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January 2011
 It
is debt first and not business that is responsible for currency
values. In order to cover the debt, there is an urgent need for a robust
recovery of the Western Economy. Such has, since they have chased the
Manufacturing sector away East, simply become impossible.
Propaganda, algorithms, talking heads, bankers who don’t
know what they are talking about and a Herd which has lost the true north
make the charts of the financial markets look like those of patients in an
Asylum.
Only
in Newsletters like Goldonomic one can read some reality. I happen to
write about potential dramas BEFORE they occur. In 1989 I forecasted the
crash of the Japanese stock market, real estate sector and Yen. I remember
that at that time I had a discussion with Japanese who thought a Real
Estate crash in
Japan was
simply impossible: the island was only so big and there was a rampant
shortage of land and housing.
I
heard similar arguments in 2006 and 2007 just before the Real Estate
crash in
Florida.
Florida was and still is an enormous swamp (the Everglades) and there is
only so much land. Today prices have fallen by more than half…What many
don’t realize is that the peak prices of 2006/07 were still lower than the
peak price level of the 1926’s .
2001/2002 I started to advise to buy Gold and Silver sector. In the
early 2000’s , I gave a presentation in Europe where I clearly outlined
the risk of holding on to Pound Sterling, US Dollars, English and
Spanish Real Estate. Most of the audience were just listening in
disbelief and did nothing to adjust their positions. During the following
years the losses of the Pound Sterling (-30%) and the British (even in
the city of
London)
and Spanish Real Estate have been spectacular.
For
some reason the Herd refuses live with the reality and prefers to call us
whistle blowers pessimists when warnings are issued. The problem
being that each time an major crash occurs, the saving of many are simply
wiped out…as it is in fact the Herd which makes the market rise or fall in
such an dramatic way.
In 2009 I issued a
warning for the Bond markets. The crash did not start until 2010.
Only one year later than what I forecasted. Better to be early than late
and sorrow. Luckily it is still not too late to get rid of your Bonds….but
it is five to
twelve. One has to be blind not to see we’re on the threshold of much
higher interest rates as well as a much higher inflation, if not
hyperinflation. This will even wipe out the value of inflation adjusted
Bonds. A bigger drama could possibly unfold once the Credit default
swaps and the few banks who guarantee these start to default. But this
is probably too difficult to understand for the average Bond holder as
well as it seems to be hard to understand that half of the Bond value is
lost when interest rates only double from 4% to 8% and that Bonds can be
sold on the Stock Market at all times.
Cash is
unfortunately also NOT a solution at a time where commodity prices are
rising by 100% to 300%. These huge price increases will impact inflation
figures (even the core indexes) in maximum 6 months from now.
Hard to understand is why people living in countries where the Real
Estate cycle is lagging (Belgium, France are good examples),
simply refuse to understand that Real Estate prices are not necessarily
function of supply and demand and that a house is nothing more than stones
and mortar with no intrinsic value whatsoever. Real Estate cycles take 76
years to complete and are an economic and historic reality, even in the
Netherlands, France and Belgium.
Hard
to understand that people simply refuse to understand they MUST buy Gold
because it is a weird somewhat barbaric and antique metal which humans
have replaced by Paper and Digital Money for some time now..…
It
is NOT the price of Gold going up but the value of fiat paper money coming
down: expressed in Gold a men’s outfit costs exactly as much today
as it did 100 and 200 years ago.
Commodities
are real assets and their price goes up or comes down in relationship with
demand and supply. Gold is no exception and Paper/digital money neither.
The difference between Gold and paper money is that the supply of the
former cannot be increased by the Authorities and bankers, Fiat money can
be multiplied hitting the Enter button of a computer.
If we take the World Gold
reserves we divide that by the amount of the US national debt of 14
trillion it yields a staggering amount of $ 16,000 per ounce. Adding the
European debt, we can easily double the figure to $ 32,000 per ounce.
We
invite all amongst you who still doubt to come to the Symposium held in
Brasschaat, Belgium where Huerta de Soto a prominent economist will
explain to you the mechanisms of the depression we’re living.
Clear is that we don not have a Gold bubble and that a lot more is to come
for the selection of stocks by Goldonomic.
Francis D. Schutte
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