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Monday, March 16, 2015

When will gold bottom out?

Everyone's giving up on gold.  Thank God.

A few more months of downtrend and there won't by many die hards left.

We'll be like the Japanese in the trees after WW II.  Still fighting the last war.

The butt of every financial joke.


Because that's what it will take.

As the dollar rockets higher and higher, it will be read by 99 percent of pundits as a sign the US economy has turned the corner and the economy is healthy again.

Rather than being read as a Global Economy collapsing under an overdose of nonredeemable debt, forcing capital to flee out of dying currencies into a currency being kept alive by daily transfusions of ever more potent debt - that is potent only by virtue of a magic printing press.

What is this magic printing press?  It is good faith.  Bona Fides.  The good faith that the US government will enforce laws fairly, will repay debts in a timely manner, and will keep the peace.

Large parts of European population  no longer believe in the Good Faith of the EEC.  Europe is suffering through a youth unemployment of 30-50 percent.  Spain's Podemos, France's Front National, Renzi's party in Italy all represent pluralities that are nationalist, isolationist and anti-establishment.

Japan still believes, though tiny Japan is losing faith.  Russia is imploding.  The Middle East is imploding.  South America is suffering terribly from the collapse in commodity prices.  Global growth in the first world has been below 2 percent for many years.

And that leaves the good old USA.  Also growing at 2 percent almost six years after that last recession.

What happens when then next recession hits with the dollar sky high, debt levels higher than they were in 2008, and interest rates at Zero?

You think there might be a dent in that Good Faith that has fled three corners of the earth and crowded into the last corner of the good old USA? 

It won't take much of a dent to send nervous capital fleeing once again.

But when Faith in America has been shaken where will it flee?

Where it has always fled.  The last refuge: Hard Assets.

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