Mint suspends red-hot Eagle gold coins

NEW YORK (Reuters) - A shortage of American Eagle bullion coins due to soaring demand following a recent sharp retreat in gold prices has forced the U.S. Mint to temporarily suspend sales of the popular coins.

“Due to the unprecedented demand for American Eagle gold one-ounce bullion coins, our inventories have been depleted. We are therefore temporarily suspending all sales of these coins,” the U.S. Mint told authorized coin dealers in a memorandum dated on Friday. Call The Superior Gold Group at 888-969-6465 and get your precious metals guide to Building Wealth You Can Touch with People you can TRUST!!! Call NOW
Michael White, a U.S. Mint spokesman, said that only the one-ounce 22-karat American Eagle coins are sold out, but the half-ounce, quarter-ounce, and 1-10th ounce coins as well as the less popular 24-karat American Buffalo coins are still available.

“We are working diligently to build up our inventory and hope to resume sales shortly,” the Mint said.

Coin dealers from the United States to Canada reported a surge in buying of bullion coins and other gold products since prices plummeted from highs last month. The buying spree contributed to supply fears and helped boost gold prices sharply on Thursday.

Rand LeShay, senior vice president of Los Angeles-based A-Mark Precious Metals, an authorized purchaser for the U.S. Mint, said that there was a big spike in demand for gold and silver coins and ingots after a recent price tumble.

He said that A-Mark currently has no one-ounce American Eagle gold coins for its customers.

“Until the U.S. Mint can supply us with more coins, we won’t be able to supply any to our customers,” LeShay said.

The move by the U.S. Mint to halt sales caught market participants by surprise as it came at a time when the metal was sharply falling, rather than rising.

In contrast, the Mint needed to allocate its

The engine used to run on premium, e.g. gold and silver; now it’s being run on credit which over time will destroy the engine and everything else.

The euro, the yuan, the yen, and the dollar are The Four Tires Of The Apocalypse, an event that recently appears to have come out of nowhere. It didn’t. Its apparently sudden appearance is new only to those who wished to see otherwise.

The destructive juggernaut now bearing down on the financial house of cards constructed by central bankers contained within it the seeds of its own destruction from its very beginning. Over time, those seeds would turn into Cerberus, the hound of hell, on whose mercy Bernanke et. al. now depends.

Epochs, like movies, need time to reveal protagonists and antagonists, as well as victims, villains and victors. We are now at the end of an epoch and as the final scene opens, the program notes are becoming disturbingly clear.

We find ourselves participants in the last and final act of capitalism and its credit based capital markets—or more correctly, credit and/or debt markets masquerading as free markets.

THE BIRTH OF CERBERUS THE GENESIS OF THE JUGGERNAUT

Capitalism did not appear until the Bank of England began issuing its debt-based paper money in 1694. The issuance of credit as money gave rise to capital markets where debt-based money replaced savings-based money

The Bank of England’s debt-based money drove out gold and silver coinage as Gresham’s Law clearly illustrates—bad money drives out good. No one would willingly pay gold or silver for what paper coupons would just as easily buy.

Capital markets are debt-markets made possible by the fiat issuance of central bank debt-based money. After central bankers’ faux money replaced gold

HYPERINFLATION SPECIAL REPORT

Issue Number 41

April 8, 2008

__________

Inflationary Recession Is in Place

Banking Solvency Crisis Has Opened First Phase of Monetary Inflation

Hyperinflationary Depression Remains Likely As Early As 2010

__________

Overview

The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.

The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.

What lies ahead will be extremely difficult and unhappy times for many. Ralph T. Foster, in his “Fiat Paper Money” (see recommended further reading at the end of this issue), closes his book’s preface with a particularly poignant quote from a 1993 interview of Friedrich Kessler, a law professor at Harvard and University of California Berkeley, who experienced the Weimar Republic hyperinflation:

“It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money.”

This Special Report updates and expands upon the three-part Hyperinflation Series that began with the December 2006 SGS Newsletter, exploring: (1) the causes and background of the evolving hyperinflation and great depression; (2) why circumstances will differ from the deflationary Great Depression of the 1930s; (3) implications for politics and the financial markets; (4) considerations for individuals and businesses.

