Gold’s un-bubble

I know we’ve been blowing gold’s trumpet hard in recent times, but this article over at FOFOA is really well worth a read. 

A little excerpt,

1980? This Time is Different!

The only way for a purely symbolic fiat currency to survive the sudden, self-reinforcing and complete coup de grâce (death blow) from its nemesis, gold, is for the central banker to get ahead of spontaneously exploding interest rates without completely demolishing the economy on which it feeds like a mutant parasite.

In 1980 this was possible, but only barely, through a drastic rate increase to 20%, and only because the economy and the national debt load was much different at the time. If the same thing was tried today the economy and the government would come to a standstill, followed by a complete and utter collapse. For this reason it is not only unlikely, it is impossible.

In 1980, the US was a net creditor nation with a balance-of-payments surplus. The financial industry was small and stable. And the US was not subservient to foreign creditors. Today the national debt is over $12 Trillion, the US Treasury Secretary must kowtow to the Chinese, and the financial industry is a brittle behemoth built on derivative quicksand. [7]

Because of these fundamental differences in 1980, Paul Volcker was able to successfully defend the dollar against the same existential threat which WILL take it down this time. That threat is capital flow into the dollar’s lifelong nemesis, gold!

You can thank all the players and their activities as identified by GATA for making this time different. You can thank the mining giants that sold forward paper contracts for their future gold. You can thank our Central Bankers who leased half of their gold into the market to squash their foe. You can thank Rubin and Summers for their “Strong Dollar Policy”. You can thank Alan Greenspan for the easy green. You can thank them all for making damn sure that this time there is absolutely nothing the Fed will be able to do, nor will it want to!

Interest rates willrise with a vengeance, and soon. And the Fed will have no way to get out in front of them, and no desire to do so either, which would make the Fed look like the entity that single handedly destroyed the economy and the government’s golden egg-laying goose. No, the Fed will prefer to let Mr. Market destroy its Ponzi currency scam with the Chairman’s remote aspiration of avoiding the hangman’s noose-wielding angry mob outside with nothing left to lose.

Unlike 1980, this time gold will go up and stay up! I’m not saying there will not be a temporary overshoot in actual purchasing power. But with the specter of hyperinflation looming, it will not be worth the attempt to capture the overshoot. An exit from gold may just capture YOU in the wrong paper at the most wrong time in all of history!