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Gold Losing Battle Versus U.S. Dollar in 2012

Gold Losing Battle Versus U.S. Dollar in 2012

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Published by: InfrangibleBank on May 16, 2012
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Gold Losing Battle Versus U.S. Dollar In 2012
May 15th, 2012
Gold bears are exuberant these days. Their mood is epitomized by a recent Bloomberg headline: “Gold Erases Year’sGain as Europe Concern Boosts Dollar” –
which was then dutifully parroted by thousands of mainstream drones. Theimplication wa
s clear: gold was on its way down and the dollar is on its way “up”, so everyone should sell their gold.
 Such confidence (depending on the source) is a reflection of either serial dishonesty or extreme delusion. The dollar-shills at Bloomberg explained what was happening:
…concern that Europe’s debt 
-crisis is deepening strengthened the dollar [emphasis mine].
Let’s examine that short statement. Let’s totally put aside the fact that Europe’s debt
-crisis wascaused by the economicterrorism of Wall Street bankers. Again it is clear what Bloomberg is implying: the euro is weakening and the dollar isstrengthening.
I’ve dealt with this inherently and deliberately dishonest statement by the mainstream media on multiple occasions in
the pas
t. In the past 100 years (i.e. ever since the Federal Reserve was given the responsibility of “protecting the dollar”)
the U.S. dollar has lost 98% of its value. That rate of collapse has increased significantly in the past 40 years (i.e. eversince Nixon eliminated the last vestige of a gold standard).
The dollar is not “strengthening” –
that is an outright lie. It is simply plummeting a little less slowly than the other(worthless) paper. Example: two people jump off a 100-storey building at the same time. While falling, one of theindividuals climbs on top of the shoulders of the other one.
Has that individual “strengthened” himself? Obviously not. He will simply go “splat” a millisecond later.
 (Legitimate) gold commentators have explained this basic fact again and again, yet had little success in penetrating the
media’s brainwashing. So let me try a personal anecdote which might be more successful in reaching the gastrically
-inclined mind of the average North American.Having an unusually hot May day on the West Coast yesterday, I decided to opt for a cool submarine sandwich fordinner, and headed to Subway for the first time in several years. I ordered my favorite foot-long sandwich, and had itprepared exactly as I had done when I used to purchase su
b’s on a more regular basis.
 However where my memory clashed with reality was when I went to pay for my sub. The cashier asked for $8.50. Ipolitely informed her that she had quoted the wrong price
and pointed to the $4.50 posted on the wall, the price Iused to pay for my favorite sub.She politely corrected me that I had (carelessly) quoted the price for a six-inch sandwich, not the foot-long. I had yet
another experience with 21st century “sticker shock”: in just a few years my paper had (literally)
lost half its value.Then there is gold. A hundred years ago, a man could purchase a fine suit for an ounce of gold. Two thousand years ago,stylish Romans could purchase the finest toga for an ounce of gold. And today, despite the fact that gold has beenpushed more than 20% below its recent high, one could still buy a more-than-adequate suit for the $1550 currentlyquoted for an ounce of gold.Yet for 100 years, as the U.S. dollar has been relentlessly losing virtually all of its value, while gold has virtually perfectlypreserved its entire value we have been hearing a consistent message from the mainstream media: the U.S. dollar is a
“safe haven”, while gold is a “barbarous relic”.
How can the media tell us that the bankers’ paper, which has already lost almost all of its value is “safe”? How can the
media tell us that gold, which perfectly protects the wealth of the holder century after centu
ry is “too risky”? The media
As I wrote previously, gold is a perfect vessel for storing one’s wealth (safely), while the U.S. dollar is nothing more than
a “leaky bucket”. So when we hear the media maliciously whispering in our ears that we should
sell an asset because
“it’s losing value”, then obviously the first thing we should be dumping is anything and everything denominated in U.S.
dollars. Better late than never!Of course this is only one reason why the dishonest gold bears urge gold- and silver-holders to dump their preciousmetals (any time and every time the banking cabal gets some traction with their market-manipulation). Since the price
of gold is usually going up, the much more common reason why the mainstream Chicken Littles “warn us”
to sell our
gold is because it is a “bubble” –
precisely what they were clucking only a few months earlier.As I and many others have explained (again and again), the so-
called “record price” for gold a few months ago was
anything but. Even using the phon
y, “official” inflation numbers of the U.S. government, the price of gold would have
had to go to roughly $2500/oz just to equal its previous high from 1980.However, for any people who choose to use real inflation numbers to discount the price of gold (like John Williams of Shadowstats.com), then we calculate that the price of gold would have to rise to over $7000/oz just to equal the 1980price. Meanwhile, Bloomberg was recently reporting(out of the other side of its mouth) that the gold miners werestru
ggling to remain profitable at current prices. Some “bubble”!
Then there is the U.S. Treasuries market. Unlike other markets, we don’t have to discount Treasuries for inflation to
examine their prices, since Treasury prices are a direct, inverse function of interest rates. Put another way, as interestrates go to zero Treasuries (and any bonds) go totheir maximum theoretical price
since obviously lenders do not payborrowers to lend them money.What have we seen in the U.S. Treasuries market for the past four years? The Federal Reserve has permanently frozeninterest rates at 0% (the absolute maximum), and then printed-up countless $billions buying-up every (unwanted)Treasury in sight, to push the effective price for Treasuries closer and closer to its theoretical maximum.Now what do we see today in the U.S. Treasuries market today? Treasuries officials are busily restructuring the market,in anticipation of buyers lining up to pay higher-than-maximum prices. Talk about déjà vu!In 2006, after U.S. house prices had tripled in roughly a decade, Chief Market-Pumper B.S. Bernanke was getting in front
of microphones on a daily basis boasting about the U.S. “Goldilocks economy”, where house prices would just keepgoing up “forever”. However, there is one hu
ge difference between the delusional (dishonest?) words of B.S. Bernankein 2006 versus the delusional actions of Treasury officials today
in preparing for higher-than-maximum prices.House prices have no built-
in “maximum price”. It was at least theoretically possible that Bernanke’s market
could have continued for a little longer…and then the bubble would have burst. With the U.S. Treasuries market, this is
it: maximum prices already.Maximum prices, at a time when maximum supply is being dumped onto the market (and the supply continues toincrease). Maximum prices, despite the fact that one-by-one the buyers of U.S. Treasuries are dropping out of themarket. Indeed, the former largest buyer
is now a (competing) seller of Treasuries, further undercutting prices.In other words, if one were to construct some extreme, hypothetical example in order to illustrate the definition of anasset bubble in its most-
obvious form, it would be impossible to invent a better example than today’s U.S.

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