Gold and Energy Advisor: Real Wealth #206, 11/18/2008

Prosperity by inflation will cost you-- your financial security!

Dear Subscribers,

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke appearing before the House Financial Services Committee this morning did their best to defend their management of the $700 billion financial bailout signed into law earlier this month, just one week after the Bush administration abandoned the original strategy behind the rescue.

Focusing the program on infusing billions into banks — and possibly other types of companies — to pump up their capital and bolster lending to customers was deemed a faster and more effective approach to stabilizing the financial system than buying rotten assets from financial institutions, the centerpiece of the original plan, Paulson said.

Buying those toxic debts would have required a "massive commitment" of the bailout money, Paulson said in testimony before the House Financial Services Committee. As economic and financial conditions quickly worsened, it became clear that the first installment of the money — $350 billion — for that purpose "simply isn't enough firepower," he said.

Secretary Paulson and Fed Chairman Bernanke are at every opportunity making clear the size and depth of the financial crisis we have seen unfold this past year. Their not pulling any punches and neither am I.

I can’t emphasize enough the dangerous impact this financial crisis will have on your investments, financial security and life.

The danger is not over. No where even close to over.

We are literally witnessing the creation of a massive inflationary wave that’s been designed to counteract a deflationary Tsunami that if left unchecked could literally collapse credit, consumer confidence and the value of currencies world wide including the U.S. Dollar.

Despite the danger there are still a great many Wall Street experts that are cheering these gentlemen and their strategy. A good many of these Wall Street experts are hanging their hats on a happy ending by pointing to the rise in the value of the dollar and the fall in the price of commodities, energy and gold in recent weeks,

These optimistic Wall Street experts insist we really shouldn’t be concerned about inflation, and that the trillions of Dollars, Euros, YEN, Yuan etc...being spend in bailouts and economic stimulus efforts are a short term event. Any inflation caused by this massive monetary creation can be handled later. The praise and argument for this very inflationary strategy engineered by Paulson and Bernanke is ...”We have to prevent a deflationary spiral at all costs.”

It’s a ridiculous argument because any economist worth his or her salt will tell you ...

Prosperity by inflation will cost you-- your financial security!

There’s no other way to look at what’s taking place. The Federal Reserve is pursuing the most inflationary monetary policy in its 95-year history. The Fed’s balance sheet is now more than 90% larger than it was just one a year ago.

Please stop and consider what I’m saying for a moment ....

The Federal Reserve has virtually doubled the supply of money in just one year. While normal increases usually run at 2% to 3% a year, we’re now growing the money supply by almost double.

Literally no major central bank in peace time has ever pursued such a massive inflationary policy.

Making matters worse, while the Federal Reserve isn’t expanding the money supply alone. The Fed has also been coordinating with Central Banks around the word and getting them to pump out hundreds of billions of freshly printed cash.

This coordinated monetary expansion is all in an single minded effort to stave off the kind of deflationary nightmare the United States and Europe experienced during the Great Depression of the 1930’s.

The problem of course is by avoiding a 1930’s style deflationary spiral by creating the biggest “Hail Mary” monetary expansion in human history could create an even greater problem.

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Ned Schmidt the publisher and editor of The Value View Gold Report, monthly, and Trading Thoughts was kind enough to send us this graph which really helps put the explosive monetary growth in perspective.

At the risk of being the party killer, this kind of monetary expansion could literally bring about the kind of monetary collapse usually reserved for post-apoplectic science fiction stories. In short, the cure may be worse than the disease. The danger of expanding the money supplies world wide at the rate and speed cannot be minimized. Here in the United States ...

The U.S. government is already running a deficit of almost $1.5 trillion, financed by selling debt to banks and investors.

This financial crisis comes at a time when the U.S. Budget deficit is running at $1.5 trillion a year and the total debt is reaching new highs. A massive $13 Trillion when you consider on and off the book debt. Throw on top of this our new President Elect’s promised spending programs and we may well be looking at a accumulated debt of $17 to $20 Trillion by the end of Obama’s first term.

Don’t let the acute sell off in precious metals; commodities and especially gold triggered by a desperate need for dollars cloud your vision. Literally trillions of dollars are being created out of air with absolutely nothing backing up this monetary expansion. It’s pure paper!

You MUST own PHYSICAL GOLD.... because when the reality of this monetary expansion is recognized the U.S. dollar will begin to fall in value steadily. In my November issue of the www.GoldandEnergyAdvisor.com I show you why this bail out and the Election of Barack Obama virtually guarantees $2,500 gold and $150 oil. Make sure you don’t miss this important issue.

Best Wishes,

James DiGeorgia

Founding Editor and Publisher

P.S. I have a wonderful group of MS 70 Gold 1 ounce American Eagles available at wholesale levels...Call my office at 866 697-4653 ext 1406.

Also, if you have an IRA my gold experts can put PHYSICAL GOLD into your IRA and as a gold and energy subscriber I will pay your first year fee's. Call my office....866 697-4653 ext 1406.