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Matterhorn Closes The Year In Style: "Hyperinflation Will Drive Gold To Unthinkable Heights"

Tyler Durden's picture





 

From Egon von Greyerz of Matterhorn Asset Management

Hyperinflation Will Drive Gold To Unthinkable Heights

We now live in a world where
governments print worthless pieces of paper to buy other worthless
pieces of paper that combined with worthless derivatives, finance assets
whose values are totally dependent on all these worthless debt
instruments.  Thus most of these assets are also worth-less.

So the world financial system is a house of cards where each
instrument’s false value is artificially supported by another
instrument’s false value. The fuse of the world financial market time
bomb has been lit.  There is no longer a question of IF it will happen
but only WHEN and HOW.  The world lives in blissful ignorance of this.
Stockmarkets remain strong and investors worldwide have piled into
government bonds in a perceived flight to safety. Due to a century of
money creation (and in particular since the 1970s) by governments and by
the fractal banking system, investors believe that stocks, bonds and
property can only go up. Understanding risk and sound investment
principles has not been necessary in these casino markets with
guaranteed payouts for anyone who plays the game. Maximum leverage and
derivatives have in the last 10-15 years driven markets to unfathomable
risk levels, with massive rewards for the participants.

In the meantime central banks are cranking up the printing presses
but as Bernanke recently said quantitative easing is an “inappropriate”
description of what should be called “securities purchases”!  Who is he
kidding? What the Fed is buying has nothing to do with “securities”.
There is no security whatsoever in the rubbish the Fed is purchasing.
They are buying worthless pieces of paper with worthless pieces of
paper. This is the Ponzi scheme of all Ponzi schemes.

Let us be very clear, this financial Shangri-La is now coming
to an end. The financial system is broke, many western sovereign states
are bankrupt and governments will continue to apply the only remedy
they know which is issuing debt that will never ever be repaid with
normal money.

So why does the world still believe that the financial system is sound?

  • Firstly, because this is what totally clueless governments are telling everyone and this is what investors want to hear.
  • Secondly, whether governments apply austerity like in parts of
    Europe or money printing as in the US, investors want to  believe that
    any action by government is good, however inept.
  • Thirdly, market participants are in a state of false security due to shortsightedness and limited understanding of history.
  • Fourthly, as long as they can benefit from inflated and false asset
    values, the market participants will continue to manipulate markets.
  • Fifthly, there has been a very skilful campaign by the US to divert
    the attention from their bankrupt economy and banks `to small European
    countries like Greece, Ireland or Portugal. These nations, albeit in
    real trouble, have problems which are miniscule compared to the combined
    difficulties of the US Federal Government, states, cities and
    municipalities.

Euro zone members can’t print money. Many EU countries are downgraded
by US rating agencies which don’t dare to touch the US rating. The AAA
rating of the US is an absolute sham and totally politically motivated.
True to form, rating agencies will only downgrade debt once it has
become worthless but never before.

Hyperinflation Watch

The result of massive money printing is a collapsing currency,
leading to escalating prices and eventually hyperinflation. This is in
simple terms how every hyperinflationary period in history has happened.
If in addition, there are world shortages of food, energy and other
commodities, this will accelerate the process.

There are currently a number of indicators all pointing to escalating
money printing and an imminent start of a hyperinflationary era. Here
are some of them:

  1. Fiscal Gap widening at alarming rates in many major economies.
  2. Commodity prices at all-time highs.
  3. Long term interest rates rising.
  4. Most Currencies falling.
  5. Precious Metals at all-time highs against most currencies.

Fiscal Gap

Tax receipts are collapsing and government expenditure soaring in
many major economies including virtually all southern European countries
as well as in the UK. James Turk has produced on his fgmr.com site two
excellent graphs for the USA and the UK showing the extreme severity of
these two countries’ deficits.

US & UK ON THEIR WAY TO BANKRUPTCY

The USA and the UK are the favourites to reach
hyperinflation first amongst major economies. Both these countries will
experience major problems in 2011.  Also many other nations have
unsustainable debt levels which will never be repaid with normal money.

GOVERNMENT DEBT WILL NEVER BE REPAID

Commodity Prices
Commodity prices have increased 26% in the last
12 months and 77% in the last 24 months based on the Continuous
Commodity Index (CCI). So whilst most economies publish inflation rates
of 1-3%, the real cost of food and energy is surging. The US government,
which doesn’t eat or use energy, recently published the adjusted 12
months’ Consumer Price Index (ex food and energy) of 0.8% per annum.
Whilst most people are struggling with a massive increase in their cost
of living, the US government is continuously adjusting and manipulating
the published figures.  There are lies damn lies and US government
statistics. Who are they fooling!

Long Term Interest Rates

In spite of US government debt being totally worthless, investors
have bought more than ever, with virtually no return, in a world
drowning in sovereign debt paper. We have for some time stated that the
US bond market is one of the biggest financial bubbles ever. As we
forecast back then, the market turned down (rates up) in January 2009.
 A 14 month correction ended in August 2010. Since then both the 10 year
and 30 year US Treasury bonds have moved up one full per cent. So
investors are finally waking up to the enormous risks in the financial
system by selling government debt. We expect both short and long
interest to surge in 2011 in many countries and to reach well into
double digits in the next few years.

INTEREST RATES WILL RISE STRONGLY

In spite of interest rates at minimal levels, both sovereign states
and individuals have major problems servicing current debt. With
interest rates likely to rise to at least 12-15% and probably higher, no
one will be able to service debt with “normal money”. Add to that the
fact that government debt will surge in most countries. The US debt is
currently $ 14 trillion. It is likely to rise to at least $20 trillion
in the next few years and probably a lot higher. The interest cost for
the US government at that stage is likely to be at least double the tax
revenue. One would assume that the US government is well aware of what
their ruinous actions are leading to. But in spite of this, they
continue to increase the deficit by reducing fiscal revenues and
increasing spending. What planet are they living on!  What is absolutely
self-evident is that they will not clear up their own mess, as the
present government will be a one term wonder!

