A Conversation with Larry McDonald of the Globe & Mail

30 May 2009

I recently received an e-mail enquiry from Larry McDonald, co-author of the Globe & Mail's "Me and My Money" column. The following discussion is preliminary only, but I felt that some of the material covered might be of interest to the readers of my blog. My responses to Mr. McDonald's questions follow below:

What investments do you have in your portfolio (name of stocks, mutual funds, etc.)?

Primarily gold and/or silver mining companies, with larger holdings in Goldcorp, Yamana Gold, Minefinders, Northgate Minerals, Pan American Silver and Franco Nevada, and also quite a few smaller cap explorers and miners, such as Rubicon Minerals, Premier Gold, Jaguar Mining, ATAC Resources, etc. I also often invest in warrants in many cases, where they are available, including Goldcorp, Yamana, Minefinders and New Gold, for example.

What is your investment approach?

While I do some active buying and selling depending upon factors of relative valuation and timing, for the most part, I am a long-term buy and hold investor, meaning that my portfolio has varied dramatically in market value over time. For example, the market valuation declined over 65% in the fall of 2008, and now we've gained 130% since the November lows. The market valuation was highest in March 2008, and lowest in November 2008. Also, the majority of my investments are held in registered accounts, meaning that I buy and sell equities rather than physical metal (gold, silver).

Brief history of investing path, e.g. how got started, etc.?

I started out very conservatively, holding bonds through the investment bubble of the late 90s. I was then a late arriver to technology investing, which was of course disastrous, and then began to research why I had become drawn into an investment bubble. I thus missed the real estate bubble, and believe that last year’s commodity blow-out was not a bubble.

In the background, my wife invested primarily in income trusts, and thus I am furious with Carney and Flaherty for blowing up Canadian small investors and forcing the western natural gas trusts in particular onto the international investment market (at depreciated values) at the expense of Canadian small investors. I'm single issue against the Conservative Party on their dismantling of the income trust program, and will never forget the betrayal of trust – as well as stupid and short-sighted policy – on that “single” issue. (Don't get me going!)

What were some of your best and worst investment moves?

Worst – investing in technology companies in the early 2000s. Best – shifting my portfolio to the precious metals sector in 2003.

What advice would you offer to other investors?

Look beneath the surface to secular trends (large trends that span decades). Study history to view these trends in perspective. Be aware that financial markets are undergoing a period of massive manipulation based on misconceived government interventions – almost all of which have been counterproductive. Understand why Federal Reserve policy is now of greater interest to the financial community than analysis of underlying economic fundamentals (the markets have become increasingly distorted by short-sighted and increasingly disastrous government and central bank policies, dating back in particular to the advent of the Greenspan era in 1987). Be wary of efforts at market timing. Invest based on underlying, long-term value against the backdrop of a macro environment of inflation, debt promotion and capital misallocation. For longer-term investors, give greater weight to fundamental value than to market price when making investment decisions. Seek the advice of wise and experienced professionals (I rely on Ed Bugos in Vancouver, Bill Fleckenstein in Seattle, John Doody – the Gold Stock Analyst, in Florida, and the Aden sisters in Costa Rica).

By the way, while I view government policy broadly as unbalanced and disastrous, I'm not a conspiracy theorist. It is simply that government is over-intervening to save the market from itself, which has never once worked in history, and the intervenors operate from a very short-sighted perspective, with no acknowledgement and/or awareness of the consequences of their actions.

I do also buy into the notion of a power shift away from the United States towards Asia, and this is due moreso to the departure of Americans from their long-term commitment to free market policy than to the inherent strength of Asian economies. In brief, Asians have been saving while Americans have been borrowing, and, as Warren Buffett illustrated in his classic “Squanderville” story (published in Fortune and other places), the long-term consequence is to shift wealth from borrowers to savers. This is what is now happening globally.

Finally, I view Canada as uniquely well-positioned due to the balance of our economy towards commodity production. However, I view our national Conservative Party leadership as largely blind to the implications of this reality, with the result that they are attacking small investors (through their anti-small investor income trust policy) and throwing money at declining industries (obviously but not only autos), rather than providing support to small investors and to investment in Canada’s capacity to lead the world in commodity production (I once read that we have more mining and mineral exploration companies in Canada than in the rest of the world combined, though I've never verified that statement by “counting”). That is, Canada has everything we need to be global leaders in the 21st century, but our elected officials are looking backwards rather than forwards.
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Bond Prices: The Seismic Shift That Triggers the Gold Tsunami (IV)

27 May 2009

It is no secret to investors that the US 30-year "long" bond has risen in value for 28 years.

It has certainly also been noticed that this almost one-third century trend has recently reversed - with the reversal confirmed by a break in the long-term-trend-defining 65-week moving average this very week.

The implication is that bond prices could now fall, and interest rates rise, for the next one-third century or so.

The cause, of course, is the massively inflated, bloated, still over-valued US dollar and the floundering US economy.

The rate of change in the bond market is typically glacial, though do remember that even glaciers have periods of rapid movement - when the weather is very cold or very hot.

However, the key point here is that bonds will soon cease to be the outperforming investments that they have been for the past 3 decades. Additionally, it has grown increasingly obvious that general equities are in a long-term bear market.

What then will investors turn to for preservation of the value of their holdings?

You know and I know that gold is a store of value in uncertain times.

The reversal in the long-bond trend is a seismic event in the investment world. The tremors will be felt far and wide for decades to come.

The falling bond price is the seismic shift that will ignite the gold tsunami.

With both bonds and equities in decline, gold remains the only secure vehicle in the investment world. Other investments may rise, but only gold possesses the combined qualities of relative strength (its time is now) and security (gold is no one else's obligation and thus is not subject to possible default).

Tsunamis begin with a deep undersea earthquake. The disruption in the ocean depths is transmitted to the surface, giving force to the giant waves that later crash to shore at the ocean's perimeter.

The collapse of the 30-year bond price is the earthquake.

The price of gold is the tsunami.

There is a tsunami coming in gold.

My gold tsunami posts are as follows:

There Is a Tsunami Coming in Gold

Gold Tsunami II: Anthropomorphizing Gold

Gold: Safe Haven in the Approaching Perfect Storm

Gold Tsunami III: James Kunstler's Use of the Analogy

Bond Prices: The Seismic Shift That Triggers the Gold Tsunami (IV)
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The Bailouts Are Above All a Moral Problem

27 May 2009

John Hussman, President of Hussman Investment Trust, has stated in simple terms what is wrong with the bailout process.

It has diverted funds from hopeful and productive enterprises to wasteful and inefficient activities. The cost? Our future wealth, health, productivity and morality.

Mr. Hussman states:

"The bailout is not something "neutral" that cancels itself out, but instead amounts to a transfer of trillions of dollars of purchasing power directly and indirectly from those who didn't finance reckless mortgage loans to those who did. Farewell to the projects, innovation, research, investment, and growth that might have been financed by the savings and retained earnings of good stewards of capital. Those funds are being diverted to the careless stewards who now stand to be made whole.

"In short, these bailouts are emphatically not neutral to society as a whole, because they damage incentives and divert productive resources into hands that have proven themselves to be reckless and incapable. To believe that the bailouts are just money we owe to ourselves is to overlook serious ethical implications, as well as distributional and incentive effects."

What else is there to say?

Well, perhaps I do have one point to add....

Now that we are funding vice rather than virtue, what becomes of the bigger issues at stake in the world? How does waste on this scale impact the chances of war versus peace? International cooperation versus conflict? Responsible government versus cronyism and promotion of special interests? Opportunity for all versus inequality? Hope versus cynicism? Moral progress versus moral dissolution?

We have not yet begun to count the costs, both financial and non-financial, of the greatest bailout of the reckless by the responsible in world history. The costs will inevitably be greater than those that are presently being reckoned.
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Rescue deCODE Genetics, not GM!

21 April 2009

I have posted previously about the landmark work that deCODE Genetics is carrying out in Iceland.

Unfortunately, this trailblazing company has overextended itself by taking on far-reaching research projects based on the analysis of genetic factors linked to the development of a wide range of human diseases.

deCODE announced on March 31, 2009 that it has run out of funds, is probably no longer a "going concern," and that it will now be divesting its various business units if possible.

