12/16/09 Zurich, Switzerland – What happened in the gold market yesterday? The price of the yellow metal held steady.
So what do you do? Is this the dip you should buy?
Well, as we keep saying…it depends. A few months ago, our view was simpler. We trusted gold because we didn’t trust central bankers. We still trust gold. And we still don’t trust central bankers. But now we see that the central bankers are even more unreliable than we imagined. They are diligently trying to do the wrong thing, as usual. But they’re not very good at it.
They increase the monetary base at central banks. But they can’t melt the huge overhang of cash and credit frozen in the system. A depression has iced over the economy. The feds turn on the pumps, but the liquidity freezes up. This cold snap could last a long time. In fact, with the feds blocking necessary adjustments, it could turn into an Ice Age. And there’s not much they can do about it – except make the situation worse.
Bond yields are already rising. There is a report of rising prices at the producer level. It wouldn’t take much to spook lenders and force the Fed to retreat…just as Greece did.
What’s more, there are two major trends underway. Neither has fully expressed itself. The bear market that began in 2007, for example, never took stock prices down to the levels you’d expect at a major bottom. Far from it. That means a major bottom is still ahead. We have had Crisis I. We will probably have Crisis II in 2010. It will make it easier for the feds to finance their deficits. But it will make it harder for the rest of the world to pay its debts.
On the other hand, the other major trend that has not fully expressed itself is the bull market in gold. When we were in the US last week we saw an ad encouraging people to sell gold “while prices are high.” People think the rise in gold is a fluke. But markets make opinions. At the top, they will believe that higher gold prices are permanent. Then, we will see ads encouraging consumers to buy gold before the price goes higher.
But don’t expect the top in gold any time soon. The major top in gold may have to wait for the major bottom in stocks. And the whole process could take many years.
So, relax. Sit back. Keep your seatbelt buckled. And enjoy the depression.
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Laughable! How can you take yourself seriously with all the excellent data we’ve had lately? Stocks sold off WAY too much in the panic this year. That was the bottom and a great opportunity which it appears you missed. Keep sitting back and in your gloom while the economy, now firmly on track, continues to build steadily.
Here goes Harry again, I wonder if he works for the gov’t…
The only thing that is keeping this economy going is Credit Cards.
Who had a credit card in the 30′s?
How will Crisis II help the govt…I guess they can use it as an excuse to drop interest rates, but rates are already so low??
Harry is a televangelist. I wonder if he sold his 2 shares of GM before, or after the market crashed last fall.
LAGirl – forget interest rates. It’s about devalued dollars.
Borrow, borrow, borrow ,buy, buy, buy, more, more, more. Same old rat race.
Leo- he works for Ben.
Bill explain to me what happens when the Euro bubble bursts? What will the impact be on the dollar, gold and inflation?
Harry sure does like this blog.
Is Gold making a turnaround or is it merely a correction?
Somebody has to know. Even if it’s only Harry.
We have’t missed a thing cuz of BB. Some people just don’t get it! Do they? Live long and prosper every1…
I was thinking the same thing myself. I think that gold will ease off over the next 6 months, presenting an excellent opportunity to increase holdings. The stock market is currently overvalued as far as I am concerned. Everyone is trying to get in cheap, that they are refusing to look at the basic economic data. A country that relies on consumer spending for 70% of its economic activity, yet where the no’s unemployed is falling, and credit spending is in free fall, is in no way out of recession.
global greatest depression coming soon
9.8mh expression
9.8mh global total all systems collapse
very too soon ( as end of the world)