Economics / Money Supply Jun 23, 2008 - 01:10 PM
By: Captain_Hook
"...And it doesn't stop there in terms of the bad news either, where although most prefer to imagine things could not get worse, they will. As alluded to above, a collapsing stock market, although important and long overdue in terms of fundamentals (think contracting earnings), is only one element of the credit crunch. Housing will continue to fall, and home equity loans will contract as a result. And then there is credit card debt, car loans, and commercial credit that will suffer as a result of the collapsing consumer. It's all tied together you know, not compartmentalized as the bubbleheads on CNBC would like you to believe. Bottom line is, the rate of growth in consumer credit is contracting, but it hasn't gone negative yet, not with all those people buying their necessities on credit cards. (See Figure 2)
One does need wonder what would be the result in the economy if this were to happen however (which it surely will), or god forbid, if the consumer were actually to begin saving money. This is why master planners smash the gold price down every chance they get, because they don't want you doing something sensible, like saving your money. You see, when you buy gold you are saving your wealth, which is a big ‘no no' as far as the banks are concerned. They need money velocities to be elevated in order to keep bank profits growing, which is all these characters are ever worried about. This is why they take such great efforts to suppress its pricing, and why the levels of gold derivatives have exploded, according to the Bank of International Settlements. It's taking increasing effort to keep gold contained however, as reflected in the growth rate (40% annualized) of derivatives required to keep prices contained.
The implication here is one of these days, with the increasing amounts of fiat currency necessary to counter a collapsing consumer, a combination of physical buying in gold, along with demand for paper pricing mechanisms, will outstrip all constraints, and the biggest short squeeze in the history of any market will ensue. So make no mistake about it, having a portion of your wealth anchored in precious metals is an absolute financial necessity these days, as this will send gold and silver prices far higher than most can presently contemplate, and in rapid fashion. In the meantime, master planners keep a lid on the situation by monetizing everything that goes wrong, which is evident in the growth of M3 shown below. In the end however, and in classic ironic form, all this liquidity floating around will lead to the demise of the present system of exchange and commerce. (See Figure 3)
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