"Government jobs are non-productive jobs that normally get paid for by taxpayers. However, because the U.S. already has a huge budget deficit with tax revenues likely to decline substantially, these jobs will be paid for through inflation. An increase in government jobs is not a sign that the economy is improving, but only a sign that we are digging our economy into a deeper hole that will ultimately lead to the U.S. dollar collapsing.
"Even Warren Buffett, who is a huge supporter of Obama and has defended his economic policies, said last week that with political leaders showing little inclination to raise taxes, the only way to pay for excess spending will be by inflating the currency and shrinking the value of the dollar.
"The worst of the recession is not behind us. Nominally, anything can happen to the Dow Jones. If the Federal Reserve prints enough money, the Dow Jones could go back to 14,000, but it won't mean anything if it costs $2,000 to fill your refrigerator with groceries.
"When the Dow Jones fell below 6,500 in March, we were at a point where everybody was afraid to own stocks; but we were telling you that the biggest risk was holding onto U.S. dollars. When you own shares of a stock, at least you own an actual percentage of a company. When you own U.S. dollars, you own a piece of paper that is backed by nothing but faith and confidence that it will always be accepted as money.
"By the Federal Reserve printing trillions of dollars out of thin air, Americans are beginning to lose their confidence in the U.S. dollar and the chart of the U.S. dollar index has been starting to break down. Soon, everybody will be afraid to own dollars and the longer the Federal Reserve keeps interest rates at 0-0.25%, the greater the chances are that hyperinflation is in our future.
"The only way to determine the true value of the Dow Jones is priced in gold. Today, the Dow Jones is worth 9.35 ounces of gold. In 1980, the last time we had an inflationary crisis like the one we are rapidly approaching, the Dow Jones reached a low of 1 ounce of gold.
"It is impossible to predict how high gold will go. Our guess is gold will probably reach $5,000 per ounce and the Dow Jones will fall to around 5,000 within the next 5 years, but there are many other ways we could forecast the potential value of gold besides the Dow/Gold ratio.
"Gold's high in 1980 of $850 per ounce would be approximately $2,300 per ounce in today's dollars. However, in 1980 we were the world's largest creditor nation. Today, we are the world's largest debtor nation so surely we believe gold is going a lot higher than $2,300 per ounce.
"Gold started the 1970's at only $35 per ounce and when it reached $850 in 1980 it equaled a percentage gain during the decade-long bull market of 2,329%. Gold's low in 2001 was $256 per ounce. If we see gold make the same percentage gain during its current bull market, we will be looking at $6,200 per ounce gold.
"Another way to calculate the potential value of gold: the U.S. currently has $1.56 trillion in M1 money supply, which measures the most liquid forms of money held by the public and includes currency, checking accounts, travelers checks, and other deposits against which checks can be written. If the U.S. decided to make each dollar redeemable by the amount of gold it possesses (286.9 million ounces) it would value gold at $5,437 per ounce.
"NIA believes gold prices must go up. Total bailout commitments by the Federal Reserve and Treasury have now reached $13.4 trillion of which $2.9 trillion has already been spent. Most of this money is being hoarded on the sidelines but soon we believe Americans will rush to spend their dollars all at once. With all of the corruption in stocks and real estate, precious metals will be the only asset class Americans will trust to store their wealth.
"In our opinion, the current bubble in the U.S. treasury market is bigger than the dot-com and real estate bubbles at their peaks combined. When the U.S. dollar starts to crash, we believe the boom in precious metals will be bigger than the dot-com and real estate booms combined; but unlike those booms, gold and silver prices could remain at a permanently high plateau because there won't be any way to reverse the effects of inflation."
