Thursday, January 13, 2011

Observations On The Government Spending Bubble, The Dollar and Government Lies

Here's a great chart I borrowed from:  HERE

The amount of debt represents the difference between Government revenues and Govt spending.  Does this chart show any signs of a Government that has the ability to reduce its spending deficit?  Now, the Fed balance sheet is growing multiple billions by the day, so the real spending deficit is even bigger than is represented by the above graphic.

I'm all for the tax cuts just passed, but it has to be offset by cuts in spending.  Not only will we NOT get cuts in spending, the budget grows by the day more quickly than pinocchio's nose.

Here is what the market thinks about the U.S. Government's ability to manage its finances:

(click on chart to enlarge)

For sure, we get some technical dead cat bounces along the way, and a reader always busts my stones when we get one (but is radio silent when the dollar resumes its descent lol), but Geither - in so many words with his China rhetoric yesterday - essentially told the world that the U.S. is going to print the dollar to much lower levels.  Bernanke is putting those words into action.  It's a serious Comedy of Errors.  Here's a great analysis of the U.S. dollar situation I sourced from King World News blog.  I agree with this view:  LINK

And what is even more humorous to me is that everyone in this country is discussing the dire multi-sovereign fiscal crisis going on in Europe.  The fact is that California alone is in worse shape than several countries over in Europe combined.  Then layer on top of that Illionois, NY, NJ, etc.  I don't have time to add up the numbers, but if you include the full present value of Federal entitlement liabilities, State pension unfunded-liabilities, State/municipal debt obligations and private debt in this country, we would all wonder why news about the situation in Europe is even in the news.  Besides, China has already said it will prevent a collapse in Europe.  I have not heard China make that proclamation about this country, nor will we after Geithner took his water pistol to a battle field of political rhetoric.  It was more pathetic than Poland's calvary trying to defend against Germany's tank and air attack.

Two of the biggest Government lies that grow and perpetuate on a monthly basis are the monthly employment and inflation reports.  For a great explanation of the golden truth about the real numbers, this interview with John Williams is a must-read:  Govt Lies

Those of us who have been investing in precious metals for at least the past decade have known all along that the Govt economic reports are bogus.  The analysis of this is now starting to seep into the mainstream media, to an extent.  Certainly not the most common sources of news like the night time local t.v. news broadcast or daily newspapers.  But it's getting a lot more exposure and acknowledgement in blogosphere. 

One more must-read.  This guy has become my favorite economic analyst and his writing style is superb:  Alisdair Macleod

One has to wonder how long it will be before the Obama people decide to curtail what is allowed to be posted on the gets more Orwellian by the day.  Protect yourself with gold and silver.


  1. On days like this it is hard for me not to pull an Elvis and fire a pistol at the computer/tv screen as I see some of my favorites (SLW, HL) get sold with reckless abandon.

    So I took that as a sign and added to positions. I now know the bottom is in since I have purchased short dated calls on SLW. I would say that shares will turn in about 2 weeks.

  2. I have targets for gold $1250 and silver $22.50 locked and loaded for back the truck up time. These drops are opportunity, not problems!

  3. GYC, I'm not saying those targets won't happen, but I would be surprised. We are overdue for a 200 dma correction, but I think the physical market is too strong in Asia/India for that to happen to the phys. It looks like the HUI maybe pullback to the 200 dma though. Here's the thing, a lot of the gold mining equities are midway between the 50 and 200 dma, but a lot of the silver stocks are just now breaking their 50's.

  4. Why is the 200 dma a "magic number"? Other than the fact that it might mean something because people BELIEVE it means something, I don't see why it should necessarily hold.

    As the stock market melts up ever higher, people are getting out of gold and their derivatives, such as the miners. It's as simple as that, IMO. They are nothing more than a "fear trade", and with the VIX around 15 while the S&P approaches 1300, fear is absent.

    You tell me when fear comes back into vogue, and I'll tell you when gold has bottomed.

  5. Nah. For 10 years now when we've had a big pullback after a big run, it has stopped and consolidated at or above the 200 dma. No magic there, just 10 years of data.

    It may overshoot to the downside for a few days. Been through that too. I think the HUI will get down to the 200 dma but many individual stocks will not and many of the juniors are outperforming this pullback. That is very bullish.

    Correction to your view: dumb and momentum-oriented Americans are unloading paper gold/silver/mining stock positions. The rest of the world is still buying.