Let me make a simple point.

deCODE Genetics is carrying out work that will benefit all of humanity for millennia to come.

General Motors has overextended itself by paying premium salaries to its employees and offering excessive bonuses and other perks to its executives and managers for decades, leading it into an unsustainable business situation.

deCODE Genetics and General Motors are thus in similar circumstances.

However, here is the difference. deCODE Genetics overextended itself doing work that will potentially aid every human being on this planet.

General Motors overextended itself by diverting its revenues to its executives and frontline workers at the expense of operating a profitable business for the benefit of its shareholders.

Rescuing deCODE Genetics would provide lasting benefits to every one of us and all of our descendants.

Rescuing GM will preserve a corporate dinosaur with a legacy of decades of horrible business practices.

I'm serious, let's reorganize the multi-trillion dollar financial rescue programs now being advanced by every Western government and fund the continuing operations of deCODE Genetics - thereby permitting GM to bear the natural consequences of its lengthy and well-documented history of mismanagement.

Somebody else will manufacture the cars and trucks we need if the inefficient automakers are let go.

By way of contrast, if deCODE Genetics goes out of business, important work to promote human health and wellbeing will be delayed for years if not decades to come.

Our priorities are simply wrong.

Here's a desperate suggestion to save deCODE, as no politician in any party is likely to adopt the rational course of action that I am proposing.

Let's set deCODE Genetics up as a registered international charitable foundation. I for one would contribute voluntarily to preserve and promote the work of this wonderful company. deCODE Genetics stands head and shoulders above General Motors by every standard that I can think of. I would rescue this company personally if I only had the means to do so! I wish a few more politicians thought in the same way that I do....

In the interim, I urge those who are interested to consider taking advantage of the innovative "deCODE Me" personal genome scan service now being offered by this company. Believe me, science fiction has now come to life, and the deCODE team are perhaps the leading pioneers in the visionary and critically important field of personal genetic analysis!

(On a side note - I received a personal notice from deCODE today that they have received the personal genetic samples necessary to begin my personal Cardio Scan. I'll be receiving my results very soon!)
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Geithner's Plan Shreds the Next Layer of "Mark to Fantasy" - Look for Further Bank Writedowns - or Bankruptcies!

25 March 2009

I'm still busy while travelling.

However, I came across this interesting piece by Henry Blodget, referenced on Jim Sinclair's website.

What Mr. Blodget points out very succinctly is that the next stage of taxpayer-funded government bailouts of the financial industry will be a great boon to the banks - if you are concerned about the real value of their assets, as Mr. Geithner is.

The problem is that the bank's books are shrouded in level upon level of fantasy. While Mr. Geithner's plan may potentially aid the banks - in terms of their real asset value - it removes their next layer of protective camouflage - and that could send them into Chapter 11, as the actual situation of the banks remains more problematic than has even yet been revealed.

What is the next layer of fantasy to be uncovered?

Banks are permitted to declare investments that they do not intend to sell as having asset values equivalent to their face value. Thus, the banks can declare these so-called assets at the prices at which they were originally written until forced to sell them at their maturity dates - at which time it is well known that the market will prove them to be of lesser worth.

Under the new Geithner plan, the banks could now be forced - through stress testing or through regulatory compulsion - to begin marking these "hold to maturity" assets at their real market value - that is - at values much lower than those now on the books.

Uh oh! This is a major tear in the fabric of the years of "mark to fantasy" bookkeeping that have sustained the US banks (and their allied international brethren) in the "pretend game" of being profitable up until the present time. (Note that this game also allowed the banks to play the quite fun game of awarding hundreds of millions of dollars in bonuses to senior staff, etc.)

When the banks tell us that their books are sound, it is this next layer of fantasy on which these seemingly reassuring statements are made.

Legally, the banks have been able to make this claim --- until now, But Mr. Geithner's plan has the potential to explode this loophole.

The implication?

According to Mr. Blodget, there is "one small problem with Geithner's plan - it will bankrupt the banks!"

The following chart (see Mr. Blodget's article below) illustrates clearly the historically unprecedented debt levels of US consumers at present. Why is this important? The chart reaffirms that we are presently dealing with a debt crisis, not a liquidity crisis:

Read all about it here.

For the avid reader - additional links on the PPIP (Public-Private Investment Partnership):

• Dr. Housing Bubble.
• Finance Trends Matter.
• Geithner's Five Big Misconceptions (Blodget).
• Table summarizing high levels at which banks mark their toxic assets (when permissible).
• The "Ridiculous Marks" of Toxic Assets.
  

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The Kenora March Palette: 2009

15 March 2009

I began to publish the Kenora Palette Series in March 2008.

March is a magical time of year in Northwest Ontario, though you have to wander the back country trails to appreciate the beauty of our region in its fullest flourish. The magic is not usually visible from the highways, as it is too subtle and delicate to be captured by this method.

We are travelling out of town for several weeks at the end of this week, so I selected today as the last opportunity to capture the waning winter magic of our surrounding trail system.

Most of today's photos were taken on a network of local trails which Susan and her friend Linda Moncrief helped to clear, beginning this time of year in 2008.

What creates the magic of the Kenora March Palette? Certainly the gently receding blanket of winter snow is a key ingredient, but there is more. Another required component is the evening sun - now venturing further north - which highlights the subtle and always muted tones of bare trees and stark granite against the crystal white layerings of now soft and gradually disappearing snow.

The temperatures this time of year can be quite variable. One day will see -28 degrees Celsius, and the next will register -4 degrees Celsius. The, out of nowhere, as has occurred the past two days, the temperatures will jump well above zero, and the crystalline fabric of winter will recede so rapidly as almost to disintegrate.

Come with me now for an evening walk along the winter trails northwest of Kenora.

The following photo illustrates well the principle of the subtle glint of light illuminating the diffusely pigmented surface of the birch in the darkening forest.

The following closeup of the same tree makes clearer still the ephemeral nature of the evening light as it yields to the darkness that until recently has ruled and dominated our landscape, challenged only by the fleeting dash of the winter sun across the southern horizon.

Occasionally our pathway is framed by fallen trees or other markers offered by nature. This particular fallen red pine, almost exactly horizontal, is my favourite of them all, though the opening created is somewhat lower than head height.

A glimpse to the side almost anywhere along the trail will reveal the irregularities of the natural world softened by thick blankets of downy northern snow. These views are almost always pleasing, despite their ubiquity.

Here is another similar view, though at an entirely different location along the trail system.

I also enjoy the delicate textures created by contrasting elements on a much smaller scale, in this case a balsam branch fallen into the snow cover on the trail.

It would be neglectful, of course, not to illustrate the trail itself. This is a typical view.

This large granite boulder, left behind by retreating glaciers, remains a favourite landmark of Susan's and mine.

There are complex, fractal, infinitely complex textures overhead in addition to those layering the forest floor.

I am also drawn to simple images, though even a single birch against the snow is not as simple as it at first appears.

From simplicity to complexity... again. Note that the tongues of snow cover are clearly giving way to the resurgent forest.

Though following rules which remain fully submitted to randomness, the following image of a young grove of birch trees certainly offers the illusion of order and deliberateness.

I entered this image not for the composition of its visual elements, but for its almost flawless representation of the full palette of March, though the fresher tones of green are not so obvious here.

This naturally occurring arbour is just as intimate and nurturing in life as it appears in the image below.

Another image which captures the palette of March almost perfectly.

And here are some of the umbers and greens which were neglected in previous palette photos.

The trail itself, traversed by dogsled more than by motorized vehicle.

The bare forest against the sky.

Here is the perfect photo to close our review of the current March Palette series. The vapour trails of the technological world remind us that the sphere of the natural world is finite in scope. However, there is more to explore here near our home than we can exhaust in the time available to us. Wilderness, though often intersected by the marks and scratchings of men and machines, seems here still to stretch without end in every direction.

Thank you for joining me again for this review of the palette of Kenora (Northwest Ontario) in March 2009.

The Kenora palette series:

The Kenora March Palette: 2009

The Kenora Palette: After the June Rain

The Kenora May Palette Erupts into Green Tones, but also into Unexpected Hues

The Kenora Palette in May

The Kenora March Palette
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Swiss Franc Alert

12 March 2009

I note that I continue to receive many visitors who are searching for information about the Swiss Franc, a currency I have generally held in high regard. However, there is bad news for the Swiss Franc today - though keep in mind that this is in large part because the currency remains fundamentally very strong!

