dowtheoryletters.com
July 23, 2003 -- There's a lot happening these days, but most of it is not being covered in your local newspaper. The reason it's not being covered is that a good deal of what's happening is occurring in that most mysterious and yet fundamental area of the economy. I'm talking about the area of money.
At this point, almost every nation on earth is trying to push or talk its currency down. Europe is not in good shape, and the talk there is of the European central bank on the verge of lowering its interest rate. Germany and France are in or near recession, and Italy is joining them. In Asia the situation is very difficult, since every Asian nation is now competing with China for exports.
The Chinese renminbi and the Malaysian ringitt are pegged to the dollar and protected by capital accounts. The Hong Kong dollar is also tied to the greenback via a currency board. All the other Asia currencies float, but their central banks have been intervening on a huge scale in an attempt to hold down their currencies, particularly since the dollar has weakened.
So the big battle on the part of almost every nation is -- "How do we keep our currencies weak against the dollar and against every other currency? The answer, and I've been predicting this for quite some time is -- COMPETITIVE CURRENCY DEVALUATIONS. "Begger thy neighbor" is the new trend in currencies.
This presents an ideal background for real money -- gold. And for gold's "little sister" -- silver. The precious metals are in a most interesting position. Think about it -- here's the Fed, printing $150 billion of BS paper in six weeks. That's enough junk paper to buy the entire gold industry and have roughly $50 billion left over. What that means to me is that gold shares are "dirt cheap," and so is their product -- the yellow metal, gold.
There's also an amazing irony in the money-gold situation. Because of a two-decade bear market which followed the bursting of the precious metal bubble in 1980, a new "doubting generation" of Americans has grown up. It's a generation which has watched gold and silver go nowhere for almost two decades.. On top of that, the new generation has swallowed the great lie promulgated by the central banks -- the lie that paper currency is wealth -- and real money, gold, is just a relic of the past. . . . |
