Ron Holland on the Coming Currency Crisis and Economic Viagra

Ron Holland has an excellent blog on the Lew Rockwell site about the coming currency crisis.  Holland makes four excellent points:

1. The Greek crisis may lead to a shrinking of the Euro zone as more socialist nations like Greece pull out in order to have the flexibility to inflate further.

2. Eurocrats would like increasing centralization of Europe, just as Republicrats here in the US favor increases in Washington's power.  But, Ron rightly notes, Europe "would be far better off as a confederation of sovereign states that allows competition among individual national currencies." The same is true here in the U.S.  The U.S. would be better off if the states were sovereign and were to spin off from Washington, which ought to become a loose coordinative hub like Brussels is today.

3. There will be continuing periods of dollar strength as the mania of  "dollar safety" continues to motivate investors.  Eventually, though, massive increases in the monetary base and China's and Japan's ending of their subsidization of a devaluing dollar will cause currency depreciation here.

4.  Holland concludes:  "Eventually the sovereign debt crisis will also come to the U.K. and then to the U.S., with disastrous results. The tragedy in Greece today is just a glimpse of what will happen to the sovereign debt of the United States. It will come to America, and it will come on its own schedule, so be prepared."

That means be ready to purchase gold when the price of gold falls.  I have about 5% of my total assets in gold right now and I'm planning to increase it over time, buying in the dips.  Other commodities such as agriculture (DBA) and general commodities (DBC) as well as silver (SLV) and other metals should be included in a balanced portfolio.  Gold stocks (for instance, Eldorado, EGO or GDF) and leveraged gold ETFs (e.g., DGP) are higher risk/higher return ways of investing in gold.  Similar ETFs exist for silver and other commodities.

I am currently 68% in cash and about 10% in commodities, including silver and agriculture as well as gold, and about 6% in two foreign currencies, the Canadian dollar and the Australian dollar. The rest is in a few stocks, including a Singapore ETF (EWS).

My worst positions are the Australian and Canadian currencies which have plummeted, apparently because of the Euro crisis (I don't understand why, but I also don't understand why the dollar is rising).  A buying opportunity in the making?

Do not buy and hold.  The mammoth increase in monetary reserves two years ago has motivated the past year's run-up in the stock market, and it may be that this injection is running out of steam. It is possible that the massive increase in potential liquidity (tripling of the monetary base) will continue to boost the stock market for some time, but ultimately the viagra will wear off.  Then, Bernanke, Obama and their supervisors at 85 Broad Street will need to decide whether to inject nine times the monetary base to try to "get the stock market up" another 50%. If they do, hyper-inflation will be a certainty. If not, then expect some major disappoints in the American stock market.

Bernanke's use of monetary reserves somehow reminds me of viagra.  The older the rally gets, the more viagra is needed.

Rand Paul's Victory

Rand Paul is the GOP candidate for Senator in Kentucky!  Yiiippppeee!  His speech is just awesome. And who can doubt that, to recall a quote I heard somewhere: something's rotten in Denmark. And long live freedom!

Mitchell Langbert's Blog Exceeds 200,000 Independent Visits in 26 Months

I don't think of this blog as mass media and generally I get between 100 and 200 visits per day.  My readers are a mixture of people who surf in through links to various topics, friends, former students, people with whom I worked on the Obama birth certificate issue two years ago and others whom I know. This past week, though, demonstrates the amazing power of the Internet.  One post concerning the use of hay to soak up oil has been attracting over 5,000 visits per day and over 10,000 on two days, with better than 50,000 visits in the past week to that page.  I am not sure how that worked.  Several major sites picked up the story and linked to that page.  But according to my site meter the majority of visits have been from e-mail links.  I'm not technologically savvy and so have had trouble piecing this phenomenon together.  I must thank Contrairimairi for forwarding that video to me.

I wish the large number of vistors were to take a look at the rest of my blog, but only about six percent have.  In any case, 200,000 visits since March '08 amounts to an average of 7,695 per month.  That's  more than the annual circulation of most academic journals.  Let us hope for many more phenomenal successes in the years to come.

Cartoon Reveals Why Obama Administration Is Snake Oil

Joe Toscano forwarded this 1948 cartoon that is featured on the National Juggernaut site. There is more sense in it than in the entire City of Washington.