Debt Saturation Ensures Much Higher Gold and Silver

GoldSeek

It is once again a great pleasure to address the attendees at this conference following the GATA Workshop I participated in this morning. I'd like to thank Bill Murphy for his kind introduction. As many of you may know, Bill and I have become great friends as the result of our mutual struggles in the gold and silver markets over the past 13 years. That struggle has simultaneously represented the most exhilarating and the most frustrating experience in my nearly 49 years in the investment business.

After acknowledging my longevity in the business, I'd love to say that I started when I was 12 years old but that unfortunately is not true. I'm just getting old, which, at least so far, beats the alternative.

The main subject I want to address today is the staggering debt situation throughout the industrialized world and the impact it will have on the value of paper money and by extension, gold and silver. However, before I get to that topic, I would like to make a few comments about the price action of gold and silver in the last four months of 2011, price action that incidentally set the stage for the explosive price rises we've seen in the first six weeks of this year.

Up until Labor Day last year, gold was enjoying an excellent year, rising by comfortably over 30 percent in price in eight months. This strong advance reflected the turmoil in Europe, the U.S. debt rating downgrade, excessive money creation worldwide, and widespread economic and financial deterioration generally. Ergo, gold was acting exactly as it should in these circumstances.

However, this also represented the worst nightmare for the powers that be, essentially revealing to the public that all was not well.

Thus, in response, the Western world governments, their central banks, and their bullion bank allies sprung into action. Gold plummeted nearly $300 in a month and silver dropped by a third despite not an iota of visible improvement in the world economic and financial backdrop. It was just the same tired old criminal drill that we have seen throughout the more than decade long powerful bull market in gold and silver. These muggings took place primarily in the paper markets of the LBMA and the COMEX while the regulators, most particularly the Commodity Futures Trading Commission here in the U.S., blissfully slept on.

Then, after gold subsequently re-established its equilibrium above $1,700 and silver bounced back into the mid 30s, both collapsed again in the wake of a totally failed European summit in early December. In the absence of any palatable solutions to their many intractable problems, the Europeans undoubtedly knew the scope of the quantitative easing they were going to have to unleash to hold things together. Thus, they and their American counterparts deemed it essential that gold and silver not be seen as an attractive and essential alternative to their beloved pure fiat currency system, which was failing rapidly in plain view. Gold dropped well over $200 and silver fell by 20 percent in a three-week period, with much of the damage occurring in the traditionally very quiet week between Christmas and New Year's Day.

Desperate people tend to do very stupid things and I can assure you that the powers that be are getting increasingly desperate.

Despite these offensive raids, gold still posted an 11-percent year-over-year price gain in 2011, marking the 11th consecutive year the price had been up, a feat the venerable investment letter writer Richard Russell termed unprecedented in any significant asset class.

However, in spite of this exemplary performance over the past decade the vast proportion of society remains blithely unaware of what is unfolding in the gold and silver markets. This stems from many sources, the first being the relentlessly negative press from the mainstream media on the subject. How many times does the public have to be subjected to the views of the likes of Jon Nadler of Kitco and Jeff Christian of CPM Group, to name but two? They are not true analysts but purely and simply establishment propagandists whose sole purpose, in my opinion, is to provide disinformation to keep the unsuspecting public away from precious metals.

Then the anti-gold cartel, with its insidious paper raids, creates wild volatility and totally counterintuitive price action that further discourages all but the most knowledgeable and committed believers in the only real money, gold and silver.

In reality, to date, the public hasn't had a chance. Whenever they have stuck their toe in the water, almost without exception they have been burned as yet another raid knocked them out of the box. When that happens often enough, most people just give up and go away and that is exactly what has occurred.

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