Bill Fleckenstein made this comment today:

"However, the really big news emanated from the Swiss National Bank, which not only trimmed rates but said they intend to buy currencies to avoid franc appreciation. Said differently, they want to trash their currency. And, they wasted no time -- by actually entering the market to effect that trade. (Within hours, the Swiss franc was lower by about 4%.)

"So, anyone with money in Switzerland as a safe haven has to be a little bit concerned, as the Swiss are definitely playing the game of let's-debase-our-currency-to-the-bottom. In any case, the NZ/Swiss news helped gold and silver, which were up 1.5% apiece."

Why is the Swiss government seeking to pull the floor out from underneath its own currency? Exports represent over 50% of the previously thriving Swiss economy. The Swiss government anticipates a contraction in GDP this year on the order of 2.5-3%. The strong Swiss franc made Swiss exports too expensive to sell and made Switzerland itself too expensive for many tourists to visit -- dealing blows to two major sectors of the Swiss economy. Estimates for the decline in Swiss watch exports are now down from -10% to -14%. Swiss luxury goods maker Richemont missed third quarter forecasts, marking its most challenging quarter in over two decades. For more information, click here or here.

I have commented previously that in a financial crisis, gold is a better choice than the Swiss Franc. I continue to hold to this position. See my previous blog entry: "Gold Is Better Than the Swiss Franc."

Here is a list of my blog entries concerning the Swiss Franc:

1. Canadians, Buy the Swiss Franc Now!

2. The Swiss Franc Continues To Climb in Canadian Dollars.

3. My first compliment from Fleck.

4. Currencies 101.

5. Another Swiss Franc Buying Opportunity for Canadians.

6. All You Need To Know About Global Money Supply in One Place.

7. The Swiss Franc Is Still Strong.

8. Use "FXF" (CurrencyShares Swiss Franc Trust) To Buy the Swiss Franc.

9. Gold is Better Than the Swiss Franc.

10. Swiss Franc Alert.
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A Letter to a Friend

5 March 2009

I have mentioned before that this is a very busy time of year in my work schedule, so I have had little time to blog. However, I wrote a letter to a friend today that sums up my views of where and how to invest in 2009.

As I don't have much time to say more, I'll just print the letter below in its original form:

Well, I've been right about gold since 2003, when I began investing in that sector.

However, I was not expecting gold mining stocks to fall with everything else as they did last year. That was a big setback for us.

Gold has climbed from the $250 range to its present $900-1000 range during that period, and can easily go much higher.

The problem with the miners is that their production costs have been rising quite a lot, and they have to access large amounts of capital, so they are vulnerable to the credit freeze also.

That being said, gold stocks have well outperformed other sectors this year, and if gold keeps climbing, the gold stocks could do very well. For example, gold stocks outperformed during the great depression, even though gold ownership was outlawed.

The reason gold is a good investment is that governments around the world are literally printing money to bail out everything. That makes money worth less, and gold worth more. For example, at the turn of the millennium, there were about $4 trillion US dollars in circulation. That figure has now gone to $15 trillion. The US government now owes about $30 trillion, and it is more bankrupt than General Motors – only high inflation will make current government debts payable.

I follow an advisor named John Doody who identifies the gold stocks he thinks will do best. Some of the bigger names on his list are Goldcorp (their main mine is very near where we live), Royal Gold, Franco Nevada and Yamana Gold. Any of these will do well over the next several years.

An exploration company I like is called Rubicon Minerals, because it has good exploration finds in Red Lake, near our local Goldcorp Red Lake Mine, and the primary investor (Rob McEwen) has very deep pockets.

In the silver sector, Pan American Silver is the big name. Two companies with very large undeveloped silver deposits are Mines Management, which I mentioned to you earlier, and First Majestic. Silver usually lags gold in the early stages, as is occurring now, then overtakes and outperforms gold, as it is a smaller market.

For market analysis, I think the best overall newsletter is written by Pamela and Mary Ann Aden. Doody’s “Gold Stock Analyst” is the best gold mining advisory. For daily market analysis, look at Bill Fleckenstein. You can find any of these with a quick Google search. You have to pay several hundred dollars per year for these advisories. Fleckenstein is cheapest, and Doody most expensive.

As far as timing, the Adens describe four cycles in the gold price. The gold price is presently in what they consider a “modest” down cycle. This modest weakness is usually followed after a few weeks or a couple of months by gold’s strongest rise, which may run for several months. The question this year is whether gold goes to $1200 or $1500 or higher. My own bias is actually slightly higher - in the $1600 range. That move will drive the gold stocks quite powerfully. After their (irrational) weakness last year, gold stocks should be this year’s best performing sector. The best time to buy would have been November 2008. However, the present period, including likely the next few weeks, should also be a good time to buy at lower prices.

I find timing the most difficult aspect of investing, and I don't think anybody is on top of how to do that. It’s always a guess as to when is the best time to buy or sell. However, it is possible – not certain – that gold stocks might do very well this year in particular.
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Is This 1929-1932 All Over Again?

19 & 21 October 2008, 6 March 2009

Mark Lundeen is graphing the 1929 and 2007 bear markets in terms of the performance of the Dow Jones Industrial Average. I advise my readers to follow his work. (The following chart is up-to-date as of March 6, 2009.)

The question everyone is asking: Are we now in a recession or a depression?

Answer: Too early to tell.

Evidence in terms of the Dow?

So far, we can't distinguish the 2007 bear market from the 1929 bear market. We are neck and neck in terms of declines.

How are US corporate earnings doing?

According to John Mauldin, despite its declines, the S&P 500 remains in heady (bubble) territory with its forward price-to-earnings ratio still at a 20.2:1 level. How can this be, following such deep declines in the average? Well, the price has fallen, but so of course have the earnings. Can corporate earnings fall further still? They certainly can, and probably will.

Warren Buffett is buying at current levels.

He is likely to get a bounce, but even the great Buffett has been wrong at times. If we are replaying 1929, we are not yet halfway to the bottom. Mr. Buffett is also exposed to financial risk due to his entry into the volatile insurance market several years ago. That is a different - and riskier - game than operating Dairy Queen.

However, based on a geopolitical analysis, and assuming it can all be fixed for $1 to $2 trillion, George Friedman of Stratfor is calling for a recession, not a depression.

Of course, the fix could end up costing more than $1 to $2 trillion.... If the $596 trillion dollar global derivatives market implodes, it could cost a lot more then $1-2 trillion to fix this mess.

In 1929-1932, the GDP of the United States fell by 50%

Ben Bernanke and Hank Paulson are working against that outcome by "reflating" the banks (and desirably the economy, if the banks can use the funds to loan, and if anyone will risk borrowing in this environment). This will result in a certain rising long-term outcome for gold, whether the eventual outcome is inflation (most likely) or deflation (if we follow a Japanese course).

Why does no one know?

Bank financial accounting is a black hole. There are so many financial sticks and levers to play with, no one anywhere knows the real financial condition of the banks. Is that a bad sign? Probably.

Is this 1929-1932 all over again?

In some ways, this time is better. The 2008 recession is only just beginning (if one disregards John Williams' true inflation and GDP numbers). The financial dislocations are occurring in the context of a much larger, more diversified, more resilient and far more open world economy.

On the other hand, the series of bubbles that spawned the 2007-2008 market crash have been far larger, and the extent of recent financial speculation and excess has been far greater, than anything imagined in 1929. The current United States financial picture, particularly in the arena of debt accumulation, is actually far uglier than the situation preceding the great depression.

The United States has undertaken an experiment in debt accumulation that is a "first" in world history. We are thus walking down a road that has never previously been trodden. That is, no economy this large has ever accumulated this much debt. On its own, the US economy is clearly in a tailspin from which recovery cannot be generated by internal means. So, if we make it out of this one alive, it will probably be thanks to the diversified global economy.

So, is this 1929-1932 all over again?

Due to the resilient global economy, this time could be better.

On the other hand, due to the United States' speculative debt bubble, unprecedented in world history, this time could also be worse (something that no one has had to think about for several generations).

