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Gold Boom/Dollar BustJoseph Russo extract Introduction Through a briefing of price charts, we will speculate on just how far the dollar can fall, and to what heights Gold may climb. In addition, Elliott Wave Technology will share with readers precisely how we have kept our trading clientele on the right side of a rather challenging Gold market from the print high of 730.40 in May 2006, through the violent, and choppy, year-long consolidation experienced since. GOLD BOOM / DOLLAR BUST Some 15-years ago in 1992, the dollar hit it lowest levels striking prints south of 78.50. Last week, it slipped back below 82.00 breaching lows most recently recorded last year in December of 2006. 
Since the start of the Federal Reserve System in 1913, the U.S dollar has lost more than 95% of its purchasing power. One can only conclude that the Federal Reserve System evolved not to tame inflation, but rather to control "faith" in an ever-valueless unit of exchange to which it has significant share of monopoly advantage.
At first thought, one might assume that the system keeps extending itself, making larger and larger promises, with no intention of truly making good on them. From another perspective however, there are vast numbers of individuals and corporate beneficiaries who are rather complicit in this grand illusory ponzi-like charade. Amid an unprecedented tripling of home values since 1999, "Joe-Homeowner", aka "consumer-Joe," is one such beneficiary. As long as he purchased his home prior to the price-surge post 2003, he is sitting pretty with huge unrealized profits, and has plenty of downside cushion to break-even should he need it. If the surge stops here, real estate purchases made after 2005 will no longer appreciate, and possibly depreciate considerably over time. Soon after, designs on buying real estate for investment or future wealth effects will become passé. It many aspects, it is the very demise of the reserve fiat dollar, which continues to feed bull markets of every stripe around the globe.
It is with sheer disbelief, and utter amazement that the real world accepts such an empty unit of exchange to start with. To fathom a possible reason for such collective behavior, one need not go any further than studying the experiment of Pavlov and his dogs. More astonishingly, the entire world, which has been built and financed from such empty illusions of exchange, will require exponential infusions of the same, with every imaginable variant accelerator to keep faith alive, and the ponzi-scheme on sound footing. All this begs the grand philosophical question of who is fooling whom, and who really cares? The answer is quite simple. Nobody cares so long as the majority feels no pain. So long as the global system alongside the majority of its citizenry remains flush with the sensation of wealth, everything else sells itself. 
Nearly two months ago, the Dow Jones Industrial average dropped just 3% from all-time historic highs, and the calls for bailouts, interest rate cuts, and rescue packages for the US real estate market rang loud and clear. The last time we checked, U.S home values have declined just modestly on balance, and nowhere near back to their 2003, or 1999 "break-even" values. In our view, this type of hair-trigger fear, and persistent pessimism, resonates due to the flawed systems necessity for sustained perpetual growth with minimal and preferably no interruptions. For the system to continue sustaining itself, debt, and money creation must continue to accelerate at ever-faster rates simply to maintain balance and neutrality.
end of extract Joseph Russo
321gold Ltd |
