Gold and T-bills - both winners!

Sunday, October 19, 2008 | posted by RedApple
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I just came across this interesting article from Pretty much summarizing the monetary inflation problem. At the moment, we are having to print more money to cover the problem from printing money. The asset deflation from de-leveraging is masking the true problem of monetary inflation. When the market stabilized, the effects of massive monetary injection will reappear in the form of inflation.

Here is an excerpt with my highlights in bold:

"... Gold was not the only thing making new records this past week. US government debt is soaring as it borrows money to pay for the bank bailouts concocted by it in recent weeks.

From September 30, 2007 to the end of this past fiscal year on September 30, 2008, total federal debt grew by $1.0 trillion, from 9,007,653,372,262.48 to $10,024,724,896,912.49, which is an 11.3% annual rate of growth. The federal debt as of October 16, 2008 is now $10,331,139,000,845.92. So in just 16 days since the end of the last fiscal year, the federal debt has grown by an astounding $331.1 billion, which is a 75.5% annual rate of growth. It has taken just 16 days to borrow one-third of what the government borrowed in all of last year.

The following chart is from Ed Steer, a regular contributor to "Casey's Daily Resource Plus" published by Casey Research. This chart of weekly T-bill issuance visually portrays this accelerated growth of federal debt.

The above chart shows T-bills only, and therefore excludes the growth of other federal debt instruments. Also, this $10.3 trillion debt total I refer to above excludes the federal government's unfunded liabilities. When these are added, the total obligations of the federal government are $110 trillion, or at least that's what they were estimated to be last May by Dallas Federal Reserve president Richard Fisher. The federal government's unfunded liabilities, and therefore its total obligations, have obviously grown further since then, and are now some unknown number greater than $110 trillion.

In short, the US federal government is staggering under the world's heaviest debt load. To meet its obligations and promises, the Federal Reserve will continue to create "unlimited" amounts of dollars.


The gold standard is long gone so it no longer acts as a "silent watchdog to prevent unlimited public spending". Because it is no longer prevented, unlimited public spending is what we are now getting. In addition to the countless ways the federal government spends - or wastes, as many would no doubt add - the dollars flowing through its accounts, it is now spending unlimited dollars to bail out banks worldwide, a reality which I think makes clear the dollar's bleak future.

To achieve this unlimited public spending, central banks are creating an unlimited amount of dollars, which will in time mean that there is no limit as to how high the gold price will reach. The new record high in the gold price against the currencies mentioned above will soon be joined by new record highs in gold against the US dollar, euro and every other national currency around the globe.

While the gold standard - what Rep. Buffett called a "silent watchdog" - is gone, gold itself is a watchdog too, and not a silent one. Gold cannot prevent "prevent unlimited public spending" like the gold standard, but a rising gold price - like a barking dog - can warn of danger. ...."

You can find the full text here: GoldMoney 18 October 2008 — GoldMoney Alert from James Turk - Gold's New Record