We'll just have to wait and see.

Make no assumptions.
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Behind the Scenes - the US Financial Collapse Continues

7 & 9 February, 6 March 2009

OK. How bad is the US financial system? Are things on their way to getting better, as mainstream economists report?

The answer... Not really.

The following facts are derived from a Mises Institute paper entitled "The Insolvency of the Fed."

What is happening is that the Federal Reserve is "recapitalizing" the US financial system by buying up bad assets - and thereby compromising the Federal Reserve system itself. In order to maintain US bank capital ratios, the Fed is taking on mountains of low quality assets, thus weakening its own capital ratios.

By way of contrast, the Fed still has massive gold holdings, left over from the days of the gold standard, at which time the US established possibly the largest gold account in world history. On the books, the Fed values its gold holdings at a nominal $42.44 per troy ounce. Of course, the Fed's gold is presently worth 20 times that amount on today's market.

Based on its present bookkeeping system, the capital ratio of the US Federal Reserve Bank has deteriorated from a factor of 22 to 1 to an amount of 50 to 1. That is, if only 2% of the Fed's current assets have to be written down, the Fed itself becomes technically bankrupt.

Interestingly, the Fed can fix this problem by pricing its gold holdings at their actual market value, which would increase its capital from 2% of its obligations to 12.35% of its obligations. This simple strategy would lower the bank's nominal capital ratio to 8 to 1!

In other words, the only asset that the Fed has left that is of substantial value is its gold holdings, which in today's market are worth 5 times the value of all of its other assets!

And if you didn't think things were bad enough at the Fed, have a look at John Williams' latest unmassaged "shadow" financial statistics.

Inflation is down all right, but not from 2% to 0% as the government spin doctors will have you believe. It is down from 14% to 8% - in a world of declining incomes!

The rate of broad M3 money supply growth is down too - but from a horrendous 18% level to a still surging and dollar-destroying 12% level.

What do these super-inflationary rates of money supply growth add up to in terms of estimated total US M3 money supply? Well, as recently as 2006, you could have talked in terms of $10 trillion US dollars in circulation. This is when the Fed stopped counting, as the number had begun to grow uncomfortably quickly! (The total reached $1 trillion for the first time in 1974, as can be seen below....)

In billions of US dollars. Data on M3 and non-M2 components (except for institutional
  money funds) cease with the week ending March 16, 2006.

