A NEW ADDITION TO THE ECONOMIC ANIMAL KINGDOM

Bulls and Bears

The financial markets have used the terms "bull market" or "bear market" to describe a "buying bias" or "selling bias" as long as anyone can remember in modern times.  I will not go into the history of those terms here, but they could be traced back to the early 1700's when bear skin traders in London would sell bear skins they did not yet have.  Assets in a "bull market" increase in value while assets in a "bear market" decrease in value.  I like to think of these market descriptions with how the animal actually attacks.  As seen in the popular Spanish bull fights, the bull charges the red cloth thrusting its head and horns up as it passes through cloth.  In the case of the bear, I see its claw being swiped down to trap food or defend itself.  I believe we will see a new animal term being used in the future to describe the markets in addition to the traditional bull/bear lingo.

Uncle Sam's Credit Bubble

As a result of World War II, the Bretton Woods monetary agreement was established for each country involved, to maintain the exchange rate of its currency within a fixed value (+/- 1%) in terms of gold.  The system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold.  This created the unique situation whereby the United States dollar became the "reserve currency" for the nations who had signed the agreement.  Ever wonder why oil is priced globally in dollars and not yen?  As of today we see a unique world in which all major currencies are fiat.  A fiat currency is one that is instituted by government decree and backed by no physical asset, just a promise which translates to confidence.  The United States has abused this power by its very nature of being a consuming/debtor economy and not a saving/creditor economy.  In addition, our military industrial complex foreign policy, domestic spending for political agendas and government promises has resulted in a national debt that is unsustainable.  We have been borrowing from the rest of the world and the only way to keep going is to keep borrowing from the rest of the world more and more.  Today the rest of the world has seen the risk involved in relying on the US dollar as the world reserve currency and has stopped buying our treasury bonds (IOU's).  This will result to a run on the US dollar eventually.  The US Federal Reserve and Central Bankers know this which brings me to my next point......

Market Manipulation and Currency Persuasion

With the de-leveraging economy and all the bailouts happening, the only tool the Federal Reserve has is their printing press.  The continuing monetary expansion to not let any company fail (appease foreign bond holders) will ultimately bring about massive inflation.  The Federal Reserve and US Central Banks create money from nothing (backed by nothing), which is a more profitable system in terms of money, power and control.  The only enemy to this system is a lack of confidence in the currency and this is represented in the only true forms of money, honest money, of the last 5000 years: gold and silver.  By having a currency backed by a physical asset like gold or silver, a government can't inflate it.  It much harder to be honest with a fiat currency, all you need is a printing press.  Every fiat currency throughout history has failed, should the US dollar be any different?  Absolute power corrupts absolutely.  I believe the gold and silver markets are being manipulated by major banks to suppress the price of gold and silver in order to give more confidence to the dollar.  A new investment strategy is emerging where the most gains are had by investing in a market that is corrupt, manipulated and fundamentally unsustainable. If you knew the truths of Enron and WorldCom before their collapses, you could of shorted their stocks and had huge gains.  This is what is happening to the gold and silver market except its being systematically deflated instead of falsely inflated.  The ones who can see this and smell blood in the water will profit greatly.  These manipulated markets will explode in a feeding frenzy of buying when the time comes and will create a hyper-bull market for gold and silver.  Just as there was a hyper-bear market for companies with accounting corruption or false performance numbers.  Blood in the water.....feeding frenzy..... One day we will hear of these hyper-bull and hyper-bear markets  as "Shark" markets which will happen quick and feel sudden to those who are unaware of them.  The greatest transfer of wealth occur in "shark markets" which I believe we will see in the near to mid term.  All signs point to a "bear-shark" market in the US dollar and a "bull-shark" market in the precious metals.  So you can be a bull, a bear or even a pig, but the jaws of the free market always prevail.  Get ready for a shark market before it's too late!