By: Bud Conrad, as reported by Dan Weil
The global debt crisis will send the dollar and other paper currencies to zero, and gold will be the beneficiary, says Bud Conrad, chief economist at Casey Research.
“The dollar is coming back right now, but it’s a false recovery,” he told NewsmaxTV. “All paper currencies are just that.”
Most money now, of course, consists of digital bits rather than paper, notes Conrad, author of a new book “Profiting from The World’s Economic Crisis.”
A government can create digital bits out of thin air anytime it wants,” he points out.
“Only by convention have people used paper money, now digital money, as if it had some real value. It’s merely the world’s biggest confidence game. I have no faith in any paper currency.”
Europe’s debt crisis currently makes the dollar more attractive than the euro.
“But in terms of long-term purchasing power, all paper currencies will eventually reach their intrinsic value, which is zero,” Conrad said.
Paper currency’s weakness is gold’s strength, he explains.
“Gold is up not because it’s physically changed,” Conrad said. It’s still just an element in the periodic table. “But paper money is what’s changing.”
The United States is at the point of no return for the budget deficit. “They’re never going to fix it,” he said.
“The government has mortgaged its future and taken on obligations that can never be paid. We are in a position where the dollar will decline in purchasing power.”
So gold, which has hit a record high of nearly $1,250, will rise further, Conrad says.
“For the long-term, gold will go up a lot higher than this.”
With Europe’s financial system in a state of collapse, “Europeans, instead of just buying dollars, will find themselves much safer buying commodities – gold, silver, platinum, palladium and copper,” Conrad said.
U.S. financial woes will continue to put pressure on our stocks and bonds too, he said.
The financial crisis here began with too much private debt, Conrad points out. “That morphed into a blue sky from government bailouts to the tune of $3 trillion,” he said.
And that bailout included Federal Reserve purchases of non-government guaranteed mortgage-backed securities that Conrad calls “unconstitutional.”
Until recently most experts predicted a typical economic recovery, but those forecasts are questionable, he says.
“This isn’t a typical crisis.” Now it’s turning into a government debt crisis, Conrad notes.
Mr. Conrad holds a Bachelor of Engineering degree from Yale and an MBA from Harvard. He has held positions with IBM, CDC, Amdahl, and Tandem. Currently, he serves as a local board member of the National Association of Business Economics and teaches graduate courses in investing at Golden Gate University. Bud Conrad, a futures investor for 25 years and a full-time investor for a decade, is also a regular lecturer for American Association of Individual Investors. In addition he produces original analysis for Casey Research, including unique charts and research on the economy and investment markets.
All Things Considered – John’s Commentary:
Casey Research is the largest equity research firm in the natural resources sector. Doug Casey is a renowned investor, literally with the golden touch. Any of their publications I highly recommend. This man has written for years, and he is right more often than not. When you stop to think about it, what are paper dollars if not backed by the “full faith and confidence of the US government?” I think we might all admit that “confidence” is on the wain.
Action to take: Take a position or continue to add – regularly and consistently in modest amounts. I have no idea what gold and silver are going to do tomorrow. I have tremendous confidence, backed both fundamentally and technically, in what gold and silver will do in the next one to three years.
What to buy: Silver is a steal at these prices. With JP Morgan holding most of the 220,000 naked short positions on the COMEX, the price of silver is pressed down like a elephant on a tiny spring (the silver market is much, much smaller than the gold market.) Buy silver 2:1 or 3:1 over gold.
Quote of the day: “There are no markets anymore… only interventions.” – Chris Powell, GATA
