Gasoline prices are not rising, the Dollar is falling

This was insightful commentary with a serious conversation about the ratio of gold / dollar and oil prices.  With large amount of debt issuance ahead to cover current budgets and long-term liabilities, it is almost “in the bag” that we will see higher prices ahead.   We will see some major corrections along the way the will allows commodity prices to fall across the board then we will be talking about the doom of deflation (I actually think this will be needed to bring incomes and cost of living back in-line) then the bulls will come out again to pump it back up.   Its a cycle but in the end, the trend is certain, higher prices for things you “need”, lower prices for “wants” (better production but not enough demand) and steady or falling wages and they will translate into the fore mentioned scenario.

We have too much debt in our system and not enough money to pay it off.   Our track record on letting things default and fail not good, so the assumed course of action will be more support and debt to try and keep things smooth.  This will not work because of the debt issue and the scarcity of money we have created with issue money as a debt instrument in society.  This will be the defining issue we will tackle in the next 25-50 years and it will shape our society beyond that.

Forbes – Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House John Boehner are both wringing their hands over the prospect of seeing their newly extended Social Security tax cut gobbled up by rising gasoline costs.

Gold may climb to record $1,650 an ounce on Fed easing

I love the $1,650 call by Goldman Sachs.  1650 is the magic number these days, I wonder where I heard that before (*cough Jim Sinclair *cough).  Gold is really breaking out, currently last time I checked it is at $1,370 per ounce.  We are seeing the reaction to the multi-trillions of new debt we are creating.  Its a total debasement of the U.S. dollar.

As long we continue this path, gold is going higher and the dollar will continue to lose value.   The USDX (Weighted currency index) is at 77, (70) is the lowest it has been recorded at.   Goldman stated in this article that gold prices will come down when the economy recovers.  This may be true but we will need to see major cuts in federal spending and much higher taxes.   Right now, gold is being re-monetized as money and if this fully occurs then even if the U.S. dollar regains confidence, people may still use gold to store wealth because they are not certain if our politics will not revert back to the same old games we have been running in this country since the end of WWII.

Bloomberg – Gold may rally more than 20 percent from this month’s record to a high of $1,650 an ounce in 12 months as the Federal Reserve takes action to stimulate the U.S. economy, according to Goldman Sachs Group Inc.