Recently I was asked by a high school teacher if I had any ideas about why students today seem so apathetic when it comes to engaging with the world around them. I waggishly responded, “Probably because they’re smart.”

In my opinion, we’re asking our young adults to step into a story that doesn’t make any sense.

Sure, we can grow the earth’s population to 9 billion (and probably will), and sure, we can extract our natural gas and oil resources as fast as possible, and sure, we can continue to pile on official debts at a staggering pace — but why are we doing all this? Even more troubling, what do we say to our youth when they ask what role they should play in this story — a story with a plot line they didn’t get to write?

“Nationalism will emerge. Healthier countries will not see fit to spend their hard earned money to bail out their less responsible neighbors.”

So far, the narrative we’re asking them to step into sounds a lot like this: Study hard, go to college, maybe graduate school. And when you get out, not only will you be indebted to your education loans and your mortgage, but you’ll be asked to help pay back trillions and trillions of debt to cover the decisions of those who came before you. All while operating within a crumbling, substandard infrastructure. Oh, and by the way, the government and corporate sector appear to have no real interest in your long-term future; you’re on your own there.

Yeah, I happen to think apathy is a perfectly sane response to that story. Thanks, but no thanks.

To understand how our national narrative evolved (or, more accurately, devolved) to become so unappealing, we have to take an honest look at money.

Money is Not Wealth

Money is just a marker for real things. As long as you can exchange your money for real things, your money represents value. Because we tend to conduct all of our most meaningful transactions using money, our perspective can become warped to the point that we think it is the money itself that has value.

The economy is measured in these units, these markers, which we call “money.” But money is not the same thing as the economy. Far from it. And money has no value on its own, but only in relation to the things we can exchange it for.

The economy consists of real needs and wants being fulfilled. On one end of the spectrum, we have the basics like food, water, shelter, medical care, and other necessities. On the other end of the spectrum, we have 15-minute neck massages at the airport. Everything else lies in between

Money, on the other hand, is simply a facilitator of exchanges.

When we reduce the economy to its simplest form, it really consists of a growing number of people trying to meet their needs and wants. More people (~80 million more each year) simply translate into increasingly greater demand for the earth’s limited and ever-limiting resources.

Since our human desire to consume is virtually limitless, a key role of money is to provide the scarcity necessary to divvy up a limited amount of goods and services among the population. There has to be a balance between money and the things that humans can produce and distribute, or else prices get out of whack.

So now let’s imagine a world where real things are in limited (and limiting) supply, and then compare this idea to our money supply in order to get a sense of where things are headed.

This is a chart of Money of Zero Maturity (MZM), which is the largest and most comprehensive accounting of money in the Federal Reserve system and has been ever since M3 was abandoned.

If that looks like an exponential chart to you, you are correct. Sure, there are a few wiggles and jiggles along the way, but the system of money we’ve been living under and setting our expectations around is an exponential money system. For it to remain in balance with resources that come from the earth, we need those to expand exponentially, too. If they don’t — and they can’t forever — things will get out of whack. And it’s probably no surprise to hear my view that money is what is increasingly out of whack in this story, not the earth’s resources.

One feature of exponential systems is that the amount of accumulation of whatever it is that is being measured increases over time. If we draw a few arrows on the above chart, we can see that money is accumulating in our system at a faster and faster pace:

“Stage 3″ in this chart shows what has been happening since 2008. Aside from the little hump there in 2008, MZM is accumulating at the fastest pace in history. Isn’t that interesting? Even as employment is historically very weak, income growth is stagnant, the economy is limping along, and inflation is (allegedly) quite low, the US is manufacturing money at the briskest nominal pace in the series.

The reason that we’ve not experienced massive inflation (yet) is that the money that is being injected into the system is basically just piling up and not really doing anything. It’s just sitting there. One measure of this is the so-called ‘velocity’ of money, which is not actually a measured value but an inferred one, derived by dividing the stock of money into GDP. The higher the resulting number, the faster each unit of money is racing around in the economy trying to do something (which usually means to spend itself before inflation steals its value).

