It’s not as far fetched as you might think.
One source predicts that it could happen
within the next one to three years.
History actually shows that it has
happened in the past and it looks like it’s
ready to come about again. We could see
the price of Gold skyrocket to over $5,000
A huge new buyer is about to enter the gold market. That could be a year off, maybe two, or three at the most.
I’ll give you a hint who: your taxes will pay for it. If true, it could send the price of the barbarous relic soaring above $5,000 an ounce, a target long led by the Armageddon crowd.
When I spoke to a senior official at the Federal Reserve the other day, I couldn’t believe what I was hearing.
If the American economy moves into the next recession with interest rates already near zero, the markets will take the interest rates for all interest bearing securities well into negative numbers. At that point, our central bank’s primary tool for stimulating US businesses will become utterly useless, ineffective, and impotent.
What else is in the tool bag?
How about large-scale purchases of Gold (GLD)?
You are probably as shocked as I am with this possibility. But there is a rock-solid logic to the plan. As solid as the vault at Fort Knox.
The idea is to create asset price inflation that will spread to the rest of the economy. It already did this with great success from 2009 to 2014 with quantitative easing, whereby almost every class of debt securities were hoovered up by the government.
“QE on steroids”, to be implemented only after overnight rates go negative, would involve large scale purchases of not only gold, but stocks, government bonds, and exchange-traded funds as well.
If you think I’ve been smoking California’s largest cash export (it’s not the sunshine), you would be in error. I should point out that the Japanese government is already pursuing QE to this extent, at least in terms of equity type investments.
And, as the history buff that I am, I can tell you that it has been done in the US as well, with tremendous results.
If you thought that President Obama had it rough when he came into office in 2009, it was nothing compared to what Franklin Delano Roosevelt inherited. The country was in its fourth year of the Great Depression. US GDP had cratered by 43%, consumer prices crashed by 24%, the unemployment rate was 25%, and stock prices vaporized by 90%. Mass starvation loomed. Drastic measures were called for.
FDR issued Executive Order 6102 banning private ownership of gold, ordering them to sell their holding to the US Treasury at a lowly $20.67 an ounce. He then urged congress to pass the Gold Reserve Act of 1934, which instantly revalued the government’s holdings at $35.00, an increase of 69.32%. These and other measures caused the value of America’s gold holdings to leap from $4 to $12 billion.
Filed under: Commodities