by Justin Spittler, Casey Research.com:
Regular readers know why I believe the gold price is poised to move from its current level of $1,250 per ounce to $1,500…$2,000…and eventually past $3,000.
Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.
In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day.
And it’s not just the Federal Reserve that’s doing it: it’s just the leader of the pack. The U.S., Japan, Europe, China…all major central banks are participating in the biggest increase in global monetary units in history.
These reckless policies have produced not just billions, but trillions in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will in many ways dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.
This isn’t some vague prediction about the future. It’s happening right now. The Canadian dollar has lost 26% of its value since 2013. The Australian dollar has lost 29% of its value during the same time. The Japanese yen and the euro have crashed in value. And the U.S. dollar is currently just the healthiest horse on its way to the glue factory.
These moves show that we’re in the early stages of a currency crisis. But if you make the right moves, you could actually make windfall gains instead of suffering losses. Here’s how to do it…
The huge winner during this crisis will be the only currency that has real value: gold.
Gold has been used as money for thousands of years because it has a unique combination of qualities. Very briefly, it’s durable, easily divisible, convenient to carry, consistent around the world, and has value in and of itself. Just as important, governments can’t create gold out of thin air. It’s the only financial asset that’s not simultaneously someone else’s liability.
When people wake up and realize that most banks and governments are bankrupt, they’ll flock to gold…just as they’ve done for centuries. Gold will rise multiples of its current value. I expect a 200% rise from current levels, at the minimum. There are many reasons, which we don’t have room to cover here, why gold could see a 400% or 500% gain.
This should produce a corresponding bull market in gold stocks…perhaps of a magnitude we’ve never seen. A true mania for gold stocks could develop over the coming years. This could make anyone who buys gold stocks at their current depressed levels very rich.
What History Teaches Us About Great Speculations
Many of the best speculations have a political element to them.
Governments are constantly creating distortions in the market, causing misallocations of capital. Whenever possible, the speculator tries to find out what these distortions are, because their consequences are predictable.
They result in trends you can bet on. Because you can almost always count on the government to do the wrong thing, you can almost always safely bet against them. It’s as if the government were guaranteeing your success.
The classic example, not just coincidentally, concerns gold.
The U.S. government suppressed its price for decades while creating huge numbers of dollars before it exploded upward in 1971. Speculators who understood some basic economics positioned themselves accordingly. Over the next nine years, gold climbed more than 2,000% and many gold stocks climbed by more than 5,000%.
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