In fact, the velocity of money is at an all-time low and seems to be headed lower. When this money all finally decides to go out and spend itself while it still has some value, it will be quite a process to observe. Just think of stored-up money like potential energy, the same as a massive snow cornice hanging precariously over a steep gully. It’s not a question of if, but when it will finally release and cause the value of money to plunge.

And the point I am trying to make is that there are two sources adding to the pressure here. One is the amount of money being piled up, and the other is the dwindling quality of oil. Adding more and more snow to the situation (as the Fed and other central banks are busily doing) is not really helping anything, and neither is a decrease in the net energy returns of new oil discoveries.

Just for kicks, here’s a chart of money in circulation (including cold, hard cash and coin) stretching back through time to around the creation of the Fed.

Is that a picture-perfect exponential chart or what?

Now the other side of the money situation is, of course, debt. Here we see something quite remarkable, which is that somehow the Fed has managed to achieve a new all-time high in total credit market debt.

I say “remarkable” because what really should be happening here is de-leveraging, not re-leveraging. We should be seeking to decrease the total amount of debt, not increase it. But of course, that is not the business of the Fed. Its business is strictly to keep the exponential money and credit systems growing exponentially.

Well, that and assuring that the big banks never have to have an unprofitable quarter. But that’s another story for another day.

Yet even with the heroic efforts of the Fed to push, badger, cajole, and horse-whip the aggregate amount of debt higher, its efforts are falling short. Note that we are still many, many trillions away from the trend line, which is what we’d need to get back to in order for things to return to ‘normal,’ as abnormal as those times really were.

Recall my other main point about debt, which is that it must double slightly faster than once every decade if we want the future to mirror the past four decades. This means that from 2008 to 2018, credit market debt will need to expand from $52 trillion to $104 trillion, or a bit more than $5 trillion per year, to keep us on the same “normal” trajectory.

Part of my skepticism about the odds of things returning to “normal” rests with the difficulty I have conceiving of what exactly it is that the US might find to suddenly go another $50 trillion into debt for.

If the US cannot find a way to go that much further into debt, then all of the many fine and subtle, overt and gross ways that we’ve come to expect the economy and financial markets to work will no longer apply. Many things will change and will simply operate very differently if no other reason than credit growth has slowed to a relative crawl.

As we are now four years past the 2008 crisis and we’ve only just managed to eke out a nominal new high in total credit market debt, this means that we are roughly $20 trillion behind the curve. You could do worse than this for an explanation as to why the national budget is such a wreck, why incomes are not keeping pace, and why the nation’s infrastructure and capital investment are in such poor shape.

The bottom line is that, as expected and predicted here many times over the years, money creation with an eye towards keeping the credit markets expanding is the name of the game.

And the problem is that money is not wealth. It’s only a marker for wealth. Simply increasing the money supply without understanding where we are in the energy story is an incredibly risky, if not foolish, thing to do.

That’s the trouble with money.

Change Is Coming

Look, I hate to be the bearer of what many will consider to be bad news, but things are not ever going to go back to “normal” if we define normal as the period from 1950 to 2000 during which relatively constant economic growth and slightly-faster-than-that debt growth went hand in hand.

Everyone currently in a position of power honed their skill sets during a period of time when the pie was reliably growing and the skirmishes centered around how best to lay claim to one’s own portion of the expansion.

Unfortunately for those with these skill sets, we have entered a brand new epoch, where, for a variety of inter-related reasons, old-style economic growth is no longer possible. These reasons are partly demographic, partly related to reaching the mathematical limit of growing one’s debts faster than one’s income (or GDP, in this story), and partly related to the end of cheap (and easy) oil.

It is this last part, the oil story, which has almost entirely eluded the intellectual grasp of our monetary and fiscal masters. I don’t blame them, as mastery of the physical sciences is not a requirement of any classical economics departments in any of the universities that churn out our PhD economists.