Currencies Declining

Since 1971, the value of the US dollar (paper money) has gone down
97.5% against real money (gold). Since Nixon abolished gold backing of
the US dollar in 1971, both the dollar and most other currencies have
been totally destroyed by reckless government. Nixon should not have
been impeached for Watergate. Instead he should have been prosecuted and
jailed for destroying the world’s currency system. Concurrently,
banking developed into a fractal system whereby banks could lend massive
multiples of their deposits and capital. All of this has served to
drive up asset prices to totally unsustainable levels.

All currencies are declining against gold but some faster than
others. The US dollar for example is down 78% against the Swiss Francs
since 1972. During the same period the pound has declined a massive 85% against the Swiss Franc.
Both the dollar and the pound are now at all-time lows against the
Swiss currency. But the Swissy is only strong relative to weak paper
currencies because against real money/gold the Swiss Franc has declined
87% since 1972.

DOLLAR DECLINE WILL ACCELERATE IN 2011

As a consequence of accelerated money printing, all paper currencies
will fall precipitously against gold in the next few years. Therefore
all paper money should be avoided and especially the Dollar, the Pound
and the Euro.

Precious Metals to reach unthinkable heights

Gold has gone up 40 times against the Dollar in the last 40 years and
almost 6 times in the last 11 years. Very few investors have
participated in this rise since the 1999 low at $ 250. Less than 1% of world financial assets are invested in gold and gold stocks. Between 1920 and 1980 circa 25% of financial assets were invested in gold and gold stocks.

THERE WILL NOT BE ENOUGH GOLD

The major rise in gold in the last 11 years has been a stealth move
with very few investors participating. The dilemma is that there is not
enough gold to satisfy the coming increase in demand. We have in
previous articles forecasted the gold price to reach anywhere between $
6,000 and $ 10,000 in the next few years – see “Gold entering a virtuous circle”. As we explained at the time, these are totally realistic targets without the effect of hyperinflation.

GOLD WILL SURGE IN 2011

Bearing in mind that we are likely to see hyperinflation in the US,
the UK and many European countries, the $6-10,000 target for gold is
much too low. The dilemma is that it is absolutely impossible to predict
how much money will be printed by governments. In the Weimar republic
gold reached DM 100 trillion. But it is really irrelevant what level
gold and other precious metals will reach in hyperinflationary money.

What is much more important to understand is that physical gold
(and silver) will protect investors against losing virtually 100% of the
purchasing power of their money. Whatever real capital appreciation
gold will have in the next few years is of less importance. But what is
vital, is that physical gold (stored outside the banking system) is the
ultimate form of wealth protection both against a deflationary collapse
and a hyperinflationary destruction of paper money.

Throughout history gold has protected investors against various
calamities but this time, holding physical gold will be absolutely
critical to financial survival.

31st December

Gold Switzerland - Matterhorn Asset Management

 


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Fri, 12/31/2010 - 08:07 | Link to Comment StychoKiller
StychoKiller's picture

Gold and Gold mining shares in % of global assets is currently low because there's so much (purportedly) other assets in the measurement, most of it paper in nature.  A lot of so-called wealthy folks are gonna find out the hard way that paper is only worth around $85/ton, no matter how much pretty ink or authoritative "promises" are on the paper(s)!

Fri, 12/31/2010 - 13:03 | Link to Comment UGrev
UGrev's picture

-" no matter how much pretty ink or authoritative "promises" are on the paper(s)!"

..love it :)

Fri, 12/31/2010 - 14:07 | Link to Comment SRV - ES339
SRV - ES339's picture

Good point SK... the explosion of derivatives to be sure.

IMHO, the miners underperform because they trade with a Comex paper bias, and reflect the games played with paper through the trading day. The "bullion" after hours trading ia a truer value of the metals, as the Comex banksters have crawled back in their caves by then... over time, this will correct.

Fri, 12/31/2010 - 08:09 | Link to Comment bronzie
bronzie's picture

from Richard Russell:

"Dear Friends,

December 27, 2010 — I have posted below the year-end price of gold starting with the year 2000, the first up-year of one of the greatest and least appreciated bull markets in history. Take in this series, you may never see it like again.

2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438.40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — $889.00
2009 — $1118.40
2010 — ?

I’ve been around a long time, and I’ve studied many primary bull markets. And now I want to venture a few of my observations.

In markets, I have never seen a series like the above end with a whimper or a fizzle. The end or the wind-up of such a series usually arrives with an upside "explosion," as those who have failed to participate in the series finally rush in to join in the apparent endless advance. This is the wild and wooly speculative phase of a great bull market. Big bull markets don’t end with a sigh, they end in exhaustion.

(1) Most great primary bull markets last longer and carry farther than the majority of investors (even the bulls) expect.

(2) A great primary bull market is an expression of something changing in a very fundamental and meaningful way. Following a great bull market, the world is never quite the same."

~

what Richard is saying is that, yes, gold is going vertical - it happens in every financial bull market and gold will be no different

Richard also makes this point about bull markets: they have three phases - phase I is when the smart money gets in - phase II is when the institutional money gets in - phase III (he calls it the 'speculative phase' above) is when the man-on-the-street finally recognizes the "new" bull market and gets in

we are in phase II now and phase III is somewhere in front of us

and, as Richard says, "There is no fever like gold fever!"

