September 8, 2009
NIA Officially Declares Gold and Silver Mania is Here
While the mainstream media has officially declared the U.S. recession over and an economic recovery here, NIA believes what the media sees as an economic recovery is nothing but inflation. We believe the U.S. recession has just begun, but declare that gold and silver mania is officially here. Of course, this is just the first inning of gold and silver mania. The mania won't reach its height until everybody you know who invested into the real estate bubble, abandons real estate and starts investing into gold and silver.
Last year during the U.S. financial crisis, Americans rushed out of stocks and real estate and into U.S. dollars as a safe haven. Unfortunately, these Americans who already lost so much in stocks and real estate, will soon get hit by a hyperinflation tidal wave that washes away what little wealth they have left. The only people who will survive are those who wake up and realize that gold and silver are the only real safe havens because the Federal Reserve can't print them out of thin air; gold and silver supplies will always be scarce.
Gold prices today reached a 18-month high of $1,009.40 per ounce and silver reached a 13-month high of $16.86 per ounce. While current gold and silver prices may seem expensive to some, they are still a long way off of their 1980 inflation adjusted highs of $2,300 and $130 per ounce respectively, and we believe inflation will soon get much worse than the 1970's.
The Federal Reserve has held interest rates at 0% for the past nine months while taking trillions of dollars of worthless mortgage-backed securities, student loans, credit card loans, and auto loans onto its balance sheet. This has caused a temporary bounce in our financial markets, with the Dow Jones index up 47% from its March low. The media sees rising stock prices as a sign the economy is recovering, when stocks are only recovering as a result of the Federal Reserve running its printing press non-stop and overloading the system with excess liquidity. We cannot have an economic recovery when real unemployment in the U.S. is now up to a 26-year high of 17%.
The Dow Jones priced in gold fell from a high of 44 in 1999 down to a low of 7 this year. Since then, the Dow to Gold ratio has bounced to 10 and is currently 9.5, but we believe the economy won't truly be at a bottom until the Dow to Gold ratio falls to 1 like it did in 1980. It took seven years from the time the Dow to Gold ratio fell to 7 in 1973, to when it finally bottomed at 1 in 1980. Therefore, don't expect to see gold prices meet the Dow Jones in the short-term, but we do believe it will happen within the next 5 to 10 years. In 1973, the Dow to Gold ratio saw a bounce from 7 to 10 just like it did this year, but its next move was down to 4 a year later. If history repeats itself, we could potentially see Dow 8,000 and Gold $2,000 in 2010.
The U.S. budget deficit this year is expected to reach $2 trillion. Obama talks about cutting the budget deficit in half by the end of his first term, but this won't be possible when interest rates will surely rise and cause the interest on our national debt to be trillions of dollars per year. It's insane to think that Obama wants to spend a reported $1 trillion a year on health care reform. Of course, if the government projects they will spend $1 trillion a year on health care, they really mean $2 trillion or more. There is no way this spending will be possible unless Bernanke prints the money up and creates massive inflation.
Gold and silver investing has for years been looked at as risky and speculative, but soon perceptions will change and Americans will look at dollars as being the riskiest asset of all. Our documentary Hyperinflation Nation surpassed 200,000 views today. We are happy to have already helped 200,000 people prepare for hyperinflation, but we need to help millions more so that the U.S. doesn't become the next Zimbabwe.
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