This is very strange, when you think about it, because economics is entirely rooted in the process of extracting and converting natural wealth into material wealth. Without the primary inputs of the earth, there would be NO secondary or tertiary wealth for us to divvy up (via a money-driven rationing process) or develop exotic derivative products around. Economics should be the study of energy and resource flows as well as money.

Imagine if medical scientists did not have to learn about digestion and nutrition as a part of their training. After such a course of study, they might come across an emaciated patient complaining of low energy and prescribe exercise because that’s been proven to boost energy in most people. Of course, they would then be mystified by why the patient deteriorated and did not recover.

Today we find the world’s central banks mystified as to why trillions and trillions of freshly-printed fiat units, be they dollars or euros or yen, are not resuscitating the world economic system. The answer might just be grounded in the observation that we are out of cheap and easy oil. The very food of the economy is no longer as packed with calories as it once was, and the patient is losing weight.

What I am describing here is nothing less than a complete and utter paradigm shift that is so profound and so large that it will, paradoxically, escape detection by most people. That’s just how gigantic shifts seem to happen: They go largely unnoticed, perhaps because they are too big to internalize.

If an ever-decreasing net energy return is slowly starving our patient, which we might detect each and every time we spend $80 to $200 to fill our gas tanks (depending on whether we live in the US or Europe), then how should we position ourselves for this very different future?

What sorts of things will change whether we wish them to or not? And what is actually under our personal control?

A Crisis Is a Terrible Thing to Waste

Times of great upheaval offer a gift — the chance to really sit down and rethink things. Certain fundamental questions can arise, such as Do I have the right job? and What should my kids study in college? and Should we really have increased total derivatives by $100 trillion after the financial crisis erupted in 2008?

When faced with the sort of predicament we currently find ourselves in, even more existential questions might dominate our thinking, such as Is there more to life than working hard, buying stuff, taking on debt, and getting older? or even What’s the meaning of life? The primary narrative telling us that we are supposed to work hard, consume harder, and keep ourselves centered on the treadmill that we seem to have been born upon is beginning to unravel.

It’s a mark of maturity to use a moment of crisis as an opportunity to engage in introspection and as a springboard for personal (or societal) growth and development. Unfortunately, there are virtually no signs that either our dominant culture or our leadership is that mature.

So our opportunity here is to really question ourselves and our actions, hold them up to the bright light of day, and decide what needs to change, what we should keep, and what new things we might start doing.

*Post courtesy of Chris Martenson, renowned author and trend forecaster interested in macro trends regarding the economy, energy composition and environment. You can read more atChrisMartenson.com.

Make no mistake about it; we have inflation no matter how you measure it.  Many investors measure inflation by growth in the consumer price index (CPI).  By this measure, prices are moving higher at a 3% annualized clip.

CPI is okay, but an increase in money supply is the proper and true measure of inflation.  Prices can rise and fall for many reasons outside of money: changes in supply & demand, productivity gains, availability of substitutable goods. Electronics are particularly prone to falling prices, even when money supply is rising.  It’s just that prices would have fallen further had the money supply remained constant.

There’s certainly a lot of money sloshing around the economy these days.  Base money – currency and commercial bank reserves held at the Federal Reserve – has soared since the Fed implemented its infamous “quantitative easing” policies in 2008.  Through the Fed’s open-market operations (purchasing debt securities with new money), base money has more than tripled in less than four years, as the graph below reveals.

Through the miracle of fractional reserve banking, banks are able to further increase the money through lending.  M2 – a broad measure of money that includes currency and coins, checking accounts, savings accounts, time deposits, and non-institutional money-market deposits – has soared.

M2 reflects lending.  As loans are made, they are usually deposited in one of the aforementioned accounts.  The chart below reveals accelerating money creation since the end of the recession in 2009.

So we obviously have monetary inflation.  We also have price inflation.  CPI running at 3% annually is a percentage point ahead of the Fed’s 2% goal. (And 3% is likely a fraudulent number, as most of us can attest with our own consumer purchases.  Shadowstats.com provides a more honest measure of CPI, which shows it running near 6% annually.)

