Faithful:

I would imagine the government is going to bail out just about everyone who asks in the next year or so. They will just keep on printing money until that money becomes pretty close to worthless. This precedent has already been set and followed almost religiously since Roman times right up through the present in Zimbabwe. Of course, there’s always the possibility that our wise leaders will somehow break with tradition and avoid the mistakes that world leaders have always made. I put the chances of this happening as about the same as me getting drafted by the NBA next year.

Also, we are not in a deflationary depression yet. The money being created is just too massive and the faith in the dollar still too strong for there to be deflation. Those commentators who believe that we are actually experiencing deflation now have seemed to miss the point that the money supply MUST shrink for there to be true deflation. As long as the money supply can be instantaneously increased by the Fed, and believe me the Fed can “print” $20,000,000,000 in a second if it has to, there can be no true deflation. There can be price declines, but they simply cannot last. The only thing that can cause deflation is the destruction of the money supply. This can only happen when the dollar loses its status as money. And this can only happen after a period of hyperinflation and the inevitable devaluation that must follow.

I sincerely believe that the Kondratieff Wave theorists are correct involving the ultimate outcome involving the tremendous amounts of credit and debt that have been created in our economy over the past generation, but the path they have chosen directly into winter is, in my view, not correct. The forces of credit expansion have been so great, the innovations so ingenious and lasting that the collapse can be no less sensational. This Kondratieff autumn will not fizzle out, but will flame out in a blaze of glory, so to speak, and hyperinflation will be the fire that ignites it. It must be so. Do you really expect, from all you know of the world and history, that this whole fiasco will end quietly and slowly? I do not see it as so.

For those of you who have read Ian Gordon, I must state here, that while I consider him a brilliant researcher and fine writer, his assessment that we have already entered the Kondratieff winter, is also, in my view, incorrect. We are not in the Kondratieff winter yet. We should be, but the technology of the computer and internet are holding it off. This is the most crucial point that most Kondratieff theorists are missing. They have failed to bring into consideration the true and profound effects that technology has had on manipulating and lengthening the Kondratieff autumn. The 1 and the 0 have altered the time frame and have set the stage for a powerful hyperinflationary period that will result in a very, very deep and dark deflationary winter that is yet to come. Not here yet, though. These thinkers have also failed to take into account the true Power that the ability to print the world’s reserve currency gives the U.S.

Bretton Woods was a very, very, very big deal. When you replace something immutable like gold with something “printable” like the dollar, you as messing with some very deep, important and powerful forces. You are calling up from the netherworld some very bad spirits of the past and future.

I write this, because many of you have seen my predictions for the Dow to hit below 3000. This will happen, but we may see a huge run-up first. This I cannot know for sure. Once the Fed increases the money supply so greatly, one can never know where the money will go. Real estate? Banking Stocks? Gold Stocks? During times of great inflation, and therefore mass psychological insecurity involving the true value of a currency, gold has most often always advanced, but when manipulation of the money supply is rampant, who knows what could occur in the short run? There are some very clever minds at work on prolonging this facade. The Dow could even climb over 20,000 in the next 24 months. If it could accomplish this amazing feat, however, it would not stay at that level very long.

The amount of currency that the Fed will have to “create” will be massive, and such a process cannot be continued ad infinitum. Each and every effort to hold back the deflationary inevitability of years of profligate deficit spending is getting more and more difficult. This last push will take just about all the Fed has, and it will fail spectacularly. When it does, gold and silver will win, and they will win mightily. The hyper-inflation will push them to new highs and the subsequent crash will make them the ruling money of the world they once were. Those who hold gold and silver through these times will not only do well, they will become the new monetary lords of the earth. Bull