The Path to $10,000-an-Ounce Gold
By Dan Amoss
There’s a plausible path to $10,000 an ounce gold. And it doesn’t require a breakdown in civil society…
Speculators see central bankers as modern-day superheroes, able to push markets around with a single phrase. In the minds of most investors, Ben Bernanke, Mario Draghi and Masaaki Shirakawa might as well be wearing tights, masks and capes. These superhero central bankers continuously swoop down into the financial markets to defend them from downticks…and to insure that they always deliver capital gains.
The reality, of course, is that these superheroes are frauds. They have no superpowers…other than the power of mass delusion. The powers of Mario Draghi and the other central bankers in Europe are waning. Excess debt is like kryptonite: Each new wave of printing has less impact on markets. As the popular phrase goes: “This is a solvency problem, not a liquidity problem.”
In other words, new money supply cannot restore health to sick loans and government bonds. The only way to restore solvency to the system is to deflate the economy or slash the amount of debt in the system through mass bankruptcy.