"The risks of further escalation of this crisis are rising"

Within the last 48 hours, the International Monetary Fund (IMF) has issued a second warning to not only the United States but other countries as well.

IMF tells states to plan for the worst

By Krishna Guha in Washington

Published: March 12 2008 23:55 | Last updated: March 12 2008 23:55

Governments might have to intervene with taxpayers’ money to shore up the financial system and prevent a “downward credit spiral” from taking hold, the International Monetary Fund said on Wednesday.

John Lipsky, the IMF’s first deputy managing director, said: “We must keep all options on the table, including the potential use of public funds to safeguard the financial system.”  See http://www.ft.com/cms/s/0/ee21ddbc-f08b-11dc-ba7c-0000779fd2ac.html?nclick_check=1

Why didn’t this make the news in the U.S.?  The American Press is controlled by private, wealthy investors who have their own agenda.  The rich and powerful have an agenda that differs from the average person on the street.  The overall economic system has consistently deteriorated to the point of collapse.  If the average citizen understood the brevity of the current economic crisis, all of the current congressmen would be removed from office along with most of the staff of the other two branches of government.  Congressman Ron Paul is the only member of Congress that I am aware of that has been challenging the status quo.  Now that he has been eliminated from the Republican ticket, I can freely speak about his record.  Paul understands the problem.  He has been an irritant to the powers that be.  His questions to Ben Bernanke of the Federal Reserve (FED) have forced Bernanke to admit that monetary policy without a gold-backed currency would promote inflation and instability.

Why do you think gold traded at a price of $1,000 for the first time in U.S. history?  The U.S. dollar is declining in value worldwide.  The following chart shows the U.S. Dollar Index relative to other currencies:


As you can see, the Dollar is in a downtrend.  My expectation is that the Dollar will continue to downward trend to the .51 level. another 30% decline.  If all else is equal, gold would then trade at $1,425 to $1,650.  You can’t stop there.  Gold is the barometer that measures economic stability.  As the current system moves toward greater instability there will be a larger premium within the price of gold.  Gold retains value while paper currency loses value from inflation.  Silver has a similar nature.  Those in power have tried to convince the public that gold and silver were no longer money.  The prices of gold and silver have been rising against all currencies.  $3,000 per ounce is no longer unrealistic.

When a central bank has no restrictions tied to increasing the money supply such as a gold standard, they can issue as much money as they deem necessary.  By adding large amounts of cash to the system, they reduce the overall value of the currency relative to other countries.  This causes the decline in the value of the currency.  The Fed is injecting more and more cash into the system in an effort to save the banking system and will sacrifice the buying power of the U.S. Dollar to do it.  Holders of the dollar are losing value daily.  The only alternative to these holders is to trade their dollars for another asset.  This helps push the dollar to a lower value as well.  The U.S. authorities know that the dollar must decline but want an orderly decline, not a volatile free fall.  At some point, I expect a possible tipping point where large holders will run toward the exits.  If this happens gold will shoot up in a parabolic rise and at the same time the value of the U.S. Dollar will tank.  As I said earlier, the barometer is the price of gold.

Gold has consistently been a store of value throughout history.  I am not suggesting to hoard gold or silver.  All indications point to a gold-backed currency in the near future.  It will once again represent the primary medium of exchange.  Gold is a tool not to be worshipped.  It will be a medium of exchange allowing for the free flow of goods and services that we may flourish in an environment of "equal weights and measures".  Governments will not be able to manipulate "value" for their own agendas.  As former President Ronald Reagan once said, "Government takes from the needy and gives to the greedy."  Power without love as the motivating force is corrupting.  It will ultimately implode.

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