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The Gold Market Discussion with Jim Clark, 2-13-15: Is this Really Recovery?

The Gold Market Discussion with Jim Clark, 2-13-15: Is this Really Recovery?

by Jim Clark

2/13/2015

Precious metals have given up some of the January momentum. However, with all of the volatility in equities, currencies, and commodities, as well as all of the interesting world events taking place, that could change any time. I believe this is the time to buy for the long term. Let’s look at some of market and world conditions that are affecting your financial outlook.

Your financial well-being including your retirement accounts, savings, and financial portfolios are all influenced by global debt, international trade, and the health of economies around the world. We live in a global economy. It’s been seven years since the great global credit bubble burst causing the worst financial crisis since the Great Depression. Yet, debt continues to grow until today all major economies have higher levels of borrowing relative to GDP than they did in 2007. Global debt has increased by $57 trillion since 2007. Global growth is forecast to slow. And there are rising geopolitical risks across the globe.

Here are some examples of what is occurring in countries around the world which show that precious metals are a smart investment. First of all, let’s look at Greece which is now in crisis mode again, even after a generous bailout agreement from the European Union, the European Central Bank, and the International Monetary Fund. The crisis is shaking up of all the Eurozone. After electing a far-left, anti-austerity leader, Greece is trying to re-negotiate their bailout terms. Many experts, including Alan Greenspan, former head of the US central bank, believe that the crisis will not be resolved without Greece leaving the Eurozone. The UK Chancellor George Osborne has said that a Greek exit would cause “deep ructions” for Britain. Many are saying the Greece will exit from the single currency and go back to the Drachma which will create instability in European financial markets also according the UK Chancellor. The Dollar has declined this week based on worries about Greece. Europe never emerged from the Great Recession and still has high unemployment, stagnant wages, and high taxes. The ECB will severely devalue the Euro by printing a trillion Euros just as the FED has printed a mountain of dollars here to artificially inflate the markets, causing the Dollar to lose 33% of its value in a little more than a decade. President Obama is expected to add $4.4 trillion to the debt in the next four years. When currencies devalue, gold prices escalate. Currently in Greece, as reported by Bloomberg, Greek investors are buying gold as a safe haven from the country’s political turmoil, with a noticeable increase in demand for investment grade gold coins. And why gold? Matthew Turner, an analyst at Macquarie Bank Ltd, said, “The one thing everyone knows about gold is it is a good thing to hold if your currency is about to devalue.” Our first president penned these words of warning before his death, “To contract new debts is not the way to pay old ones.” Now, with the central banks in charge of our currency and about to monetize more than 100% of global debt, isn’t it time to buy gold as global debt insurance?

Thomas Jefferson wrote in a letter in 1816, “And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” Unfortunately, our leaders have forgotten and disregarded the words of our founding fathers. But fortunately, Americans have the freedom to exchange their devaluing dollars for gold and silver- wealth that is real and tangible and is not dependent on the manipulation of a central banking system.

Please read the extremely important and informative article below written by one of our Senior Precious Metals Experts, Jeff O’Rafter, for more about our global situation.

Is this what the new normal looks like?

Now, for the first time in history, Central Banks around the world will monetize more than 100% of global sovereign debt. We have been told that 2015 was when Central Banks would normalize. What they call the new ‘normal’, I call insane. In fact, 16% of all global government debt, $3.6 trillion, is now trading at negative yields around the world and that certainly does not scream: Recovery!

 

After having fallen 60% in the past three months, the Baltic Dry Index has crashed to the lowest level ever this Monday, February 9th and again on Wednesday, February 11th to a new low. This index reflects the movement of dry bulk shipping globally. Dry bulk is the material they use to make the things that we buy. (See chart below.) And by the way, the index is priced in US dollars and with the dollar at nine year highs, it’s even more telling. As a confirmation, the Chinese market has just seen a collapse in both imports and exports. A report just out shows that business inventories domestically are growing at the slowest rate since May of 2013, and it has pushed the business inventory-to-sales ratio to the worst it has been since the Lehman Brothers crisis. So what does this obscure, never talked about index mean to you and me? A LOT!

 

What we have been told by Central Banks and politicians around the world is that we have to rescue economies by quantitative easing. The theory is that printing money, along with zero or negative interest rates and going further into debt, will stimulate the economy by getting companies to move capitol through the system by expanding business. The result will then be job creation, wage growth, and expanding GDP. How is that working out?

In our economy we have a stock market that seems bound to go higher. In the last few years, companies buying back their own stock by borrowing near free money have in large part help lift the market. Now in the S&P 500 approximately 46.3% of all sales come from overseas. We are truly part of a global economy. The mass media, politicians, and the Federal Reserve tell us that we are fully on the road to recovery and we are leading the world out of this troubling time. Do you believe them?

For the last 39 months in a row, we have had over 46 million Americans on food stamps. There are nearly 49% of all Americans receiving some form of government assistance. With over 93 million Americans not participating in the labor force, a higher percentage than we have seen since 1979, we have a jobless recovery. January this year has had the worst retail sales drop since October 2009. How does that theory go again, job creation?

I believe the sole reason we are on top of the global economy right now is our reserve currency status. What happens when that changes? Well, then those dollars held overseas come home to roost as a local domestic currency, history shows that like the British Empire, we will see perhaps a couple decades of hyperinflation as we mop up the excess liquidity. (Good for gold and silver coins though). Is it possible to lose the reserve currency status? If you missed out on several key events last year, where nation after nation declared movement away from Petrodollars as their goal, then YES!

Remember, when fraud is the status quo, possession is 100% of the law. Having tangible assets in hand always trumps a paper asset. If you have already preserved some of your wealth with physical gold and silver coins, fantastic! Maybe it’s time for more. If you have not, it’s a good time to start. If you have retirement accounts, please consider protecting them. Call me or your representative here and let’s go over your options. Thank you once again for your time and consideration.

“Educate and inform the whole mass of the people… They are the only sure reliance for the preservation of our liberty.”
—Thomas Jefferson

I’ll be keeping a sharp eye on the market and I encourage you do the same!

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