“Gold in the hands of the public is an enemy of the state.”

I wonder what he meant by this? Was Hitler retarded? Did he have a childhood marred by parental beatings with Gold plated items? Why would he say such a thing?

Here’s another Hitler quote on Gold:

Gold is not necessary. I have no interest in [G]old. We will build a solid state, without an ounce of [G]old behind it. Anyone who sells above the set prices, let him be marched off to a concentration camp. That’s the bastion of money.

Such a hatred of a shiny metal seems irrational, doesn’t it? Is a piece of metal that harms no one really an enemy of any government? Perhaps Gold represents something more important than bling bling. Perhaps Gold allows people to opt out of a system when that system no longer functions as advertised. The extreme lies and misinformation coming out of the highest levels of our government have become Orwellian in scope and character.

The United States now advocates “Wars” against military tactics instead of real enemies (i.e. The War on Terror) and against certain chemicals while profiting enormously from other chemicals (i.e. The War on Drugs). We are now told that our country must go further into debt to support Wall Street and banks or our economy will collapse. Our private, non-federal, for profit corporate central bank (i.e. the federal reserve) has now purchased over $1 trillion in distressed mortgage debt paper and placed it on the balance sheet that backs the U.S. Dollar because it is “needed” to prop up home prices even though 59% of Americans do not have mortgage debt.

In a situation that I consider along the same lines, we are told that the U.S. Mint cannot keep up with demand for Gold and silver coins. In 1999, due to the fear surrounding the so-called Y2K crisis that was going to cause a systemic meltdown, the U.S. Mint produced over 2 million 1 oz. Gold coins to meet demand. In 2008, the Mint produced less than 1 million 1 oz. coins and reported inability to keep up with demand. The same official story is being repeated this year with multiple shortages occurring due to “demand.”

But is it inability or unwillingness to keep up with demand on the part of the U.S. Mint? Can’t the U.S. Mint buy more Gold on the free market? Can’t they find another manufacturer to get around their problems? Can’t they extend a little effort to meet the public demand, since that is their mandate? Don’t they actually make a profit by selling these coins? If they don’t, can’t they just raise premiums and keep up with demand and thus generate a little revenue for the public coffers (we all know the government could use the money…)?

Why is it that China is encouraging its citizens to buy Gold and silver and the corporately controlled U.S. media laughs at/ridicules Gold at every turn? Are we devolving into the same fascist state that Hitler sought to create? Isn’t the definition of fascism the union of big business and government (i.e. Mussolini’s “corporate state”)?

Would anyone performing an honest assessment of what’s wrong with America truly deny that corporate interests are now the main force driving government policy? Corporations seek to control government (i.e. Goldmun Sucks and JP Whore-gan) and government seeks to control corporations (i.e. Degenerated Motors [GM], AIG, Fannie, etc.). Does anyone deny that Goldman Sachs and JP Morgan have completely infiltrated the highest levels of the government to create policies benefiting Wall Street? Does anyone deny that the insurance companies and pharmaceutical companies are the main drafters of the health care bills floating through Congress? Does anyone deny that there are more private “gun for hire” (e.g., Blackwater) soldiers in Afghanistan than actual official U.S. military soldiers? Does anyone deny that pompous windbags like Barney Frank and Christopher Dodd are beholden to housing bubble interests due to heavy financial support from this industry including the Fannie and Freddie fascist frankensteins? Does anyone who reads history doubt, knowing that we already have an FBI and a CIA, that “Homeland Security” is a new government program taken directly from the Hitler playbook?

So, yes, I do believe that Gold is the enemy of the United States. When debt becomes unmanageable, it is destroyed through default and/or paid back in worthless dollars (i.e. deflation versus heavy inflation/hyperinflation). Capital flows in the fiat era, as Martin Armstrong has pointed out, may have a bigger say than in Gold standard monetary situations. This makes the inflation-deflation debate more nuanced than at first glance, as we are not in a closed, academic system consisting of rational behavior. The current regime of U.S. “czars” seeks to maintain a fiat grip on the world to maintain and aggrandize their power, reality and the best interests of the sheeple be damned. If U.S. citizens turn to Gold en masse, ain’t the gig up at that point for the Dollar?