	SEASONALLY ADJUSTED		NOT SEASONALLY ADJUSTED
DATE	M3	NON-M2 M3	M3	NON-M2 M3
1959-Jan.	288.8	2.3	292.0	2.2
1959-Feb.	289.9	2.2	289.9	2.2
1959-Mar.	291.4	2.2	290.1	2.2
1959-Apr.	292.3	2.2	292.5	2.2
1959-May	294.4	2.2	292.5	2.3
1959-June	296.3	2.2	294.8	2.3
1959-July	297.4	2.2	296.7	2.3
1959-Aug.	298.5	2.1	297.0	2.2
1959-Sep.	298.8	2.1	298.2	2.1
1959-Oct.	298.5	2.0	298.9	2.0
1959-Nov.	299.1	2.0	299.7	1.9
1959-Dec.	299.7	1.9	302.4	1.8
1960-Jan.	300.1	1.9	303.4	1.9
1960-Feb.	300.4	1.9	300.4	1.9
1960-Mar.	301.4	2.0	300.2	2.0
1960-Apr.	302.2	2.1	302.4	2.1
1960-May	303.0	2.1	301.0	2.2
1960-June	304.5	2.2	303.1	2.2
1960-July	306.4	2.3	305.8	2.3
1960-Aug.	309.3	2.4	307.7	2.5
1960-Sep.	311.0	2.6	310.4	2.6
1960-Oct.	312.2	2.7	312.5	2.6
1960-Nov.	313.6	2.7	314.3	2.6
1960-Dec.	315.2	2.8	318.0	2.7
1961-Jan.	317.1	3.1	320.5	3.0
1961-Feb.	319.9	3.3	319.9	3.3
1961-Mar.	321.9	3.6	320.8	3.6
1961-Apr.	323.8	3.9	324.2	4.0
1961-May	326.5	4.3	324.5	4.4
1961-June	328.9	4.6	327.5	4.8
1961-July	330.5	5.0	330.0	5.1
1961-Aug.	332.7	5.1	331.0	5.2
1961-Sep.	334.8	5.2	334.0	5.2
1961-Oct.	336.5	5.4	336.8	5.2
1961-Nov.	338.8	5.5	339.3	5.2
1961-Dec.	340.8	5.3	343.7	5.2
1962-Jan.	343.0	5.5	346.5	5.4
1962-Feb.	346.1	5.9	346.2	5.9
1962-Mar.	349.4	6.3	348.4	6.3
1962-Apr.	352.1	6.6	352.7	6.7
1962-May	354.2	6.7	352.1	7.0
1962-June	356.3	7.1	355.0	7.3
1962-July	358.0	7.1	357.4	7.3
1962-Aug.	360.1	7.3	358.3	7.4
1962-Sep.	362.5	7.6	361.5	7.6
1962-Oct.	365.1	8.0	365.3	7.8
1962-Nov.	368.0	8.2	368.3	7.8
1962-Dec.	371.3	8.6	374.0	8.2
1963-Jan.	374.2	9.0	377.9	8.8
1963-Feb.	377.2	9.2	377.3	9.2
1963-Mar.	380.2	9.6	379.4	9.6
1963-Apr.	383.1	9.8	383.9	10.0
1963-May	386.2	10.1	383.9	10.5
1963-June	388.8	10.3	387.4	10.6
1963-July	391.5	10.4	390.9	10.7
1963-Aug.	394.5	10.9	392.5	11.0
1963-Sep.	397.3	11.3	396.1	11.2
1963-Oct.	400.0	11.7	400.1	11.4
1963-Nov.	403.8	12.3	404.1	11.8
1963-Dec.	405.9	12.7	408.7	12.2
1964-Jan.	408.5	13.2	412.6	13.1
1964-Feb.	411.3	13.7	411.4	13.7
1964-Mar.	413.6	13.8	412.9	14.0
1964-Apr.	415.8	14.1	416.8	14.4
1964-May	418.9	14.6	416.4	15.1
1964-June	422.1	15.1	420.8	15.4
1964-July	425.5	15.4	424.9	15.6
1964-Aug.	429.2	15.7	427.0	15.9
1964-Sep.	433.0	16.2	431.7	16.0
1964-Oct.	435.9	16.8	436.2	16.3
1964-Nov.	439.3	17.3	439.6	16.7
1964-Dec.	442.4	17.6	445.5	17.1
1965-Jan.	445.8	18.3	450.5	18.1
1965-Feb.	449.1	18.6	448.9	18.7
1965-Mar.	452.0	18.8	451.2	19.0
1965-Apr.	454.5	19.0	455.7	19.4
1965-May	456.4	19.3	453.6	19.9
1965-June	459.9	19.8	458.5	20.1
1965-July	463.3	20.4	462.6	20.5
1965-Aug.	466.8	21.0	464.5	21.2
1965-Sep.	471.1	21.6	469.8	21.3
1965-Oct.	474.9	22.4	475.4	21.7
1965-Nov.	478.3	22.6	478.7	22.0
1965-Dec.	482.1	23.0	485.5	22.4
1966-Jan.	485.1	23.1	490.1	23.0
1966-Feb.	487.8	23.2	487.1	23.4
1966-Mar.	490.8	23.6	489.8	23.9
1966-Apr.	494.0	24.8	495.3	25.2
1966-May	495.4	25.4	492.2	26.1
1966-June	497.1	25.9	495.7	26.1
1966-July	497.8	27.0	497.2	26.9
1966-Aug.	499.6	27.0	497.5	27.4
1966-Sep.	502.3	26.9	501.2	26.6
1966-Oct.	501.4	25.7	502.0	25.1
1966-Nov.	502.0	24.7	502.4	24.3
1966-Dec.	505.4	25.3	508.6	24.9
1967-Jan.	509.1	27.5	513.7	27.3
1967-Feb.	514.5	29.3	513.0	29.5
1967-Mar.	519.9	30.3	518.6	30.5
1967-Apr.	522.6	30.5	523.8	30.9
1967-May	527.7	30.5	524.5	31.2
1967-June	533.1	31.1	532.0	31.1
1967-July	537.7	31.4	537.3	31.1
1967-Aug.	542.5	31.7	540.9	32.3
1967-Sep.	546.8	32.2	546.2	32.0
1967-Oct.	550.2	32.1	550.8	31.6
1967-Nov.	553.9	32.7	554.1	32.5
1967-Dec.	557.9	33.1	560.9	32.9
1968-Jan.	560.4	33.0	564.7	32.8
1968-Feb.	563.6	33.2	561.4	33.3
1968-Mar.	567.0	33.8	565.4	33.9
1968-Apr.	569.2	33.5	570.5	33.7
1968-May	572.3	33.4	569.3	33.8
1968-June	575.9	33.3	575.4	33.1
1968-July	580.6	35.0	580.7	34.5
1968-Aug.	585.6	36.2	584.5	36.9
1968-Sep.	590.6	37.1	590.2	37.1
1968-Oct.	595.8	38.2	596.4	38.0
1968-Nov.	601.7	39.3	601.8	39.3
1968-Dec.	607.2	40.3	610.0	40.4
1969-Jan.	607.9	38.6	612.1	38.6
1969-Feb.	609.1	37.2	606.2	37.1
1969-Mar.	610.8	36.4	609.0	36.1
1969-Apr.	611.5	35.8	613.2	35.8
1969-May	611.6	35.1	608.9	35.4
1969-June	612.1	33.7	612.0	33.3
1969-July	610.1	30.6	610.7	30.1
1969-Aug.	607.7	27.7	606.6	28.2
1969-Sep.	608.5	26.5	608.0	26.6
1969-Oct.	608.9	25.5	609.3	25.6
1969-Nov.	613.5	28.1	613.0	28.2
1969-Dec.	615.9	28.0	618.2	28.1
1970-Jan.	616.1	26.5	618.3	26.3
1970-Feb.	613.3	27.0	610.3	26.9
1970-Mar.	615.7	28.5	615.7	28.4
1970-Apr.	619.5	31.2	624.2	31.4
1970-May	624.3	32.8	623.8	32.9
1970-June	627.1	31.9	629.0	31.5
1970-July	635.7	36.6	637.1	35.8
1970-Aug.	644.8	40.0	643.6	40.6
1970-Sep.	654.4	43.2	652.7	44.0
1970-Oct.	662.3	45.9	660.5	46.5
1970-Nov.	669.3	48.2	666.4	48.1
1970-Dec.	677.1	50.6	678.2	50.3
1971-Jan.	685.5	52.6	688.4	53.0
1971-Feb.	695.8	54.8	692.7	54.7
1971-Mar.	706.5	56.6	706.3	56.2
1971-Apr.	713.7	55.3	718.9	55.4
1971-May	723.3	56.6	722.7	56.6
1971-June	730.1	57.2	732.1	56.2
1971-July	738.3	58.7	739.8	57.4
1971-Aug.	744.0	58.5	743.1	59.4
1971-Sep.	751.7	59.3	750.0	60.4
1971-Oct.	760.2	61.8	758.3	62.7
1971-Nov.	768.3	63.7	764.9	63.7
1971-Dec.	776.0	65.7	776.6	65.3
1972-Jan.	783.8	66.1	786.1	66.1
1972-Feb.	792.9	67.2	789.2	67.0
1972-Mar.	800.6	67.1	800.5	66.8
1972-Apr.	807.9	69.5	813.2	69.4
1972-May	816.1	72.7	815.4	72.9
1972-June	824.6	74.9	827.0	73.8
1972-July	835.5	76.1	837.8	74.8
1972-Aug.	846.6	77.9	846.1	79.1
1972-Sep.	856.4	78.1	854.8	79.6
1972-Oct.	865.8	78.9	863.6	80.0
1972-Nov.	875.8	81.8	871.9	81.7
1972-Dec.	885.9	83.7	886.2	83.1
1973-Jan.	896.3	86.0	897.8	85.6
1973-Feb.	906.1	92.0	901.7	91.6
1973-Mar.	915.0	99.7	914.7	99.1
1973-Apr.	922.4	102.7	927.8	102.3
1973-May	932.3	105.5	931.6	105.8
1973-June	940.7	107.5	943.5	106.3
1973-July	950.3	113.7	953.2	112.5
1973-Aug.	959.0	120.2	959.5	122.1
1973-Sep.	965.8	126.5	965.0	129.0
1973-Oct.	972.0	129.4	970.2	130.9
1973-Nov.	977.3	128.5	973.8	128.4
1973-Dec.	985.0	129.5	985.2	128.7
1974-Jan.	993.9	134.3	994.6	133.1
1974-Feb.	1002.4	138.2	997.2	137.4
1974-Mar.	1010.7	140.6	1010.0	140.0
1974-Apr.	1020.8	147.9	1025.6	147.0
1974-May	1029.2	154.6	1028.5	155.1
1974-June	1037.8	159.9	1040.4	158.5
1974-July	1043.9	162.5	1047.3	161.3
1974-Aug.	1048.6	164.5	1049.6	166.7
1974-Sep.	1052.9	164.9	1052.6	167.9
1974-Oct.	1058.5	165.2	1057.2	166.8
1974-Nov.	1063.7	165.1	1060.5	165.1
1974-Dec.	1069.9	167.8	1070.8	167.3
1975-Jan.	1075.5	169.2	1076.8	168.9
1975-Feb.	1082.7	168.6	1076.3	167.6
1975-Mar.	1090.0	165.0	1088.7	164.2
1975-Apr.	1095.8	160.7	1100.8	159.7
1975-May	1105.9	158.0	1105.0	158.8
1975-June	1118.7	155.7	1121.2	154.3
1975-July	1128.7	153.6	1131.9	152.2
1975-Aug.	1135.1	152.0	1135.5	153.1
1975-Sep.	1145.9	154.4	1144.5	156.1
1975-Oct.	1153.8	156.0	1151.8	156.2
1975-Nov.	1163.8	156.9	1161.6	156.8
1975-Dec.	1170.2	153.9	1173.3	155.5
1976-Jan.	1181.6	155.0	1183.2	154.8
