GOLD 0.51% $1,391.7 gold futures

us dollar to fall hard .. gold to soar

  1. 24,765 Posts.
    Here is why the US dollar, despite all the spin in the media, is going to fall hard and gold accordingly strongly rise:

    1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.

    That is happening right now. GMH has been in trouble for some time. Housing is also on the decline in the US with inventories rising and house prices falling.

    2. This affects many other industries and the jobs report. Jobs growth is now regularly "surprising" on the downside.

    3. An economy is either rising at a rising rate or business activity is falling at an increasing rate. There is no such thing in any market as Cinderella or Goldilocks situations. That is media spin.

    4. We have seen the Dow rise on economic news indicating that growth in the US economy is slowing. This continues until major businesses start announcing poor earnings.

    5. This makes the Dow fall faster than it rose, moving it deeply into the red.

    6. This can be seen in #2 above. Put simply, lower economic activity means lower profits.

    7. Lower profits means lower Federal Tax income.

    8. Lower Federal tax income in the face of increased Government spending causes massive geometric rises in the US Federal Budget deficit.

    9. This is also true for US cities & States as it is for the US Federal government.

    10. The increased US Federal Budget deficit in the face of a huge US Trade Deficit means the US Current Account Deficit increases.

    11. The US Current Account Balance when in deficit indicates how fast money is leaving the US into world markets.

    12. It is this deficit that must be met by investment coming into the US from overseas in any form. It could be anything from new overseas business investment coming into the US, overseas purchase of US shares or overseas purchase of US Government paper like bonds.

    13. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations. It is a contradiction to expect developing nations to keep investing in eg. the US, usually by purchasing US paper assets. The developing nations need their finances to help them develop, not finance the US spending.

    14. If investment money coming into the USA fails to meet the dollars leaving by all means, then the US must finance its excess spending from within.

    15. Assuming the US itself now has to finance an increasing amount of the maturities of Government paper, interest rates must rise with the long term rates moving fastest regardless of what the economic situation is like.

    16. This will further worsen business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

    17. Therefore as you arrive at this situation you are automatically back at #1. This is an economic downward spiral.

    Jim Sinclair heard all this "slow business" as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.

    A summary of "Jim's Formula" and why the US dollar will fall and gold will rise from http://www.jsmineset.com/home.asp
 
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