December 2, 2011– The world’s major central banks launched a joint action to provide chief emergency US dollar loans to banks in Europe and elsewhere.<\/p>\n
In a desperate effort to raise stocks the central banks of the world coordinated by forcing more money into the world system. The obvious result was a surge in stock prices with the Dow rising almost 500 points. This is exciting for now but it will result in inflation within 6 months to a year. Along with rising inflation will be its cousin, higher interest rates. This will impact everything from commodity prices to the rising cost of financing the federal debt. Right now the federal debt is being rolled over at extremely low interest rates, but as rates climb, compounding will occur and the cost of rolling over the federal debt will become a critical problem.<\/p>\n
Remember, 40 % of the federal debt matures in less than one year and the average rate of the entire federal debt is 4.3%. This is when compounding of the federal debt becomes poisonous. The problem of borrowing to finance the federal debt becomes prohibitive. For now the act by the federal bank of flooding the market again with cash acts as a stimulant, but the same stimulant becomes, in a matter of years, inflation poison. The first bubble to be crushed will be the ridiculous federal debt. The second crushed will be the US dollar. The compounding federal debt will act as a steam roller, rolling everything in its path. The island of safety will be pure wealth, better known as gold. Patient subscribers will be rewarded for their patience. The great enemy will be the act of compounding pressing its weight of the US debt. Just as compounding turned rising money supply into fortunes, compounding the rising interest rates will turn fortunes into shoestrings.<\/p>\n
His traditional recommendation: Buy gold (which has done well this year). Look at this chart and the two lines I drew.<\/p>\n
The bottom line shows the trend from earlier this year. Note that we’re still on trend. What happened in July is that the rise went bubble-like. It started going through the roof. I’ve noticed this before — especially with stocks (e.g. 1999). It always signals an early and abrupt correction. Good idea to draw lines when we start to get too enamored with our own briliance.<\/p>\n It’s been a semi-awful year. Equities are back where they started. Worse was the volatility from end-June on.\u00a0 Many investors dumped shares, then bought them back, then dumped them. The losses for many were horrendous.<\/p>\n The S&P 500 showed the same volatility. It’s down, so far. At least the Dow is up, slightly.<\/p>\n Compare\u00a0 their performances to Vanguard’s high-yield tax-exempt fund — VWALX. Including its dividend, it’s up about 8% this year.<\/p>\n Look at NXC — a tax-free bond fund if you live in California. It pays nearly a 5% dividend. Bond funds are doing well.<\/p>\n 60 Minutes did a piece on corporate fraud.<\/strong><\/span><\/p>\n It wondered why there had been no convictions fromthe sub-prime bust. It focused on Countrywide and Citigroup and found compelling evidence that fraud had been committed. 60 Minutes interviewed a Justice Department spokesman who squirmed but could give no plausible reason why Justice had done nothing. He denied that the White House had called and suggested that Justice go easy on the financial community — Obama’s single biggest contributor. Watch it here.<\/strong><\/a><\/p>\n Amazing chart on on youth unemployment.<\/strong><\/span> From the Economist. These are average<\/strong> numbers. Unemployment in specific communities — e.g. Muslim enclaves — is\u00a0 much,\u00a0 much higher. It’s very sad.<\/p>\n![\"\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2011\/12\/GoldLinesThisYear.jpg\" "\\"GoldLinesThisYear\\"")
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