1976-Feb.	1193.5	153.1	1186.7	152.5
1976-Mar.	1204.6	154.6	1202.1	154.4
1976-Apr.	1216.7	155.9	1221.7	154.8
1976-May	1227.6	155.5	1226.6	156.3
1976-June	1236.1	158.5	1237.9	157.2
1976-July	1245.9	159.6	1249.9	158.3
1976-Aug.	1259.2	160.6	1258.6	161.2
1976-Sep.	1268.2	157.4	1266.8	158.3
1976-Oct.	1280.8	155.8	1280.4	155.4
1976-Nov.	1294.5	156.2	1291.9	156.8
1976-Dec.	1309.9	157.9	1313.6	160.1
1977-Jan.	1322.5	157.3	1324.6	157.0
1977-Feb.	1335.5	158.0	1327.6	157.7
1977-Mar.	1348.4	159.9	1345.2	160.0
1977-Apr.	1360.6	161.0	1366.2	159.6
1977-May	1374.0	164.9	1371.2	165.7
1977-June	1387.6	169.8	1388.2	168.4
1977-July	1400.4	173.6	1405.2	172.3
1977-Aug.	1415.2	178.2	1414.0	178.7
1977-Sep.	1428.0	181.8	1426.9	182.2
1977-Oct.	1441.8	187.8	1442.8	186.9
1977-Nov.	1457.1	194.8	1456.4	196.1
1977-Dec.	1470.4	200.1	1476.2	203.1
1978-Jan.	1486.3	206.6	1488.9	206.6
1978-Feb.	1498.1	212.6	1489.8	212.9
1978-Mar.	1513.0	220.8	1509.7	221.5
1978-Apr.	1528.6	228.2	1533.1	225.7
1978-May	1544.3	233.8	1538.7	233.9
1978-June	1555.4	236.9	1553.7	234.7
1978-July	1567.0	242.9	1571.2	241.1
1978-Aug.	1583.2	249.6	1581.9	250.5
1978-Sep.	1597.2	252.1	1597.0	252.3
1978-Oct.	1611.1	258.8	1612.9	257.6
1978-Nov.	1630.2	271.1	1631.0	272.9
1978-Dec.	1644.5	278.6	1652.6	281.7
1979-Jan.	1656.8	285.2	1660.6	285.4
1979-Feb.	1669.2	291.4	1661.8	292.5
1979-Mar.	1683.2	295.4	1680.5	296.5
1979-Apr.	1700.8	298.7	1703.7	295.2
1979-May	1711.0	300.8	1703.7	301.0
1979-June	1728.1	305.1	1725.1	302.6
1979-July	1743.3	308.5	1746.6	307.3
1979-Aug.	1761.6	315.0	1761.8	317.5
1979-Sep.	1783.1	328.9	1783.6	329.1
1979-Oct.	1796.7	336.3	1798.4	334.8
1979-Nov.	1798.9	333.1	1800.7	334.3
1979-Dec.	1808.7	335.0	1815.2	336.2
1980-Jan.	1823.0	340.3	1826.4	340.1
1980-Feb.	1841.7	347.2	1835.4	349.2
1980-Mar.	1850.2	350.4	1848.5	351.3
1980-Apr.	1854.2	352.0	1856.0	348.3
1980-May	1867.0	354.6	1858.4	354.2
1980-June	1884.4	355.2	1880.3	352.9
1980-July	1903.2	357.7	1906.3	357.3
1980-Aug.	1920.8	359.3	1923.9	363.2
1980-Sep.	1935.2	361.2	1935.5	362.4
1980-Oct.	1953.6	368.8	1956.7	368.3
1980-Nov.	1975.3	379.5	1979.7	380.7
1980-Dec.	1995.5	395.7	2000.8	396.0
1981-Jan.	2020.6	413.6	2023.5	412.9
1981-Feb.	2039.5	420.8	2033.1	422.5
1981-Mar.	2058.1	421.5	2055.4	422.2
1981-Apr.	2086.4	427.1	2087.6	423.2
1981-May	2102.7	438.5	2093.5	438.1
1981-June	2118.4	448.1	2112.0	445.0
1981-July	2137.9	456.0	2140.1	455.0
1981-Aug.	2157.1	462.8	2162.1	467.5
1981-Sep.	2179.4	473.3	2181.7	475.3
1981-Oct.	2204.7	482.9	2209.5	483.1
1981-Nov.	2226.7	490.6	2233.0	492.0
1981-Dec.	2254.5	499.1	2259.0	498.8
1982-Jan.	2275.7	505.4	2276.6	503.8
1982-Feb.	2284.4	509.9	2276.4	511.1
1982-Mar.	2303.0	516.5	2298.8	517.1
1982-Apr.	2328.5	524.5	2328.1	520.3
1982-May	2343.1	527.7	2332.9	528.0
1982-June	2359.7	533.7	2353.0	530.3
1982-July	2372.2	537.8	2373.5	535.7
1982-Aug.	2396.6	547.2	2401.9	551.8
1982-Sep.	2413.0	549.7	2416.5	552.5
1982-Oct.	2435.0	560.3	2441.8	561.1
1982-Nov.	2447.4	559.0	2455.9	561.1
1982-Dec.	2460.6	550.4	2469.1	550.9
1983-Jan.	2488.9	525.6	2492.3	524.5
1983-Feb.	2517.8	517.4	2507.5	518.1
1983-Mar.	2534.1	515.5	2529.3	516.2
1983-Apr.	2553.9	522.0	2555.7	518.7
1983-May	2569.5	523.1	2559.8	524.7
1983-June	2585.0	528.4	2579.8	524.9
1983-July	2596.0	528.2	2597.6	524.9
1983-Aug.	2609.8	532.9	2610.8	535.4
1983-Sep.	2626.3	540.2	2626.0	542.0
1983-Oct.	2646.1	543.9	2649.4	544.4
1983-Nov.	2673.9	558.5	2681.1	560.4
1983-Dec.	2697.4	570.9	2708.5	571.4
1984-Jan.	2714.9	573.7	2721.4	573.5
1984-Feb.	2742.6	581.2	2733.2	582.4
1984-Mar.	2771.9	593.6	2766.6	594.4
1984-Apr.	2801.2	606.3	2802.1	602.8
1984-May	2828.4	620.9	2817.8	623.0
1984-June	2850.2	631.7	2845.8	628.1
1984-July	2871.8	644.9	2870.7	639.4
1984-Aug.	2886.0	652.4	2885.8	653.7
1984-Sep.	2904.7	657.1	2905.6	659.7
1984-Oct.	2930.2	668.0	2932.3	669.4
1984-Nov.	2957.9	673.1	2965.9	676.2
1984-Dec.	2990.6	680.7	3004.6	682.5
1985-Jan.	3018.0	681.9	3026.5	683.3
1985-Feb.	3040.7	683.2	3031.7	684.9
1985-Mar.	3056.6	687.1	3051.6	687.8
1985-Apr.	3062.5	683.7	3062.5	679.4
1985-May	3078.8	685.6	3067.0	687.0
1985-June	3103.6	687.4	3100.0	682.9
1985-July	3112.7	679.6	3111.9	673.7
1985-Aug.	3131.4	683.9	3129.9	684.0
1985-Sep.	3149.7	689.8	3148.5	692.4
1985-Oct.	3167.1	695.5	3166.9	697.0
1985-Nov.	3182.3	701.1	3189.7	704.2
1985-Dec.	3208.1	712.4	3221.6	714.0
1986-Jan.	3232.8	727.1	3243.0	728.6
1986-Feb.	3250.7	734.6	3241.8	736.4
1986-Mar.	3277.2	741.0	3272.8	742.1
1986-Apr.	3307.7	746.7	3309.9	741.8
1986-May	3331.0	742.6	3318.4	743.7
1986-June	3353.0	744.4	3348.8	739.9
1986-July	3381.9	751.4	3381.2	744.9
1986-Aug.	3407.8	757.5	3407.3	757.6
1986-Sep.	3435.3	763.4	3432.2	766.4
1986-Oct.	3455.6	763.7	3453.7	764.8
1986-Nov.	3467.1	761.6	3474.9	765.4
1986-Dec.	3499.1	766.8	3513.3	768.3
1987-Jan.	3524.7	776.7	3536.0	778.4
1987-Feb.	3534.3	782.6	3524.1	784.6
1987-Mar.	3542.6	784.9	3538.4	786.4
1987-Apr.	3562.7	790.8	3568.1	784.9
1987-May	3578.2	801.0	3565.1	801.1
1987-June	3593.4	814.6	3588.0	810.4
1987-July	3599.2	815.9	3599.8	810.4
1987-Aug.	3620.1	827.8	3621.1	829.5
1987-Sep.	3642.5	838.9	3639.8	842.3
1987-Oct.	3667.9	848.7	3665.6	850.0
1987-Nov.	3681.5	857.5	3689.1	862.4
1987-Dec.	3686.5	855.0	3698.7	855.3
1988-Jan.	3709.1	856.7	3719.9	857.7
1988-Feb.	3737.2	861.8	3728.0	864.1
1988-Mar.	3762.1	866.4	3759.7	868.0
1988-Apr.	3788.5	872.7	3796.0	865.5
1988-May	3814.6	883.4	3798.5	882.6
1988-June	3834.2	890.9	3827.8	887.6
1988-July	3850.3	897.2	3851.5	892.4
1988-Aug.	3864.5	906.3	3864.9	908.9
1988-Sep.	3876.3	913.1	3872.3	916.0
1988-Oct.	3890.1	918.5	3888.4	920.1
1988-Nov.	3909.0	922.6	3917.4	928.5
1988-Dec.	3928.8	934.4	3941.1	934.3
1989-Jan.	3937.0	939.3	3944.3	939.4
1989-Feb.	3940.8	942.7	3932.8	944.3
1989-Mar.	3961.5	955.8	3962.2	957.1
1989-Apr.	3970.8	958.9	3980.0	950.8
1989-May	3974.9	957.5	3958.1	956.1
1989-June	3995.2	961.6	3987.5	959.2
1989-July	4017.4	959.2	4016.6	955.1
1989-Aug.	4027.5	947.1	4027.3	950.3
1989-Sep.	4035.2	936.4	4029.7	937.3
1989-Oct.	4047.5	926.8	4043.6	927.8
1989-Nov.	4063.1	923.7	4071.4	929.4
1989-Dec.	4077.1	918.6	4089.5	918.0
1990-Jan.	4089.2	916.4	4091.7	914.9
1990-Feb.	4095.6	910.0	4089.8	912.8
1990-Mar.	4098.3	901.7	4102.8	903.8
1990-Apr.	4105.8	897.4	4117.5	891.3
1990-May	4107.8	901.2	4093.4	900.7
1990-June	4115.1	895.9	4111.3	895.0
1990-July	4127.8	897.9	4125.2	895.2
1990-Aug.	4144.2	896.5	4145.4	901.1
1990-Sep.	4151.5	891.4	4147.1	892.3
1990-Oct.	4155.9	890.9	4149.8	890.2
1990-Nov.	4151.8	882.2	4156.8	884.7
1990-Dec.	4154.7	875.9	4166.1	874.2
1991-Jan.	4177.2	882.7	4177.9	881.7
1991-Feb.	4193.9	882.1	4191.0	887.7
1991-Mar.	4201.5	872.1	4209.9	875.4
1991-Apr.	4209.0	868.6	4220.9	863.7
1991-May	4208.4	857.9	4195.9	858.0
