier projections and that the US will see deficits at multiples of the projected deficits?

Why Gold is Going to $10,000 and How You Can Protect Yourself from the Coming Hyperinflation

Nick Barisheff explains in his new book, $10,000 Gold: Why Gold's Inevitable Rise is the Investor's Safe Haven, the story behind the coming hyperinflation and what you can do to protect your wealth. Available online and in bookstores everywhere.

View Video

Visit Book Site: http://www.10000goldthebook.com

To preorder your copy of Nick Barisheff's upcoming book, "$10,000 Gold: Why Gold's Inevitable Rise Is the Investor's Safe Haven" please visit:

http://www.amazon.com/10-000-Gold-Inevitable-Investors/dp/1118443500/ref=sr_1_1?ie=UTF8&qid=1343323234&sr=8-1&keywords=barisheff

GOLD

Why Gold Is Money

Ben Mountifield

Most people believe that gold is simply a commodity. The truth, however, is that gold is money.

Good money is easily divisible into standardized units; easily recognizable and verifiable; has a high value density; is difficult to replicate/forge; is easy to transport; is durable and almost indestructible. As well, the existing supply must be small relative to new annual supply so as to avoid rapid dilution/ debasement.

There are plenty of items that satisfy some of these criteria, but only gold (and silver) satisfy all of them.

Money must perform three primary roles: It must act as a medium of exchange to facilitate trade. It must serve as a unit of account (a standard monetary unit that enables the measurement of the value/cost of goods, services, or assets), and it must provide a store of value or wealth.

When gold’s vital role as a store of value (wealth) is understood in the context of the true definition of inflation, we can see that today’s fiat (paper) money is not “good money,” as it does not provide a store of value.

Today’s paper currency isn’t good money because, thanks to profligate governments and central bankers, it does not provide a store of value. In contrast, thanks to its limited supply, gold has a long history of preserving wealth and that is why central banks around the world hold so much gold (around 31,490 tonnes), and why they are adding to their holdings.

People are beginning to realize that today’s fiat currency is flawed, its value continually debased by central bankers via their inflationary monetary policies. As a result investors are turning to real money—gold. Over the past 9 years, gold purchases for investment purposes have increased by 366%.

Gold is reclaiming its rightful role as money, and although it may be years before it is once again part of the official monetary system, there can be little doubt that that is where we are heading.

http://www.247bull.com/why-gold-is-money/

Fade Goldman’s Bearish Gold Call

Tim Iacono

The latest research note on gold from investment bank Goldman Sachs—in which they see the gold bull market coming to an end in the months ahead—might be taken more seriously if not for two factors:

First, the call is based on a vastly improved US economy next year that leads to higher real interest rates, but Goldman hasn’t been terribly accurate in their economic forecasts, and the firm has a reputation for telling investors to do one thing and then betting against it, as many (some in Congress) believe was the case with subprime mortgages as the housing bubble peaked.

Second, in order for real rates to rise, either interest rates must go up (something the Fed has promised will not happen) or inflation must fall sharply (something that would prompt more money printing). The Fed is determined to spur economic growth and keep monetary policy loose until the recovery has taken firm hold.

As for the forecast for heady economic growth, it's worth noting that Goldman Chief Economist Jan Hatzius has had a run of bad luck lately, predicting big things and then having to reverse course later on.

http://seekingalpha.com/article/1050101-fade-goldman-s-bearish-gold-call?source=email_macro_view&ifp=0
 

Gold and Silver the “Go-To” Asset for Capital Preservation

Lawrence Williams

Williams discusses Paul Mylchreest’s latest Executive Summary, “Inflationary Deflation: Creating a New Bubble in Money.” Mylchreest examined the way excessive monetary stimulus coupled with low interest rates creates financial bubbles; he believes that central banks are now creating the ultimate bubble – in money – in an attempt to counter the downleg in the most recent Long Wave cycle.

Mylchreest says physical gold is the only financial asset with no counterparty risk and a track record of several thousand years as a store of wealth par excellence. Furthermore, gold is the only asset that outperforms during both inflation and deflation, and he reckons we are seeing a battle to the death in these opposing forces.

While potential gold investors may feel they have missed the boat, Mylchreest thinks the gold price will reflect the reciprocal of the purchasing power of existing currencies and that these are being debased at an ever-increasing rate. He discusses gold’s increased demand as the price rises rather than the reverse, with ETF holdings at an all-time high and central banks becoming buyers rather than sellers. He also notes that China is at the forefront of gold purchasing despite not reporting such changes in its official reserve figures.

