I am not a gold bug, but I can spot a warning sign when I see one. Gold is near an all time high and this is no fluke! High prices are the result of big demand from monster players who are afraid of a dollar crash. My fears all center around Fed Chief Ben Bernanke’s announcement in mid-August of plans to end Quantitative Easing. QE is a program where the Fed used more than 300 billion in “printed money” to buy Treasuries to artificially hold interest rates down. The Fed wants this program phased out by the end of October. Oh really! Bernanke is going to stop buying debt and allow interest rates to spike! Not a chance. Interest rates could go up dramatically, and any homeowner with an adjustable rate mortgage would be hit with higher payments…much higher. I, and many other people, think The Fed will be forced to keep “printing money” and that creates an even bigger problem for the dollar. Martin Hutchinson at the Prudent Bear revealed his prediction in a recent article called “October Surprise,” …” Given the current predilections of the world’s central bankers, it is likely that when the T-bond bubble bursts, they will rush to the printing presses, the Fed buying Treasuries in a frantic attempt to stabilize the bond market. In all but the shortest term, that is unlikely to work; it will cause a spiraling increase in gold, oil and other commodities…” Hutchinson goes on to say,”If October 2009 fails to produce a full-scale T-bond rout, it will not be long delayed thereafter…”
He’s not the only one feeling something bad is coming. New York University Professor Nouriel Roubini, who predicted the financial crisis, said recently,“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar.”
Nassim Taleb, author of the runaway best seller “The Black Swan,” said in mid-August on CNBC ,”The risk is still there and we are probably worse off than we were before.” You definitely cannot call Taleb a market cheerleader and he is clearly not comfortable with this so-called “recovery.” You can check it out in the video below.
I think when Taleb says, “worse off” , he means the economy is worse now than when Secretary of the Treasury Hank Paulson told members of Congress last year that there was risk of “systemic failure.” Right after that Congress voted for TARP money to bail out the banks.
Even easy Al Greenspan is a little worried about the dollar. “Unless we roll in this whole degree of expansion, we will be in trouble,” the former Chairman of the Federal Reserve told a conference in Mumbai via videoconferencing. “I am not talking 3-5 per cent inflation, I am talking double-digit inflation in the US.”
Finally, there is John Williams at shadowstats.com. Just last week, he correctly predicted there would be a “negative surprise” with the unemployment number. He was right on target, it was worse than expected. Now he says,”With both the economic and systemic solvency crises, I believe the worst
still is ahead of us.”
How far ahead of us is my question? Famed gold investor Jim Sinclair thinks the dollar will take a big hit,”in the middle of the fourth quarter.” Sinclair also thinks the Fed will once again be forced to “print money” to buy Treasuries when the QE program ends. When that happens, the dollar will fall hard and all hell will break loose.
Just like the famous book “Something Wicked This Way Comes,” there will be horror. Who knows how it will all turn out, but there will be no happy ending and gold will sell at a much higher price.
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.