The broad outlook has not changed during the last year. More generally, though, developments in the economy and the financial markets have been in line with projections and have tended to confirm the unfolding disaster. Specifically, the current inflationary recession has gained much broader recognition, while the still-unfolding banking solvency crisis has confirmed the Fed’s and the U.S. government’s willingness to spend whatever money they have to create in order to keep the financial system from imploding. While the dollar has taken a heavy hit — down roughly 20% against key currencies from last year — selling of the U.S. currency still has been far short of the outright dollar dumping that eventually will lead to flight to safety outside of the U.S. dollar. That event is important to the shorter-term timing of the pending hyperinflation.

Regular readers may recognize text from last year’s Series, as well as material from various SGS newsletters, but such is the nature of revisions to prior material. Points that may be repeated from earlier newsletters are done so in sequence to help build the arguments explaining the unfolding crisis. Great thanks are extended to the numerous subscribers who offered ideas, questions and materials that have been incorporated in this report.

Defining the Components of a Hyperinflationary Great Depression

Deflation, Inflation and Hyperinflation. Inflation generally is defined in terms of a rise in general prices due to an increase in the amount of money in circulation. The inflation/deflation issues defined and discussed here are as applied to goods and services, not to the pricing of financial assets.

In terms of hyperinflation, there have been a variety of definitions used over time. The circumstance envisioned ahead is not one of double- or triple- digit annual inflation, but more along the lines of seven- to 10-digit inflation seen in other circumstances during the last century. Under such circumstances, the currency in question becomes worthless, as seen in Germany (Weimar Republic) in the early 1920s, in Hungary after World War II and in the dismembered Yugoslavia of the early 1990s.

The historical culprit generally has been the use of fiat currencies — currencies with no asset backing such as gold — and the resulting massive printing of currency that the issuing authority needed to support its system, when it did not have the ability, otherwise, to raise enough money for its perceived needs, through taxes or other means.

Foster (see recommended further reading at the end of this issue) details the history of fiat paper currencies from 11th century Szechwan, China, to date, and their consistent collapses, time-after-time, due to what appears to be the inevitable, irresistible urge of issuing authorities to print too much of a good thing. The United States is no exception, already having obligated itself to liabilities well beyond its ability ever to pay off.

Here are the definitions:

Deflation. A decrease in the prices of goods and services, usually tied to a contraction of money in circulation.

Inflation. An increase in the prices of goods and services, usually tied to an increase of money in circulation.

Hyperinflation: Extreme inflation, minimally in excess of four-digit annual percent change, where the involved currency becomes worthless. A fairly crude definition of hyperinflation is a circumstance, where, due to extremely rapid price increases, the largest pre-hyperinflation bank note ($100 bill in the United States) becomes worth more as functional toilet paper/tissue than as currency.

As discussed in the section Historical U.S. Inflation: Why Hyperinflation Instead of Deflation, the domestic economy has been through periods of both major inflation and deflation, usually tied to wars and their aftermaths. Such, however, preceded the U.S. going off the gold standard in 1933. The era of the modern fiat dollar generally has been one of persistent and slowly debilitating inflation.

Recession, Depression and Great Depression. A couple of decades back, I tried to tie down the definitional differences between a recession, depression and a great depression with the Bureau of Economic Analysis (BEA), the National Bureau of Economic Research (NBER) and a number of private economists. I found that there was no consensus on the matter, so I set some definitions that the various parties (neither formally nor officially) thought were within reason.

If you look at the plot of the level of economic activity during a downturn, you will see something that looks like a bowl, with activity recessing on the downside and recovering on the upside. The term used to describe this bowl-shaped circumstance before World War II was “depression,” while the downside portion of the cycle was called “recession.” Before World War II, all downturns simply were referred to as depressions. In the wake of the Great Depression of the 1930s, however, a euphemism was sought for future economic contractions so as to avoid evoking memories of that earlier, financially painful time.

Accordingly, a post-World War II downturn was called “recession.” Officially, the worst post-World War II recession was from November 1973 through March 1975, with a peak-to-trough contraction of 5%. Such followed the Vietnam War, Nixon’s floating of the U.S. dollar and the Oil Embargo. The double-dip recession in the early-1980s may have seen a combined contraction of roughly 6%. I contend that the current double-dip recession that began in late-2000 already is rivaling the 1980s double-dip as to depth. (See the Reporting/Market Focus of the October 2006 SGS for further detail.) Please note that the definition for “great depression” below has been revised to a contraction in excess of 25% (from 20% stated in the March 16, 2008 newsletter), in order to be consistent with the usage in last year’s Series.

