Tuesday, March 8, 2011

No inflation?

(Note:  I wrote this last night.  This morning I found a great post from James Turk on Eric King's blog: "I’m often asked by people when do I think they should sell their gold? I tell them this time around it’s going to be easy because you are not going to sell your gold, you’re going to spend it. In other words, gold will once again become currency.” Here's the LINK  Turk expresses the same view I have about the dollar, which is that it will sooner or later plummet quickly into worthlessness)

Hmmmm....this week is going to be a light posting week for me.  I moved apartments and I'll be skiing Wednesday.  I wanted to mention that a continual source of irritation for me is the pervasive commentary and economic analysis pointing to a strengthening economy based on an improving job market, higher wages and low inflation.  What planet are these people from?  Every labor market-related headline data is based on heavily manipulated, faulty data.  All you have to do is read through the details and footnotes of the reports to see that.  If the labor market is improving, how come the long term jobless benefits number AND the number of people on food stamps increases nearly every week?

And how about inflation.  I just paid $3.45/gallon for gasoline.  In late November I was paying 2.80 for the same octane from the same gas station.  That's a 23% increase.  Fortunately for me my gasoline expenditure is not yet a meaningful portion of my weekly income.  But for many millions in this country it is.  And it's not just gasoline.  All of my utility plus cable bills are increasing and so is my weekly food tab.  All you have to do is look at any commodities index chart to see that inflation is accelerating.  Ditto for the comments coming from any company that produces human necessities.  All of these so-called economic and Wall Street experts have to either be complete idiots or psychopathic liars to not see the accelerating trend in price inflation. 

And one of the biggest sources of inflation is the inflation of the Government spending deficit:  The federal government posted its largest monthly deficit in history in February, a $223 billion shortfall.  Here's the article, which was reported by several media sources:  LINK  Despite the rhetoric, the Obama Government will continue the growth of deficit spending and the growth in outstanding Treasury debt.  It is true that drastic cuts in spending will hurl our system into a nasty economic contraction.  But the alternative will make the eventual and inevitable economic bust even worse.  The dollar will collapse and everyone holding only paper currency will be pauperized (is that a word? lol). 

One of my best friends in NYC called me today asking for the best source to buy silver from.  I sent him to Tulving and told him to put as much as he can into silver and gold.  All of the major coin dealers are running thin on sovereign-minted silver coins and soon the premiums will be even higher.  I tried to convince him to cash out of some of his IRA and buy even more metal, but he can't get his mind around the idea of paying the penalty and taxes.  Of course, the alternative will be a mandatory force-feeding of Treasury annuities by the Government, which will eventually seize everyone's retirement plans and exchange the assets for worthless Government paper (not mine, I cashed out of mine slowly over the past 5 years and moved most of it into gold and silver that is held outside of the system).  Hopefully over the next several months I'll be able to convince my friend to start converting his IRAs into gold/silver.

In nearly 10 years of doing exclusively this sector, I've never seen gold/silver remain so resilient to the constant attacks of the big bank bullion cartels. Having traded all aspects of this sector during this time, it makes it difficult to not take profits and wait for a pullback. But we don't even have stops on our positions right now because all that will accomplish is to get stopped out by the volatility and then be left contemplating chasing the price higher in order to re-enter positions.  We are daytrading the volatility and making some nice trading profits, but we put everything back in place before the market closes each day.  My best advice for playing this market if you are unable to spend time trading it is to put on a thick pair of blinders and hold on tight!


  1. Hi Dave. Been reading more and more about the IRA confiscation possibility where the government forces us to buy a portion of Treasury bonds to fund our debt (if I have that right). What are the penelties and taxes for doing so? (I'm sure this has been asked before) Grazie!

  2. Great post Dave

    When the sheeple say the economy is getting better read this then get back to us.



  3. Ciao Gallo, come stai?

    You have to pay a 10% penalty off the top that is unavoidable. Then however much you take out will treated as ordinary income, so you'll pay whatever your marginal tax rate is for that year.

