It really is that simple!

Every Action Has a Consequence
The masses have been incessantly conditioned for decades to believe that the current reality and all those quaint “laws of nature” can be disregarded and managed away by the enlightened. As a result of such false beliefs personal and public finances have been (and continue to be) managed with an attitude that any actions or pursuits, no matter how reckless or patently unsustainable, can be taken without concern for consequence. The lie was sold easily to, and embraced wholeheartedly by, a populace that delighted in the underlying subtext that one could really get something for nothing.

Paper Currencies vs. Precious Metals
This modern episode of popular delusion, and its inevitable outcome playing out before our eyes, is not unique to man. The basis behind the numerous cycle theories and the notion that history repeats lies in the fact that the desires, actions and reactions of humanity do not change. That being the case, we can surely expect that all things temporal and frivolous – such as paper currencies managed by corrupt men – will eventually “flame out” as compared to the timeless elements as represented by gold and silver which have continued to “burn brightly” over the ages.

Global Liquidity and the Price of Gold
A key driver to the price of gold is money supply. As such, when gold is correctly understood as a monetary metal one can confidently disregard the mainstream media’s “chicken little” warnings about a supposed gold bubble and realize that it is the excessive extent of global liquidity that is supporting the price of gold.

I think you would agree that there is no need to editorialize yet again regarding the Fed’s constant flooding of the market with liquidity in order to spare the economy from the pains of economic contraction – or how this action has caused each successive downturn to increase in intensity at shorter and shorter intervals. Nevertheless, we gold investors should never lose sight of the fact that this never ceasing policy of monetary and fiscal reflation is adding to the supply of money which, in turn, is supporting gold and silver as global stores of wealth in a naturally limited supply.

Each crisis that has emerged, be it the dot.com crash, the housing bust, the derivatives melt down, the sovereign debt debacle, etc., has been, and continues to be, met with the same remedy – another bailout and even more liquidity.

One of the ironies of peoples’ misunderstanding of gold is the belief that gold’s price rises because of a crisis or disaster. Such is not the case. It’s the official response to such crises – the creation of cheap credit and the subsequent flood of bad money – that drives the price of gold higher.

What Does the Future Hold?
Can gold investors count on continued loose and destructive monetary and fiscal policy? That is most likely, in my opinion, when the following is considered:
– Federal budget deficits are projected into the future, with no end in sight
– Mortgage defaults are still increasing and Fannie/Freddie are holding hundreds of billions in bad paper
– Union pension funds (think militant voting bloc) are short hundreds of billions of dollars
– Many states are insolvent and will be in line for hundreds of billions of dollars in bailout money (think public sector workers and their militant voting bloc)
– Social Security is underfunded
– Medicare is insolvent
– Medicaid is insolvent
– National health care has yet to start

Conclusion
Unfortunately for the Nation as an entity, these crises will continue and the same remedies will continue.

Indeed, the magnitude of the problems facing America are so immense and intractable I believe one should seriously consider converting more than a little of one’s hard earned wealth from paper-backed-by-nothing to that “barbaric relic.”