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Archive for June, 2010

Things are looking clearer…

Quick investment update: Things are looking clearer.

Both gold and US Treasuries are volatile but trending up.  The Euro is in the dog house.  Stocks are looking like they’re about to fall off a cliff.  Oz house prices are losing steam and trending sideways at best.  And some economies are blowing up or about to blow up quickly and spectacularly.  What is going on?

Well, as I’ve stated for over 3 years now, we are reaching the Keynesian endpoint:  Zombie govt employees can no longer counterfeit their way out of economic disaster because debt levels (in absolute terms) are becoming unsustainable.  When that happens the house of cards collapses, govt entitlements have to be cut back and the whole capital structure experiences a heart attack.

With mass defaults in debt-crushed economies, what do the bankster-counterfeiters do?  They KNOW their own toilet paper is rubbish.  They’ve never held on to toilet paper.  They’ve always bought stocks and houses and govt debt.  Now stocks and houses look shaky.  So they race to their trusted “thick as thieves” brother – the govt.  But then eventually even the govt collapses under the weight of interest payments and trillion dollar debt.  Then it’s either depression or QE-ing to infinity.  That’s where gold comes in – a liability to know one, indestructible, malleable and real money.

When a banker’s liquidity preference increases in the face of rising risk aversion, he goes to real money – gold.

So it’s gold and govt bonds.  And when bonds die, it’s gold.

Simple.

Categories: Predictions 2010