The dollar, gold and China.

Let us again put the sequence of recent financial history in order. Sep 15, 2008 the FED virtually stops the movement of money by invoking the 'mark to market' accounting system for banks. The move declares a lot of assets of the big banks worth zero (because temporarily there is no market for them). The banks are required to put their money in reserve, which stops the circulation of money. Because the GDP is related to the movement of money, these moves put the economy into a tailspin. Barak Obama is elected a month and a half later and Bush is blamed for the calamity. Sen (Dunce) McCain capitulates to Obama during the debates on the question of the economy and the responsibility for the meltdown.

The meltdown continues to cause lasting damage to the US and world economy. After Obama is inaugurated, he and his financial advisers "bail out" GM and Chrysler then push them into bankruptcy. The government ends up owning both companies. Banks are also "bailed out" by receiving actual currency and guarantees. This gives the Obama regime control over the biggest banks. Then the FED opens the money spigots and the banks take the Stock Market up.

Obama's henchmen and Congressional Democrats built a slush fund of over 800 billion dollars and claim that the retreat from the abyss is due to the "Stimulus" bill. In reality, the Stimulus bill is designed to pay off Democrat constituencies so the Dems can get re-elected in 2010. The bill contains over $4 billion for ACORN to fix the election. Eighty percent of the "Stimulus" bill remains unspent.

Michelle Obama said the other day that the health care overhaul is the next step in the program of the movement that elected Obama.

Some folks believe that freedom in America is finished and that Obama will remake us as a Socialist country. not quite, not yet. The Obama movement toward Marxism is running into trouble. The majority of people now oppose ObamaCare and this threatens the Democrats in Congress. What threatens the Obama regime most is the collapse of the financial hoodwinking they are doing. While, a very good sized part of the American electorate has been hoodwinked by Obama and the Media, the world of international finance can not be so easily fooled.We see a continuous deterioration in the US dollar and a simultaneous rise in the price of gold.

The $1000 level for gold has been a recent resistance, which has been breached. While, cycle theory predicts gold to rise steeply next year, it may do so sooner. The target indicated by the charts is $1,300 (see graphic below). The total sum of gold mined through history is worth $5 Trillion if gold is valued at $1000/oz. Of this, $1 Trillion is held by banks, the rest by individuals. Close to $35 Billion is in ETF's like GLD.

The most important factor in the rise of gold price will be China. While, China owns $1.9 Trillion in dollars, it is in their interest to convert their dollar reserves into gold to stop the Obamabots from devaluing their reserves. It is very likely that the FED had promised China some currency to stop them from dumping their dollars, but money talks. Besides, China is becoming the biggest gold minor, so they will push their own interests. Thus, the key to the value of gold will be the behavior of China.

The supply of gold available to back up the tremendous amount of shorts in gold is dwindling and a short squeeze will also help gold prices. In addition to gold, silver has also been shorted. Supposedly (see my post on the RB), the banks that hold the silver for SLV have sold the silver on the market (which in fact is a naked shorting of silver), so if SLV and others demand the actual metal, the banks will have to buy the metal. Even if the FED pumps in monopoly money, they can not print silver. The shortage of silver may also push gold prices higher.
All these coming calamities are waiting to ensnare the Obamabots and they will not help the US economy either.