Comments on: Recognizing a Bubble – Dynamics of Free Money http://www.sustainablewealth.org/recognizing-a-bubble-dynamics-of-free-money Seek to achieve sustainable wealth through superior insight into the economic universe with a clear focus and commitment to a diversified approach to long-term investing Sat, 06 Mar 2010 18:12:50 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: R. P. Reitz http://www.sustainablewealth.org/recognizing-a-bubble-dynamics-of-free-money/comment-page-1#comment-190 R. P. Reitz Wed, 21 Oct 2009 09:35:58 +0000 http://www.sustainablewealth.org/?p=751#comment-190 Gold is going to replace the dollar. From the point of view of a citizen living in a country that has first begun to devalue its currency, the people hoard the "good" currency and then spend the bad currency by giving it to anyone who will still accept it. As the government of the country continues to devalue the currency, the citizens will finally stop accepting the "bad" currency and demand that all money transactions be made with "good" currency. This is exactly what happened in Zimbabwe. The Zimbabwe government devalued its paper currency. When that lost too much value, it then replaced old paper currency with new paper currency. The government then continued to devalue its new paper currency just as it did the old. As long as the people accepted the currency, the Zimbabwe government could pay its troops and get the troops to force the will of the government upon the people. However, after a while, the people got tired of using the monopoly money from the government. They were tired of seeing the fruits of their labor devalued. So they went to gold. Every transaction that took place...whether it was buying a loaf of bread or buying gasoline (what little there was of it) ...had to be paid in gold. The government could not print gold. It could only print worthless paper. The government could no longer pay its army with money that could buy things. That forced the government to change. From a foreign creditor point of view, most central banks around the world have dollars as part of their reserve currency. Some of these countries have loaned the US billions in the form of T bills and other securities. They do not want to paid back with dollars that are worth less than half the value of their initial investment. That is why Russia, China and many others are buying gold. Gold is hard currency. It can't be printed. The OPEC nations are going to have to start selling their oil in some currency other than the dollar. If they do not, then they will face what we Americans are going to face...rising prices for their imported goods from Europe and elsewhere. They will want to preserve their wealth and stop selling oil in US dollars. When that happens....and it will happen soon...the US will face staggering inflation rates. Already the Russians are selling oil to the Chinese in non-dollar currency. They are moving toward creating an international currency that is more than 50% weighted in gold. It is easy to understand why. They do not trust any central bank that controls fiat currencies to NOT devalue the currency. But you can't print gold. China is getting ready to move toward a gold-backed currency. The Chinese government has sold gold and silver to its populous. When the Chinese are ready, they will go onto the market and buy as much gold as they can. The size of the global gold market is only $80 Billion currently. It will be easy for China to drive the price of gold up to $10,000 or $25,000 per oz. They have over $2 Trillion in reserves in their bank already. It would only take a fraction of that to drive the gold price up to $25,000 or higher. When that happens, the value of the US dollars that remain in their bank will drop....but their gold reserve will increase in value enormously. So, they will effectively replace the dollar as the world's reserve currency with gold. Not only that, China will ensure that its population is enormously wealthy. Those Chinese people who have been buying gold and silver at the current price will become wealthy. That is what is going to happen. The American people need to preserve their wealth now by doing what the Chinese people are doing...buying gold, silver and any other hard currency assets that are available. Those that do not are going to become impoverished. All of this was made possible because the American people stopped walking with God and decided instead to NOT treat their neighbors as they would treat themselves. Instead, they elected politicians who, for the sake of gaining and holding onto political power, were willing to kill the unborn and the infirmed (e.g. Terri Shiavo). The politicians that they elected promised them that only the top 5% of the income tax bracket would be taxed...only 1 in 20 Americans. That pleased the other 19 of 20 Americans. They thought that it would be just fine to take (...steal through government 'redistribution of wealth"...) the assets of other Americans to give to themselves. That is why they elected Obama. It was due to their own selfishness and greed. But Obama and the liberals in Congress are now taking the wealth of the people and giving it to themselves and their banker friends from Wall Street. After all, when you are willing to kill the most innocent amongst us for the sake of gaining political power, what's a little thing like lying to the American people? What's a little thing like stealing? In some ways, the American people who voted for Obama and the liberals in Congress are getting exactly what they deserve. They elected Obama to steal the wealth of their fellow Americans to give to themselves. Little did they realize that what they intended to do to their fellow Americans was, instead, going to happen to them. It is, in some sense, poetic justice. It is like the Bible says...what you sow, you will reap. Those who are wise will buy gold while they still can. Sorry... forgot to say great post - can't wait to read your next one! Gold is going to replace the dollar. From the point of view of a citizen living in a country that has first begun to devalue its currency, the people hoard the “good” currency and then spend the bad currency by giving it to anyone who will still accept it. As the government of the country continues to devalue the currency, the citizens will finally stop accepting the “bad” currency and demand that all money transactions be made with “good” currency. This is exactly what happened in Zimbabwe. The Zimbabwe government devalued its paper currency. When that lost too much value, it then replaced old paper currency with new paper currency. The government then continued to devalue its new paper currency just as it did the old. As long as the people accepted the currency, the Zimbabwe government could pay its troops and get the troops to force the will of the government upon the people. However, after a while, the people got tired of using the monopoly money from the government. They were tired of seeing the fruits of their labor devalued. So they went to gold. Every transaction that took place…whether it was buying a loaf of bread or buying gasoline (what little there was of it) …had to be paid in gold. The government could not print gold. It could only print worthless paper. The government could no longer pay its army with money that could buy things. That forced the government to change.

