As has been stated here several times(almost daily) ALL countries and ALL states will be BAILED OUT. This WILL cause MASSIVE INFLATION. The ONLY way to protect your wealth is to purchase PRECIOUS METALS you can hold in your hands.





Europe Agrees on $40 Billion Emergency Aid Plan for Greece
Euro zone finance ministers approved a $40.12 billion emergency aid mechanism for debt-plagued Greece on Sunday but stressed Greece had not requested the plan be activated yet.





Spain, Italy, and Portugal are next to be bailed out... California and 39 other States are right behind them...





What he means is...we will print money till we run out of trees...

Government stimuli like ‘narcotics’ for economy, Marta says





Is Platinum the New Gold?





Do you hear any of this reported by the main stream media?

William Endahl: US Economy Will Not Recover for at Least 15 Years






How The Central Bank Can Lose Their Fight Against Inflation Posted: Apr 10 2010 By: Jim Sinclair Post Edited: April 10, 2010 at 4:15 pm
Filed under: General Editorial

Jim,
BIS Working Papers No 300 explains how the Central Bank can loose their fight against inflation.
Best regards, CIGA Christopher

Dear Christopher,
I have been preaching this for years. It is the real basis of the simplification we call the Formula of 2006.
The Intelligencia of the Establishment calls this BS. It is nice now that they have to challenge the BIS now.
Here is a definition to allow more CIGAs to grasp this point. This will allow you with certainty to understand that we have monetized trillions in the Fed purchase of questionable OTC derivative paper. Monetization – is the process of converting or establishing something into legal tender. It usually refers to the printing of banknotes by central banks. Even . Monetization may also refer to exchanging securities for currency.
Wikipedia.
Respectfully, Jim


Excerpts From PDF linked above:

To answer these questions, it is helpful to review the mechanisms by which persistently high fiscal deficits could lead to inflation.

A first mechanism stresses the ultimate impossibility of continuing to roll over ever increasing levels of public debt when monetary and fiscal authorities are pursuing inconsistent objectives. When the public reaches its limit and is no longer willing to hold public debt, the government would have to resort to monetisation. The result, consistent with the quantity theory of money, is inflation. And anticipation that this will happen may also lead to an increase in inflation today as investors reassess the risk from holding money and government bonds. In such an environment, fighting rising inflation by tightening monetary policy would not work, as an increase in interest rates would lead to higher interest payments on public debt, leading to higher debt, bringing the likely time of monetisation even closer.
Estimates of the impact of public debt levels on real interest rates vary substantially. For the United States, Chinn and Frankel (2005) find an impact as low as 2 basis points per percentage point of the debt/GDP ratio. For Europe, EC (2004) provides a range estimate rising to 16 basis points.
A main distinction in the literature is whether the quantitative theory of money holds (in which case inflation is always and everywhere a monetary phenomenon) or whether fiscal variables have a direct influence on the price level in addition to money (fiscal theory of the price level).
This “paradox of tight money” is the striking finding of Sargent and Wallace’s analysis (1981). Note that in their example debt is perfectly indexed in real terms. This rules out the case that inflation arises from the monetary authorities’ attempt to reduce its real value. Inflation, instead, arises because at a certain point bond investors refuse to hold debt and the government is therefore forced to issue money, short of an outright default.
Thus, in the absence of fiscal tightening, monetary policy may ultimately become impotent to control inflation, regardless of the fighting credentials of the central bank.
Conflicts between the goals of fiscal and monetary authorities can explain a number of inflationary outbursts in emerging market economies. Notable examples of this are: the Brazilian inflationary boom in the early 1980s when monetary policy, in the face of persistent fiscal deficits, started to act more aggressively against inflation (Loyo (1999)); the large jump in Israeli inflation in October 1983 (Sargent and Zeira (2008)); and the Indian inflation of the 1970s and 1980s in which fiscal deficits were monetised (Rangarajan and Mohanty (1997)).
A second mechanism by which public debt can lead to inflation focuses on the political and economic pressures that a monetary policymaker may face to inflate away the real value of debt. The payoff to doing this rises the bigger the debt, the longer its average maturity, the larger the fraction denominated in domestic currency, and the bigger the fraction held by foreigners. Moreover, the incentives to tolerate temporarily high inflation rise if the tax and transfer system is mainly based on nominal cash flows and if policymakers see a social benefit to helping households and firms to reduce their leverage in real terms. It is, however, worth emphasising that the costs of creating an unexpected inflation would almost surely be very high in the form of permanently high future real interest rates (and any other distortions caused by persistently higher inflation).
More…




