Executive Summary

• We've seen this movie before. At this point, the Fed really only has two options left.
• Prepare for asset price deflation across categories in the near term.
• Yet realize a currency crisis is likely to accompany this next credit crisis.
• The defensive steps prudent investors need to consider now

If you have not yet read Part I: Everything is Being Sold available free to all readers, please click here to read it first.

Gold and Silver

Ugh. This is the hard part of this story for me, personally, and for many reading this. The dash for cash has included gold and silver, even more so than any other asset classes on a percentage basis. Why this should be so is both a mystery and a vexation for me.

The fundamentals for gold in this environment could not be stronger, especially the demand for gold out of the East, but the way that speculative money prices things simply does not have to make sense, and if we are about to repeat 2008 all over again, things will get uglier before they get brighter.

My larger view of the markets these days is simply that they are broken. We know the price of everything but the value of nothing. This is mainly because a lot of the money in the markets is the hottest of the hot, it is fickle, and it is leveraged to the hilt.

This money, unleashed by the Fed, chases whatever is hot, both up and down, amplifying moves in either direction. Japan willingly encouraged this money to come and chase its currency down and its stock market up, and it did. But in the process, it merely shook trillion-dollar markets around as if they were penny stocks, damaging credibility and trust along the way.

I see all of this as having a life cycle, and the first stage is a hefty deflationary impulse that scares everyone, but especially the Fed and other central banks, and this will lead to another round of money printing. Eventually.

But first there has to be some more downside, and this brings us to a very long-term chart of gold.