Wednesday, April 20, 2011

Debt Bomb; Murderer of the Middle Class

Gold in New Zealand dollars: $1891.93 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $55.64 per oz
Previous all time high: $48.58
per oz

Interesting title you say. Bit far fetched?

Are the events going on the US now, in regard to the debt ceiling increase and the budget, going to cause the the world economy to implode?

The gold and silver prices are going to new record levels (gold) each day. Why?

The issue is the deficit of the US Government. Precious metals are looking to head much higher. The high price is unknown, just as the size of the debt bubble is unknown.

And this is going on as the European economies struggle with their own debt bomb. Perhaps this is a bigger issue than the US debt. It's closer to popping.

One troy ounce of gold and one troy ounce of silver (both 32.15gm) will always be the same. The price is the only thing that changes.  The price is changing because the amount of debt that we are accumulating is increasing.

Central Banks are pumping more credit into the system daily. Call it Quantitative Easing, call it monetizing the debt, or purchasing government bonds. The Debt bubble is inflating and it will burst. That's just a law of physics.

There is more money (credit) chasing the same hard assets, so price goes up. Gold and silver are our tea leafs or our Prophet on his soap-box. Telling us there is something acutely sick about the world economy.

As the US dollar devalues, more and more people are rushing to protect themselves in commodities and hard assets. Unfortunately, the middle-class have nowhere to go. The flood of money doesn't help them, they just get sideswiped by the increasing money supply (inflation) and find their grocery and fuel bill skyrocketing. They are getting 'murdered'.

The debt bomb will explode. Is it now?

I don't know, but what I do know is what goes up, must come down. This will affect the price of precious metals and that even in a deflation, they protect wealth.


Articles of interest:

World Bank president: 'One shock away from crisis'

See article here
BBC News

Britain will not help to bail out the Euro

See article here
The Telegraph

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