~

"A great primary bull market is an expression of something changing in a very fundamental and meaningful way. Following a great bull market, the world is never quite the same."

what's changing IMO is that fiat currencies are dying

Fri, 12/31/2010 - 08:31 | Link to Comment LeBalance
LeBalance's picture

That is certainly one perspective, but after the money printing and the destruction of the purchasing power of the fiat currencies, exactly how will the "worthless paper" relate in a meaningful way to gold?  It will not and therefore the financial system will need to be recapitalized with respect to an asset or asset class in which there is confidence, namely gold (FOFOA).

Richard is viewing the "gold bull" from the perspective of an asset.  Certainly it can be viewed from that perspective.

But I believe (as do others or should I say Anothers? :) ) that gold is changing its role in the financial system.  And its price in dollars?  Euro?  Yen?  There will not be one as these currencies will fail as you say.

So to reiterate Richard Russel is barking up the "investment wall of worry" and although that appears to be what gold is about, the larger financial system breakdown and its relationship to the "price" or "non-price" of gold is very very different from that perspective.

Fri, 12/31/2010 - 08:58 | Link to Comment bronzie
bronzie's picture

yes, Richard is viewing gold as a financial asset category and applying his 50 years of market knowledge to make projections as to how that asset category is likely to perform in the future

he is also hinting that there is a bigger picture to be aware of when he says, "A great primary bull market is an expression of something changing in a very fundamental and meaningful way."

this bigger picture, the fundamental change, is what you are referring to - ie, the current system is dying and will have to be replaced with something else

Fri, 12/31/2010 - 13:15 | Link to Comment Sean7k
Sean7k's picture

Couldn't agree more and this point fails to be made. People will consider selling their gold and silver at a "market top". Unfortunately, when currencies collapse, they are created new and the new currency is revalued in gold or silver. 

All the old currency in the world will yield you little in value or the new currency. This is why gold and silver are not available at "any price" when hyperinflation begins. (see zimbabwe) Weimer coins changed from silver to zinc to lead. Gresham's law takes over.

When all the major global currencies are going ponzi, there will be no other means of making an exchange than by a gold or silver backed currency. Trade will continue, but will you have anything to exchange?

Fri, 12/31/2010 - 14:50 | Link to Comment SRV - ES339
SRV - ES339's picture

This is why gold and silver are not available at "any price" when hyperinflation begins

Looks like Ag is starting down that road... I invested in the new Sprott Silver Bullion Trust a month ago and the it's appreciating in multiples of spot recently (Ag: up 1.5%  Trust: up 3.85% today)... very interesting.

Fri, 12/31/2010 - 08:56 | Link to Comment Z
Z's picture

Dammit! I knew I should have bought gold when I was 15. :/

By the way, anybody figure out a sequence formula for Gold in USD?

Fri, 12/31/2010 - 09:01 | Link to Comment bronzie
bronzie's picture

not sure about sequence formula but Jim Sinclair uses french curves to plot parabolic moves in the financial markets

Fri, 12/31/2010 - 12:08 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

Parabolic or hyperbolic ? - will it leave this solar system ?

Fri, 12/31/2010 - 12:10 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Slingshot around the sun.

Mon, 01/03/2011 - 02:46 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Slingshot around the sun.

I'm hoping it will travel back in time and into my underwear drawer in 1981

Fri, 12/31/2010 - 10:25 | Link to Comment antidisestablis...
antidisestablishmentarianismishness's picture

Is this the same Richard Russell who said back in May 2010, "Do your friends a favor, tell them to batten down the hatches because there's a hard rain coming....sell anything they can sell in order to get liquid....because by the end of this year they won't recognize the country."

Fri, 12/31/2010 - 13:05 | Link to Comment pslater
pslater's picture

Mr. Russell has highlighted one of the biggest problems in investing: while his (your) analysis and conclusions may be spot on, WHEN they will prove to be correct is far more difficult.  To be sure, the Fed and the other CB's are formidable adversaries committed to maintaining the status quo.  The problem is as noted above "yup, the math always wins."  The game will continue until it doesn't.

 

In one respect Mr. Russell is right - at the end of this year, I hardly recognize this country.

Fri, 12/31/2010 - 13:28 | Link to Comment I think I need ...
I think I need to buy a gun's picture

yes he is only several months off

Fri, 12/31/2010 - 15:01 | Link to Comment chumbawamba
chumbawamba's picture

There's still 13 hours to go from where I sit.

Downtown Manhattan went from recognizable at 8:46am on 2001-09-11 to unrecognizable by 10:29am.

I am Chumbawamba.

Fri, 12/31/2010 - 19:17 | Link to Comment Confuchius
Confuchius's picture

Chumba;

Happy new year!

 

Amazing what a few tons of nano-thermate can do when the building's security is "taken care of" by the president's brother. At least up to the day of the demolition / coup.

 

!00+ assasinated each &  every day on the highways, zero EVER harmed in aircraft, but any air travellers must now be treated like prisoners headed for the gulag...

"Winston Smith"

 

Fri, 12/31/2010 - 17:08 | Link to Comment RockyRacoon
RockyRacoon's picture

It's the end of this year -- and I don't recognize this country.

I guess he was spot on.  It's only a matter of degree.

Fri, 12/31/2010 - 13:23 | Link to Comment trav7777
trav7777's picture

ok, for the zillionth time, Gold production peaked in 2001.

Why the fuck does everyone look at EVERY "dollar price" as if it HAS to end up in a fucking parabolic bubble??

It's like these idiots WANT to drive mania so they can get a bubble

Fri, 12/31/2010 - 17:09 | Link to Comment RockyRacoon
RockyRacoon's picture

We at the verge of peak champagne!   Cheers!

Fri, 12/31/2010 - 19:21 | Link to Comment Confuchius
Confuchius's picture

Trav;

We really have very little idea when / if Gold "production" peaked. I f it has.

