..time to short gold..%%$$$

[Scuba Chuck]

Laserboy, I'm impressed. Very knowledgeable. Not many readers of Steve Roach on this site I bet. Maroondude, you sound very "green", and I wish you the best of luck in your profession.

Besides the fall in the dollar - which is a very powerful reason enough to consider gold, there are two other very important reasons to be long gold.

First is rising inflation. Next to the falling dollar, it's the second most likely/probable trend going forward, one that will last for many years. Despite what Greenspan says when he flaps his lips - particularly the following quote:

From the Nov. 10 FOMC meetings...
"Inflation and longer-term inflation expectations remain well-contained."

Inflation is not well-contained. Consider this, the CPI (which serves the government, not the people), the most common index used to measure inflation, excludes two very important consumption components to human existence. Food & Energy. Think a significant rise in these two areas might affect middle income America's pocket books? The Dow Jones AIG Commodity index, which is made up of 84% food and energy, is up 22% annualized (74% total) over the past 2 years and 9 months. Does that look like it's contained? And if you doubt this trend will continue, consider this. As the Chinese and Indian economies continue to expand, what do you think their growing middle class will be spending their money on? Perhaps the lifestyle that Americans enjoy? We're talking about an increase of demand of basic commodities on a massive scale.

But besides demand, is any one paying attention to the amount of money being printed around the world? Despite the trillions of US dollars printed over the past 36 months by the US (Follow money supply), Japan printed $1.4 trillion dollars worth of yen just to buy US bonds. Printing money (paper) to buy someone else's money (paper). Most people aren't aware that there is a global currency war going on, and the winner is the one with the cheapest currency. Does anyone care that the governments' can print money at will, especially at the magnitude that they are doing it at?

Third reason is panic. Which I hope doesn't happen. But there could be a major global psychological shift away from the desire to own US paper dollars. Currently, 75% of the world reserve currencies are denominated in US dollars. As I said in a previous comment about the falling US dollar, study the current account deficit. The natural reaction for a significant current account deficit is the fear that we will not be able to cover our debts. That's when foreigners sell dollar denominated assets, which could lead to panic. I hate to rant too much about panic, because if this occurs, it is likely many years away, 7-15 years in total. But there are other reasons for panic as well. They all revolve around paper dollars.

To sum up, current reasons to consider gold as an investment
1. Falling US dollar
2. Rising Inflation
3. Panic

PS - Roach's best article of the past two years was written last week. "Why the dollar must fall."

I invest to help me keep my money. To gamble, I play poker.

[laserboy]

Well in all fairness to the fine folks at the Bureau of Labor and Statistics, how many of us actually spend money on trivial stuff like food and gasoline? [img]/images/graemlins/wink.gif[/img]

I think anyone with half a clue recognizes the fact that the CPI is a complete sham. Try telling someone in Southern California that housing, education, gasoline, and healthcare are increasing at 2%/year or whatever fraudulent statistic they are putting out. It's actually pretty mindboggling, the level of audacity the government has in reporting these statistics. Replacing the price of steak with the price of hamburger, claiming the price of gasoline isn't going up because the new federally mandated fuel additives have made gasoline "better", hedonic adjustments to show that the price of electronics keeps going down...

The most instructive thing about the CPI is to recognize the lengths to which the government will go to manipulate these statistics and exactly why they are doing it. They know inflation is rampant and yet are doing everything they can to suppress it. (Everything except balancing the budget and trade deficits/stop printing money at full steam - that would be too politically unpopular). When the central banks try to artificially suppress something against the will of the free markets, bet on the the free markets.

[Scuba Chuck]

Do I sense a hint of Bill Gross in your comments? Remember one thing. Not all Americans are intellectual. 70% of Americans think GW Bush found weapons of mass destruction in Iraq. The populous will believe anything. This is your opportunity. Carpe Diem. The world is your oyster, if you have the vision and patience. Good luck. Oh, you won't need that, just aviod the BIG MISTAKE.