GMI Describes "The Future Recession In An Ongoing Depression" In This Must Read Report

VIPS Sends Memo To Obama Warning Israel May Bomb Iran "As Early As This Month"

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Fiscal Wake up Tour Online

David Walker

Fiscal Wake-Up Tour panelist David M. Walker, President and CEO of the Peter G. Peterson Foundation, delivers his Wake-Up Tour presentation on the nation's fiscal challenges. Length: 07:48
www.youtube.com/watch?v=_cBnP8jDUMg

GOLD

The Psychology of Gold

Chuck DiFalco
While gold has rebounded from its lows of the early 2000s, it is nowhere near the mania stage of sky-high prices and bubble status, because investor psychology is at least as important to an asset price as the fundamentals underlying the asset. DiFalco believes that investors generally are far from jumping on the gold bandwagon. He likes Robert Prechter’s ideas about investor psychology; Prechter says that investor psychology reveals itself in the popular media. So when insiders using television ads and shopping mall kiosks are actively buying average people’s gold for paper dollars, it is clear who has figured out what’s a good deal. The only sell-side gold bullion retailing seems to happen during conservative talk radio shows, a small audience compared to television. Bottom line: if investors need more data, studies, and analysis to convince them that gold’s greatest gains lie ahead, they will miss the investment opportunity because (1) they haven’t done/don’t want to do the homework, or (2) they wait for the herd to stampede before moving. To make the biggest gains in investing, there must be situational awareness; often, what you’re looking for is right in front of you. The big move up of this secular bull market in gold is yet to come. Since the majority of voters want something for nothing, US politicians will coordinate with the Fed to pay for deficits and pay debt by electronically printing money. The path of least resistance is inflation. The psychology of gold, as with any other asset, will lag the fundamentals. Passive investors will stampede when mass media and retail start selling gold to them rather than buying from them. Such panic will cause dangerous price spikes. DiFalco will wait for newly minted gold bugs to tell him they’ve finally bought gold bullion from a kiosk at the mall, then he’ll start worrying about deflation.

http://financialsense.com/contributors/chuck-difalco/the-psychology-of-gold

Gold Coin Sellers Angered by New Tax Law

Rich Blake
President Obama’s new health care legislation includes a provision that puts gold coin buyers and sellers under closer government scrutiny. Section 9006 of the Patient Protection and Affordable Care Act will amend the Internal Revenue Code to expand the scope of Form 1099, which is used to track and report the miscellaneous income associated with services rendered by independent contractors or self-employed individuals. This form will be a means of reporting to the IRS the purchases of all goods and services by small businesses and self-employed people that exceed $600 during a calendar year. Precious metals such as coins and bullion fall into this category and coin dealers have been among those most rankled by the change, which could mean filling out tens of thousands of tax forms per year. The buying of physical gold has become a trend among Tea Party supporters and others who dislike Obama’s economic policies. Rep. Daniel Lungren, R-Calif., has introduced legislation to repeal the section of the health care bill that would trigger the new tax reporting requirement because he says it is a burden on small businesses. “Large corporations have whole divisions to handle such transaction paperwork but for a small business, which doesn't have the manpower, this is yet another brick on their back,” he said. “Everyone agrees that small businesses are job creators and the engine which drives the American economy. I am dumfounded that this Administration is doing all it can to make it more difficult for businesses to succeed rather than doing all it can to help them grow.” Identity theft is another concern because criminals may set up shops specifically to get the personal information that would accompany the filling out of a 1099.

http://abcnews.go.com/print?id=11211611

MONEY

Is The End Game Hyperinflation or Debt Implosion?

Lorimer Wilson
This article is the text of a speech given by Jeff Nielson of BullionBullsCanada.com, edited and reformatted for brevity and clarity. Topics covered include: derivatives (an unregulated one quadrillion dollar market); why all is not as it seems; the serious dilemma facing investors; why we need ‘good money’; and what happens to money during a deflationary implosion or a hyperinflationary scenario. Nielson explained that “Where a deflationary implosion differs from hyperinflation is that in such an implosion all asset prices become severely depressed and most people are more likely to move to cash because of its supposed buying power. Eventually, however, in either scenario, paper currencies would go to zero.” He concluded his remarks with the following advice: “You need to hold ‘good money’ and the ultimate ‘stores of value’ – the only ‘good money’ – is gold and silver and thus the best protection from the events that lie ahead.”

http://financialsense.com/print/contributors/w-lorimer-wilson/is-the-end-game-hperinflation-or-debt-implosion

Why More Quantitative Easing Can’t be Avoided

Julian Phillips
At best, the US economy could be said to be experiencing an L-shaped recovery. The average consumer has little confidence in the economy or the housing market; even Fed Chairman Bernanke says the future of the US economy is “unusually uncertain.” Forty-eight states will be in deficit this year and the combined shortfall will probably exceed $300 billion; many states anticipate deficits of more than 20%. There is no choice but for massive government bailouts alongside quantitative easing, and the net effect is the threat of default and massive deflation. The Fed and government regard inflation as the lesser of two evils; while it will result in the devaluation of the dollar, it will also lessen the threat of deflation, recession and bad debts. Consumer spending will ramp up; this will ignite the velocity of money, and stimulate retail sales, inventory building, investment in capital goods and growth. Inflation becomes a danger. Because of the falling dollar, trade-dependent satellite nations will have to devalue their own currencies to keep exports at constant levels; Europe will be unhappy to see the euro hold value while the dollar devalues and will attempt to follow suit; foreign surplus holders of T-bills and bonds will be furious with such a devaluation after being castigated by the US for holding their currencies down. China in particular may simply stop investing or acquiring new dollar holdings. Lower demand for the dollar from these sources will hit the US hard, then rising interest rates alongside runaway inflation will be the order of the day. The careful balancing act needed to manage this environment may be too much for the Fed. If it acts too soon to slow inflation, deflation resurges. If it acts too late, inflation will skyrocket, and the measures needed to tame it will once again devastate the economy, resulting in more deflation and an environment of mortally wounded confidence. Letting these forces loose enables the Fed to catch the tiger by the tail – but it may not be able to let go.

http://financialsense.com/print/contributors/julian-phillips/why-more-quantitative-easing-cannot-be-avoided

The Fate of Paper Money

Mike Hewitt
Hewitt provides a history of fiat currencies: paper money in Asia; paper money in Europe; existing currencies in circulation; currencies no longer in circulation; and recent expansions to the US monetary base. Interestingly, the first well-documented widespread use of paper money was in China during the Tang dynasty around 800 AD. By 1455, however, the Chinese abandoned paper money due to numerous problems of over issuance and hyperinflation. At present there are 176 currencies in circulation in the world. The median age for all existing currencies in circulation is only 39 years and at least one, the Zimbabwe dollar, is in the throes of hyperinflation. Charts show the declining value of the two longest-running currencies – the British pound sterling and the US dollar, considered to be the most successful paper currencies of all time. As of January 2009, the British pound had lost 98.8% of its value compared to its silver-backed predecessor of 1560. As of January 2009, the US dollar had lost 89.5% of its value compared to its silver-backed predecessor of 1792. Obviously, those percentages are even higher today. Hyperinflation is one of the greatest calamities that can strike a nation; this devastating process has destroyed currencies in the US, France, Germany and many other countries. Today, it seems the US may be struck again. America’s monetary base, which comprises of currency in circulation and the commercial banks' reserves with the central bank, has been experiencing unprecedented growth. This massive expansion increases the probability of a complete collapse in the confidence of the US dollar’s value. Such a shift in sentiment would light a hyperinflationary match to the world's de facto reserve currency.

http://dollardaze.org/blog/?post_id=00405

Why Fears of Hyperinflation Won’t Die

Kit Roane
The Congressional Budget Office says that US federal debt should hit 62% of GDP by 2010, and surge to 185% by 2035 if planned spending is realized. The US is not alone; the IMF estimates that the average general government gross debt ratio of advanced economies, which has already ballooned by close to 20% of GDP since the onset of the crisis will rise by a further 20 percentage points by 2015, reaching about 110% of GDP. This is clearly unsustainable, but no politician wants to be the first to pull the plug. Treasury Secretary Tim Geithner says the Treasury markets are not pushing the US to take its medicine now, because everyone knows the government plans to tackle the deficit. Still, there is plenty of talk about “Helicopter Ben” – a reference to Bernanke's belief that deflation can be solved by running the monetary printing press, which allows the government “to produce as many US dollars as it wishes at no cost.” That printing press can also come in handy when dealing with unsustainable US debt. With tax receipts down and radical spending cuts not an option, the US appears to have only two avenues of escape – default or reduce the debt by inflating it away. The popular belief is that the US will ultimately take the Weimar route and turn on the presses. The pain will eventually come, and when it arrives there is nowhere for the average citizen to hide. “Since those dim beginnings in the forests of the Stone Age,” wrote Jens O. Parsson in Dying of Money: Lessons of the Great German and American Inflations, “governments have been perpetually rediscovering first the splendors and later the woes of inflation Nations can always clearly see objectives they would like to reach, such as fighting wars or being prosperous, and they are often willing to spend whatever is necessary to reach them. They are not often so willing to pay up.”