Here are the definitions:

Recession:Two or more consecutive quarters of contracting real (inflation-adjusted) GDP, where the downturn is not triggered by an exogenous factor such as a truckers’ strike. The NBER, which is the official arbiter of when the United States economy is in recession, attempts to refine its timing calls, on a monthly basis, through the use of economic series such as payroll employment and industrial production, and it no longer relies on the two quarters of contracting GDP rule.

Depression:A recession, where the peak-to-trough contraction in real growth exceeds 10%.

Great Depression:A depression, where the peak-to-trough contraction in real growth exceeds 25%.

On the basis of the preceding, there has been the one Great Depression, in the 1930s. Most of the economic contractions before that would be classified as depressions. All business downturns since World War II — as officially reported — have been recessions. Using the somewhat broader “great depression” definition of a contraction in excess of 20% (instead of 25%), the depression of 1837 to 1843 would be considered “great,” as technically would be the war-time production shut-down in 1945.

The current economic contraction is about halfway towards being classified as a “depression,” based on my definitions and GDP accounting. As the Great War became World War I with the advent of World War II, so too may the Great Depression become Great Depression I, as the current crisis reaches its full, terrible potential. As with the two world wars, what may become known as Great Depression II had its roots in Great Depression I.

Current Environment

Before examining how the current circumstance can evolve from an inflationary recession to a hyperinflationary depression and then great depression, it is worth defining the nature of the current economic and inflation conditions in the United States, and likely near-term developments.

Based on the regular material discussed in the SGS Newsletter, the U.S. economy is in an inflationary recession as will be reported in official statistics. Real (inflation-adjusted) fourth-quarter 2007 GDP, in July’s benchmark revision, and/or first-quarter 2008 GDP should be in contraction, with most underlying economic series showing distressed levels of activity consistent with a recession. Annual CPI inflation is at 4.0% and headed higher. Oil prices remain over $100 per barrel, weakness in the dollar is just beginning to impact the CPI, and the inflationary effects of soaring broad money growth should start to surface around mid-year. Official CPI could be running in double-digits by year-end 2008.

Net of gimmicked methodologies that have reduced CPI inflation reporting and inflated GDP reporting, the U.S. economy has been in a recession since late-2006, entering the second down-leg of a multiple-dip economic contraction, where the first downleg was the recession of 2001 that really began back in late-1999. Annual CPI inflation currently is running around 11.6%, again, facing further upside pressures.

The current outlook does not exclude further bounces and dips in economic activity. As was seen during the Great Depression, in severe contractions the economy can hit bottom and then bounce briefly until it falls again, finding a new bottom. As discussed in the Depression/Great Depression section, the current economic downturn reflects a structural shift, which increasingly has constrained consumer activity during the last several decades, and which cannot be turned quickly. The current downturn, by my numbers, already is halfway to qualifying as a depression. The evolving depression quickly will move to great depression status, when the hyperinflation hits, as such will be extremely disruptive to the conduct of normal commerce.

The efforts by the federal government and the Federal Reserve to prevent a systemic collapse as a result of the banking solvency crisis has started to spike broad money growth, as measured by the SGS-Ongoing M3 measure, which currently shows a record annual growth rate of 17.3%. While the Fed has not been formally creating new money — yet — by adding to reserves, it has had the effect of creating new money by re-liquefying otherwise illiquid banks, by lending liquid assets versus illiquid assets. As a result, a number of banks have been able to resume more normal functioning, lending money and creating new money supply. As the systemic bailout proceeds, formal money creation will follow and already may be starting to show up in official accounting.

In response to the rapidly deteriorating fundamentals underlying the value of the U.S. dollar, selling of the greenback has been intense, but contained, with brief periods of stability as seen at the moment. In the near future, dollar selling should build towards an extreme, with heavy foreign investment in the dollar fleeing the U.S. currency for safety elsewhere. With the domestic financial markets and U.S. Treasuries so heavily dependent on foreign capital for liquidity, the Federal Reserve — now touted as the formal financial market stabilizer — will be forced increasingly to monetize federal debt. That process will build over time, given the federal government’s effective bankruptcy, as discussed in the section U.S. Government Cannot Cover Existing Obligations. Therein lies the ultimate basis for the pending hyperinflation.

Again, the current circumstance will evolve into a hyperinflationary depression, then great depression. Although such is not likely much before 2010, or after 2018, that financial end game for the current markets will tend to come sooner rather than later and will break with surprising speed when it hits. As discussed later, this likely will not be a deflationary environment as seen during the Great Depression.