 

Gold's value never changes.

Only the quantity of worthless paper it takes to acquire it changes.

Fri, 12/31/2010 - 14:36 | Link to Comment mikhail kalashnikov
mikhail kalashnikov's picture

When made into hand chart form against Weimar Germany gold prices,

we appear to be at about february, 1922.

Remember that steel,brass,lead and copper are precious metals,too.

And don't forget tin.

Fri, 12/31/2010 - 08:09 | Link to Comment alexwest
alexwest's picture

good... most worring that despite  gov revenues stop falling

and grow a bit 2-3% y/y,, outlays still up and more than

reveneus.. so US stuck w/  1.5-1.7 trln per annum. deficit..

well  2-3 years and  rates will spike up,, then complete collapse  and chaos .. I doubt there will be next president elections in USA

most likey CIA/ARMY/FBI will shut down  gov/mass media/ useless parlament and install some kind of military regime...

take my word   on that

alx

 

 

Fri, 12/31/2010 - 08:10 | Link to Comment bronzie
bronzie's picture

from Jim Willie: "The Gold bull will continue as long as the cost of money is negative."

this is an important concept to understand for determining when it might be time to move back out of silver and gold

Google "negative real interest rates" and read some of the stuff you will find

the idea, as I understand it, is that "real" interest rates are the difference between the Fed's stated interest rates and inflation - right now stated interest rates are close to zero while actual inflation is about 6% (use John Williams' inflation numbers from shadowstats.com not the BS numbers published by govt) - that gives us a negative real interest rate of over 5%

to get back to positive real interest rates the Fed interest rate would have to be 6% or more - before you say that can't or won't happen, remember that Volker raised interest rates to 21.5% in 1981 which was one of the factors that stopped the gold bull market of that time

bottom line: until we get back to positive real interest rates, gold and silver will be the asset category to own

Fri, 12/31/2010 - 08:38 | Link to Comment Azannoth
Azannoth's picture

They can't raise rates without blowing up the system, it's impossible

Fri, 12/31/2010 - 12:05 | Link to Comment tmosley
tmosley's picture

Yup, the math always wins.  If our interest rate went to 6%, interest on the national debt would consume more dollars than the Federal Government takes in taxes.  Might be twice as much or more.  

Also remember that gold and silver went parabolic in a high interest rate environment.  Raising rates to that level won't stop the rising prices, it would just turn it from a fundamentals driven rally into a bubble.

Fri, 12/31/2010 - 17:58 | Link to Comment TheGoodDoctor
TheGoodDoctor's picture

Exactly Azannoth. This time it is different. If they do, it is game over. No way we can pay that debt off. If interest rates go that high isn't hyperinflation a guarantee? They will lie about the inflation numbers anyway - which will be higher than any interest rate paid. My guess is that is when the money at the banks (they aren't borrowing out) makes it out into the economy is when this inflation will hit. I may be wrong but overall it's end game. Willing to hear other scenarios.

How did this play out with Weimar? With interest rates?

Fri, 12/31/2010 - 08:10 | Link to Comment bronzie
bronzie's picture

Google "gold deep storage"

there has been some interesting changes in the verbiage that is used to categorize the US supply of gold

some people suspect that the 8000 tons of above-ground gold have been sold/leased/stolen and replaced with "deep storage" gold meaning gold that has yet to be mined

Fri, 12/31/2010 - 13:32 | Link to Comment trav7777
trav7777's picture

yes.  there is some evidence that sovereigns, whenever in possession of market-moving amounts of a commodity, have sold into a tightening market to attenuate price moves to the upside.

This is at least provably true in the case of Helium (USA), which peaked earlier this decade while the US was selling strategic Helium reserves into the market.  It's also true of Palladium, for which Russia holds significant stockpiles and has been selling them into the market.

This latter trend might be why Palladium trades for less than Platinum does, despite rough parity in terms of yearly ounces mined and the ability to substitute one for the other in catalytic applications.

It seems that in every case there have been large sovereign stockpiles, for whatever reason, these were sold into the market to attenuate upside price moves or to make up for sudden supply deficits caused by peak-related shortfalls or else plateauing of production curves.

Fri, 12/31/2010 - 08:20 | Link to Comment LeBalance
LeBalance's picture

Very well put.

I only have super minor quibbles:

(1) Governments are not "clueless" as to what they are doing.  They are expertly run by men and women at higher levels of their organizations who know exactly what they are doing.

It is a matter of dispassionate viewpoint and the appropriate quote from the King James bible is: "Forgive them for they know not what they do."  That is the perspective that prevails today, due to that programming.  The pre-King James biblical quote (the same line) was: "Do not forgive them, for they know exactly what they do."

Nicht wahr? (you get it right?)

(2) Richard Nixon certainly is getting saddled with a great deal of responsibility for stuff that happened while he was president.  Well being as he was a "protege" of Prescott Bush and a made man of the Oligarchy that certainly puts the nickname "Tricky Dick" in a new light.  I wonder how he performed in the Tomb of the Skull and Bone(r)s?  Tricky was just following orders.  Sieg Heil!

Fri, 12/31/2010 - 12:04 | Link to Comment 2028
2028's picture

This is pretty much the gospel. The next 10 years they will consolidate all currencies into one. Chances are it will not be paper. During this time yes Gold and Silver will soar against the failing paper currencies.  The powers behind the scenes put people like Bernacke out there to do their bidding and Bernacke is the shit magnet and nothing touches them. All countries will fall for their plan except maybe China with a 200 million man army. Again this is gospel. This new currency will be the only way you will be able to buy or sell. If you try to barter with anything else it will be under penalty of death if caught. So yes thru this time we can keep our buying power thru the metal. But when it becomes a police state and you realize that barter is too dangerous as with people betraying each other and rewards given for turning in people. You will be given the nice option to convert into their world currency. Probably not a favorable rate. This is when if you look to any organized church (Vatican and her daughters) on the planet they will guide you to convert.

