Gold Report from MyCoinBroker.com

"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." Fed Chairman Ben Bernanke

"Using the St. Louis Fed's Adjusted Monetary Base (effectively total reserves plus M1 cash in circulation), the year-to-year growth in the latest period was an unprecedented 38.0%. In the period since 1919, the previous high growth rate was 28% in September 1939, as the U.S. was building up industry for the evolving war in Europe." - John Williams

Buying Opportunity and Hedge Against Uncertainty Ahead
Joseph Brusuelas
Gold's failure to advance in price is perhaps the most notable characteristic of the credit crisis, but Brusuelas believes the current gold price represents a buying opportunity. He is calling for gold to spike towards $1,100 in 2009, with the potential for a much larger move over the longer term. Money supply in the US is up 18.6% year over year; the Fed has pumped over $1 trillion into the economy, and the US government is at risk of running a $2-trillion deficit during 2009. The steps taken to prevent a complete meltdown of the global banking system are damaging the credibility of central banks, and while disinflation caused by deleveraging is the current problem, inflation will eventually overtake it. When it does, gold supply will fall short of paper money supply, and in the face of profound economic uncertainty, financial instability and geopolitical turbulence, gold will reassert itself as the preferred safe haven of savvy investors. Two scenarios could limit gold's upside: a Japanese-style deflation in the US; or European, Asian and emerging markets suffering worse financial stresses than the US. The dramatic rise in the US dollar resulted from a reactionary move into Treasuries by global investors used to dollar hegemony. Once volatility abates and investors can begin to evaluate the extent to which American, European and other governments have moved to stem the tide, Brusuelas expects that gold will replace the dollar as the preferred hedge against uncertainty.

Dollar-Driven Gold Plunge
Adam Hamilton
During this brutal stock market sell-off, gold has not been spared. Month-to-date, it is down a staggering 15.6%. Since this type of market should have led to a frenzy of gold buying, gold investors are wondering just what happened. In fact, there has been a frenzy of gold buying; bullion shortages are being reported around the world. But despite soaring physical demand, futures traders have been selling aggressively, thus driving down the price. Why are traders selling in the face of the worst financial panic in decades? Forced selling to meet margin calls is one factor; if you own gold and receive a margin call from your broker, you have to sell what you can and gold is one of the most liquid assets in the world. Individuals and hedge funds alike getting into margin and leverage trouble were forced to unwind gold positions to raise cash fast. Traders not in trouble were selling too, in response to the extraordinary surge in the US dollar, because to most gold is an anti-dollar call, rather than a unique asset with its own strong fundamental merits. Hamilton gives a comprehensive explanation of why the US dollar is experiencing a surging rise in value, and the consequent effect on US Treasuries, foreign currencies and gold. Extreme circumstances, in the form of global financial panic, are driving the sharp rally in the US dollar, and this has had a negative effect on gold. But once the panic abates and money managers all over the world start chasing good returns again, the Treasury Bill buying frenzy will reverse hard. When that happens, the US dollar will sink again, reflecting its dismal fundamentals, and gold will really shine.

Even Gold Can't Hedge a Nuclear Explosion
Bob Moriarty
If you think gold going down $40 in a day is exciting, writes Moriarty, wait a few days until it starts going up. Gold has dropped in price recently, along with everything else, despite its reputation as an insurance policy against financial chaos. In fact, it has been a hedge, but an imperfect one. In Canadian, Australian and British currencies, gold is hitting new record highs. Hedge funds that used gold as a hedge made money on that investment before chaos set in, and they were forced to sell because their other holdings were leveraged 50:1. When those tanked, hedge funds sold gold because they could. Gold has gone down in US-dollar terms because it was being used as a hedge and it was the last thing of value bankrupt hedge funds could sell. Meanwhile the economic crisis continues: governments are throwing money at the problem, and making it worse. There seem to be no consequences for stupidity, and endless bailouts would indicate that President Bush's new mantra should be "No chump left behind." The ultimate solution to the madness is going back to a system where all currencies are tied to gold, but for the moment individuals can buy insurance in the form of physical gold and silver. The system is falling apart; there are dark days ahead and it is time to be very prudent. While gold may not be a perfect hedge, it is better than anything else.