Thus, I believe “official” sources of Gold and silver will remain scarce. I also believe the futures markets based in the U.S. will continue to ignore market manipulation and heavily concentrated short positions that are the definition of manipulated markets when it comes to Gold and silver. In fact, I would argue that such a situation is ignored because it is government policy and is sanctioned by the highest levels of government. Keep in mind that Madoff could not have had his scam last as long as it did without the express blessing of the highest ranking members of the SEC, since “rank and file” SEC employees like Harry Markopolos saw Madoff’s Ponzi scheme years in advance and rang the alarm bells repeatedly [EDIT: Markopolos was as an independent fraud investigator, not an SEC employee] but were intentionally ignored.

The last job of a central banksta is to tell the truth. Thus Bernanke sees the recession as being over, denied the housing bubble when others with an understanding of markets saw it as inevitable, and thinks it is appropriate to purchase private assets with counterfeited money (illegal, by the way) and put them on the balance sheet backing the U.S. Dollar. Widdle Timmy Geithner didn’t pay his taxes even though he was elected as the Secretary of the U.S. Treasury. These and other examples while “extend and pretend” (to steal from Jim Sinclair) requires a willful suspension of traditional and rational accounting practices for every banking institution in the United States, so that we can all pretend banks are solvent when the truth is the opposite.

Now, I am not trying to pick on the U.S. government. We are the worst country except for all the others. I understand that in an anchorless global paper currency system that the least ugly currency wins and I understand that for brief periods this may be the U.S. Dollar. But Gold is the currency that will ultimately win. People who think Gold is no longer money also think Bernanke is going to get us out of this mess. I consider such thoughts to be religious in character, not rational. Gold is the antithesis of paper. A slick Wall Street brochure and “can’t lose” sales pitch versus an immutable member of the periodic table of elements that doesn’t try to sell anything. The pendulum swings both ways.

Investing in Gold is not a vote of confidence in the near-term future, for sure. However, investing in hype when the Wall Street promoters are broke and desperate ain’t such a grand long-term plan. And, no, it is not the end of the world. If I thought it was, I would advise taking your Dollars and converting them into bullets and cigarettes. Gold and Gold stocks can thrive without a total collapse of the system, just like in the 1930s and 1970s (perhaps we are a dealing with a 40 year cycle, suggesting the 2010s are a time to be all Gold buggy and what not). Every asset class has its turn in the sun and the torch is being passed from U.S. government debt to Gold (stocks peaked in 2000 and haven’t been the “choice” asset class for a decade).

Gold is a protector of wealth during periods of government insanity and instability. Our current regime in the U.S. has passed the point of no return. Bush was our Hitler and Obama is our Chavez. Democrat versus Republican is about as meaningful as blue versus red or purple versus green. The highest levels of our government are composed of corporate whores, so the only difference between candidates is which corporations own them. Obama the war president is the Nobel Peace prize winner. Orwell is doing cartwheels somewhere in the universe.

Our debt cannot be sustained so it won’t be. Debt repudiation will occur via any combination of frank default and/or currency devaluation. Gold will protect one’s savings during this situation, while the U.S. Dollar is unlikely to do so. I can’t side with Prechter on this one. Commodities, government bonds, stocks and corporate bonds, in aggregate, require one to guess correctly on the inflation-deflation debate while Gold doesn’t.

The Dow to Gold ratio will reach 2 (and may well go below 1) before this cycle is over. I get caught up in the short-term swings too often as someone interested in trading to augment long-term returns, but my physical Gold is not for sale at current prices. Gold is the best vote I can cast against a government out of control, since votes at the local booth, faxes, phone calls and letters to officials accomplish nothing. I have a feeling that my understanding of Gold and my zealous intention to spread its word will prove to be the most valuable civic duty I am able to provide in the midst of a now seemingly perpetually corrupt regime no longer interested in the ideals of a free people or the country’s Constitution.

“Dollar Up, Gold Down” or “Dollar Down, Gold Up” is a common one in the Gold investing community. This works until it doesn’t. The funny thing is that THE MOST IMPORTANT BULL RUN IN THE LAST CENTURY FOR GOLD PROVES THIS ISN’T A GOOD WAY TO LOOK AT GOLD! I am not making this up. This is actual market history there for anyone to examine. But most instead steadfastly stick to simple phrases that cannot possibly capture the nuances of the complex human psychology that backs market behaviors.

