Sunday, November 18, 2007

Billions Of Reasons To Dump The Dollar, And Buy Gold

Fed Injects Cash Into Financial SystemThe Associated Press - Nov 15, 2007WASHINGTON (AP) — The Federal Reserve injected a fresh infusion of $47.25 billion into the US financial system on Thursday, reflecting normal operations as ...

Fed injects US$32.75 bil. to ease liquidityChina Post, Taiwan - Nov 9, 2007WASHINGTON -- The Federal Reserve injected US$32.75 billion into US money markets Thursday to help ease tight liquidity, the central bank said. ...

Fed injects $41 billion into financial systemUSA Today - Nov 1, 2007The Federal Reserve Bank of New York, which carries out the central bank's open market operations, moved Thursday to inject $41 billion in temporary ...

Fed Injects Cash Into MarketHouston Chronicle, United States - Oct 24, 20072007 AP NEW YORK — The US Federal Reserve has pumped $25.5 billion in liquidity into the financial system so far this week, raising concerns of continued ...

In just the past four weeks, the US Federal Reserve has pumped $146.5 Billion into the financial system. Virtually printing money out of thin air. Little wonder then that OPEC, as a group holding one of the worlds largest hoards of US Dollars, would openly question the validity of the Dollar as the worlds "reserve" currency:

OPEC to Study Effect of Dollar on Prices- AP
OPEC will study the weak U.S. dollar's effect on the oil cartel's earnings and investigate the possibility of a currency basket, Iran's oil minister said Sunday.

Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves.

If the Dollar was no longer backed by OPEC, there would be no need for nations to hold vast reserves of Dollars to be used to purchase oil. The effect of that decision by OPEC would be not only catastrophic for the Dollar, but for the US Economy...and perhaps even our way of life as we know it. This OPEC Oil / Dollar peg, in a nutshell, is why the USA is involved in Iraq. It is why, "The War on Terror" is vital to the US "national interests". If OPEC kicks the Dollar to the curb, the United States goes with it. In effect, the US Military is out roaming the globe in an effort to "force" nations to use the Dollar as their primary means of trade. The US Dollar is doomed.

Need any more reasons to dump the Dollar and buy Gold?

Bob Chapman, The International Forecaster has good reason to buy Gold:

Well, the mainstream media, the analysts and the pundits are already predicting the downward trend in gold to a price somewhere in the 750 range by the end of the year. The Fed-heads are out jawboning about how we may not need more rate cuts in order to slow gold down and support the sagging dollar as they continue to lie through their Wall-Street-bailing teeth in their desperation to save the commercial shorts from a walk into Crispy Critter Country. They say there will be a big correction in gold and silver this year and prices will not move up until next year. What they fail to mention is that there are still almost 240,000 open December gold futures contracts even after the 22,000 that were closed out on Thursday which undoubtedly accounted for gold's rise to about 818 that day, and that the commercial shorts own most of them, many of which are now still underwater by about $15,000 per contract even with gold stubbornly holding at about 790. Already the open gold futures contracts for February have soared to a very manipulative level of 116,000 contracts as the cartel gears up for the winter/spring rally for precious metals, and as the cartel attempts to intimidate traders and attempts to take the public out of the precious metals markets for fear of a big correction and much lower prices. They hope that everyone will forget about the issue of the 240,000 December gold futures contracts that is still unresolved. Do not be intimidated. Support the large specs in their battle to push gold past 850. Do not let up on the cartel. The gold alarm must be rung so people can be alerted to the coming danger. The covering of 22,000 shorts sent gold from Wednesday's close of 797 to a high late Thursday of 818 before a series of substantial central bank sales brought gold down to 785 on Friday. Can you imagine what would happen to the price of gold if there were a short-covering of many multiples of 22,000 short contracts?

Determining an Appropriate US Dollar Exchange Rate
By: Christopher K. Potter
Northern Border Capital Management LLC

The price of gold should be $2,500 per ounce. While this may appear to be an overly optimistic projection, it is reasonable when analyzed in the context of today’s highly inflationary environment. Inflation occurs when central banks create excessive amounts of money and today we are in the middle of the largest money creation exercise in history. Since 2000, the supply of US dollars has grown by 84% and since the early 1970s, when official dollar convertibility into gold ended, the number of dollars in circulation has grown by over 1400%. That is not a typographical error. In 1971 there were 776 billion US dollars in circulation. Today there are over 12 trillion. Around the world the supply of paper money is growing at a stunning pace. In the last seven years alone, the supply of British pounds grew by 99%; Euros grew by 78%; Indian Rupees grew by 234%, Chinese Yuan grew by 227% and Russian Rubles grew by 1,508%. Because central banks create money at virtually no cost, its supply tends to grow without constraint.

This essay, in it's entirety, will blow your mind. Few things I have read over the past five years can touch this work by Christopher K. Potter. If you don't believe the US Dollar is doomed, and Gold is going to the Moon after reading this never will.

Need any more reasons to dump the Dollar and buy Gold?
Please click on the chart above to enlarge.

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