You are all starting to see that it is the rare person who can block out all the noise and objectively put the pieces of the puzzle together. People are so damn biased they cannot see the truth. When it comes to the markets, I love it that people are biased, because this is exactly why 90% of people lose money. But in terms of the country I live in, the general lack of courage to stand up to rampant corruption in the government is going to affect my life in a negative way. So yea, I’m a little ticked off. It’s a fact that many of our government officials don’t pay income taxes. It’s a matter of the public record that the biggest supporters of “too big to fail” companies with dubious policies also coincidentally received the biggest political donations. You can’t make this stuff up. If you think this kind of corruption doesn’t get resolved through a crisis, then I really can’t help you. You will be blindsided by the coming crisis just like I’m sure you were blindsided in 2008.
The next unstoppable trend is the bankruptcy of state and local governments. There will likely be widespread protests in America, just like there are currently in Europe. Why are protests in Europe just starting to intensify if the debt crisis is over? Why is gold trading at $1310? Where are the jobs in a recession that supposedly ended 15 months ago? I mean seriously, do people believe the government anymore? 12 months ago you all may have thought I was a bit kooky and a tad bearish, but now you all see I was telling you the truth this entire time. This debt crisis is going to intensify and ill-conceived government responses will make things worse.
Structurally, American states and European Union countries aren’t all that different. They are both mandated to have balanced budgets; they both cannot print their own currency; and they both have bloated public sectors. This is a situation that can only be settled via currency devaluation. There is only so long you can tweak pension assumptions and play around with your accounting before the day of reckoning arrives. States are scrambling for cash and are resorting to sacrificing future productive capacity to hide leaks on their balance sheet.
At the end of the day, the protests in America and Europe reflect a major collapse in public confidence. What else do you call it when the Tea Party movement becomes mainstream? 21 months ago people were hailing the “Messiah” Obama with tears in their eyes about the coming hope and change. Now, he’s a lame duck President. So yes, events can change quickly. Sentiment can change quickly. And what I am telling you is that you ain’t seen nothing yet because the world operates dynamically. Confidence will collapse very quickly- this is just the way history flows.
The saturation in the public sector to me is no different than the saturation in the financial sector. Half the people in finance should just get into farming or construction and do something productive. Essentially what you saw the past year was a government and FASB-driven rally in the financials. But gee, let’s think for a second. What do government-sponsored entities do when their sponsors go broke? Most of these financials (aka prop desks) cannot create adequate returns on capital without unregulated products that have left behind a swath of destruction. Derivatives work fine as a hedge and to mitigate risk. But the way derivatives are being used is as a gambling tool and a means of robbing others. This is not a business model that can outperform in a normal environment.
At the end of the day, our leaders will just press the reset button. They will restructure the dollar and explain it away with esoteric terminology so people don’t realize they just got robbed. Gold is the canary in the coal mine- it is telling you the future. There is some major volatility in store for us. What I have been warning you about is unfolding as we speak. The permabulls on our economy have suddenly disappeared, as have the gold permabears. They are not quite extinct yet, but eventually they will go the way of the dodo.
This is about as uncertain of a political, social, and economic environment we have seen in some time. I genuinely hope you are all positioned in gold and are ready to buy on the next bout of weakness. It may be arriving soon. Keep a steady head because the markets are going to go bonkers. It is almost time for the masses to be enlightened by events that were foreseeable for years. Believe me, there is a huge bull’s eye on $1600 gold for this next leg up. Eventually we are going much higher. Predictions of $2500 gold were once laughable; they will soon be a fact.Follow