Blog

If the US government cannot attract enough savings to meet its borrowing needs, it has to ‘print’ the dollars it wants to spend, which is of course what quantitative easing is all about. But this printing comes with a cost, just like every episode of government currency creation throughout history. It is the cost of inflation, and eventually, hyperinflation.

January 9, 2010 – The total quantity of US dollars in circulation has declined over the past year.  As of December 31, 2009, M3 is $14.193 trillion compared to $14.317 trillion one year ago, based on preliminary estimates prepared by shadowstats.com. The nosedive in M3 annual growth rates from its peak of 17.4% in March 2008Read more

January 9, 2010 – Silver jumped out of the gate to begin 2010 with a flying start.  It climbed a remarkable 9.7% in this year’s first week of trading to end the week at $18.458.  From its $8.79 low barely fourteen months ago after the de-leveraging and mass liquidation of assets resulting from the LehmanRead more

January 2, 2010 – It is time to record my outlook for 2010, but before looking forward to the year ahead, I always like to first look back at what I was expecting for this past year.  My forecasts for 2009 were driven by my overall outlook for the economy, which is captured by theRead more

December 30, 2009 – The Federal Reserve needs more money to continue purchasing US government debt, the aggregate amount of which is soaring because of ballooning deficits.  But the Fed has a problem. The US government doesn’t pay its bills with ‘cash currency’, the green paper Americans carry around in their pocket.  So the FedRead more

The government spends more money than it is receiving in taxes, which forces it to borrow. As these deficits grow, they eventually exceed the market’s capacity or willingness to lend money to the government.

December 19, 2009 – Socialism has come to mean many different things to many people, but regardless how it is defined, in the months immediately ahead it will be put to a rigorous test.  The test will be visible to everyone as countries around the globe run out of money and confront overwhelming debts thatRead more

December 16, 2009 – One of the best explanations of fractional reserves comes from a polemical essay written in 1995 by Murray Rothbard, one of the prominent champions of the Austrian School of Economics: “Banks make money by literally creating money out of thin air, nowadays exclusively deposits rather than bank notes. This sort ofRead more

December 13, 2009 – In my last commentary I asked “What’s next for gold?”  Answering my own question, I noted that “$1200-$1400 is a reasonable target for the end of this year, but first, it seems likely that gold will re-test support.” In fact, gold kept climbing to above $1200, so my timing was off.  OnlyRead more

December 6, 2009 – I have not commented on the stocks of gold and silver mining companies since August 22nd because there hasn’t been much to say, but that has changed.  As expected, the XAU Index of mining stocks eventually broke through “resistance around the 152-154 area” and kept climbing.  However, I am now gettingRead more