Decoupling Now, Currency Crisis Soon!

• I have warned persistently of a coming global currency crisis triggered by the collapse of the USD. All fiat currencies will be under assault. The snakes will take the whole world down with them and thereafter introduce their One World Currency and Global Central Bank (BIS? with IMF as global treasury department?).
   
• There is a worldwide bond bubble. 10 year US treasury yield is at 2.5% and 30 year bond yield is at 3.53%. Real inflation as reported by www.shadowstats.com is at 4+%. Why would anyone continue putting money into bonds after such a massive rally? It is all about herd instinct/behavior. When the flight out of bonds and into commodities come, it will be spectacular. Such moves will stoke inflation and possibly hyper-inflation worldwide. The parabolic price rise in gold and silver is still ahead of us. Don’t be the last sheep out of the bond door into gold.
   
  Decoupling Now, Currency Crisis Soon
  NIA believes that the decoupling we have been predicting of precious metals from the Dow Jones has now officially taken place. A year ago we would consistently see precious metals and stock market prices rise and fall in parallel. We have now seen the Dow Jones decline by 6.1% from its high on August 9th, along with both gold and silver rising by about 3.3% during this same time period….. We expect silver to significantly outperform gold in the months to come.
    
  One year ago, almost all mainstream economists on CNBC were calling for either a “U” or a “V” shaped economic recovery. NIA said that prices were rising only due to inflation and there would be no economic recovery. NIA went into detail about how destructive government programs like the homebuyers tax credit were helping to artificially boost economic numbers, but as soon as these programs were over, economic activity would collapse to new lows. NIA was right. Now that the government has ended its homebuyers tax credit, we just saw sales of previously owned homes decline in July by 25.5% from one year ago, to their lowest level in a decade. We also saw new home sales in July based on the signing of new contracts decline by 32.4% from one year ago.
    
  The government will report their second estimate of second quarter GDP on Friday and we will likely see a revision from growth of 2.4% down to growth of less than 2%. Keep in mind, the White House budget is projecting a GDP growth rate of 5.58% over the next five years (along with permanently low interest rates) in order to get the budget deficit down to $752 billion in 2015. With a sharp contraction in GDP likely coming in the third quarter, NIA continues to believe that the Federal Reserve will unleash the mother of all quantitative easing this fall, along with a huge push by Congress for a new stimulus plan.
   
  U.S. mutual funds currently have about $10.5 trillion in assets, with $2.5 trillion being in bonds and $4.6 trillion being in equities. Although the amount of money invested in equities is still far greater than bonds, asset inflows into bonds have outpaced equities for 30 consecutive months. During these 30 months, $559 billion were invested into bond funds while $209.4 billion were pulled out of equity funds. It is a real shame that most retiring baby boomers who are looking for safety, are actually investing their savings into the riskiest assets of all…… When this bond bubble begins to burst, prices of commodities will explode to the upside like nothing you have ever seen before.
   
  NIA believes that there is a risk of the bond bubble beginning to burst as early as this fall. Smart money is now loading up on commodities. In the week ended August 17th, net long holdings in futures for 20 commodities rose 2.6% to 1.18 million contracts, with the biggest rises coming in agricultural commodities like wheat and corn. Commodity assets under management gained by about $8 billion in July to over $300 billion.
   
  The World Gold Council just announced today that gold demand surged in the second quarter of 2010 to 1,050.3 metric tons, up 36% from one year ago. This rise in demand came mostly from rising investment demand, with gold demand for backing ETFs climbing 414% and retail investment demand rising by 29%.
    
  Because the rest of the world still likes to follow and emulate the U.S., it might be Americans who initiate the upcoming stampede out of bonds, U.S. dollars and other dollar-denominated assets, and into precious metals. For the time being, the average American is still more likely to be a seller of gold. Recycling of gold increased 35% last quarter to 496 metric tons. Once Americans become educated about how gold isn’t expensive and is still trading for only 1/2 of its all time high adjusted to the CPI and 1/4 of its all time high adjusted to the real rate of price inflation, and that by recycling gold they are actually trading real money for fiat paper money, this recycling supply will diminish and the world will face a major gold shortage. The world already has a major silver shortage that will become apparent to all very soon.
   
  NIA’s co-founders still receive phone calls on a daily basis from non-NIA member friends asking for us to invest in Real Estate “short sales” and other foreclosure deals. By year 2012, NIA guarantees nobody is going to want to touch Real Estate and all of your friends will be calling you about the latest Krugerrand that they bought. Although NIA doesn’t project hyperinflation to occur until the years 2014-2015, there is a serious risk of hyperinflation occurring any day now. Hedge funds need to be where the momentum is and as soon as the momentum turns against the dollar, we could see the bond bubble burst and the currency crisis begin instantaneously.  

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