As the Macroeconomic Continues to Trumpet Failure

The debt related problems in Greece have spread to other European countries. The Slovenian government has collapsed with nary a whimper. Belgium is on the verge being downgraded, following the recent downgrades in Spain and Italy. All of these events come down to not enough cash, and simply, too much debt! In the end, the ECB will finally hold an emergency meeting that befits the name and simply print more euro dollars. Inflation will accelerate.

In Britain, the Bank of England fearing the most serious crisis ever, has turned on the printing presses pumping even more paper money into the system. History has proven that currency debasement leads to inflation.

In America, Ben Bernanke is clearly out of monetary and fiscal ammunition. He is quite correct when he says the economy is ‘close to faltering’. His tepid ‘Operation Twist’ reminds me of Oliver Twist – and the most famous line in that story has Oliver asking for ‘more’. Trust me, Bernanke gets the message, but rather than porridge expect him to ladle out paper money. I am looking forward to seeing how Bernanke will try to handle stagflation in America.

Adding to the folly and nonsense is Christine Lagarde’s recent announcement that the IMF is in need of a paper money bailout! In answer to this call, someone (probably the Fed) will print more paper money and give it directly to the IMF or funnel it to where it is needed most, the European Central Bank.

And lest we forget, the unpredictable dog currently sleeping under the dining room table – China, and their $1,173.5 billion worth of U.S. debt. Even the smallest growl would be enough to spook the markets and cause the Fed to panic.  

A Tissue of Dull Excuses

I would suggest that you should dispassionately observe and study the macroeconomic panic, but most definitely do not buy into the fear that such a panic generates. We did that in 2008 and came out just fine because many of us began to understand the true value of physical gold, while correctly identifying that we were on the cusp of a robust bull market for junior gold companies. The only stench in the air is the flatulence emanating from the sour stomachs of the Keynesian bankers, as they wrestle with the fact they will once again embark on the road leading to hyperinflation. For you and I, there is no ‘velocity of fear’. How can fear win when we are already on the path to prosperity, as we know what happens to the worth of a paper currency once government turns on the fiat printing presses.

Dispel All Anxious Concerns and Errant Thoughts

Equally important is to stand by your convictions regarding the true value of gold, by continuing to ignore the spot price, and instead rely on the value offered by owning physical gold. And the key word here is physical gold. Reason: If gold is suddenly such a downer, then why am I receiving anecdotal evidence from many readers world-wide regarding the lack of availability of gold coins and bullion? Example: One of my most avid European readers has informed me that he can no longer simply drive to his usual outlet (government mint) and instantly swap fiat for gold. Instead, he must wait six weeks for delivery! It is only common sense to continue buying gold on the dips, even though getting a fill might put you on a waiting list. And do not think we are any longer in the forefront of gold accumulation. Beside the central banks joining our party, Morgan Stanley is now on record about gold’s long-term performance. They now describe gold as resilient and value-retaining, making it an attractive investment. MS just raised its target price of the currency metal to US $2,200 by next year.  

Ignore the Feeble Dribble as Junior Golds Bounce Off the Bottom

As stated in my previous report, I am no longer concerned about the rise of the gold price. It will continue to rise. How high and how fast depends on how quickly the Keynesians decide to print more money. When it comes to the price of gold juniors, it is key to remember my earlier missive about the state of affairs so far in 2011: To date we have not faced any surprises! The 2011 seasonal trends are right on the mark. We experienced our usual energetic start to the first quarter, patiently endured the usual boring sluggish summer, and now junior gold stocks sit poised to enjoy a dramatic upturn.

How did we make money in the junior gold markets in 2008? Ninnies aside, the rest of us correctly identified an oversold market; practiced our due diligence and prospered through some well researched bargain hunting. Normally I recommend buying gold juniors during the summer months as typically the share price drops off as volumes dry up. This year I thought the summer doldrums would extend past the Labour Day holiday and this appears to be the case. But waiting for an absolute bottom can wind up being a fools’ game. From everything I have seen over the last couple of weeks, now appears to be the time to get into the game. And to the junior gold markets now does not take courage, only common sense.

The odds of prices going much lower are miniscule. Hopefully all of you have been practicing our reality-based investment system and had invested at least part of your summer doing due diligence on price-depressed target companies.