This will be interesting times but will you have the spirtual strength to walk away from all this wealth you built up not to convert. You can still be spiritualy lost without converting but converting only cements it.

Spend some time getting ready spiritually also. That will be the real survival tool to get you thru this and come out on the proper side of eternity.

Fri, 12/31/2010 - 12:21 | Link to Comment Smu the Wonderhorse
Smu the Wonderhorse's picture

Sounds about right to me.  I think Russia will be the holdout.  She is the great villain on the stage in the minds of the Western globalizers and not without reason.

Orthodox Christianity: accept no substitutes.  http://www.orthodoxinfo.com .

Fri, 12/31/2010 - 12:36 | Link to Comment 2028
2028's picture

Mother of harlots: http://www.vaticanassassins.org/

 

Fri, 12/31/2010 - 13:33 | Link to Comment trav7777
trav7777's picture

horseshit.  Our government is CHOCK FULL of diversity hires who have no fucking clue whatsoever.

Fri, 12/31/2010 - 14:29 | Link to Comment Thanatos
Thanatos's picture

Its worse.

They think they have a clue and are willing to act on it.

Extreme FAIL is in our future.

Fri, 12/31/2010 - 14:38 | Link to Comment mikhail kalashnikov
mikhail kalashnikov's picture

Trav, I think our gubmint is full of Mossad agents, and this is exactly the plan.

The United States government stopped acting in the intrests of the citizens a long time ago, and the actions taken have consistently benefited one country, and it isn't ours.

 

Fri, 12/31/2010 - 08:31 | Link to Comment hamurobby
hamurobby's picture

Doesnt everyone realise that Ben is smarter than those other guys in history who created money? He is putting it in a different pocket so it wont create hyperinflation.

Fri, 12/31/2010 - 08:37 | Link to Comment LeBalance
LeBalance's picture

Bilbo sez: "What has I got in my pocket?"

"It was My Precious! You stole My Precious!"

Hamurobby, BB just prestoed more than $2T in the last year and you say its in a pocket that is isolated from investor eyes and market confidence?  These are the forces that cause political moves like hyperinflation.  Maybe you need to define exactly what you are talking about: "this isolated pocket."

Fri, 12/31/2010 - 08:56 | Link to Comment hamurobby
hamurobby's picture

Sorry, I really was being sarcastic. Ben would like to believe that the market does not see his 2T as money printing, time will tell.

You should hear my gollum impression every time I get another gold coin.

Fri, 12/31/2010 - 08:56 | Link to Comment LeBalance
LeBalance's picture

Thought you might be /sarcing/ but I couldn't hear the sound of your voice.

:)

Fri, 12/31/2010 - 08:35 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Silver is missing from the roundup. Is Matterhorn assuming an implied correlation between gold and silver?

Silver, the new gold.

ORI

http://aadivaahan.wordpress.com

Fri, 12/31/2010 - 08:41 | Link to Comment Gaston
Gaston's picture

I'm a much bigger fan of silver then gold at this stage, I expect silver to outpreform all other PM's..... so much data supporting silver, historical silver to gold ratios, Industrial demand, JP Morgan short squeeze etc... But more or less, for the price of 2 ounces of small gold coins/bars, one can buy a brick of silver...

Fri, 12/31/2010 - 09:00 | Link to Comment TLT
TLT's picture

Silver US$30.70.

Fri, 12/31/2010 - 09:22 | Link to Comment espirit
espirit's picture

Get it while you can, as the U.S. Mint appears to be experiencing a continued shortage of silver blanks for Eagles.

Demand has finally exceeded supply, perhaps indefinitely.

http://catalog.usmint.gov/webapp/wcs/stores/servlet/CategoryDisplay?cata...

Fri, 12/31/2010 - 13:36 | Link to Comment trav7777
trav7777's picture

As Russia winds down its reserve stockpiles of Pd, it should, based upon industrial usage and production levels, achieve rough price parity with platinum.

Compared to gold, Pd and Pt would appear to be severely undervalued.

Fri, 12/31/2010 - 17:21 | Link to Comment RockyRacoon
RockyRacoon's picture

Silver is a market or fiat money play, whereas, gold is money.  Silver will look better and better as time goes on, but only gold will save one's bacon in the long run.   I am in NO way saying not to do the silver tango, but don't get left holding a ton (literally) of it when the music stops.   Cash in all your profits for real money, gold, at every opportunity.   I do buy and sell enough silver to know the tricks and traps of the coin markets, but I always try to keep my head above the clouds when up to my furry ass in Morgan dollars.

Sat, 01/01/2011 - 00:14 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Thanks for the advice Rocky. 

Long long term, I can see what you are saying.

Best for this new year.

ORI

Fri, 12/31/2010 - 08:37 | Link to Comment Gaston
Gaston's picture

Last trading day of the year, Silver and Gold will end the year with a bang... DXY (dollar index) has taken a massive beating the last few days. I'm bullish on the dollar for the short term, but if we break below 78.50 its likely the downtrend resumes... Watch for silver and gold to break their highs for the year....

Fri, 12/31/2010 - 08:52 | Link to Comment Liars Poker
Liars Poker's picture

I agree. I think they are headed much much higher. No one has a reason to sell.

 

www.nacocapital.com

Fri, 12/31/2010 - 09:16 | Link to Comment margaris
margaris's picture

PM traders do. I mean those guys who bought tons of silver when it was 5$.

They are happy to sell small amounts of it now at 6x the price.

 

They are selling gold and silver to me and you at this moment.

