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Everybody is listening, hoping that all the ‘expert’ evidence is true. According to the self-styled gurus of the present market forces, the worst part of the recession is now over and everything will be better from here on in. It only saddens me that people actually believe such rubbish. Certain analysts have compared recent events to that of 1929. If this is true then it must be remembered that the bottom of that market was 1932.
Porter Stansberry stipulated as much at the end of last year. He said, “The coming great inflation will destroy America’s economic leadership. It will lead - eventually - to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects… The price of gold will be well over $2,500 per ounce… Americans haven’t experienced anything like this since the Great Depression.”
Please remember this was forecast weeks before President Obama took office and none of us had any real idea of how he was going to present his economic and fiscal policies. By the end of January this year we knew there would be huge deficit spending in 2009. What was not immediately apparent was that Obama also plans to increase deficit spending over the next decade as well. This means that the American national debt would double - at least.
The Congressional Budget Office (CBO) has drawn up the table on this page. This makes comparisons between the deficits of the 1980s and 1990s to present and future budgets.
If it assumed that Obama stays in office for two terms then the CBO has calculated the deficit policy will put up the national debt by over USD10 trillion by 2019. To compare this, just think that ten trillion was the total federal debt just over two years ago. Also, remember that this is just what the CBO is forecasting. By the time the politicians have finished tinkering with it the chances are it will be much more.
If all of the above just looks like lies, damned lies and statistics then I would ask you just to bear in mind one thing. President Obama wants to borrow more money over the next eight years than all of the other presidents - combined.
The numbers defy belief. Twenty trillion dollars looks like this - USD20,000,000 ,000,000. How can anyone honestly believe this can be paid off? When the Republicans were elected in 1980 the total US debt was USD930 million - less than one billion or not even five percent of what Obama wants to cough out.
In case you’re having as much trouble keeping track of federal spending as I am:
The US government has spent the entire national output, 9 times over. And that’s without counting contingent liabilities and guarantees!
If the nation were a person earning $50,000 a year, he’d be in debt to the tune of $461,000 - If that person asked you for a loan, what would you say?
Even more important, this debt cannot be financed indefinitely. Sometime, someone is going to want to have their money back - preferably with interest. If the new president has his way then our children’s children’s children will still be manacled with this debt. If they do not make good roads into it then the US dollar will go the way of the Reichmark or Zimbabwean Dollar.
There is an argument to say this is already on the way. China, Russia and several other countries have put forward the idea of a basket of currencies to replace the US dollar and be the World Reserve Currency (WRC). Okay, this has not happened but the very idea would have been inconceivable just a few years ago. President Putin has recommended that gold be used for all international trade transactions. Given that all the US has done for the planet over the last few decades the real irony is that no-one wants to be a creditor to America in case they do not get their money back.
If this happens then panic could ensue as more countries and individuals try to get out of the American currency. Obama will have to act and the probability is he will cease free exchange of the USD into different currencies. In fact, the present president may follow the idea of Roosevelt in the 1930s and ban the buying or selling of gold.
At the time of writing, gold is not doing well, which is an excellent buying opportunity to get as much bullion and gold equity into your portfolio as possible. For any US expats, this time also is ideal for getting as much money out of the US as possible. Why is this? Well despite not getting a WRC the Chinese are still not happy. Over the last six years, it has increased its gold reserves by more than three quarters and is in the top five of countries holding gold. This is not all. As of the end of Q1 2009, the Chinese had the largest FX reserves in the world at almost USD2 trillion.
Due to Obama’s policies, the Chinese Premier, Wen Jiabao, is very worried that the US dollar will weaken thus reducing the value of the US Treasuries that China now owns. This is now nearly USD750 billion. Many Chinese financiers are now advocating changing into commodities to protect Chinese investments. Other Asian central banks are also thinking along the same lines. As Si Kannan, associate vice president at Kotak Commodity Services Ltd, recently said, “While the IMF is selling gold, Asian central banks are diversifying into gold. That’s a good thing, in times of dollar uncertainty and the global volatility in the forex market.”
It is also the ideal time for American expats to invest using the multi-asset class approach thus creating a diversification of assets that they have never had before. By doing this they will be guarding against large increases in personal and corporate tax, inflation, restricting movement of money and massive unemployment.

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Paul Gambles on [email protected]

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