US Dollar Death Dance
Jim Willie
The US dollar has had a remarkable rally thanks to huge liquidations - speculative positions, deleveraging, payouts of defaulted bonds, and more. The US is entering not a recession, but an unprecedented disintegration. Liquidation is the opposite of investment, and precedes job cuts, not job creation. Willie discusses the factors behind the US dollar's rally, worsening dollar fundamentals, the widening gap between the physical gold market and the paper gold market, the recent meeting of G8 finance ministers in Brussels, Arab goals and motives, erosion of US Treasury Bond demand, deserved disrespect for Alan Greenspan, no solutions for the economy from bailouts; interrupted distribution channels; and dishonour among bankers. As for gold, Willie reports that last week in Toronto a major off-market gold transaction took place. The price: $1,075 per ounce. The volume: the multi-million dollar range. There was no US involvement in the transaction, and the settlement was in euros. Willie believes this transaction was made by a large financial entity with global activity and ties to central banks, perhaps as part of an enormous repositioning by the groups that will participate in a new, gold-backed currency. The asylum managers are losing control of their paper-physical arbitrage, he writes; watch the gold and silver lease rates, which have more than tripled in the last two months, and which precede price movement.

Shocked
David Chapman
Former Fed Chairman Alan Greenspan says he is "shocked" by the credit crisis. Chapman is shocked that Greenspan could have been so naive for so long. Allowing interest rates to remain at rock bottom for such an extended period while printing money apace was like throwing gasoline on a fire. Still, the decline has happened very quickly, with no sector left unscathed. Chapman discusses Greenspan's legacy and whether or not the US is bankrupt. A crisis that still looms is the collapse of the US dollar, and along with it the bond market. The dollar's recent rise is easily explained: as hedge funds and others unwind positions in foreign currencies and repatriate the process, the dollar climbs. The yen carry trade is also unwinding, resulting in an even more spectacular rise in the yen. Those who believe gold is the ultimate hedge have been disappointed recently, but Chapman would rather hold the yellow metal than US dollars. After all, gold is a hard currency with a 3,000-year history and no liability, therefore it will never default. The dollar is a paper currency with a 200-year history and $10 trillion - at least - of debt behind it. It is an IOU whose value can only fall over time. While gold's current problems are temporary, the US dollar's problems may be terminal. As for markets, there are baby bears, papa bears and mama bears. Today's bear has all the characteristics of being a mama bear, a rare creature last seen in the 1930s and the 1970s. If it is, we have Alan Greenspan to thank. Alan, writes Chapman, we are shocked by your gift.

Inflation vs Deflation... Nope - Stagflation
Krassimir Petrov, PhD
The Fed and the media continue to relentlessly propagate the myth that the slowing US and global economy will ease inflationary pressures. In addition, the credit crisis and the ongoing collapse in commodity prices have encouraged deflationists to reiterate their beliefs that deflation is inevitable. These views represent two different approaches to the same myth. Investors should not fall for it. Given the recent price drop in a broad range of commodities, we are assured that inflation is no longer a problem; that the real threat is deflation; that inflation is transitory and that inflationary expectations are "well anchored". We are told that "recessions cure inflations." Nothing, however, could be further from the truth. On the contrary, given the current macroeconomic environment, the massive government stimulus of hundreds of billions of dollars in rebate cheques and a series of bailouts will most certainly translate into much higher inflation and little or no economic growth. We must be prepared for the reality that the government's cure will be worse than the disease. In coming years, investors must expect a lot more inflation and adjust their portfolios accordingly; their survival depends on it. Petrov outlines the importance of the inflation-deflation debate, interprets its meaning, provides historical evidence, and presents the arguments for future economic development with its investment implications.