Here is a chart including the most important and legendary move in Gold that every Gold bug has seen a picture of (stolen from chartsrus.com):

During the 1979 to 1980 parabolic run when Gold more than quadrupled in about a year, do you think the U.S. Dollar collapsed? Well, it obviously went down a lot, but we know it didn’t collapse, right? Here’s the chart of the rapid but not catastrophic collapse in the U.S. Dollar Index from 1978-1980 (again, stolen from chartsrus.com):

If only markets were so simple that basic phrases describing intermarket relationships could make you rich. Ahhh, we can dream can’t we? So if you really want to get rich in Gold, I guess you should buy Gold when the Dollar is rising.

Those thinking that a rally in the U.S. Dollar Index, which is an abstract index comparing anchorless paper to anchorless paper, can stop the secular Gold bull market don’t understand Gold or secular bull markets. Secular bull markets become self-perpetuating momentum machines that shrug off “bad” news and power higher anyway. The U.S. Dollar Index rose 50% between 1995 and 2000, but did that stop the secular general stock bull market or cause a collapse of the internet tulip mania? Absolutely not. The secular bull market in Gold will keep on going until we get to the public mania phase, after which it will collapse on its own weight, irrespective of the U.S. Dollar Index. I am betting this will happen after the Dow to Gold ratio gets to the 0.5 to 2 range.

Assets are deflating relative to Gold. This is the missing link of the deflation/inflation game. Prechter is focused on the wrong currency. His theory has already been proven when Gold is used as the measuring currency. I know, I know, only freaky, crazy, tin foil hat-wearing, irrational, hunker down in the bunker Gold bugs could possibly think of Gold as money. I get it, paperbugs, I get it.

The promises of powerful men much smarter than I are obviously more reliable than a timeless piece of metal. Give men the power to create money out of thin air and they of course will be wise enough not to abuse it! Our society is so advanced that I couldn’t possibly understand the ramifications of going back to a barbarous relic as the backing for our currency – only people of Paul Krugman’s caliber really understand economics and they say it’s a bad idea.

I guess this is because the most prosperous years this country has ever seen were on the Gold standard. I guess this is because the so-called “great depression” was on the federal reserve’s watch, as was the irrational boom fueled by excessive money creation beforehand that was part of the cause of the “great depression.” Yes, it is true that I have been reading the non-revisionist, non-party history texts and I know this is not encouraged, comrade. I am sure one of our new czars would be upset if they were to hear such talk. As our paper currency degrades further, we will need more and more czars and more and more government control to right the ship.

I also know that every currency in history has failed, whether Gold backed or not. When Gold backed, currencies are destroyed because the government breaks its promise and drops the Gold backing whenever a war needs to be fought or times get too hard. When not Gold backed, currencies generally hyperinflate into oblivion and are then replaced. History keeps repeating over and over again, but this time, gosh darn it, it is different. Bernanke and widdle Timmy Geithner are the most powerful brain trust ever seen in the history of financial markets and will take care of everything for everyone.

Keeping these admittedly Gold buggy-type background thoughts in your mind so that you realize this piece is written by an irrational lunatic, those who are calling for the imminent destruction and collapse of the U.S. Dollar need to remember that we are not the only country on the paper-money-road-to-hell path. We are not doing well, but the following graphic estimating the government debt-to-GDP ratios in 2006 and 2010 help one understand a bit where we are (chart “care of” Deutsche Bank and stolen from The Automatic Earth blog – typical internet reporting…):

I do not fear only for American citizens or the American dollar, as a global crack up boom in assets priced with paper money seems a likely path if things continue on the current track. In Gold terms, we have already been in deflation for years depending on the asset in question. For what asset class left is not deflating in Gold terms? This is the missing link in Prechter’s work that he needs to reconsider in my opinion. Perhaps T-Bills have outperformed the stock market over the past decade, but they have lost money when currency depreciation is taken into account. Gold has trounced T-Bills, T-Bonds and the U.S. Dollar as well as the stock market, corporate bonds, real estate market and general commodities.