1991-June	4209.2	850.0	4205.2	848.1
1991-July	4202.5	839.8	4197.0	835.5
1991-Aug.	4197.1	835.5	4197.1	838.9
1991-Sep.	4191.2	829.3	4182.8	828.5
1991-Oct.	4195.4	828.5	4187.1	826.4
1991-Nov.	4201.2	829.3	4209.7	831.6
1991-Dec.	4210.3	830.5	4222.8	829.4
1992-Jan.	4215.8	827.6	4218.1	828.1
1992-Feb.	4236.2	829.1	4234.3	837.3
1992-Mar.	4238.4	826.6	4241.6	829.7
1992-Apr.	4226.1	818.9	4240.1	814.4
1992-May	4220.5	815.9	4211.1	816.4
1992-June	4218.7	818.1	4211.4	815.0
1992-July	4218.9	817.6	4212.2	811.3
1992-Aug.	4227.1	821.4	4227.9	824.0
1992-Sep.	4235.7	818.6	4225.1	816.7
1992-Oct.	4234.9	803.8	4227.8	801.6
1992-Nov.	4230.8	796.6	4240.7	799.9
1992-Dec.	4222.6	789.5	4237.6	788.3
1993-Jan.	4204.5	777.2	4210.1	778.3
1993-Feb.	4207.7	784.2	4201.2	792.3
1993-Mar.	4211.1	790.0	4210.9	792.1
1993-Apr.	4212.6	791.8	4225.3	786.9
1993-May	4241.9	797.7	4231.4	798.2
1993-June	4242.1	792.4	4238.4	790.7
1993-July	4238.9	788.9	4234.7	783.3
1993-Aug.	4240.4	785.7	4237.8	787.3
1993-Sep.	4249.6	788.4	4239.4	786.4
1993-Oct.	4256.5	791.2	4253.0	791.1
1993-Nov.	4275.3	795.9	4283.5	799.4
1993-Dec.	4285.6	801.3	4304.5	800.1
1994-Jan.	4282.4	797.3	4288.5	798.5
1994-Feb.	4268.7	782.3	4258.1	788.7
1994-Mar.	4279.6	786.8	4276.8	788.2
1994-Apr.	4290.4	793.2	4307.0	788.8
1994-May	4300.8	795.4	4285.3	795.5
1994-June	4297.3	805.3	4294.9	804.5
1994-July	4318.3	820.5	4317.4	815.5
1994-Aug.	4319.7	824.2	4316.7	824.3
1994-Sep.	4329.4	832.7	4318.0	830.0
1994-Oct.	4339.7	844.6	4335.6	846.2
1994-Nov.	4355.4	857.4	4364.0	861.2
1994-Dec.	4369.8	872.2	4389.0	870.4
1995-Jan.	4393.7	890.3	4397.4	891.9
1995-Feb.	4396.5	895.9	4387.0	902.3
1995-Mar.	4415.7	913.8	4417.7	916.4
1995-Apr.	4436.5	926.6	4454.0	922.0
1995-May	4476.0	942.8	4459.4	943.1
1995-June	4514.6	956.0	4510.2	954.6
1995-July	4540.2	963.0	4537.6	957.2
1995-Aug.	4575.5	976.1	4570.0	973.4
1995-Sep.	4596.4	985.2	4585.7	980.4
1995-Oct.	4613.6	990.4	4604.8	992.2
1995-Nov.	4624.4	993.5	4631.1	997.3
1995-Dec.	4636.3	995.7	4658.8	995.0
1996-Jan.	4670.3	1011.8	4676.3	1015.1
1996-Feb.	4700.6	1028.0	4694.8	1037.9
1996-Mar.	4734.7	1036.6	4746.4	1042.0
1996-Apr.	4753.0	1043.6	4770.7	1039.6
1996-May	4788.1	1069.2	4769.3	1069.5
1996-June	4811.0	1079.0	4807.1	1075.9
1996-July	4837.4	1089.9	4827.5	1081.9
1996-Aug.	4857.3	1101.3	4850.3	1095.4
1996-Sep.	4885.4	1119.4	4869.6	1112.1
1996-Oct.	4925.6	1145.7	4911.9	1146.1
1996-Nov.	4946.3	1151.4	4954.3	1155.7
1996-Dec.	4985.5	1170.3	5008.0	1172.4
1997-Jan.	5013.0	1183.9	5021.6	1188.6
1997-Feb.	5045.3	1205.2	5047.3	1219.0
1997-Mar.	5079.8	1224.8	5100.4	1234.1
1997-Apr.	5120.7	1248.7	5145.3	1245.5
1997-May	5146.8	1262.6	5128.8	1264.0
1997-June	5176.9	1275.0	5166.8	1270.9
1997-July	5235.2	1313.6	5216.1	1300.9
1997-Aug.	5291.5	1339.9	5278.7	1328.7
1997-Sep.	5333.7	1362.7	5309.2	1350.8
1997-Oct.	5376.2	1387.6	5358.6	1384.6
1997-Nov.	5417.2	1407.1	5425.1	1411.6
1997-Dec.	5460.9	1429.3	5489.2	1436.4
1998-Jan.	5508.6	1453.0	5522.2	1460.6
1998-Feb.	5545.5	1457.3	5554.2	1475.2
1998-Mar.	5610.7	1495.5	5638.5	1508.6
1998-Apr.	5647.1	1508.7	5679.9	1508.0
1998-May	5687.0	1527.6	5673.2	1531.7
1998-June	5728.4	1543.1	5711.8	1538.5
1998-July	5749.6	1546.8	5721.5	1528.7
1998-Aug.	5814.7	1586.1	5792.2	1569.3
1998-Sep.	5883.9	1612.9	5851.5	1593.6
1998-Oct.	5953.6	1641.5	5927.5	1631.3
1998-Nov.	6010.3	1658.5	6015.4	1663.7
1998-Dec.	6051.9	1668.2	6087.9	1681.6
1999-Jan.	6080.9	1675.0	6102.9	1687.5
1999-Feb.	6134.1	1702.0	6151.2	1725.6
1999-Mar.	6132.3	1690.2	6172.0	1708.2
1999-Apr.	6172.7	1699.1	6211.7	1700.3
1999-May	6200.4	1708.6	6188.3	1715.6
1999-June	6237.5	1723.9	6219.7	1720.1
1999-July	6268.7	1730.9	6232.2	1707.9
1999-Aug.	6299.2	1740.0	6265.7	1719.4
1999-Sep.	6323.0	1748.7	6282.4	1723.0
1999-Oct.	6378.4	1784.6	6346.7	1766.6
1999-Nov.	6465.0	1845.2	6467.2	1849.9
1999-Dec.	6551.5	1902.8	6597.1	1922.0
2000-Jan.	6605.5	1929.9	6630.9	1946.2
2000-Feb.	6642.2	1951.1	6661.1	1976.2
2000-Mar.	6704.0	1983.4	6753.1	2006.7
2000-Apr.	6767.3	1996.2	6812.4	1998.2
2000-May	6776.9	2013.5	6765.3	2025.5
2000-June	6823.6	2043.1	6805.1	2041.7
2000-July	6875.2	2081.6	6836.1	2055.1
2000-Aug.	6945.0	2116.7	6905.8	2092.4
2000-Sep.	7003.5	2142.4	6957.5	2108.2
2000-Oct.	7027.0	2147.9	6982.0	2120.2
2000-Nov.	7038.3	2149.6	7043.7	2154.1
2000-Dec.	7117.6	2186.3	7173.8	2211.1
2001-Jan.	7237.2	2250.1	7259.5	2269.1
2001-Feb.	7308.5	2281.3	7332.5	2311.3
2001-Mar.	7372.0	2284.2	7428.5	2313.7
2001-Apr.	7507.8	2358.4	7546.0	2357.6
2001-May	7564.1	2414.8	7551.6	2427.0
2001-June	7644.7	2456.4	7631.7	2455.9
2001-July	7691.9	2470.1	7644.1	2437.6
2001-Aug.	7696.3	2438.9	7658.0	2412.5
2001-Sep.	7853.2	2484.1	7802.5	2441.9
2001-Oct.	7897.8	2534.6	7845.9	2500.2
2001-Nov.	7973.0	2568.2	7981.4	2574.7
2001-Dec.	8035.4	2584.0	8105.8	2619.8
2002-Jan.	8063.9	2586.6	8086.7	2613.2
2002-Feb.	8109.3	2604.1	8128.1	2637.0
2002-Mar.	8117.3	2604.2	8174.2	2634.5
2002-Apr.	8142.6	2624.7	8171.9	2619.1
2002-May	8175.1	2630.8	8159.6	2638.6
2002-June	8190.8	2624.4	8184.9	2624.7
2002-July	8244.2	2629.8	8202.6	2600.2
2002-Aug.	8298.1	2645.0	8268.9	2623.1
2002-Sep.	8331.5	2653.6	8285.5	2615.5
2002-Oct.	8368.9	2642.6	8317.1	2608.5
2002-Nov.	8498.8	2726.2	8513.4	2730.6
2002-Dec.	8568.0	2767.4	8633.5	2801.3
2003-Jan.	8588.1	2757.6	8602.0	2782.0
2003-Feb.	8628.7	2759.1	8635.5	2789.6
2003-Mar.	8648.8	2761.6	8694.4	2787.0
2003-Apr.	8686.0	2757.3	8714.2	2748.9
2003-May	8741.9	2758.1	8728.4	2765.9
2003-June	8791.6	2767.8	8792.3	2772.7
2003-July	8888.7	2815.5	8850.5	2787.4
2003-Aug.	8918.2	2797.5	8902.7	2781.9
2003-Sep.	8906.5	2806.6	8871.7	2780.2
2003-Oct.	8896.8	2810.9	8852.1	2780.1
2003-Nov.	8880.3	2800.9	8894.6	2798.7
2003-Dec.	8872.3	2792.7	8927.8	2815.9
2004-Jan.	8930.2	2841.9	8930.7	2859.9
2004-Feb.	9000.3	2868.1	8993.9	2892.5
2004-Mar.	9080.7	2907.6	9108.2	2927.3
2004-Apr.	9149.6	2932.9	9178.3	2926.1
2004-May	9243.8	2963.4	9236.2	2972.6
2004-June	9275.7	2987.1	9281.4	2993.5
2004-July	9282.7	2987.5	9257.1	2964.2
2004-Aug.	9314.4	2997.3	9299.9	2987.5
2004-Sep.	9351.8	3005.1	9333.8	2989.6
2004-Oct.	9359.4	2990.3	9329.1	2965.7
2004-Nov.	9395.1	2991.3	9396.0	2982.5
2004-Dec.	9433.0	3011.1	9482.2	3025.4
2005-Jan.	9487.2	3051.1	9479.3	3063.8
2005-Feb.	9531.6	3076.2	9511.8	3096.3
2005-Mar.	9565.3	3090.4	9584.7	3107.0
2005-Apr.	9620.9	3139.9	9660.5	3136.6
2005-May	9665.0	3175.5	9654.6	3186.4
2005-June	9725.3	3209.3	9734.3	3215.5
2005-July	9762.4	3226.4	9745.7	3206.5
2005-Aug.	9864.6	3298.4	9852.8	3291.0
2005-Sep.	9950.8	3354.3	9938.7	3344.9
2005-Oct.	10032.0	3406.3	10005.7	3386.3
2005-Nov.	10078.5	3431.0	10077.2	3416.4
2005-Dec.	10154.0	3478.5	10201.4	3488.3
2006-Jan.	10242.8	3506.0	10221.9	3515.2
2006-Feb.	10298.7	3540.2	10276.1	3560.7