    But think about the alternative when the Govt annuitizes everyone's IRA/401k with Treasuries. Your IRA will eventually be worthless in dollar terms.

    Would you rather have a big tax bite now and move the money into metals, or have close to 0% of a big number down the road?

    Capisci? Avere un buon giornata!

  4. Need some discussion around this point -

    Bill Gross totally out of Treasuries - http://www.zerohedge.com/article/exclusive-bill-gross-dumps-all-treasuries-brings-total-government-related-holdings-zero-flee

    It probably isn't helping the bulls today in everything precious - however a few points

    Zerohedge summizes that QE3 is dead due to this. The assumption is that Gross will not protect his cash in other assets - such as precious metals??

    The other assumption is that we need QE3 for precious metals to be in a bull still??

    So either way - QE3 or not - there are only the precious metals assets - the rest is dead!

    The other thing is - it seems 36 for silver is a very, very important level regarding JPM and their silver derivatives??? Any insight?

    Thanks you very much

  5. I may publish a response to that. It is horrible - as usual - analysis by Durden. Why do you think Gross is loading up on mortgage paper? Tresuries pay so little that they're the same as holding cash. The Fed has to keep buying those so QE3 will for sure happen. But QE's will devalue the dollar which means Gross is saying Treasuries are useless.

    BUT, housing will be so bad by this summer that the Fed will ALSO include a big program to buy mortgages. Either directly or indirectly by printing money and giving to FNM/FRE/Govt to buy mortgages back. You can make a lot more buying mortgages at a discount if I'm right.

    So QE3 will happen and it will be even more profound than QE2

  6. Hi Dave, always enjoy reading your blog, but this is my first time commenting.

    On the topic of inflation, I have been keeping track of my household expenses since 2009, and comparing it to the "official" CPI rate. Last year my cost of living increased 8% vs. the CPI's 1.5%. This year, mostly due to the 23%+ rise in gas, my expenses have increased 3.3%. (So far in 2011, gas has gone up about $0.01 per day!)

    If anyone is interested, I have posted my "Personal CPI" numbers at verifythecpi.blogspot.com.

  7. one point on tax penalty on Withdrawal from IRA--the 10% tax is only if you are under 59.5 years old.

  8. As has been pointed out over and over again, there is NO OTHER BUYER for this crap paper than the Fed. For them to stop buying, it would bring the whole thing down on top of their heads.

    The owners of the Fed:
    A. Own all the gold that was once in Ft. Knox, and probably now in villas throughout Europe.
    B. Don't give a shit about inflation in the USSA because of A and their liquid wealth is in Euros, Swiss Francs, and probably Yuan.

    Hilarious how few people understand this simple issue and still believe that we are in deflation.

  9. Si. Io capisco molto bene...adesso:) Grazie mille ancora, Dave.

  10. Dave,

    Don't you think at least they'll pause after QE2 for a few months before they continue?

    They would want to see how the markets react right? Obviously, then there'll be deflation in stocks/commodities/bonds, because all this sloshing liquidity now stops.

    I think it is in the best interests of the banking class to take a breather after QE2, since the path towards endless QE is surely a destruction of the central banking system.

    your thoughts?


  11. Thanks for your comments on the Gross story.

    I don't give a shit about the dollar effecting the local American economy but globally its just too frustrating for words what an effect America wants to enforce globally. The dollar index is the most outdated measurement there is. It compares crap with crap.

    In the last 18months in South African rand terms the gold price has gone nowhere. The rand used to be one of the riskiest currencies around and even as we watch the dollar bounce in the last few days it hasn't been able to do that against the rand, even in the face of all the ME crap.

    So then who actually makes investment decisions in the USA?? It seems every single data point and statistic is outdated and faulty.

  12. great site:


  13. Until I see tons (or any for that matter) of advertisements for low interest rate loans to purchase silver and gold...I will continue to assume no "bubble" can be blown: hence, buy silver, buy gold, heck, buy platinum, rare gems and art.

    Inflation is about to make them launch into the stratosphere.

    Simple, yes? No credit: no bubble.