Fri, 12/31/2010 - 10:36 | Link to Comment bobert
bobert's picture

True, however, I regret having sold @ $1k oz., and may

regret having sold now when it's $5k.

Sun, 01/02/2011 - 02:27 | Link to Comment margaris
margaris's picture

Dont forget to buy a metric ton of copper, tin, lead, zinc, nickel etc. while you're at it!

I know I will sell gold when I can buy enough farm land with it. And livestock!

 

Fri, 12/31/2010 - 09:01 | Link to Comment Mark Medinnus
Mark Medinnus's picture

This article is an elaborate eleventh-hour rehash.  Yawn.

Fri, 12/31/2010 - 15:45 | Link to Comment Mark Medinnus
Mark Medinnus's picture

Failure of imagination: only seven junkies?  (with my nose flute sturm und goop melange)

Fri, 12/31/2010 - 08:59 | Link to Comment yabs
yabs's picture

I am beginning to believe in the hyperinflation outcome as well

It really is the trillion dollar question and its why Bernanke needs to be shot

If masrkets were left alone obviously cash would be king but now

iyts very difficult to see the final outcome

I thought we would get an other deflationary burst like 2008, and then the printing to Weimar

but now I ma not so sure

Cash may notbe King but rather the pauper from here on.

But do you choose to put cash into gold which is the most manipulated market on earth

or stocks which is a giant casino

wihtout insider info everyone really is f*cked

Fri, 12/31/2010 - 09:02 | Link to Comment TLT
TLT's picture

I don't believe in hyperinflation of the dollar.

Simply because if it happens, this will be the collapse of world commerce. Countries will be unable to trade. It'll be complete caos.

It's a lot easier to replace with a new currency, for example.

Fri, 12/31/2010 - 11:14 | Link to Comment toto
toto's picture

Α new currency will not extinguish the debt of each country.

What we see in the price of gold , is the simultaneous hyperinflation of all currencies in the world.

Fri, 12/31/2010 - 11:22 | Link to Comment JimmyTheHand
JimmyTheHand's picture

Just wanted to point out that China and Russia have already stopped trading (with each other) using the dollar.

Fri, 12/31/2010 - 14:16 | Link to Comment Thanatos
Thanatos's picture

...this will be the collapse of world commerce. Countries will be unable to trade. It'll be complete chaos.

Exactly.

Take a look into the crystal ball known as Juarez Mexico for clues to your future.

What you see there is a government that is impotent from imbibing too much corruption. It still has a functioning mouthpiece, it still has a functioning Army, Navy, Parliament... It has the ability to come and tax businesses (although it can't protect them), it has the ability to set up checkpoints and shake down everyone who rolls in...

What it doesn't have is Consent of the Governed in large areas of it's Sovereign lands.

When this happens, strong men move in to provide structure (nature abhors a vacuum)... That structure has resulted in what you can see there today. The economics of a place where there isn't any work but "service" work... Services like smuggling, kidnapping, assassination, extortion, arson, and just plain 'ol massacring innocents...

There isn't any law there... There have been 92 prosecutions for 6000 murders. Half of them walked.

Keep in mind that this is all occurring while HSBC branch offices are open and doing business as usual on the other side of a thin wall from the streets where headless bodies are dumped daily. Mexico City stock and commodities markets are operating as usual... Pemex is still pipe-lining oil... Sometimes...

The point is that it takes a while for entire countries to loose grip... Regions of countries tend to go "off the reservation" before the entire country follows...

Keep an eye out for this... It is already happening in parts of the Southwest US. Phoenix, AZ is 2nd highest on the list of kidnappings in the WORLD.

California and Arizona are looking like Prime Candidates for this type of decay into anarchy scenario... Hyperinflation will hasten the arrival of it.

We will fall in strata... Those who have the least cushion will be the first into the cold water... Once they realize the gravity of their situation, they will accelerate the fall of the strata above them (even unintentionally) as they fight to stay relevant and alive. Once enough of the lower strata go "into the water" (I just thought of that Cousteu song...) the US will look just like Mexico... Super Rich, Wealthy, Poor. That is going to cause a little friction.

2011... The year we had to admit something was bad broken... Because it was punching us in the back of the head.

Fri, 12/31/2010 - 17:28 | Link to Comment RockyRacoon
RockyRacoon's picture

Good stuff.  We are the frogs and the water is getting incrementally hotter. 

I see some doubters about the hyperinflationary scenario above, and I draw their attention to the commonly accepted axiom that inflation benefits those who get their grubby,thieving hands on the money first.   Can you say "Wall Street" and "Bankers"?

Things are going according the the Grand Plan.  In the old days of the Barbarians there was much bloodshed to accompany the looting.  Today it is done in more "civil" ways.  Hell, we even package it up nicely and hand it to them willingly.

Sat, 01/01/2011 - 03:52 | Link to Comment honestann
honestann's picture

Countries will be unable to trade.  It will be complete chaos.

NO.  They will simply say "all future payments must be gold".

Fri, 12/31/2010 - 08:59 | Link to Comment mogul rider
mogul rider's picture

I loved "The Greenspan" and made gobbles of cash which I converted to my Precious.

I adore "The Bernank" because he's bubbling the world and I'm making even more cash which I immediately convert to my Precious.

In the end, would you rather have 2% growth every year and a 7% return on your investments? Or would youy like to be up 200-300% every year and convert your winnings to the only thing worth anything?

 

The answer is simple -

 

To the observant these are the greatest wealth creating times in the last 80 years.

To the 100 inch TV in every room crowd - it's boxing day sales.

Your choice my friends

Happy New Year may you and your family prosper

Fri, 12/31/2010 - 09:08 | Link to Comment margaris
margaris's picture

Amen!