Now - I guess you had better round off that recent (February 2006) $10 trillion figure to $15 trillion US dollars in circulation today. Only three years was required to achieve this dramatic near-50% ($5 trillion) increase. Or, you could break out the Monopoly game board and use your US dollars as "Monopoly money."

Because the great majority of the $4-5 trillion in new dollars were created out of thin air, they were just "imagined" into existence by the Federal Reserve, if you will, as illustrated in Mr. Williams' chart below:

Let's look at the other sectors.

How about unemployment? It's up almost double - from 10% in 2000 to 18% today.

GDP growth? Down from 7-8% in 1983, but not to 0%, as we are told by the authorities. Rather, US GDP growth is now running at a -4% annual clip.

How about the trade-weighted dollar? Well, it's been up since the financial system fell apart. Why? Because investors who are scrambling out of illiquid assets into US treasuries have to buy US dollars to purchase the Treasuries. But the "ascending" dollar has held only 55% of its value since 1985, and pretty soon, it is going to fall considerably lower than that, as it continues its death spiral.

So are we soon going to be getting back to normal?

The answer? Not a chance.

All that's left is "the new normal" - an insolvent Federal Reserve, US money centre banks that are wards of the indebted US government, a US government that will never pay its trillions of dollars in mounting debts, and a US dollar that is spiralling towards parity with the Zimbabwean currency.

Want to know what the new normal is?

The new normal is that gold is money again, and investors are beginning to figure that out in larger numbers - as the market value of gold has continued to climb against almost all other assets.

In fact, little known to most - the value of gold has moved to record highs this year in almost every global currency save the US dollar and the Japanese Yen. Let's close with a look at the market value of Canadian dollar gold (now $1150 Canadian per ounce):

Gold is the new normal. And the golden tsunami continues its roll to shore from the centre of the deep ocean. I'd guess we're continuing on our way to $6000 gold.

9 & 27 February, 6 March 2009: How bad can the general economic circumstances get? As mentioned previously, Mark Lundeen has been tracking the current stock market crash against the grand-daddy of them all - the 1929-1932 (89.16%) crash.

The current crash is now the second worst on record, with a 53.44% drop as of March 5, 2009. Only the great depression stands as competition to the downside. As Mr. Lundeen pointed out February 9, the Fed had drained a further 11% of its reserves in just the previous 6 weeks. Behind the scenes, the fundamentals have perhaps never been uglier - even in 1929! After all, in 1929, no one had even dreamed of a multi-trillion dollar derivative market, nor any of the other disastrous financial inventions of the recent ultra-bubble era.

So, have we seen the bottom yet? I don't think so. A bounce is due at some point - probably a big one. But this bounce is likely to be only a hiccup on the way down as the Greenspan Depression continues its descent! Mr. Lundeen's best guess is that this decline will be at least the second greatest in US history, and over the past 3 weeks, it has moved from 5th to 3rd, and now (March 2, 2009) 2nd on the list (not yet entered in chart above). Note that this decline stands as first for greatest one-year decline - the low point can be seen at week 52 on Mr. Lundeen's chart.

Bill Fleckenstein also noted today that the past ten years have been the worst ten year-period in history for US investors, reminding his readers that Alan Greenspan's easy money policies triggered the series of financial bubbles that morphed into the current meltdown. And believe me, we are in for considerably more than 10 bad years. There will be ups and downs, but the bad investment news is going to continue for many, many more years to come!
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