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Billionaire investor Warren Buffett said the U.S. economy has avoided a meltdown and appears on a slow path to recovery, but Congress must now deal with enormous amounts of debt that threaten to erode U.S. purchasing power.
In an opinion column published on Wednesday by the New York Times, Buffett wrote that he "resoundingly applauds" actions by the Federal Reserve and the Bush and Obama administrations to pump trillions of dollars into the financial system.
But the "gusher of federal money" has run up a high level of debt that could fuel inflation, he said.
In an opinion column published on Wednesday by the New York Times, Buffett wrote that he "resoundingly applauds" actions by the Federal Reserve and the Bush and Obama administrations to pump trillions of dollars into the financial system.
But the "gusher of federal money" has run up a high level of debt that could fuel inflation, he said.
- Newsmax
The battle to save economies goes on. The feared enemy is deflation. How do you conquer deflation?
Deflation, by definition, represents an insufficient amount of money dealing with too great a supply of goods. So the Bernanke solution is tried – create trillions in new money. Urge consumers to buy, buy, buy. And bury deflation in a rising tide of fiat money.
But wait - there's a problem. When you create all this new money you are also creating mountains of debt. How do you pay off this debt? You can renege on it (unthinkable) or you can refinance it (push the pay-off out to as many years into the future as possible) or you can systematically inflate it away. The easiest and time-tested way – inflate it away.
At some point, so much fiat "junk" money is created that people no longer trust it.
Deflation, by definition, represents an insufficient amount of money dealing with too great a supply of goods. So the Bernanke solution is tried – create trillions in new money. Urge consumers to buy, buy, buy. And bury deflation in a rising tide of fiat money.
But wait - there's a problem. When you create all this new money you are also creating mountains of debt. How do you pay off this debt? You can renege on it (unthinkable) or you can refinance it (push the pay-off out to as many years into the future as possible) or you can systematically inflate it away. The easiest and time-tested way – inflate it away.
At some point, so much fiat "junk" money is created that people no longer trust it.
- Richard Russell
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Watch Your Back on Wall Street, Seriously
By Dr. Steve Sjuggerud Wednesday, August 19, 2009 Watch Your Back on Wall Street, Seriously -
What Chinese Authorities Do Not Want You to See
By Tom Dyson Tuesday, August 18, 2009 What Chinese Authorities Do Not Want You to See -
How to Play the Collapse in Meat Prices
By Tom Dyson Monday, August 17, 2009 How to Play the Collapse in Meat Prices -
The Fight Between Inflation and Deflation is Over
By Porter Stansberry Saturday, August 15, 2009 The Fight Between Inflation and Deflation is Over -
Are You the Smart Money or the Dumb Money?
By Dr. Steve Sjuggerud Friday, August 14, 2009 Are You the Smart Money or the Dumb Money?
China Is About to Buy a lot More Silver...
By Matt BadialiThursday, August 20, 2009
Two years ago on August 21, China's government allowed its citizens to invest in an entirely new asset. It allowed them to invest in Hong Kong-listed stocks.
Hong Kong is a special region of China. It's one of the most dynamic, capitalistic places on Earth. The move from the government was a move toward "investment freedom" for the Chinese people.
On that day, Hong Kong's benchmark stock index rose 8.74%. Over the next two and a half months, it skyrocketed from 11,000 to over 20,000. It was a chapter in a story that you should get used to over the coming years: When the Chinese decide to invest in something, it causes giant ripples across the world.
This sort of situation is starting to happen again: This time it's happening in precious metals... especially silver.
The Chinese have a centuries-old affinity with silver. It began in the 1500s with the explosion of trade with Mexico via the Spanish galleons. These sailing ships were the super-tankers of their age. They made one voyage per year, carrying tea, silks, and spices from Asia to Mexico. The ships returned to Asia with gold and silver. After the Chinese threw off imperial rule in 1912, the country used silver money. Today, the Chinese word for "bank" means, "silver movement."
And now that China is becoming one of the richest, most dynamic capitalistic countries on Earth, this story is about to take a modern twist. The Chinese want silver again.
Thanks to a decade of wealth accumulated by regular Chinese citizens, there is plenty of cash to chase good investments. As the famed global investor Jim Rogers points out, these people are the best capitalists in the world. They are great savers. Chinese people want their money to work for them... so they invest.
I recently watched a China Central Television piece on gold investing... According to the program, there are some 400 million households in China, with an average ownership of about 0.1 ounces of gold. The average gold ownership in most emerging countries works out to about 1 ounce per household. The Chinese are beginning to make up that gap. From 2006 to 2007, domestic demand for gold rose 60% to around 700,000 ounces. Experts continue to urge citizens to put 3% to 5% of their net worth in precious metals.
Chinese government statistics show the average urban Chinese household has about $1,300 in disposable income to invest. While that doesn't seem like much, when you add up all those households, there's about $36 billion that could move into the next big investment opportunity – precious metals.
The government is now actively encouraging its citizens to buy gold and silver. They recently unveiled silver bullion for investing (you can see the video here). The premise is that gold was 50 times more expensive than silver in 2007... but is now 70 times more expensive.
The government is promoting silver bullion as an investment for regular citizens. And remember, a bunch of Chinese students laughed at U.S. Treasury Secretary Tim Geithner this year when he claimed the dollar was safe. The Chinese know the value of real assets... real money like gold and silver.
What does this mean for silver prices? It's impossible to say. But here's a little math that interests me. According to the Silver Institute, demand for silver in 2008 (for industry, jewelry, and investing) was 832 million ounces. At today's price, that's an $11.5 billion market... or about 1/3 the capital available in China alone.