(I am not religious, but I believe in gold/silver)

Fri, 12/31/2010 - 09:36 | Link to Comment Silverhog
Silverhog's picture

All in well, but I believe Silver will once again outperform Gold for 2011. It's returning monetary status has blind sided the ever growing industrial users. Going to be a wild ride this coming year.

Fri, 12/31/2010 - 18:42 | Link to Comment Armchair Bear
Armchair Bear's picture

A New Year's Toast:

Hi-Yo Silver!  Away!

I agree - a wild ride is coming, on many fronts.  The silver ride will be a great one for those holding physical...

And a great disappointment for those not.

Fri, 12/31/2010 - 09:43 | Link to Comment Chartist
Chartist's picture

This is turning into a real shit sandwich.  Between the US and Europe's debt level, there doesn't seem to be an alternative to printing money to pay it off.  And we should probably get it over with soon while China is still not sustainable and therefore won't be in a position to bitch much.

Fri, 12/31/2010 - 09:52 | Link to Comment apberusdisvet
apberusdisvet's picture

 

The problem with the ultimate doom scenarios, even though they are quite possible, is that some asshole in NK or Pakistan feeling that their country has nothing to lose will start throwing nukes around.

Fri, 12/31/2010 - 15:07 | Link to Comment Thanatos
Thanatos's picture

Nukes.. It takes 1 powerful one or 3 small ones to slap North America back to the Iron Age.

Or a specifically designed EMP weapon that doesn't use Nukes and these are fairly cheap and easy.

Even a hot nuke war is not an "Ultimate Doom" scenario though. Books didn't unwrite themselves etc...

Something big like NEO impact, supervolcano, etc... That is Human Doomsday.

Barring a big 'un, we will scurry round on this rock for a long time.

Maybe not your typical N. American... But some natives somewhere, who never adopted modern life will just go on living as if nothing happened.

Fri, 12/31/2010 - 09:54 | Link to Comment fiftybagger
fiftybagger's picture

The Silver Bubble Debunked

http://www.youtube.com/watch?v=3lVCtIiMveE

Fri, 12/31/2010 - 09:59 | Link to Comment pgarner
pgarner's picture

Egon von Greyerz rocks. He publishes on an approximately quarterly basis, & is a worthy oracle. Thanks, ZH, for running this---

Fri, 12/31/2010 - 10:03 | Link to Comment Nozza
Nozza's picture

"Throughout history gold has protected investors against various calamities but this time, holding physical gold will be absolutely critical to financial survival."

As ONJ recommended back in the 80’s “Let’s get into physical”

http://www.youtube.com/watch?v=VQXECBdPgEA

HNY to all – and thanks for an interesting ride

Noz (Unlurking)

Fri, 12/31/2010 - 10:24 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Egon is da Man !

Fri, 12/31/2010 - 10:26 | Link to Comment Ignatius
Ignatius's picture

"The road will seem so straight and fair to travel, that you will kick yourself for stumbling through the brambles for so long, and wonder at your neighbors who still can't see the path, though it is truly a freeway." (Aristotle -- no, the other -- courtesy of FOFOA)

Fri, 12/31/2010 - 11:44 | Link to Comment SilverRhino
SilverRhino's picture

It's been a wild ride in silver this year.   Next year will be even better.   Those 10 year data series from Bronzie above make for a VERY interesting chart.

 

2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438.40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — $889.00
2009 — $1118.40
2010 ~ 1425.00

 

Fri, 12/31/2010 - 12:52 | Link to Comment Saxxon
Saxxon's picture

Hyperinflation is for countries in extremis; Weimar German in the ashes of World War One or Zimbabwe with its complete breakdown of whatever sense of management it ever had; as well as banishment of any of those who could manage it.

The U.S. has enough power not to go the hyperinflation route. We are a democracy and not paying, say, war reparations.  Conditions are different.  We are not isolated in this predicament.

If instead of a spike to $5,000 we continue to see a steady incrementing of say 10 per cent appreciation in PMs per year, I will be satisfied I have done what I could to prepare.

But the mother-of-all spikes is certainly possible and the odds in its favor have grown; therefore one wants to be in a position in case that happens.  The great majority of U.S. citizens around me are unaware of the spot prices and own no bullion; nay, they are continuing unfortunately to be forced to sell exactly that which they should own.

I think the State/Muni thing is the biggest bear in the room; followed closely by the incrementing retirement debacle.  I expect Au to clear $5,000 in ten years without even coming to a boil.  That's a triple from here, 30% a year.  And this while other asset prices fall or stagnate.

There is no way out for Ben and the rest.  All they can do is try to manage it. There is not the political will to do the right thing, since by doing right they will be thrown out of office and power over people is their ultimate goal.

Best wishes for a Happy and Prosperous New Year.

Fri, 12/31/2010 - 14:35 | Link to Comment Thanatos
Thanatos's picture

Nice call.

Its like Hospice care for our Country. Managed decent into quiet darkness.

Fri, 12/31/2010 - 19:46 | Link to Comment penisouraus erecti
penisouraus erecti's picture

Also, since USD's are the world reserve currency, that makes the difference from Weimar and Zimbabwe even greater, though there are certainly many parallels. If somehow the USD were to be replaced by some other currency(ies) couldn't that lead to a SHTF scenario? Don't really see that happening though, does anyone see that happening?

Fri, 12/31/2010 - 12:41 | Link to Comment cramers_tears
cramers_tears's picture

What do you do when they come for your PM's?  I heard the guy say bury it at least 4' deep and spread BB's all around. 