Mylchreest also discusses the inevitability of a new global reserve currency replacing the US dollar. China is taking the role of France, which effectively brought down the old Bretton Woods agreement through its distrust of the dollar. Key Chinese figures have noted their dissatisfaction with US monetary policy and the country is thought to be stockpiling gold to give it a better negotiating position when choosing a future reserve currency.

http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=165606&sn=Detail

CURRENCY

Research Shows ALL Paper Money Systems Failed

Gold Silver Worlds

“We often read or hear quotes like ‘paper money [always] eventually fail[s]’ and ‘paper money always returns to its intrinsic value which is zero.’ In this article, we provide evidence why these statements are true, backed by research in which 599 different forms of paper money have been analyzed. We explain in an easy to understand way what money fundamentally is, how monetary policies of governments are affecting everyone of us and how gold is first and foremost an alternative form of money (for each and every one of us, not only for an elite).”

http://goldsilverworlds.com/gold-silver-insights/research-shows-all-paper-money-systems-failed/

Reflections on the Effects of War as Compared to the Effects of Fiat Money

Hugo Salinas Price

WW II leveled cities and killed millions of soldiers and civilians. After the war, both the winners and the losers turned to re-building their countries. The devastated cities began to heal; new, modern factories were built. By 1970, you could hardly tell there had been such terrible destruction and loss of life just 25 years earlier.

As for fiat currency, at Bretton Woods in 1944 the dollar was pronounced to be as good as gold for purposes of international payments, and the US promised to redeem for gold dollars held by the world’s central banks.

This arrangement was doomed to fail. In 1971, the US defaulted on its promise, and we entered the era of globalization. Salinas Price discusses the effects of fiat as the world’s currency, and the effect it has had on the whole world: the overthrowing of productive structure, the apparent prosperity that is sustained by credit expansion, the welfare state and its shortcomings.

Fiat currency has destroyed humanity’s normal way of life, a way of life in which people could find their places and were thankful to have them. The old attitudes toward life and work are gone.

“This is destruction many times worse than the worst destruction of any war. That is where we are today. This is what fiat money has brought to the world. Fiat money is the child of the arrogance of human intellect, which has sought to invalidate the laws of human nature which have regarded the precious metals as money for thousands of years, and sought to substitute an intellectual construct for the real thing. Now we are going to pay for that arrogance.”

“What now? Nobody knows. Unquestionably, we are headed straight into fearful problems never seen before. At least, owning physical gold and silver may be help some of us survive.”

http://www.24hgold.com/english/news-gold-silver-reflections-on-the-effects-of-war-as-compared-to-the-effects-of-fiat-money.aspx?article=4149348536G10020&redirect=false&contributor=Hugo+Salinas+Price&mk=1

OIL

The Significant Impact of U.S. Oil Production

Frank Holmes

After seven decades of importing oil, the US is only a few years away from reversing the flow. In 2005, the US imported 13.5 million barrels per day; by year-end 2012, net imports are projected to fall to 8.6 million barrels per day, or about half the country’s current consumption.

By 2020, the estimated gap between supply and demand narrows considerably; that is also approximately when the US should surpass Saudi Arabia as the world’s largest oil producer.

Expected output by 2020 amounts to more than 10% of what the IEA says will be the world’s daily oil requirement of 96 million barrels per day. This compares to a consumption of 87.4 million barrels per day today. And, when the expected decline of about 10.5 million barrels per day from the mature fields around the world is factored in, North America’s output is significant to global supply.

Still, the Minerals Leasing Act of 1920 dictates that all US crude exports must get approval from the government before proceeding. At the time, the country had net imports of about 300,000 barrels of oil a day.

Until now, the US hasn’t had to worry about what to do with excess oil. But as applications for crude export permits increase, opposition may emerge because of consumers’ belief that exporting crude means higher prices at the gas station. Consumers, however, pay a global price for gasoline, and exporting US ‘land-locked’ light sweet crude would actually help push down the global price of gasoline

If Washington prevents oil from leaving the country, the likely outcome is that barrels will begin stacking up in the Gulf Coast area. Bank of America Merrill Lynch estimates that, by 2017, refiners will likely be ‘saturated with light oil.’

http://dailyreckoning.com/the-significant-impact-of-u-s-oil-production/