Dear Daily Crux reader,
Today we present the second part of our interview with investment "guru" Dr. Marc Faber. You can find the first part here.In today's segment, you'll get a great overview of Marc's thoughts on the U.S. dollar, stocks, precious metals, and much more... You'll even learn his thoughts on the best cities in the world for nightlife.This quick read contains several gems from one of the world's most respected – and entertaining – investors. To pick up where we left off last week, read on...Good investing, Justin BrillManaging Editor, The Daily Crux http://clicks.stansberryresearch.com//t/AQ/AAFZBQ/AAFfTQ/AAGZtw/AQ/ArfmKw/0GKG
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The Daily Crux Sunday InterviewAn exclusive Crux interview with Marc "Dr. Doom" Faber, part II

The Daily Crux: On that tack, let's move on to the U.S. dollar...Most of our readers are familiar with the idea that the U.S. government's low interest, easy-money policies will likely lead to big inflation. But something that not many people realize - that you've been vocal about - is that the percentage of government tax revenues that must be spent on servicing the national debt is grower larger and larger. It's unsustainable. In your view, what does it mean for the dollar?

Marc Faber: When the percentage of interest payments to tax revenue gets too high, it will become clear to everyone that the government will need to print money in earnest to make these payments. That's when you're likely to see a crisis of confidence in the dollar. There will be no question that dollar is being debased.The question is will there be a crisis of confidence in all paper monies and what will the reaction of investors be? I would imagine that when the crisis really emerges, you'd see people flee from all paper currencies into precious metals.There may also be interest in stocks, because they usually offer some protection against inflation, compared to cash at 0% or long-term government bonds, either of which would be a recipe for disaster.

Crux: For someone who wants exposure to equities as an inflation defense, would you recommend the larger, more stable blue chips – like a Johnson & Johnson or an ExxonMobil – or do you see more upside in some of the smaller speculative names?

Faber: Well, you see, I'm not a U.S. citizen... so I'm a little bit cautious about investing in America as an overseas person because I think that Mr. Obama is a very dangerous character.

Crux: We agree.

Faber: I think eventually foreigners may not be able to get their money out of the U.S... or will only be able to get it out with major tax implications. So I'm not overtly keen on investing in U.S equities.Of course, an American investor is in a different boat, but if I were an American I would seriously consider diversifying my assets.I would especially ensure I had custody and ownership of some of my assets outside the U.S. If you were to buy foreign shares through a U.S. bank or broker, I would be concerned about what the government may do in the future. I think from a prudent point of view, everyone should diversify the custody of their assets. In other words, don't have everything you own in the U.S.In my case, I don't think it's wise to have everything held in Switzerland in a Swiss bank, so I have assets in Asia, I have assets in New Zealand, and so forth.Now, most Americans will already find it extremely – and I repeat extremely – difficult to open an account somewhere else in the world, because nobody wants their money.It's possible an American could still open an account with a bank in Thailand, or Cambodia, or Vietnam... one of the countries that aren't on the radar screen of the U.S. at this time. But those countries are now the exception to the rule. And it's safe to assume the U.S. will become nastier toward foreign banks that hold accounts for Americans in the future.Of course, there are still some things an American can do that are out of reach of the government. Probably the best option is to go and buy real estate overseas. That's something I would definitely consider doing as an American. There's also the option of storing precious metals overseas.

Crux: Marc, speaking of precious metals... since gold made that jump from $950 to $1,200, it now seems to have good support at around $1,050 or $1,100 per ounce. Each time the price falls to that level, there appears to be some big buyers coming in to support the price. Do you think we'll see $900 gold again anytime soon?

