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Trading Lessons

How To Use Gold And Silver To Get Rich On Inflation 

Commodities / Gold and Silver 2011 Feb 23, 2011 - 05:39 AM GMT

By: Bob_Clark

Commodities Best Financial Markets Analysis ArticleBelow, I look at what is driving the precious metals markets. The US government and the Fat Boys that control the Federal Reserve banking system, both benefit from inflation. We can also benefit, by understanding who, is doing what, to who.
In the second part, I suggest a way to use loose money and low interest rates to protect us from inflation.


A hunger for democracy?
Inflation is starting to show up in the producer price index.  This month the consumer price index showed that the producers are starting to pass their increased input cost on to the end users.  As long as they are successful at doing that, then inflation can spiral higher.  We have seen similar inflation data in China, India and the United Kingdom.  

As the inflationary pot sits bubbling on the burner of quantitative easing, the poorer countries will be flash points, where inflation gives no sanctuary.  Only starvation, sickness and death. When you live in grinding poverty, subsisting on $2.00 a day and spending 80 percent of your income on food.  When your teeth are rotting in your head and your children, dressed in rags, are crying themselves to sleep with empty bellies, you don't think much about buying gold or silver as an inflation hedge.  

Most of the world's people need help from their governments to survive.  Irresponsible monetary expansion has made that possible for most countries. Until now. The illusion of prosperity has set the world up for major trouble. 

The media talks of a world, hungry for democracy.  They miss the point.  The world is just hungry, and getting hungrier. 

None of these counties have ever had democracies and most never will.  Not for long.

There will be constant fighting. Tribal warfare. Dislocation and chaos.  

It's coming. 

The truth is, we are about to see the same fate befall many so called democratic countries as well, including the United States.  In fact, it is already happening.  Even in "inflation central", the standard of living is collapsing.  States and municipalities are bankrupt now. They are cutting subsidies.  Laying off the people that supply essential services.  For example, at the same time that they reduce police budgets and staff, they are letting felons out of prison because they can't afford to hold them.

The dictatorial governments are not passing enough money through to their citizens.  They are taking too big a cut for themselves.  This isn't going away.  Times will get harder. Oppressive regimes will have to take a hard line against protesters.


Don't kid yourself, the Fat Boys are an oppressive regime. I include the federal reserve banking system in the Fat Boy's empire. The thin edge of the wedge is already in the crack.

The truth is that only a few benefit from inflation.  Most are harmed. 

This is an organized inflation to benefit the rich.  They don't care who they harm, anymore than Gaddafi does.

The government and the Federal reserve system, form a dangerous parasitic-symbiotic relationship that we all have to fear and protect ourselves from.  The rich want more and they have found a way to get it. Now they can print as much money as they want. They can't just put the money in their pockets however.  That would be counterfeiting.  They need to launder it first.

The Fat Boys have slammed the trap shut.

They have found the perfect laundry.  The people of the United States and their government. These patsies are abetting a perfect crime.  They have bankrupted themselves, but don't want to live the life style they are doomed to.  Like the people of Egypt, they have a hunger.

The US government desperately needs a way out of the debt trap they have created, before the people start rioting in the streets. 

Hush money.

The Fat Boys have hooked the country's leadership on the idea that we need more inflation. 

It gives the government the resources they need to fiscally bribe the people.  It keeps them from going hungry and pouring into the streets.  That is just one benefit. 
 
The Federal reserve finances the country's day to day operations and drives up prices.  At the same time,  the government applies the only weapon they have that can dig them out of the debt trap.  They tax the inflation that the Fed is creating. 

It is a hidden tax, that uses inflation to take a huge cut of everything we make in the markets. The more we hedge by owning hard assets, the more it appears that we make.  The more we make, the more tax we pay. Therefore, the bigger the government's tax base.  Even though your gains may only keep even with inflation, you have to pay the government 30 percent on your illusory gains.   

Here is the beautiful part for the Fat Boys. 

