“Ponzi” Casino Capitalism Discredited – Risk of Global Monetary Crisis
Gold and silver surged last week (up 13% and 15% respectively) as the financial crisis deepened considerably and there was a realisation that the “ponzi” casino capitalism of recent years has critically wounded the US financial system and done serious damage to the global financial system. Gold surged from below $780/oz to close at $861.40 on Friday and has risen again in European trading today to over $882/oz.
A likely close above $900/oz in the coming days should see us rise to $1,000/oz in the next few weeks and possibly sooner than even the very bullish expect.
Even after stocks’ incredible surge on Friday they remained flat for the week (Dow, S&P and Nasdaq) and are set to come under pressure in the coming weeks as the ramifications of the trillion dollar bailouts gradually seeps in.
The dollar, the reserve currency of the world, is also likely to come under serious pressure again as the epicentre of the crisis remains on Wall Street and in the US financial system. Some notable commentators have rightly warned of the possibility of a US default on its huge debt obligations. Given the extent of financial contagion a dollar crisis and wider global monetary crisis is not beyond the bounds of possibility as the unthinkable increasingly becomes more thinkable.
New World Financial and Economic Order
Gold’s safe haven credentials are again coming into their own as the modern incarnation of the global financial and capitalist system is creaking at the seams after years of dangerous “Disney land” leveraged finance. It is arguable that systemic risk has never been as high as this (even during the Great Depression) and unfortunately conditions, particularly in the wider economy are set to get markedly worse before they get better.
Financial contagion is spreading throughout the financial system and most worryingly, it is spreading from Wall street to Main street and on to the global economy. This can only be bullish for gold and those who fail to see this have little comprehension of monetary and economic history and our modern monetary system.
This is not economic Armageddon but rest assured that the old world financial and economic order is gone and will be replaced by a new world financial and economic order – where frugality, savings and prudent investments will be rewarded and leverage, speculation and irresponsible risk taking will be unacceptable. The Anglo Saxon Disney finance of recent years has been wholly discredited and there will be a shift in power towards more sustainable and prudent European and Asian models.
In the light of the continuing deterioration of the financial system and the increasing risk of contagion in the financial system and the wider global economy, gold remains very undervalued and will continue to outperform other asset classes in the coming weeks and months.