Both monetary and price inflation could get a lot worse, because banks are far below their lending capacity.  Banks are sitting on a record $1.6 trillion in excess reserves – funds used for lending – on deposit with the Federal Reserve.  If these funds were put to use, the M2 money supply could theoretically double.

Inflation – money and price – can pauperize investors who own the wrong investments.  Rising inflation invariably leads to rising interest rates.  Some asset classes simply don’t generate sufficient return to compensate for lost purchasing power in a rising-rate environment.  Other asset classes stand to lose because rising interest rates translate into higher capital costs.

Investors need to be particularly wary of the following asset classes.

1. U.S. Treasury Securities.  If you own U.S. Treasury securities, you’re already getting killed.  The real rate of interest on a 10-year U.S. Treasury note is -1.0%, calculated by subtracting the current annualized CPI rate of 3% from the current yield of 2.0%. You’re losing purchasing power as it is, but you’ll lose even more when the CPI rises. When interest rates rise – and they will – not only will you lose purchasing power, you’ll suffer a capital loss if you need to sell the note before maturity.

2. Fixed-Income Debt.  If you own long-term fixed-coupon bonds, you’ll suffer similar losses to those Treasury security owners will suffer: Rising rates will produce capital losses should the bond be sold before maturity.  Concurrently, you’ll suffer an opportunity cost, because you’ll be foregoing the opportunity to receive interest payments on higher-coupon debt. Holders of long-term certificate of deposits and other guaranteed contracts will suffer a similar income opportunity cost.

3. Speculative Growth Stocks.  When interest rates rise, capital becomes more costly and scarce.  Companies that are losing money or companies that need to continually tap outside sources of capital could quickly find themselves in trouble.

4. Leveraged Investments.  Higher debt levels raise financial risk, particularly if that debt needs to be rolled over in a rising interest rate environment.  Be wary of investments that require leverage to generate returns and companies whose debt exceeds their equity.

5. Bank Stocks.  Banks have been subsidized by artificially low interest rates for the past three years. Many have profited handsomely through carry trade – borrowing short to lend long.  When inflation needs to be wrung from the system, short-term rates are the first to rise.  A flattening of the yield will, in turn, diminish bank profits, because of narrowing of the spread between borrowing short and lending long.

2012 could be a difficult year for investors in the wrong asset class.  The right asset classes – high yields and rising dividend stocks and variable-rate debt – will continue to hold their value in an inflationary and rising interest-rate environment.  Not coincidentally, these investments are the mainstay of the High Yield Wealth portfolio, which provides a haven and a plethora of choices for investors fearful of losing purchasing power and a permanent loss of capital.

*Post courtesy of Ian Wyatt of Wyatt Investment Research. He is the editor of Daily Profit.

The U.S. tax code is a complete and utter abomination and it needs to be thrown out entirely.

Nobody in their right mind would ever read the whole thing – it is over 3 million words long. Each year, Americans spend billions of hours and hundreds of billions of dollars trying to comply with federal tax requirements.

Sadly, it is the honest, hard working Americans in the middle class that always get hit the hardest. The tax code is absolutely riddled with loopholes that big corporations and the ultra-wealthy use to minimize their tax burdens as much as possible. Many poor people do not pay any income taxes at all. The dishonest are rewarded for cheating on their taxes (if they can get away with it) and the ultra-wealthy have moved trillions of dollars to offshore tax havens where they can avoid U.S. taxation altogether.

Our system is incredibly unfair to the millions of hard working people in the middle class and upper middle class that drag themselves out of bed and go to work each day and try to do the right thing. In addition, the current U.S. tax system is incredibly inefficient, it diverts a tremendous amount of resources away from more valuable economic activities, and it has chased thousands of businesses and trillions of dollars out of the United States. The U.S. tax code is such a complete and utter mess at this point that it can never be “fixed”. The only rational thing to do is to abolish it completely, and any politician that tells you otherwise is lying to you.

