Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Euro Attack Sending Gold Lower

Commodities / Gold and Silver 2010 Mar 01, 2010 - 12:56 AM GMT

By: Howard_Katz

Commodities

Best Financial Markets Analysis ArticlePart of the explanation for the Dec.-Jan. decline in gold is the attack on the euro which is now going on in the media.  Indeed, the euro topped out very close to the exact day of the top in gold.  The market is thinking: decline in euro = rise in dollar = decline in gold.


First, let us ask what is the euro and how did it come to be?  Here there is a little historical background.  After we beat a little sense into them in 1941-45, the Germans gave up their attempt to become the master race and rejected all of the thinking which had led to the Hitler victory in 1933.  In 1949, they elected as chancellor a man who admired America, Conrad Adenauer, affectionately called der Alte or the Old Man,

Germans back at that time remembered the depreciation of the German mark in 1923, which had wiped out the middle class and destroyed their savings.  Adenauer admired America, in part, because of the stability of her currency.  The American dollar had kept its value from 1793 to 1933, meaning that average wholesale prices were the same in 1933 as they had been 140 years before.  In 1949, the depreciation of the U.S. dollar had only just begun, and America was regarded, at that time, as a relatively sound money country.

So Conrad Adenauer set up a German money system modeled on America.  In 1957, he created the Bundesbank.  The Bundesbank did print money, but it was committed to a policy of printing it in a very stingy fashion.  And then Germany, which had been bombed into rubble and overrun with foreign armies, emerged as the best economy in Europe.  German tourists stirred up resentment as they visited other countries in Europe.  “Hey, didn’t we just beat those guys?  How come they can afford to tour here, and we can’t afford to tour there?”

Even establishment economists spoke of “the German economic miracle.”  Even Sweden, which had escaped the devastation of the war completely, could not keep up with Germany.

Put simply, during the 19th century the two countries on a firm gold standard, America and Britain, had the two greatest economies in world history.  Observing this, the “economists” of the 20th century all turned against the gold standard.  All countries left the gold standard.  So during the second half of the 20th century the best economy in Europe and the fastest growing in the world was the one which issued the least paper money, the German economy.

After this period of massive irrationality, somebody finally did something sensible.  The nations of Europe noticed that Germany was beating the pants off of them.  So they decided to imitate the German monetary system.  They created a European Central Bank s (ECB) bound by the same rules as the Bundesbank and issued a new European currency, the euro, intended to be a currency which followed the same conservative rules as the German mark.

Today the ECB is fulfilling its planned role, and its head, Jean-Claude Trichet, is following the vision of Conrad Adenauer: a conservative central bank which issues only modest amounts of new money and takes as its only principle the battle against rising prices.

This is not easy to do.  There are vested interests who want to steal your wealth, and the counterfeiting ability of a central bank was intended to benefit such people.  These interests are trying to use the Greek crisis to destroy the basic concept of the euro.

What happened was that Greece did not abide by the rules to which she had agreed when she joined the euro zone.  She ran enormous budget deficits.  Here in the U.S., when we run large deficits, the Federal Reserve just counterfeits up some money and lends it to the Government.  This is done in such a manner as to steal from the ordinary people of the country and enrich a small group of wealthy people.  To trace the gains and losses from paper money is a bit complex; so I just sum it up by referring to the beneficiaries of this paper money as the paper aristocracy.

The key concept here, which made the whole system work, was the redefinition of “the economy” as “the interests of the paper aristocracy.”  For example, it has been beaten into your head ever since you were young that a depression is a general decline in the wealth of an entire country and here in America we had a Great Depression in the early 1930s.

Depression?  From 1929-34, real wages in this country rose.  People started to eat more meat.  Per capita meat consumption in 1930 was 129 lbs. per person; in 1934 it was 144 lbs. per person.  During the same period people switched from margarine to butter, and also gave more to charity.  During the early 1930s most Americans were getting richer.  The Great Depression was only a depression for the paper aristocracy.