Faber: I really can't say... but I wouldn't rule out a move to the $950-$1,000 level, where gold broke out last year. I think we reached a peak of $1,226 on December 4th of last year, and then we dropped into February 5th and bottomed out at $1,045.The Reserve Bank of India bought its gold slightly above the $1,050 level. My sense is that if gold went lower than $1,050, the Chinese would come in and buy some. I think they're waiting for lower prices, because they don't want to pay more than the Indians as a matter of pride.If it dropped below the level where India bought, I think they would jump back in.But honestly, I'm telling everybody in the world the same thing. I own my gold and I will never sell it, especially when I see clowns like Ben Bernanke, Larry Summers, Tim Geithner, and a very dangerous president...When I'm looking at all these characters in government, I want to own physical gold.There are times like now when stocks perform better than gold, like from the bottom in March 2009. The S&P's up some 77% and gold has not gained nearly as much. On the other hand, if you go back to say 1999 or so, then gold has substantially outperformed the S&P, and the Dow, and essentially all markets in the world.It depends on your time horizon, but I wouldn't rule out that for the next few months stocks might continue to do better than gold... although I wouldn't place a bet on that either.We're just coming out of a seasonal period where gold is often weak, and heading into a period of seasonal strength, so it's possible gold may start outperforming here.An interesting note... based on observations and from e-mails I've received... I think many individuals have sold their gold already.As prices rise in a bull market, investors often try to be clever, and will sell thinking they'll buy the asset back when it drops back down a bit. Of course, oftentimes they never get the chance to do that, and end up missing a large portion of the rise.You saw this when gold was trading in the $900s last year. When gold finally broke out over $1,000, many people thought it was too expensive and didn't buy.Of course, so far we haven't seen $1,000 again.I don't concern myself too much with the price. Many people worry about gold declining to $200 or some terribly low number. I don't worry about that... I can tell you if gold is trading at $200, we'll all have bigger problems to worry about. None of us will have jobs. We'll all be bankrupt.

Crux: Marc, if a year or two down the line we see an acceleration in the decline of paper currencies... the crisis of confidence in the dollar you mentioned earlier... do you see silver having more upside than gold?

Faber: I'm not so sure. I know many people who think silver will go up much more than gold, which is certainly a possibility in a bull market, but I'm skeptical of that over the near term.I think the probability is relatively high that China will suffer a setback – some of my friends would say a "collapse" – within the next six to 18 months. You don't want to be in things like copper and iron ore when the Chinese collapse happens. You don't want to own industrial commodities. And silver has the character of an industrial commodity.

Crux: What are your thoughts on U.S. stocks today?Faber: I would be careful right here about buying heavily into stocks. We're up about 80% on the S&P. We've seen a huge market move without a substantial correction.
If someone were to tell me the S&P will go to 1,300 by yearend – or even within the next two months in some kind of an upside meltdown – I wouldn't doubt it. But I think it's quite likely that almost any stock you may want to buy today will be 10%-20% cheaper within the next 12 months.

Crux: Great point. How do you feel about gold exploration stocks? Do you own any of those?

Faber: Yes, I do own several. First of all, I'm on the board of Ivanhoe (symbol NYSE: IVN), so I have involvement there. A few others I own are Gabriel Resources (symbol TSE: GBU) and NovaGold (symbol AMEX: NG), as well as Centamin Egypt (symbol TSE: CEE).
Gabriel Resources and Centamin Egypt trade primarily on the Toronto Stock Exchange. U.S. investors can purchase these stocks through a number of online and traditional brokers that specialize in international markets. The Daily Crux does not endorse brokers, but Interactive Brokers allows U.S. investors to buy stocks in over 80 foreign markets. The company regularly receives performance awards from popular financial sources like Barron's.
I tell everybody it's not so important what you own, but how much you own and how much money you have on the sidelines to weather a correction.
Ivanhoe, just to give you an example, was at $1.55 at the low in October 2008. It's now $16. So you have to be able to live with that kind of volatility if you're going to invest in exploration companies.

Crux: Speaking of Ivanhoe and exploration... are you interested in Mongolia from an investment standpoint, or is the government there just too unpredictable for you?

Faber: I actually have friends who started a fund there and bought equities and so forth. I think there are opportunities there... for mining obviously, and there could be opportunities in real estate as well.But you have to understand... I'm 64. My investment time horizon is shorter than some other people's. I have two females in my family – my daughter and my wife – who have no clue about investments and money. I try to keep things relatively simple these days.Investing in places like Mongolia or Bahrain or Iraq is something I probably would have done 20 years ago... but I don't want to do it anymore.Crux: Fair enough. How about Japan? Do you see value in Japanese stocks?Faber: Well, I think the Japanese market is one of the most attractive ones in the world, simply because it hit 30-year lows during the 2008 crash, and it's not trading far from there now.Purely from a probability point of view, there's more upside there than other markets. Thirty-year lows on the S&P 500 would be around 120. That gives you a perspective of where we are in Japan.I understand that Japan will not grow a lot. That is out of the question, but the companies can still do very well, and they're relatively cheap right now.

Crux: Lastly Marc, life can't be all about investing and trading. We were wondering if you would share with us a few of your favorite cities for nightlife.

Faber: Well, I think Bangkok and Pattaya are two of the best cities for nightlife by far. If someone is interested in nightlife, these are the best in the world. High quality and unlimited supply. In Thailand prices have gone up a little bit recently, but if I go out somewhere like Zurich it will cost me 80% more than in Thailand.That's not to say Zurich isn't a good city... It's actually underrated for nightlife. They have very good restaurants... I would imagine the best restaurants in the world in terms of variety: German, Swiss, Italian, French food. The service in general and the quality of the food is very good. You have great cultural bars that are basically open 24 hours... and you can still smoke.Now that may stop in May, when some places will have a separate venue for smoking, but at least you can smoke outside in Switzerland.In America they're so ridiculous. You can't even smoke outside most places. They're absolutely brain damaged.

Crux: Now Marc, when you're forced to travel to the U.S., are there any particular places you enjoy going?

Faber: In America, I don't go out because when I go through immigration they always spoil my mood. Big time. I don't feel like going anywhere.I was recently at the Chicago airport and I was in transit. So I went to the bar near the gate and ordered a beer. The woman at the bar asked me for my ID. So I thought she was making a joke. But no, before she handed me over the beer she said, "I want to see your ID."I'm 64!So I said, "Madam, do you mind explaining to me? I take it as a compliment that you think that I'm younger than 21... but just as a matter of interest why do you have to see my ID?"Then she said, "Well over the last 12 months this huge crime occurred where two underage individuals were caught drinking alcoholic beverages." Two in one year and now everyone has to show ID.

Crux: Yes, we have quite a few ridiculous rules...

Faber: By the way, I've been to many African countries, and in almost all of them the nightlife is also excellent.

Crux: As a traveler, are there any countries you haven't been to that you'd like to make it to before...

Faber: Before I go to hell? [Laughs]

Crux: Before you check out?

Faber: I'd like to go to Antarctica... I haven't been.I've been to Argentina, but there is more there I'd like to see.Also, I haven't been to some central Asian republics like Uzbekistan. I think the city of Samarkand is probably worth a visit.I haven't been to Lebanon. It's definitely on my list... also Ethiopia, Sudan, and Yemen. These are all countries that I'd still like to see.

Crux: Finally, Marc, you live in Thailand... what brought you there?

Faber: Well, for my taste, there are few places I'd rather be than the north of Thailand. I just love it here, and if worse comes to worse, we have enough land that we could be self-sufficient. The area is very rich in agriculture... it grows right into the city. Whatever else happens, we'll always have food. That may sound silly today, but it could be important.If you live someplace like New York or London, the supply of food could become a problem one day. These cities are dependent on the shipment of food from elsewhere.I think having a self-sustaining home or community could be rather important down the road. That's something people should at least think about now, rather than waiting for an unfortunate situation to develop.

Crux: That's a great thought to end this on. Thanks so much for speaking with us.

Faber: Very good. Thank you very much.

Editor's note: If you haven't taken a look at Marc's Gloom, Boom, & Doom Report, I encourage you to do so. It's got something for everyone from the amateur investor to the seasoned professional. Anyone looking for "no BS" market analysis will find it full of great ideas. As I mentioned last week, the March issue, titled "The Great Reflation" could be the most important thing you'll read about the market all year. You can learn more about the Gloom, Boom, & Doom Report here. You can also learn about Faber's excellent book on the rising economic power of Asia in Tomorrow's Gold: Asia's age of discovery.