Hyperinflation is “Assured”

From the April Edition of the Aden Letter, Dean Harry Schultz says

“This is the first time old friend Jim Sinclair has said hyperinflation is “assured” – IE, certain, not just possible or likely. 

Jim says: “The madness will not stop. The situation is over the edge. The damage is done. Hyperinflation is assured.” I’m afraid Jim is right. Governments could have prevented it, but didn’t want to pay the price. Fiat currencies will pay the price. The US dollar will both waterfall and lose its reserve currency status which in turn will ignite rampant inflation.

Jim adds: “The new reserve currency will be a virtual currency (an average of the major currencies). It will be (remotely) tied to gold via a worldwide M3 type liquidity. It won’t be convertible (will be used between central banks, not you and I). Today’s existing currencies will continue to be used but valued one to the other. A measure will be created similar to the old M3 (which reveals government pumping) but to reflect their entire past money creation. Upon initiation, the M3 level and the level of gold will be considered as 100 on the virtual index. Contributions of gold to BIS or IMF (agent of the virtual reserve currency) to participating currencies in the index will have to rise to meet rising liquidity. All situations, like now, will resolve themselves via a commodity currency. That is the entire story.”

Source

Gold Hits New Record on Inflation, Debt Fears

Gold and silver prices soared to record highs and commodities continued pushing upwards as investors seek safe havens amid growing fears about inflation and the debt crisis swamping Europe.

On April 8 the spot price of gold in U.S. dollars was hovering at around $1,470 per ounce, a new record for the metal. When adjusted for inflation, however, gold was actually much higher in the late 70s and early 80s.

Silver also continued its upward trend. By April 8 it hit a new 31-year high at over $40 per ounce. Analysts blamed inflation and worsening political and economic turmoil worldwide for the rush to buy precious metals.

"You tend to get movements like this into gold and silver on the type of risks we're seeing in the [Middle East and North Africa] region, and now the flare up in Europe's sovereign debt issues," Morgan Stanley analyst Joel Crane told Reuters. "It's investors doing what investors do."   

Worries about the purchasing power of paper money are playing a key role in the soaring prices too. Investors are becoming increasingly jittery as central banks around the world — especially the U.S. Federal Reserve — continue to inflate their currencies.

Combined with debt woes and chaos around the world, currency problems only compounded the rush into real assets.

“Inflation uncertainty and geopolitical risks are still high,” LGT Capital Management analyst Bayram Dincertold the Bloomberg news service. “Sovereign bankruptcy in the European periphery is also supporting gold prices.”

Wal-Mart CEO Bill Simon told USA Today earlier this week that “serious” inflation would be hitting retail prices soon. “We’re seeing cost increases starting to come through at a pretty rapid rate,” he said in the interview.

Other analysts have been warning for years about the looming rise in prices resulting from the expanded money supply. And some of the world’s most successful investors believe the Fed’s currency creation will keep going.

“The money printer will continue to print, that I'm sure," warned legendary investor Marc Faber, editor of the Gloom Boom & Doom report. In mid-March, Faber predicted many more rounds of “Quantitative Easing” — Fed speak for creating new money - and said there wasn’t really anything else the central bank could do at this point. He also said gold was still a good buy on March 31.

Adding to the high prices caused by inflation of the money supply and geopolitical turmoil is also a real increase in the demand for commodities driven by growing Asian economies and emerging markets.

“All central banks are up against the fact that we do have a commodity boom market, and even if they didn’t print money, the prices of things are going to continue to go much, much higher,” explained Jim Rogers, another prominent investor with a track record of accurate analyses. “But with the U.S. pouring gasoline over the fire, it’s going to be much more difficult for anybody to stop inflation. America is fanning it as best as it can, and it’s going to get worse.”

In addition to the spike in gold and silver, oil prices also rose sharply in recent days, hitting almost $125 per barrel by April 8. And prices of commodities across the board were continuing to climb through the end of the week - food and raw materials especially.

"High and volatile oil and food prices will, in particular, reverberate through the world economy, and they are likely to stay that way in 2011-2012," the Asian Development Bank said in an April 6 report cited by Reuters. "They will thus be a significant source of global inflation, especially in developing countries where recovery is firmly under way."  

Some analysts predict that with rising interest rates in China, Europe and eventually the U.S., gold and silver prices could dip again. But other experts expect the rise in precious metals to continue even with higher interest rates.

“Even though it’s been booming, silver is still 30 to 40 percent below its all-time high,” investor Rogers told Forbes. “If I’m right, agriculture prices are going to go much, much higher.”

A decade ago, gold was still below $300 per ounce. And on April 7, Standard Chartered bank predictedthat could rise to above $2,000 in a few years and approach $5,000 by 2020.

At this time last year, silver was at less than half of current prices. In 2000 it was close to $5 per ounce. And analysts expect the upward trend to continue, especially as the loss of the dollar’s purchasing power accelerates.

Source