The unemployment of the early 1930s was caused by a rise in real wages.  Nominal wages declined, but prices from 1930-33 fell faster (by about 30%).  As singer Eddie Cantor told us, “Potatoes are cheaper; tomatoes are cheaper.  Now’s the time to fall in love.”  It is true that the paper aristocracy was getting poorer. But that argument would not have gone over too well.  So the paper aristocracy (which controlled the media) argued that everyone was poorer.  And for this reason a big to do was made over unemployment.  Higher unemployment is the other side of the coin of higher real wages.  The exact same thing had happened in the 1870s.  At that time also, the Government reduced the money supply to eliminate the money which it had created to finance a war.  However, the unemployment of the 1870s had passed quickly, and the party in power had been re-elected in 1876.  Americans did not know they were in a depression.

Fast forward from the early ‘30s to the early ‘40s.  In the early ‘40s, Americans could not buy a new car or a new house.  Many food items were rationed.  Everyone in the country was limited to 3 gallons of gas a week.  Real wages fell, and women were forced, for economic reasons, to enter the work force. 

The early ‘40s were in truth a depression for the American people.  And yet, the early ‘40s are called a boom by the “economists” of the paper aristocracy to suggest that people were richer.  Take heart, dear gold bug, these are the people against whom you are competing in the financial markets.  They are stark, raving idiots.  To this day, they do not know that, when a group of nations go to war, suspend the activities of production and devote themselves to destruction, that it is natural for them to get poorer.  Being richer means that one has more economic goods.  If one has fewer goods, one is poorer.  A war may be worth fighting for reasons of morality or self interest, but it is not a way to get rich.  The war in which a poor country attacks a rich country and makes up for the normal destruction of war by taking the wealth of its defeated enemy may exist in theory.  But in history, such wars are few and far between.  Mostly, the rich and powerful country attacks the poor and weak country, beats the dickens out of it and then finds that there is nothing left to steal.  (The Japanese attack on the U.S. in 1941 was part of complex scenario arranged by FDR to get into war with Japan’s ally, Germany.  The Japanese were suckered in and then double crossed.  Japanese messages, intercepted and decoded by the U.S., told F.D.R. the exact date and place of the attack.  Read Admiral Kimmel’s Story, by Husband  Kimmel, who was scapegoated to cover for FDR, 1955.)

If Europe bails out Greece, it will be a victory for the paper aristocracies of the countries of Europe, and a defeat for the ordinary people.  The ECB will have to print money at a faster rate, and this will be bullish for gold.  If the ECB stands firm, it will be bullish for the euro and bearish for the dollar.  Either way the dollar price of gold is going up.  Note the triangle outlined in the chart above whose apex is at 132.  This might be the place where the euro turns.  Gold, which is rising against both the euro and the dollar, has already turned.  All that happened in Dec.-Jan. was that media hype scared traders and caused an intermediate decline.  There will be many such declines in this long bull market, and if you are going to be a successful gold bug, then you will have to be tough enough to ride them out.  The big money is made in the big move.

Gold has now completed the preparatory work for a massive move to the upside.  Who are you going to believe, the economists of the paper aristocracy or the gold bugs?  Your future life and well being depends on your answer.  Be long or be wrong.

To help you protect yourself against the paper aristocracy, I publish a fortnightly newsletter on the financial markets.  To protect yourself from paper money, you must be in real goods, principally commodities, stocks or real estate.  Real estate is a bit iffy right now.  There was a time for stocks in 1982 and will be at some distant point in the future, but the commodity pendulum tells us not to be in stocks today.  Now is the time for commodities, and gold is the most conservative, user friendly and technically well-behaved commodity there is.

To subscribe to the One-handed Economist, you may send $295 ($5 cash discount for using regular mail) to: The One-handed Economist, 614 Nashua St. #122, Milford, N.H. 03055.  Or you may visit my web site, www.thegoldspeculator.com and send $300 via Paypal.  Right now I am convinced that gold is ready for a big move, and I invite you to ride this move with me.  Thank you for your interest.

© 2010 Copyright Howard S. Katz - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules