Tonight on Asian news they were calling for a correction in gold to reach $870 before taking off to $1,200 later this year or next.
By Daniel at 4 July, 2009, 4:14 am
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I think the timing will be based on the bond markets. As long as they get good response to the bond auctions gold won’t rise and the dollar will stagnate or rally.
However, we are trying to borrow more money than there is in the world to lend us. We want a couple trillion and 11 other nations want $8.2 trillion according to the IMF. If there isn’t enough for us and we have to compete for what there is with those 11 other nations, this could fall apart rapidly.
The crisis, if it happens will be revealed when the FED stops monetizing or quantitative easing, as they put it and interest rates start to climb week after week. It would mean we either have to stop spending or get the FED to go back on their word that they wouldn’t monetize debt (testimony in Congress by Bernanke).
The trillions in other nations hands, not what we have, will determine the value of the dollar. They don’t want the dollar to collapse but, at some point it will and they will have no option but to get rid of what they have as soon as they can or hold them in hopes that in a few years the dollar comes back. The problem is that they have been moving to short term debt and out of longer term debt and every few months that debt would mature and have to be paid in devalued dollars.
A ponzi scheme eventually collapses no matter how well it is run. The debt based growth society we have had for so many decades is a Ponzi scheme as it requires more and more lenders every year just to create an illusion of growth.
Whether the collapse leads to higher prices for gold, or oil, or raw materials like copper or grains to feed the growing global population, it will happen. Whether it is this year or in a few years, we can’t say for sure, only that we have been headed for this, and warned we were headed for this for decades.
We may be able to make one more delay but, that will require a bubble in something.
We can’t grow and we can’t tax out of this. At some point, the loans will be cut off even if they don’t sell what they currently have.
Jan
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