Let's be honest. What would we do with our gold if it rallied to 1800 -- and then above 2,000? Actually, I wouldn't do anything with my physical gold, any more than I'd do something with my house if the real estate market got hot and my house was suddenly worth more.

What would I sell my gold for? Sell it for dollars, for euros, or for renminbi? Or trade it for a Ferrari? No thanks, if you have physical gold, don't touch it, sit on it, and save it for a rainy day. When the economy starts raining, and the dollar collapses, you'll be glad you have something of value. "Patience, patience" is the right stance.

Gold -- walkin' up the blue trendline. The moving averages show a "golden cross." Sure, gold is overbought, but let's see if it can stay on the ascending trendline. Look at the expanding volume on yesterday's rise to a new high. I'm still waiting patiently for 1800.

Facts -- Suppose we decided to stabilize our growing debts through spending cuts alone? We'd have to cut all government spending by 31%.

But suppose we decided to stabilize our growing debts through taxes alone. We'd have to raise taxes by an impossible 46%.

Both of these "solutions" would wreck the nation. Therefore, neither one will be on the table. But a combination of both will probably be tried.

But wait -- suppose there is no political or reasonable answer to our growing and compounding deficits and debts -- none? Then what? Wait, there is one answer, and it's the answer that our government will surely try. That answer is to try to print our way out of the debt problem. The government will surely attempt to print our way out of our growing troubles.

The biggest debt problem is connected with our government health program. By the year 2050, health programs will chew up about 14% of the US's entire gross national product. Cutting back substantially on Medicare is politically impossible.

Thus, the answer to all the above is for the Federal Reserve to turn to printing us out of trouble. How will we know when this is happening? Since wholesale creation of the currency (printing) is inflationary, the answer is to monitor the dollar and to watch the bonds (which dislike inflation).

As the purchasing power of the dollar deteriorates, it will take an increasing number of dollars to buy one ounce of gold. Thus, when we buy an ounce of gold, our purchasing power is stabilized. But at the same time it will require an increasing number of dollars to buy one ounce of gold. It will also require an increasing number of dollars to buy anything else.

As the dollar declines in purchasing power, it will begin to lose its international reserve status. Foreigners will begin to avoid the US dollar. At around that time I believe the dollar will face growing competition from the Chinese yuan. To make matters more difficult, I believe the yuan will ultimately be partly backed by gold. This will be part of China's plan to take over leadership of the world.

Throughout history, the nation with the reserve currency was also the nation with the most powerful military. This was true of Holland, Spain and most recently, Britain. When Britain lost its power and military (navy) leadership during World War II, the US moved to the fore, and, in turn (Bretton Woods), the US dollar became the world's reserve currency.

The US's Pentagon is now worried about the build-up of China's military, particularly its navy. China knows what it is doing. China knows that if it becomes the world's leading military power and it possesses the world's reserve currency, it will be the new leader of the world.

The Chinese communist leaders know that if they can elevate China to world leadership, then the Chinese population of 1.3 billion, which has been starved for recognition, will appreciate and be proud of their nation and its new leadership. In this way the communist party in China will have ensured its power in the world's most populated nation (China is not worried about India, which is not a military power).

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Did you notice that during the debate neither candidate directly addressed the deficit or the growing debt? The reason they didn't is because neither of them has a plausible answer! There is only one answer, and it's a temporary answer -- printing.

Richard Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.