The following is one statement that you should get used to seeing: "The price of gold set another record today." Today, spot gold reached a new all-time record of $1461.91 an ounce before settling back a little bit. Silver is also skyrocketing. At one point today silver hit $39.75 an ounce. It seems inevitable that at some point we are going to be talking about $50 silver. The price of oil is also continuing to relentlessly march upwards. At last check U.S. oil was at about $108 a barrel. All of this is great news for those that are investing in gold, silver and oil, but all of this is also really bad news for the U.S. economy. Why? Well, because when these commodities go up in price it is a sign that the U.S. dollar is dying and that our country is getting closer to economic collapse.
Traditionally, there has been an inverse correlation between the price of gold and the value of the U.S. dollar. Usually when the U.S. dollar goes down, the price of gold goes up.
One of the main reasons why gold has been so strong over the past year is because the U.S. dollar has been rapidly losing value.
So why is the U.S. dollar declining?
Most economists point to all of the quantitative easing that the Federal Reserve has been doing.
So exactly what is quantitative easing?
Well, it is basically like playing Monopoly with someone that reaches under the table and pulls out a bunch of extra money when they are almost broke.
The Federal Reserve has been creating huge amounts of money out of thin air and has been pumping it into the financial system. It is essentially cheating, and it is highly inflationary. The rest of the world has not been amused.
But quantitative easing is not the only issue.
The truth is that whenever the U.S. government goes into more debt, more money is created. The U.S. has been running trillion dollar deficits for several years now, and this has created a lot of new money.
This is another reason why it is so important to get the U.S. government debt situation under control. The Obama administration is projecting that the budget deficit for this fiscal year will be about 1.6 trillion dollars. This is highly inflationary and it will continue to destroy the value of the dollar.
In addition, the rest of the world is beginning to have serious doubts about the sustainability of U.S. government debt. They are starting to lose faith in the U.S. dollar and in U.S. Treasuries.
In fact, investors are losing faith in paper currencies all over the globe. The euro is on the verge of a massive crisis. On Tuesday, Moody's downgraded Portuguese government debt for the second time in a month. Portugal needs a bailout, but they are far from alone. A half dozen European nations are experiencing a financial meltdown and the European debt crisis could spiral out of control at any moment.
Because of all of this financial instability, investors have been seeking some place safe to put their money.
For many investors, precious metals and commodities have been the answer.
In fact, silver has been doing even better than gold lately. On Wednesday, silver set a new 31-year high for the third day in a row.
People are even starting to talk about the possibility of $50 silver. Most analysts would have considered such talk complete nonsense a year ago.
But now nobody is laughing.
Read more:
http://theeconomiccollapseblog.com/archives/gold-silver-and-oil-are-all-skyrocketing-and-that-is-bad-news-for-the-u-s-economy
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