What lies ahead for the current year will be severe enough and financially painful enough to affect the outcome of the 2008 presidential election. Historically, the concerns of the electorate have been dominated by pocketbook issues. Prior to gimmicked methodologies making the reporting of disposable personal income largely meaningless, that measure was an excellent predictor of presidential elections.

In every presidential race since 1908, in which consistent, real (inflation-adjusted) annual disposable income growth was above 3.3%, the incumbent party holding the White House won every time. When income growth was below 3.3%, the incumbent party lost every time. Again, with redefinitions to the national income accounts in the last two decades, a consistent measure of disposable income as reported by the government has disappeared. Yet, even with official reporting, the current annual growth in real disposable income is at 2.2%, well below the traditional 3.3% limit.

Accordingly, odds are quite high that the numbers for 2008 will favor an incumbent party loss, i.e. a victory for the Democrats. Where I always endeavor to keep my political persuasions separate from my analyses, for purposes of full disclosure, my background is as a conservative Republican with a libertarian bent.

What follows or coincides politically with a hyperinflationary depression offers a wide variety of possibilities, but the political status quo likely would not continue. Times would be financially painful enough to encourage the development of a third party that could move the Republicans or Democrats to third-party status in the 2010 mid-term or 2012 presidential elections.

Historical U.S. Inflation: Why Hyperinflation Instead of Deflation

Fire and Ice

Some say the world will end in fire,
Some say in ice.
From what I’ve tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.

– Robert Frost

As to the fate of the developing U.S. great depression, it will encompass the fire of a hyperinflation, instead of the ice of deflation seen in the major U.S. depressions prior to World War II. What promises hyperinflation this time is the lack monetary discipline formerly imposed on the system by the gold standard, and a Federal Reserve dedicated to preventing a collapse in the money supply and the implosion of the still, extremely over-leveraged domestic financial system.

The accompanying two graphs measure the level of consumer prices since 1665 in the American Colonies and later the United States. The first graph shows what appears to be a fairly stable level of prices up to the founding of the Federal Reserve in 1913 (began activity in 1914) and Franklin Roosevelt’s abandoning of the gold standard in 1933. Then, inflation takes off in a manner not seen in the prior 250 years, and at an exponential rate when viewed using the SGS-Alternate Measure of Consumer Prices in the last several decades. The price levels shown prior to 1913 were constructed by Robert Sahr of Oregon State University. Price levels since 1913 either are Bureau of Labor Statistics (BLS) or SGS based, as indicated.

The magnitude of the increase in price levels in the last 50 years or so, however, visually masks in the first graph the inflation volatility of the earlier years. That volatility becomes evident in the second graph, with inflation history shown only through 1960.

What is shown in the second graph is that up through the Great Depression, regular periods of inflation — usually seen around wars — have been offset by periods of deflation. Particular inflation spikes can be seen at the time of the American Revolution, the War of 1812, the Civil War, World War I and World War II.

The inflation peaks and the ensuing post-war depressions and deflationary periods tied to the War of 1812, the Civil War and World War I show close to 60-year cycles, which is part of the reason some economists and analysts have been expecting a deflationary depression in the current period. There is some reason behind 30- and 60-year financial and business cycles, as the average difference in generations in the U.S. is 30 years, going back to the 1600s. Accordingly, it seems to take two generations to forget and repeat the mistakes of one’s grandparents. Similar reasoning accounts for other cycles that tend to run in multiples of 30 years.

Aside from minor average annual price level declines in 1944 and 1955, the United States has not seen a deflationary period in consumer prices since before World War II. The reason for this is the same as to why there has not been a formal depression since before World War II: the abandonment of the gold standard and recognition by the Federal Reserve of the impact of monetary policy — free of gold-standard system restraints — on the economy.

The gold standard was a system that automatically imposed and

Robert Kiyosaki Why the Rich Get Richer

When Pessimism Prevails, It’s Time to Get Rich

by Robert Kiyosaki

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Posted on Tuesday, July 22, 2008, 12:00AM

If you’re serious about getting rich, now is the time. We’ve entered a period of mass-produced pessimism, when bad news is everywhere, and the best time to invest is when optimists become pessimists.

The Weird Turn Pro

Journalist Hunter S. Thompson used to say, “When the going gets weird, the weird turn pro.” That’s true in investing, too: At the height of every market boom, the weird turn into professional investors. In 2000, millions of people became professional day traders or investors in dotcom companies. Mutual funds had a record net inflow of $309 billion that year, too.

