Monday, January 6, 2014

The Fed Just Guaranteed $9 Gas and $3800 Gold

Now that the Fed has announced they are barely tapering their enormous stimulus program, it's more obvious than ever that a few powerful men have hijacked our economic, financial and political structure.  And here's a news flash: They aren’t socialists or capitalists.  They’re criminals.  The Fed's decision to continue buying $75 billion dollars worth of toxic banking assets and U.S. debt per month means the money-printing factory has just gone into high gear. Not only can you say goodbye to your paper-based savings and retirement, but the Fed just guaranteed $9 gas and $3800 gold.
The Fed's Spending Spree
Every month in 2013, the Fed increased its balance sheet by $85 billion, consisting of $40 billion in mortgage-backed securities and $45 billion in 10-30 year treasuries. The Fed is on pace to monetize roughly half of the US budget deficit in 2013. Putting it all together, the Fed's balance sheet has increased to $4 billion. A total increase of $1.17 trillion in one year!  And tapering to $75 billion isn't going to change much.
The Fed has been promising to taper their stimulus program pending the improvement of the labor market.  But as the labor market continues to stagnate, now the Fed has reversed course and announced that they will continue their reckless stimulus program (a.k.a "money printing") for the foreseeable future.
So, how does Fed spending affect the value of your money?  To clearly illustrate this point, let’s take a look at gold price action and debt accumulation since 2005.  I can take this back all the way to 2000, or even further, and it will hold true.  But then we would have to start inflation-adjusting the numbers.  (The US Treasury was used to gather this debt data):
  • 2005 US Debt = 7.6T | Gold = $430/oz. | Gas = $1.82/gallon
  • 2006 US Debt = 8.1T | Gold = $520/oz. | Gas = $2.28/gallon
  • 2007 US Debt = 8.7T | Gold = $635/oz. | Gas = $2.40/gallon
  • 2008 US Debt = 10.7T | Gold = $875/oz. | Gas = $2.90/gallon
  • 2009 US Debt = 10.6T | Gold = $855/oz. | Gas = $2.75/gallon
  • 2010 US Debt = 12.3T | Gold = $1,100/oz. | Gas = $2.80/gallon
  • 2011 US Debt = 14T | Gold = $1,320/oz. | Gas = $3.15/gallon
  • 2012 US Debt = 15.2T | Gold = $1,540/oz. | Gas = $3.40/gallon
  • 2013 US Debt = 17T | Gold = $1,580/oz. | Gas = $4.50/gallon
And here’s where we’re going:
  • 2014 US Debt = 18.8T | Gold = $2,200/oz. | Gas = $5.00/gallon
  • 2015 US Debt = 21T | Gold = $2,600/oz. | Gas = $6.00/gallon
  • 2016 US Debt = 22.7T | Gold = $3,100/oz. | Gas = $6.75/gallon
  • 2017 US Debt = 25.5T | Gold = $3,575/oz. | Gas = $7.50/gallon
  • 2018 US Debt = 28T | Gold = $3,800/oz. | Gas = $9.00/gallon
So... we'll surge to $28 trillion in U.S. debt by 2018. Based upon the chart above, that will put gas at $9 and gold at $3800.
The Gift That Keeps On Giving
As clear as day, this chart illustrates that Fed stimulus is truly the gift that keeps on giving if you are a holder of gold.
They call it “Quantitative Easing," or QE.  The reason QE is like the gift that keeps on giving for a holder of gold is because it blatantly debases the U.S. dollar.  Allow me to illustrate:
Round one (QE1) started November 25, 2008 and ended March 31, 2010.  During that 17-month period, a gallon of gas rose from $1.75 to $2.75 and gold rose from $725/oz. to $1125/oz.
QE2 was started Nov 3, 2010 and lasted seven months until June 30, 2011.  During the seven months of QE2, gas prices rose from $2.80 to $3.60 and gold from $1325 to $1700.   QE2 was also marked by massive global food inflation and global riots.   QE2 ended June 30, and we have had no further ‘major’ balance sheet expansion until mid-September 2012.
In the last few weeks leading up to QE3 and the week after, gold rose 15%.  During the summer of 2013, when the Fed starting backing off their "tapering" talk, gold rose a staggering 13% in a matter of months.  The proof is in the numbers.
QE3 Will Not Improve Labor; It will Ruin The Economy
This policy is complete insanity.  By 2018 when the debt peaks, gas will be over $9 per gallon!  These same factors put gold at $3800 by 2018! It debases the U.S. dollar significantly at a time when we need fiscal responsibility more than ever.  But here’s the real insanity behind this kind of move and its perceived intentions:  How does spending $85 billion a month buying toxic paper from banks even help the labor market anyway?  How can the Fed even get away with another huge lie and distortion like this one?
These policies aren’t really aimed at fixing the labor market or improving the real economy at all.  These policies are designed to be bailouts for too-big-to-fail banks and to keep rates low so that the Fed can service $17 trillion in debt.   This was a move that had complete panic all over it.
Protecting Your Wealth from the Madness
To actually achieve sound wealth protection at this point, you need to look for true diversification (as opposed to banker diversification), by removing some of your wealth from “the system.”  You need to get a portion of your wealth out of the insolvent banking institutions that don’t pay you any yield anyway, and then you need to buy some real money.  Some grass-fed, non-GMO, organic, real MONEY.  The unprocessed kind.  The kind that is not attached to all the political lies and corporate greed.  Money free of debt and that can’t be printed by criminals.  The kind that has outlasted every paper fiat currency ever invented by man for over 5000 years.
"The greatest trick central bankers ever pulled was convincing the world that they work for the public and not for the banks." If you presently do not own any gold, then you do not have the luxury of time.  The foundation and the safety of our monetary, banking and financial systems has never been less sound.  Never.  And while the media may try and convince you otherwise, I hope you have gained the ammunition to see the truth and make some decisions about how you will prepare for the inevitable math of the future.  You don’t have to be an optimist to make money, and you don’t have to be a pessimist to protect it.  You need to be a realist.
Written by Damon Geller