Because the government wants to keep the illusion of legitimacy, they are not printing the money themselves. The Fed has been given permission to print money out of thin air.  Then lend it to the Government. Then the government gives the Fat Boys back their cut (interest),  lets use 3 percent for illustration purposes.  By printing 600 billion for the government, they have counterfeited roughly 20 billion per year for themselves.  Remember it is per year. There is no way the government is ever going to pay it back. In fact, it will increase every year as the 20 billion gets added to the deficit.  Not to mention all the old debt that will need to be rolled over and the new debt that will be created. It will all have to be financed by the Fed.

The Fed has no reason to lend to the general public now, unless they are part of the elite.  In fact they have more reasons not to. The longer the economy founders, the more government fiscal stimulus will be needed.  That means more QEs and that means the Fed's cut gets even bigger.  

Disingenuous at best.

Bernanke is warning the US government that they have to be more fiscally responsible, all the while knowing full well it is not possible.  Why ?  It is a form of character assassination, which scares away bona fide lenders and makes sure that interest rates on US treasuries stay high or go higher.  Higher rates support the dollar and that is what they are counterfeiting.

You ask, why are long term rates going up, not down, as the Fed buys Government debt? Think about it. Who benefits from higher rates.

Below is a chart and some of the commentary from an article I wrote last December in an M.O. article entitled "What is wrong with gold" . Beneath that is a chart that brings us up to the present. I have colored what happened to the price since December 21, in red.  I used the gld chart but the same basic parameters apply to gold itself. They also apply to silver and slv.  

Here is the conclusion I wrote, from that article.
..........................................................................................
I am looking for another quick swing toward the highs, that may reach above 1400. Then I expect a swipe down toward the October lows (128ish). That is where I will be backing up the truck.
.........................................................................................

                                 

 
Late translation says "good to go"

In the above chart, we see that the low was essentially 128 and the low came in on time. Since then we have gone up steadily for almost a full month. The blue dots mark 1 month cycles. Notice that we are due for a 1 month low now.  When we go up this late in a cycle, it is called late translation and indicates that the larger cycles, such as the 3 month and the 6 month, are pushing up and adding lift.  That is what we were expecting to occur.  So far it seems to be confirmed.

If you look back at what happened in August, you get an idea of what I mean. If the market is as strong as it telling us, we shouldn't fall much below 132.50 when we make this month's low. We have to watch what happens of course, but for now it looks good to go.

We have a minimum target of $148 which translates into nearly $1500 on bullion.

The higher gold goes (and inflation in general) the more the taxman rakes in, so we have the Fed and the government on our side.

To beat the inflation tax you need to use leverage. If inflation is going to wipe out our savings, it follows that it will also wipe out our debts.  As long as money is available at interest rates below the inflation rate, it is almost free.  That is what the fat boys are doing.

Leverage beats the inflation tax. It is how we can hedge inflation and grow our wealth.

One example. 

One of my students (Ben) has grown his account from $90K to $325K in less than 6 months.  The $90k was borrow to start with and he used margin debt as well. When Ben pays back the money he borrow. The lender will not be able to buy as much with the money as he could when the loan was made. The lender pays the inflation tax. The money that Ben has in his account after the loan is paid back, is money out of thin air.  Instead of illusory profits. He has made real profits, on illusory debt.

There is just one small problem. 

To use leverage requires a higher skill set.  You need to know where to enter and how to minimize risk. I have created a powerful set of videos that will teach you those skills. I also teach one on one courses, in real time, using real money. My money.

I never use indicators. moving averages etc.

Conventional technical analysis doesn't work. If it did, making money trading would be easy. Instead the Fat Boys prey on traders that use indicators. 

It is much more important to know how to find the trigger points that the Fat boys use in their algorithms. You have to understand market structure and manipulation to be profitable.

The Fat Boys control the markets and if you are not with them, then you are a victim. 

Please go to my web site or Email me. 

    Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

    © 2011 Copyright Bob Clark - 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.


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