In an earlier column, I stated that it was time to sell all nonperforming real estate. My market indicator? A checkout girl at the local supermarket, who handed me her real estate agent card. She was quitting her job to become a real estate professional.

As a bull market turns into a bear market, the new pros turn into optimists, hoping and praying the bear market will become a bull and save them. But as the market remains bearish, the optimists become pessimists, quit the profession, and return to their day jobs. This is when the real professional investors re-enter the market. That’s what’s happening now.

Pessimism vs. Realism

In 1987, the United States experienced one of the biggest stock market crashes in history. The savings and loan industry was wiped out. Real estate crashed and a federal bailout entity known as the Resolution Trust Corporation, or the RTC, was formed. The RTC took from the financially foolish and gave to the financially smart. Call The Superior Gold Group at 888-969-6465 and transition into real MONEY—-GOLD!

Right on schedule 20 years later, Dow Industrials and Transports struck their last highs together in July 2007. Since then, nothing but bad news has emerged. In August 2007 a new word surfaced in the world’s vocabulary: subprime. That October, I appeared on a number of television shows and was asked when the market would turn and head back up. My reply was, “This is a bad one. The worst is yet to come.”

Many of the optimistic TV hosts got angry with me, asking me why I was so pessimistic. I told them, “The difference between an optimist and a pessimist is that a pessimist is a realist. I’m just being realistic.”

As we all know, things only got worse in early

Can Anything Stop It?

For weeks, I’ve been doing talk-radio interviews to help me sell my book, How to Prosper During the Coming Bad Years in the 21st Century. It’s déjà vu all over again, and I’m enjoying success.

But often I’ve been asked: “What advice would you give to the presidential candidates to head off the coming hyperinflationary depression?”

My answer is two-fold:

1. “I would tell them to stop lying to us. They are all making promises no president can keep. Our president is not an emperor or an absolute ruler; many promises being made can only be kept by Congress. No president can keep all those promises, and in many cases, even he if could, he shouldn’t.”
2. “I’m not in the business of curing national problems; I’m not smart enough to do that. I’m trying to help middle-class Americans who aren’t economists and are less concerned with solving the national problems than protecting themselves. My role is to help them know what to do with the money they have. Many of them have never “invested” before, and certainly not on Wall Street. But the average American is making investment decisions whether he knows it or not.”

We all have earned a certain amount of money by performing our jobs. We have to decide what to do with that money, so my advice is two-fold:

1. It is defensive. The real problem is not a depression like the 30s coming back. That’s not likely. That depression was deflationary in nature. 25 percent of the people were out of work and had no income, but you could buy a loaf of bread for a nickel. In the inflation we face, the cost of a loaf of bread will be measured in dollars, perhaps many of them. It’s a different problem entirely. We face runaway inflation, which has already started. My job is to teach you how to cope with the fact that during hyperinflation, commerce becomes undependable. Every store depends on trucks which roll up to their back doors every day and restock the shelves which were attacked by buyers the day before.In an inflationary environment, the cost of fuel soars. Independent truckers, especially, cannot afford to drive their trucks because of the cost of fuel. Strikes become endemic. Although there will always be some commerce, it will not be as dependable as you would like. You may not be able to buy what you want when you want it, at a price you can afford.

   My defensive advice is really simple; when you buy anything, don’t just buy one. Buy five or six for storage. You will pay today’s prices and consume them at tomorrow’s higher prices. That’s a fine investment.It doesn’t require some kind of national calamity to make sense, but we will have a national calamity – hyperinflation.

2. When you have cash to invest, don’t invest in anything denominated in dollars because dollars will become worth less and less (including most stocks, bonds and cash).

The dollar is supposed to be a means of exchange and a store of value. It is still a means of exchange and will continue to be for some time, but it has long ago ceased to be a store of value. Call The Superior Gold Group and start building your portfolio with precious metals and make GOLD your portfolio’s BEST FRIEND at 888-969-6465

One common question from the radio hosts has been “what proof do you have that you are right about a runaway inflation?”

Haven’t you been looking? It’s all around you! It’s already started. Look at the price of gasoline, wheat and corn. Eggs are up 30 percent. The major factor in the increase of a barrel of oil is not that oil is becoming scarce or more valuable. There is enough oil in the United States to meet demands for the next 60 years. There is more oil in the shale in Utah and Colorado than there is in Saudi Arabia. There is no real actual shortage, although it is a function of price and politics.

As oil becomes more expensive, it becomes more useful to consider the oil shale in the Rockies. It is approaching a price where exploiting oil shale is profitable. We know the oil is there.

What causes the increase in the oil price? Inflation, pure and simple. Oil is denominated in dollars, and the value of a dollar is shrinking, so producers want more dollars for a barrel of oil. The oil price simply reflects of the decreasing value of the dollar.

Oil is not the only sensitive indicator of the value of the dollar. The dollar is now in its twilight years; it is rapidly diminishing in value. You once could buy the best suit of clothes in town with two pairs of pants from the best tailor around, for one American gold piece. You can still buy the best suit of clothes with two pairs of pants from the best tailor in town with the value of one American gold piece. The price of gold also reflects the loss of value in the dollar.

There are really two things to watch, the price of oil and the prices of gold and silver.

Will Rogers once said, “Invest in inflation; it’s the only thing that’s going up.” That’s pretty funny, but it is also a profound truth. There are ways to invest in inflation. Stop buying most investments which are denominated in dollars. The stock market is denominated in dollars, although certain stocks are the same as investing in inflation.

I like uranium stocks because we will be building many nuclear plants, and there is only half enough uranium above ground to fuel them, so Uranium Mining Stocks will do very well over the years.

I like Oil Service Stocks – companies that build and service oil rigs.

I like Mining Stocks, not just for gold and silver, but for basic metals like copper because of the soaring demands of an exploding population in China and India which will lead to more and more construction. They will need raw materials. So we are now in an age of basic raw materials, and we must look beyond America to see what’s happening in the rest of the world.

Doing these interviews has caused me to think far more broadly about the roots of the problems we face, especially if it is denominated in shrinking dollars.

It’s very simple. You should get rid of your dollars by investing in inflation. What is the alternative? Not foreign currencies, which is what Wall Street would like you to do, because inflation is contagious and will affect every currency in the world. You must base your future portfolio in gold and silver and their derivatives because the world is changing; the lead article in this newsletter explains how you have to make occasional market changes in how you approach these metals.

The fundamentals are changing, and your outlook must change also. Hidden behind these problems is a glowing opportunity. Perhaps once in a lifetime we face a change as fundamental as this, allowing us to invest early in the game and turn small amounts of paper dollars into genuine wealth. That is what The Ruff Times is devoted to.

The Collapse of the Dollar?

I’ve received several emails and letters from subscribers asking “what will happen to gold and silver denominated in dollars if there is a collapse of the dollar and it becomes worthless.”

The term worthless is a combination of two words – “worth” and “less.” I’m of the opinion that the dollar will not become worthless, it will just become worth less. If we have runaway inflation, the dollar still exists and has some value, it just won’t have as much value as it has now, and it will take more dollars to buy stuff.

Currency is supposed to be a means of exchange and a store of value. The dollar today is a means of exchange and will continue to be a means of exchange as long as it is in existence. But it has ceased to be a store of value. Consequently, this argues that one of the worst long-term holdings is cash in the bank. It sounds prudent to have a lot of cash, but that assumes that the dollar is stable and continues to maintain its value. That is not the case now and will be the case less and less as years go on.

So gold and silver will retain their value. Denominated in dollars the nominal value will multiply many times over.

A similar question is, “what will happen to gold and silver if the stock market collapses.”

The price of gold and silver has nothing to do with the stock market. It is an international phenomenon. If the dollar becomes useless as an everyday currency, you can bet that gold and silver will become valuable as currency. It has happened several times throughout history, ever since the invention of the printing press. When a currency becomes less valuable, gold and silver becomes more valuable.

I remember during the metals’ bull market of the 1970s when we were worried about gas rising to $1.50 a gallon, some enterprising gas stations put up signs selling gas for a dime a gallon. Of course, they wanted pre-1964, 90-percent silver dimes which had value in excess of a gallon of gas. If you were smart, you didn’t fall for it. You were better off keeping the coins to yourself.

Let’s make sure we don’t throw words around carelessly, like “worthless.” I am not suggesting the dollar will become “worthless;” it will become worth less in terms of its utility in buying every-day commodities.

The value of the dollar is measured in two ways:

1. Its value relative to foreign currencies like, for example, it will cost you considerably more to go to Europe because the Euro has increased in value relative to the dollar, and everything will be more expensive;
   and
2. It is also a measure of what the dollar will buy in America, which is an entirely different matter. In either case, gold and silver are historically the best answers.Call The Superior Gold Group and start building your portfolio with precious metals and make GOLD your portfolio’s BEST FRIEND at 888-969-6465

By Howard Ruff

It’s rather amazing that despite the firm rise in Gold and Silver these past few weeks, the mining stocks aren’t moving at all. Well, that’s not entirely true. The mining stocks do tend to move at times, only in the opposite direction! Needless to say, this is incredibly frustrating to all gold and silver bugs.

Mining stocks appear to be moving in sympathy with the major equities markets. Although we have seen this before, it’s still amazing to see the holders of mining stocks lose faith so easily. Eventually, buyers of quality mining companies at today’s bargain prices will be

And now, on to the report… Transition into GOLD now. Don’t hesitate!!!

Reggie Middleton on the Asset Securitization Crisis and Consumer Finance

As with the mortgage market, the consumer lending market reported significant growth since the beginning of this decade largely due to lax lending standards of financial institutions, imprudent lending and poor assessment of payback abilities of customers and more importantly, securitization!!!

Consumer credit is generally classified as revolving and non-revolving. Revolving consumer credit includes credit card lending, lines of credit, home equity line of credit (HELOC) and similar products. These types of lending products do not have a fixed number of payments; there is a limit assigned to the borrower up to which he can borrow and pay the principal and interest within a certain period. The method of functioning in this case is very similar to that of a credit card.

On the other hand, non revolving consumer credit includes loans such as automobile loans, loans for mobile homes, education, boats, trailers, vacations, etc. Unlike revolving credit, these require fixed number of payment over a period of time. Over the last 27 years, non revolving credit on an average has constituted 68.8% of the total consumer credit market.

Consumer credit outstanding (US$ bn)

Source: Statistical Releases of the US Federal Reserve

Growth in consumer credit registered its peak during the S&L crisis, as it grew 18.4% y-o-y to US$517.2 billion at the end of 1984. Over the last 20 years (1988 to 2007), total consumer credit outstanding in the US economy has grown at a CAGR of 6.7%, making it a US$2.57 trillion industry at the end of 2007.

The growth proceedings were dominated by revolving consumer credit (CAGR of 9.0%) due to the rising demand for HELOCs over the years, a result of the booming housing market. Moreover, with low interest rates in the earlier years, borrowers found it easy to get their credit limits enhanced. As opposed to this, non revolving credit grew at a lower CAGR of 5.7% over the same period simply due to the dominance of mortgage lending over other lending forms. The faster growth in revolving credit led to a change in the composition of the market. Revolving consumer credit constituted 37.3% of total consumer credit outstanding in 2007, from 25.2% in 1988.

However, since the growth in the consumer credit market was based on extremely fragile assumptions – which cracked as soon as interest rates went up – increasing number of defaults hindered the performance of the consumer credit industry.

Source: The American Bankruptcy Institute

Rising interest rates led to higher loan payments, which most borrowers could not afford as they were never truly ineligible to bear such heavy burdens of loan paybacks in the first place when they were granted these loans. As a result, the number of individual bankruptcy filings in the US has grown at a CAGR of 2.1% in the last 20 years, from 549,612 in 1988 to 822,590 in 2007. The total bankruptcies in the US totaled 850,912 at the end of 2007, registering a CAGR of 1.7% over the last 20 years. If you

Table of Contents

1. General Information
2. National Budget
3. The National Debt
4. The National Debt and the Consumer Price Index
5. The National Debt and the Gross Domestic Product
6. Foreign Debt (added December 8, 2004)
7. The Gold Standard
8. Raw Numbers
9. Sources of Information & Links

I also wrote an article on The U.S. Trade Deficit that should be read alongside this one for a more complete picture of our place in the world.

1. General Information

Money for debt is raised by the Treasury, and limited by Congress. Each time the limit is reached, Congress either has to approve of a new debt ceiling, or close / limit branches of government to ensure that the United States can meet it’s debt obligation and repay it’s debts.

This is part of the checks and balances built in to the Constitution. In practice, Congress has almost never in recent history denied an increase (with an incident in 1995 being a notable exception).

The current US Debt is close to 7.4 Trillion dollars. In November of 2004, Congress will vote on whether or not to increase the debt ceiling. This vote was pushed back from October to avoid it becoming an election issue.