From John T Reed... On April 5, 1933, about a month after he was inaugurated, by Executive Order 6102, President Franklin Roosevelt outlawed possession of circulating gold coins, gold bullion, or gold certificates. The order directed all U.S. residents to turn in such gold to the nearest Federal Reserve Bank by May 1, 1933. Failure to comply with this order was a criminal, not civil, offense carrying a prison sentence of up to ten years and or a fine of $10,000 ($168,000 in 2010 dollars). The gold was not confiscated as is often alleged. Rather, the government ordered residents to sell it to them for $20.67 an ounce which was below market. So they did steal the difference between $20.67 and the market price.

Was that law unconstitutional? Absolutely. But the U.S. Supreme Court said otherwise, probably because they were afraid of FDR’s popularity.

Can the U.S. government force a citizen to open their safe deposit box? As I understand the law, they can under certain extremely narrow circumstances.

Fri, 12/31/2010 - 12:46 | Link to Comment Saxxon
Saxxon's picture

Buy it off the books if you are worried about confiscation.  If we get to that point the govt. won't have the manpower or will to execute anything more than a law on paper.  If we get to that point the econ will be underground anyway.

Sat, 01/01/2011 - 03:48 | Link to Comment honestann
honestann's picture

If they ever show up asking for your gold, tell them you gradually spent most of it, and SOLD the rest for cash to strangers.  They have no way to disprove this.  Just make sure you hid it well.

And listen up, all potential morons.  Do not give them your gold!

Fri, 12/31/2010 - 12:56 | Link to Comment merehuman
merehuman's picture

But   what idiot would trust a bank at this point? Safe deposit boxes in a time of likely bank holidays? No way.

Happy New Year!

Fri, 12/31/2010 - 13:44 | Link to Comment MrBoompi
MrBoompi's picture

There will always be enough gold to be a monetary standard.  On this issue I agree with Ron Paul.

Fri, 12/31/2010 - 14:29 | Link to Comment Jerry Maguire
Jerry Maguire's picture

The commenter that pointed out the difference between places like Weimar Germany and Zimbabwe, on the one hand, and US and international elite cartels on the other, was insightful. 

The story at present and for the foreseeable future is mild deflation, not inflation.  Paradoxically, deflation could result in hyper-inflation eventually, depending on political developments.

But our rulers are smart.  You have to hand them that.  They can change the currency, for which the Euro was a test case, and redistribute debt that way.  Leading up to that they can produce austerity:  just shy of the civil unrest threshhold.

This is what Bernanke is doing.  It actually isn't that difficult, you just slow things down so that the bulk of people can't discern cause and effect. 

The Fed is tightening, not loosening.  It is inflicting economic pain not out of mindless cruelty but because that is necessary to restore the system down the line.  If they see an inevitable collapse on the horizon they will move into a new currency, and the confusion will suppress any impetus towards rebellion or civil unrest. 

We are in uncharted territory, and the only way I can understand it is to understand monetary theory and central banking on its own terms, as best I can.

People may find these musings helpful:

http://strikelawyer.wordpress.com/2010/12/30/inflation-deflation-debt/

http://strikelawyer.wordpress.com/2010/12/08/money/

http://strikelawyer.wordpress.com/2010/12/11/money-ii/

 

Fri, 12/31/2010 - 17:45 | Link to Comment anonnn
anonnn's picture

...Sixthly:

 

"Economics", as taught in America, is only half-truths, and thus a lie, bec it deliberately omits a vital datum...

Namely, there must be a working justice system to monitor and regulate unfair dealing  [e.g. fraud, lies, lack of transparency, etc]. This is not taught. It is ignored.

 Otherwise, crims rise to the top of all control points.  Now look around and observe that truth.

It is not complicated.

Fine article, Matterhorn!

 

 

Fri, 12/31/2010 - 23:59 | Link to Comment essence
essence's picture

I see a few posters getting it... but most are too busy doing high fives
at the rise in PMs.

The PowersThatBe are already way ahead of you.
Just last night I read a story about how US border patrol is inspecting
OUTBOUND cars at the US/Mex border looking for cash and PMs.

The US is moving to a orwellian police state where your every transaction is monitored.

Think you'll just barter your gold... the gov will pay rewards for informers
to rat you out. There are/will be laws that all transactions have to be reported.

The gov is herding everyone into electronic money so as to prevent
an escape via cash transactions.

 

This is serious shit.
The US is becoming something unrecognizable.

Sorry to be a downer on NewYears eve.... but being aware is a step
along the path of being prepared.

 

 

Sat, 01/01/2011 - 03:39 | Link to Comment honestann
honestann's picture

Which is simple proof that americans hate themselves.

Anyone with half a brain and any shred of self-respect has already left the USSA, or is planning to leave in 2011.  Even now we must plan carefully to leave this hell hole.  By 2012, it will be impractical to take anything with you, or sneak anything out.

LEAVE NOW... or you will be very, very, very, very, sorry.

Sat, 01/01/2011 - 23:34 | Link to Comment dizzyfingers
dizzyfingers's picture

Too late. The loopholes are closed. Can't take anything, have to pay to get out.

Sun, 01/02/2011 - 04:27 | Link to Comment honestann
honestann's picture

Not true.  Many "loopholes" still work.  For example, avoid the airlines and take a cruise from LA or NY or your favorite large coastal city... to Mexico, Panama, Ecuador, Peru, Chile, Brazil, take-your-pick.  Sure, you pay for the "round trip", but when you fail to return to the ship after a stop in <name-your-city>... you are "outta here".  And they don't have TSA molesting people when they get on cruise ships... YET.  And you can still hire a private plane/yacht/other to haul your butt outta here.

But 2011 is your last chance folks, unless you resort to serious measures (way more "serious" than 99.9% of the pablum-people who inhabit the USSA are willing to take).

Sat, 01/01/2011 - 23:38 | Link to Comment dizzyfingers
dizzyfingers's picture

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