Gold Price Rises as Easy Money Destroys Economy in US, Venezuela

Gold is coming back. It advanced more than US$9 yesterday…to US$691 an ounce.

One of the best long-term bets you can make is to bet against the dollar…and holding gold is the safest (and most profitable) way to do it.

The dollar is perhaps the greatest source of ‘easy money’ the world has ever seen. The US Treasury can create almost as much of this ‘money’ as it wants – at negligible cost. Ben Bernanke said so!

The feds no longer give out the news, but private analysts continue to track M3 – the broadest measure of US money supply. According to the latest figures, M3 is increasing at about 13% per year – or about four times as fast as GDP.

Nothing destroys an economy more thoroughly than easy money. It multiplies the mistakes people make and magnifies the damage. Yesterday’s paper tells us that Venezuela is beginning to suffer the effects of easy money. In Venezuela’s case, the money came from the oil boom. Venezuela is an oil exporter. As the money came in, it permitted President Hugo Chavez (who claims to be an admirer of Trotsky and Guevara) to indulge his fantasies. Now, consumer prices are rising at 16% per year, with certain staples becoming hard to find at any price. The bolivar is falling at nearly 30% per year…and on the black market a US dollar fetches 4,750 bolivars.

From the air, London must have looked like an ant colony this morning. Millions of little black figures (everyone wears black in London) filing along the streets, the riverbanks, and over the bridges. The London Tube workers have been on strike. People had no choice; they walked to work.

Strikes are often good for people. A doctors’ strike in Scandinavia coincided with a drop in death rates; embarrassed, the doctors decided never to go on strike again. This strike in London is probably good for people too…

Bill Bonner
Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

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Whats the best way to hold gold though?

Specific shares

Bullion from the Mint

Gold Coins

Try Gold Futures??

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