If China, Japan, the Eurozone, Australia, India, the Middle East and Brazil all agree to crank up the printing presses and create an astronomical amount of new debt to replace that lost by the private sector, and then they all agree to buy each others’ debt with this newly created debt, this will be deflationary when Gold is used as the currency of measurement. But will it really feel like deflation to the average gal or guy on the street holding paper currency units? For it is really only Gold that has a done a reasonable job of preserving purchasing power over this past cycle. Gold has reverted to its role as the international currency of last resort.

This is why the “mainstream” inflation-deflation debate has become less meaningful for me – I think we are in a wicked deflation, but it’s in terms of Gold. And yet, in the parlance of paper, a rising Gold price is almost by definition called inflation. Six of one, half a dozen of the other. One thing I do know for sure even without a PhD in Ponzi economics: Gold’s in a bull market and you don’t want to bet against it.

Here’s a picture of a nasty deflation – The S&P 500 index priced in Gold over the past 12 years (i.e. the S&P 500 divided by the price of Gold [$SPX:$GOLD ratio chart]):

While the individual sovereign paper currencies rise or fall relative to one another, they are all sinking. Which index accurately reflects this basic fact during the current cycle? The answer is simpler than you think. Gold. That’s right, Gold, the senior international currency of this world, awakened from its slumber by the massive abuses of the prior secular stock bull market that have come home to roost. As the pendulum swings back the other way, a further loss of confidence in the teflon Wall Street dons, our apparatchiks and central bankstaz will occur. This will manifest itself via a further decline in the Dow to Gold ratio, which will continue to fall until it gets to 2 or less, much to the paperbugs’ disbelief.

I own some physical silver but hold much more Gold. My concern is simple. In past deflationary cycles, Gold has done well but silver not as well. Since I favor deflation over inflation for this cycle, I heavily weighted myself towards Gold and only hold a little silver. I even made the stupid mistake of shorting silver a few months ago and had my a$$ handed to me.

Silver made a big move today and a short-term break out. Silver can make explosive moves up and down and with a push slightly higher, silver will have a confirmed breakout that targets new highs for the decade. Unlike Gold, silver is still a ways from its all-time nominal high around $50 during the last silver bull market in the 1970s. If silver makes new highs in the next few months, the deflation scenario won’t be looking so good.

Though I have believed deflationary forces were too powerful to be overcome by government intervention, global capital flows and/or an insane level of intentional wasting of money may prove to be too much. If silver breaks out to new highs for the decade, the deflation argument is going to look mighty thin. I remain hedged with Gold, as an inflationary holocaust means that Gold will peak in the $5,000-$20,000/oz range instead of the $2,000-$3,000 range. Either way, Gold holders will win over general stock holders. However, in a heavy inflationary environment, I believe silver has greater upside potential than Gold. Needless to say, I am going to hang on to my remaining physical silver until I see how this one plays out.

Here’s a daily chart of the silver ETF (ticker: SLV). This ETF doesn’t hold the silver it claims to and is believed fraudulent, but is being used for charting purposes because it can show volume. Silver bulls are advised to hold physical bullion as their core holding. I am not saying this ETF can’t be used for short-term trading, but paper is paper and metal in your possession is metal in your possession. Anyhoo, here’s a one year daily candlestick chart of SLV:

Here is a long-term weekly chart of silver ($SILVER):

Mr./Ms. Market is always right and those of us trying to keep up with him/her have to be flexible. I am learning not to fight the tape and instead embrace it. If my deflationary stance proves wrong and the government bond market is no longer relevant, so be it. As a Gold holder, it doesn’t matter to me – heads I win, tails I win more. Silver is on the verge of sending out a powerful warning to the deflationists to reconsider. If it occurs, I’ll be among the first skeptics to give it props and respect the move. If it doesn’t, I promise not to act like I saw it coming all along, as today’s move in silver was not what I expected.

You’re not going to hear inflexible Prechter-like deflationary dogma from me if silver breaks out to new highs for the decade. The Dow to Gold ratio is my secular compass, not the inflation-deflation debate. We should know within a few days whether or not this move in silver is the real deal. Perhaps I’ll have to start digging into, researching and expanding my junior silver miner stock list sooner than I thought…