Friday, May 20, 2011

U.S. Government Spendaholicism Means $5,000 Gold Eventually: Forecast

In the "Gold and Silver Blog," a forecast is made for higher inflation and $5,000 gold. Ben Bernanke's words about moderating inflation are dismissed out of hand, with his track record on the housing bubble being used to justify doing so. It's also contrary to normal Fed operation:
The Fed's policy of pushing easy credit for the past 30 years to fuel economic growth has left Americans swimming in debt. The housing collapse and declining incomes have resulted in millions of mortgage defaults and underwater homeowners. The Government's attempt to bailout a collapsing economy and over leveraged banks and consumers has resulted in trillions of dollars in new debt and a $1.5 trillion deficit.

Government debt has exploded to the point where the solvency of the U.S. Government is now being questioned. Large tax increases to erase the deficit would spin the U.S. into a deep recession. The President and Congress lack the political will to cut spending. The U.S. has spent and borrowed itself to the eve of financial ruin and must "inflate or die" at this point.

The Fed, with the experience of two money printing campaigns already under its belt, will have no problems extending this practice....
That burst of money-printing will lead to an upward move in the precious metals that will dwarf the ones up 'til now.

The bullish call is plausible, but the only way gold could make a move to $5,000 would be if an all-out mania developed. It's possible, of course, but it wouldn't be sustained.

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