The most important thing to understand about this situation is the Chinese people become freer every time the government loosens up a restriction. These people couldn't legally buy silver bars before. Now, they can. They're becoming richer... and they will continue to do so for decades.
Add this to a world already waking up to the grand currency debasement you've read about in DailyWealth (like here and here), and you have a recipe for the continuation of the big bull market in silver and other precious metals.
Good investing,
Matt Badiali
P.S. The Chinese government isn't just urging private citizens to invest in silver. It's also conducting a huge program to develop its domestic mining industry. And when the Chinese government gets behind an investment, it almost always skyrockets. To learn how to make the biggest gains from the coming China silver craze, click here.
Hong Kong is a special region of China. It's one of the most dynamic, capitalistic places on Earth. The move from the government was a move toward "investment freedom" for the Chinese people.
On that day, Hong Kong's benchmark stock index rose 8.74%. Over the next two and a half months, it skyrocketed from 11,000 to over 20,000. It was a chapter in a story that you should get used to over the coming years: When the Chinese decide to invest in something, it causes giant ripples across the world.
This sort of situation is starting to happen again: This time it's happening in precious metals... especially silver.
The Chinese have a centuries-old affinity with silver. It began in the 1500s with the explosion of trade with Mexico via the Spanish galleons. These sailing ships were the super-tankers of their age. They made one voyage per year, carrying tea, silks, and spices from Asia to Mexico. The ships returned to Asia with gold and silver. After the Chinese threw off imperial rule in 1912, the country used silver money. Today, the Chinese word for "bank" means, "silver movement."
And now that China is becoming one of the richest, most dynamic capitalistic countries on Earth, this story is about to take a modern twist. The Chinese want silver again.
Thanks to a decade of wealth accumulated by regular Chinese citizens, there is plenty of cash to chase good investments. As the famed global investor Jim Rogers points out, these people are the best capitalists in the world. They are great savers. Chinese people want their money to work for them... so they invest.
I recently watched a China Central Television piece on gold investing... According to the program, there are some 400 million households in China, with an average ownership of about 0.1 ounces of gold. The average gold ownership in most emerging countries works out to about 1 ounce per household. The Chinese are beginning to make up that gap. From 2006 to 2007, domestic demand for gold rose 60% to around 700,000 ounces. Experts continue to urge citizens to put 3% to 5% of their net worth in precious metals.
Chinese government statistics show the average urban Chinese household has about $1,300 in disposable income to invest. While that doesn't seem like much, when you add up all those households, there's about $36 billion that could move into the next big investment opportunity – precious metals.
The government is now actively encouraging its citizens to buy gold and silver. They recently unveiled silver bullion for investing (you can see the video here). The premise is that gold was 50 times more expensive than silver in 2007... but is now 70 times more expensive.
The government is promoting silver bullion as an investment for regular citizens. And remember, a bunch of Chinese students laughed at U.S. Treasury Secretary Tim Geithner this year when he claimed the dollar was safe. The Chinese know the value of real assets... real money like gold and silver.
What does this mean for silver prices? It's impossible to say. But here's a little math that interests me. According to the Silver Institute, demand for silver in 2008 (for industry, jewelry, and investing) was 832 million ounces. At today's price, that's an $11.5 billion market... or about 1/3 the capital available in China alone.
The most important thing to understand about this situation is the Chinese people become freer every time the government loosens up a restriction. These people couldn't legally buy silver bars before. Now, they can. They're becoming richer... and they will continue to do so for decades.
Add this to a world already waking up to the grand currency debasement you've read about in DailyWealth (like here and here), and you have a recipe for the continuation of the big bull market in silver and other precious metals.
Good investing,
Matt Badiali
P.S. The Chinese government isn't just urging private citizens to invest in silver. It's also conducting a huge program to develop its domestic mining industry. And when the Chinese government gets behind an investment, it almost always skyrockets. To learn how to make the biggest gains from the coming China silver craze, click here.
DID YOU SEE WARREN BUFFETT'S WARNING?
This week, legendary investor Warren Buffett sounded a public cry for the government to be careful of inflation. You can check out his widely read op-ed piece in the New York Times here.
To paraphrase Buffett, his warning goes like this: We've headed off financial disaster by doling out a bunch of free money and credit. But we'll need a smart performance by our politicians to prevent a big inflationary mess because of it.
Buffett's warning should scare the heck out of anyone with a lot of dollar savings in the bank. You see, we sat down yesterday to recall the number of times the government has made a huge mess of things by not turning in a smart performance. We were soon exhausted from all the thinking. Fannie Mae, Freddie Mac, Hurricane Katrina, Vietnam, Iraq, the tax code, and Social Security are a few things that came to mind.
All that got us thinking about this question: Are you going to own dollars and place your lot with a group of bureaucrats – most of whom have never lived outside of government la-la land or college – trying to successfully diffuse the biggest monetary bomb in history? Or are you going own gold and place your lot with the oldest, safest form of honest money? It's an easy choice.
To paraphrase Buffett, his warning goes like this: We've headed off financial disaster by doling out a bunch of free money and credit. But we'll need a smart performance by our politicians to prevent a big inflationary mess because of it.
Buffett's warning should scare the heck out of anyone with a lot of dollar savings in the bank. You see, we sat down yesterday to recall the number of times the government has made a huge mess of things by not turning in a smart performance. We were soon exhausted from all the thinking. Fannie Mae, Freddie Mac, Hurricane Katrina, Vietnam, Iraq, the tax code, and Social Security are a few things that came to mind.
All that got us thinking about this question: Are you going to own dollars and place your lot with a group of bureaucrats – most of whom have never lived outside of government la-la land or college – trying to successfully diffuse the biggest monetary bomb in history? Or are you going own gold and place your lot with the oldest, safest form of honest money? It's an easy choice.