From a foreign creditor point of view, most central banks around the world have dollars as part of their reserve currency. Some of these countries have loaned the US billions in the form of T bills and other securities. They do not want to paid back with dollars that are worth less than half the value of their initial investment. That is why Russia, China and many others are buying gold. Gold is hard currency. It can’t be printed. The OPEC nations are going to have to start selling their oil in some currency other than the dollar. If they do not, then they will face what we Americans are going to face…rising prices for their imported goods from Europe and elsewhere. They will want to preserve their wealth and stop selling oil in US dollars. When that happens….and it will happen soon…the US will face staggering inflation rates. Already the Russians are selling oil to the Chinese in non-dollar currency. They are moving toward creating an international currency that is more than 50% weighted in gold. It is easy to understand why. They do not trust any central bank that controls fiat currencies to NOT devalue the currency. But you can’t print gold.

China is getting ready to move toward a gold-backed currency. The Chinese government has sold gold and silver to its populous. When the Chinese are ready, they will go onto the market and buy as much gold as they can. The size of the global gold market is only $80 Billion currently. It will be easy for China to drive the price of gold up to $10,000 or $25,000 per oz. They have over $2 Trillion in reserves in their bank already. It would only take a fraction of that to drive the gold price up to $25,000 or higher. When that happens, the value of the US dollars that remain in their bank will drop….but their gold reserve will increase in value enormously. So, they will effectively replace the dollar as the world’s reserve currency with gold. Not only that, China will ensure that its population is enormously wealthy. Those Chinese people who have been buying gold and silver at the current price will become wealthy. That is what is going to happen.

The American people need to preserve their wealth now by doing what the Chinese people are doing…buying gold, silver and any other hard currency assets that are available. Those that do not are going to become impoverished. All of this was made possible because the American people stopped walking with God and decided instead to NOT treat their neighbors as they would treat themselves. Instead, they elected politicians who, for the sake of gaining and holding onto political power, were willing to kill the unborn and the infirmed (e.g. Terri Shiavo). The politicians that they elected promised them that only the top 5% of the income tax bracket would be taxed…only 1 in 20 Americans. That pleased the other 19 of 20 Americans. They thought that it would be just fine to take (…steal through government ‘redistribution of wealth”…) the assets of other Americans to give to themselves. That is why they elected Obama. It was due to their own selfishness and greed. But Obama and the liberals in Congress are now taking the wealth of the people and giving it to themselves and their banker friends from Wall Street. After all, when you are willing to kill the most innocent amongst us for the sake of gaining political power, what’s a little thing like lying to the American people? What’s a little thing like stealing?

In some ways, the American people who voted for Obama and the liberals in Congress are getting exactly what they deserve. They elected Obama to steal the wealth of their fellow Americans to give to themselves. Little did they realize that what they intended to do to their fellow Americans was, instead, going to happen to them. It is, in some sense, poetic justice. It is like the Bible says…what you sow, you will reap. Those who are wise will buy gold while they still can.
Sorry… forgot to say great post – can’t wait to read your next one!

]]> By: MICHAEL http://www.sustainablewealth.org/recognizing-a-bubble-dynamics-of-free-money/comment-page-1#comment-183 MICHAEL Tue, 20 Oct 2009 17:08:58 +0000 http://www.sustainablewealth.org/?p=751#comment-183 We can see that the Federal Reserve Bank is creating the next bubble by issuing huge amounts US treasury notes and short term bonds. We can see that the Federal Reserve Bank is creating the next bubble by issuing huge amounts US treasury notes and short term bonds.

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