U.S. Treasury - FAQs: National Debt

The total public debt is largely a legacy of war, economic recession, and inflation. It represents the accumulated deficits in the Government’s budgets over the years. The United States first got into debt in 1790 when it assumed the Revolutionary war debts of the Continental Congress. At the end of 1790, the gross public debt was approximately $75 million. For a brief period in the mid-1830’s the public debt was virtually zero. At the start of World War I in 1916, the public debt was $1 billion. It then rose to a peak of $26 billion in 1919 to finance the war. The debt declined for the next decade. During the Great Depression of the 1930’s, however, the debt increased from $16 billion to $42 billion. During the Second World War the public debt rose sharply to a peak of $279 billion in 1946. From its postwar low in 1949, the outstanding public debt grew gradually for nearly the next two decades. Then, beginning at the time of the Vietnam War in the mid-1960’s, the rate of the debt’s increase accelerated sharply.

There are three ways of measuring government spending. One is simply to look at the actual dollars, but this doesn’t take into account inflation (the how much more things costs today than yesterday), or the economy as a whole (all of the goods and services produced in the country, GDP).

So I’ve provided 3 graphs for the budget and debt. The first is in “nominal dollars” (not inflation adjusted) the second is in “real dollars” (inflation adjusted), and the third is as a percentage of the GDP, or Gross Domestic Product.

Any numbers beyond 2003 are projections by the US Government.

2. National Budget

Receipts, Outlays, Surplus and Deficit in Current Dollars (amounts in millions)

This chart represents is income and expenses of the US Government from 1913 to 2009.

Receipts, Outlays, Surplus and Deficit in Constant (FY 2000) Dollars (amounts in millions)

This is the same graph as above, but takes into acount inflation. In the previous graph you saw that the government was spending more money every year, but you couldn’t tell whether or not it was just keeping pace with inflation. Here you can see that the actual value of the income and expenses of the US Government has increased.

Receipts, Outlays, Suprlus and Deficit as a % of GDP

So while in the previous graph you saw that the government was receiving more and spending more in constant dollars, here you can see that in terms of the economy as a whole, spending has been more-or-less constant since WWII.

Receipts by Source

This chart is not adjusted for inflation.

3. The National Debt (Nominal Dollars)

The National Debt, 1940 - 2009

The debt reached a peak during WWII (More on this later),

Dollar crisis looms, China ponders reform: Mundell

Tue Jun 03 12:23:41 UTC 2008

By Jason Webb,

VALENCIA, Spain (Reuters) - A major dollar crisis could come within five years and China is discussing reforms to the global monetary system to protect its $1.6 trillion reserves pile, says Nobel Prize-winning economist Robert Mundell.

Mundell, who has regular contacts with Beijing officials, said they are considering proposing ways to to fix major currencies including the dollar and the euro, in a system similar to the one which operated under the Bretton Woods agreement from the end of World War Two until the 1970s thereby putting America back on the Gold standard.

“There’s no doubt about it that inside the Chinese government there’s a lot of discussion going on. I’m not sure how they’re doing it but I know they’re going to get an input from me,” Mundell told Reuters in an interview.

Without reform, the global monetary system is headed for a dollar crisis within years, Mundell believes.

However, he thinks the United States will avoid a technical recession during the current downturn and that

Inflation Leaves Investors Little Choice

Kurt Kasun

May 30, 2008

The peaceful co-existence between commodity-related investments and most sectors which comprise the broader US Stock indices, is drawing to a close. As inflation tightens its grip over the world economy, US treasuries and stocks (consumer-related, tech, and financials) will suffer while investments in tangible assets will see their gains accelerate higher. I consider the terms “inflation” and “currency debasement” to be largely synonymous. The bottom line is that purchasing power is going to drastically decline. Income and wealth is not going to keep up with rising prices for goods and services for the US consumer. Hard asset investments will emerge as the sole safe haven against the deleterious effects of inflation.

I find it amazing that the majority of pundits and advisors in the financial media are still peddling tech and financial investments. Most of these guys who proclaim commodities are in a bubble are merely trying to persuade their audience to invest in US stocks. “A bet against the American consumer has been a bad bet for 25 years” is a popular refrain. Well, 25 years of living beyond our means to consume is going to have ugly consequences. The government’s highly inflationary and currency-devaluing policies heretofore created asset bubbles, the over-flow of which created a wealth effect that positively impacted consumption and GDP. The problem was that the numbers masked the rot which was occurring in the real economy. Incentives created asset growth and dependency at the expense of investment in this country’s productive capacity in tangible goods. Austrian economists refer to this as mal-investment. Inflation is the inevitable outcome, even in a US-centric world. But things have changed. We are on the brink of massive global inflation, the likes of which the world has never seen.