The Only True Standard of Value By Richard Russell
- 321 Gold | April 22, 2011
The dollar is doing just what the Fed wants it to do –
it's sinking, sinking and sinking more. Sadly, the great
American public doesn't understand what's happening, and
if they were told they couldn't care less. Of course, what
the public does notice is the painful result of the dollar's
bear market. The result is seen every time Joe six-pack
and his wife hit the neighborhood super-market. The rising
prices are a shocker. And if the price of your favorite
cold cereal has not been raised, there is less of the cereal
in the box. Then when Joe has to fill up the buggy to get
home, he groans as he sees the gasoline tab. "Sixty
bucks to fill up this lemon. I'm going to get a motorized
bike," growls Joey. "This country is going to
hell in a hand-basket."
The US has been getting away with spending more than it
takes in ever since World War II. It's a process that isn't
sustainable, and if a process is unsustainable it will end.
The US's habit of spending more than it's paying for has
finally hit a brick wall. The wall is the demise of the
famous "Yankee dollar." In order for the US to
live over its head, it must borrow. Half of the US's borrowing
comes from foreign sources. And that's a problem.
The fiat US dollar has no fixed value. It's worth must
be measured against other currencies. "The dollar is
worth so much in relation to the Brit pound – or the
dollar is worth so much in terms of the euro." Our
foreign creditors, many of whom are loaded with dollars,
keep a sharp eye on the comparative value of the dollar,
and they're now frightened and mulling over the credit-worthiness
of the US. The recent warning from the S&P rating agency
heightened our creditors worries about both the US and the
dollar. The disgraceful battle between Obama and the Democrats
vs. Paul Ryan and the Republicans is further raising the
fears of our creditors.
With commodity inflation now out in the open, Fed head
Bernanke has a problem. His absurd defense is to refer to
"core inflation" (without the cost of food and
energy). Bernanke announces to the world that there's "no
inflation," and besides if there is inflation the Fed
can end it any time they want.
What Bernanke and the Fed can not control is the tell-tale
price of gold. As I write the battle is on to keep June
gold from closing above 1500. Yesterday June gold hit an
intra-day high of 1500, but can it close there? "Ah,"
Bernanke must be thinking, "If I could only control
the price of that damn gold."
Yesterday, as I looked at my computer, and I could see
the fierce struggle that was going on as gold whipped up
six dollars, then five minutes later it is up a dollar-fifty.
There must be a powerful contingent (perhaps backed by the
Fed) that is desperate to keep the price of gold DOWN and
below 1500.
But alas for the Fed, gold is traded internationally across
the face of the planet and 24 hours a day. Gold is out of
the hands of the Fed and Goldman Sachs, and it trades everywhere
and where it wants.
This year I've been telling my subscribers to think in
terms of two concepts:
(1) Think in terms of avoiding losses (rather than thinking
in terms of building fat profits).
(2) Think in terms of PURCHASING POWER. Are you gaining
or losing purchasing power?
For ten years I've advised my subscribers to climb aboard
the great bull market in gold. Early subscribers who have
followed my advice now have huge paper profits, many have
become millionaires, others have been able to retire on
their gold positions.
Even new-comers have benefited from their belated investments
in gold. Over the last 12 months, the dollar price of gold
is up 31.32 percent.