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Major crashes by principle never make the headlines in the media several months in advance.

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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