The following are 24 outrageous facts about taxes in the United States that will blow your mind….

1 - The U.S. tax code is now 3.8 million words long. If you took all of William Shakespeare’s works and collected them together, the entire collection would only be about 900,000 words long.

2 - According to the National Taxpayers Union, U.S. taxpayers spend more than 7.6 billion hourscomplying with federal tax requirements. Imagine what our society would look like if all that time was spent on more economically profitable activities.

3 - 75 years ago, the instructions for Form 1040 were two pages long. Today, they are 189 pages long.

4 - There have been 4,428 changes to the tax code over the last decade. It is incredibly costly to change tax software, tax manuals and tax instruction booklets for all of those changes.

5 - According to the National Taxpayers Union, the IRS currently has 1,999 different publications, forms, and instruction sheets that you can download from the IRS website.

6 - Our tax system has become so complicated that it is almost impossible to file your taxes correctly. For example, back in 1998 Money Magazine had 46 different tax professionalscomplete a tax return for a hypothetical household.  All 46 of them came up with a different result.

7 - In 2009, PC World had five of the most popular tax preparation software websites prepare a tax return for a hypothetical household. All five of them came up with a different result.

8 - The IRS spends $2.45 for every $100 that it collects in taxes.

9 - According to The Tax Foundation, the average American has to work until April 17th just to pay federal, state, and local taxes.  Back in 1900, “Tax Freedom Day” came on January 22nd.

10 - When the U.S. government first implemented a personal income tax back in 1913, the vast majority of the population paid a rate of just 1 percent, and the highest marginal tax rate was just7 percent.

11 - Residents of New Jersey pay $1.64 in taxes for every $1.00 of federal spending that they get back.

12 - The United States is the only nation on the planet that tries to tax citizens on what they earn in foreign countries.

13 - According to Forbes, the 400 highest earning Americans pay an average federal income tax rate of just 18 percent.

14 - Warren Buffett had an effective tax rate of just 17.4 percent for 2010.

15 - The top 20 percent of all income earners in the United States pay approximately 86 percentof all federal income taxes.

16 - Sadly, as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.

17 - The United States has the highest corporate tax rate in the world (35 percent).  In Ireland, the corporate tax rate is only 12.5 percent.  This is causing thousands of corporations to move operations out of the United States and into other countries.

18 - Some tax havens are doing a booming business in setting up sham headquarters for U.S. corporations.  For example, the city of Zug, Switzerland only has a population of 26,000 people but it is the headquarters for 30,000 companies.

19 - In 1950, corporate taxes accounted for about 30 percent of all federal revenue.  In 2012, corporate taxes will account for less than 7 percent of all federal revenue.

20 - In a previous article, I discussed how many of our largest corporations make huge profits and yet pay less than nothing in taxes….

What U.S. corporations are able to get away with is absolutely amazing.

The following figures come directly out of a report by Citizens for Tax Justice.  These are combined figures for the tax years 2008, 2009 and 2010.

During those three years, all of the corporations below made a lot of money.  Yet all of them paid net taxes that were below zero for those three years combined.

How is that possible?  Well, it turns out that instead of paying in taxes to the federal government, they were actually getting money back.

So for these corporations, their rate of taxation was actually below zero.

If you have not seen these before, you are going to have a hard time believing some of these statistics…..

*Honeywell*

Profits: $4.9 billion

Taxes: -$34 million

*Fed Ex*

Profits: $3 billion

Taxes: -$23 million

*Wells Fargo*

Profits: $49.37 billion

Taxes: -$681 million

*Boeing*

Profits: $9.7 billion

Taxes: -$178 million

*Verizon*

Profits: $32.5 billion

Taxes: -$951 million

*Dupont*

Profits: $2.1 billion

Taxes -$72 million

*American Electric Power*

Profits: $5.89 billion

Taxes -$545 million

*General Electric*

Profits: $7.7 billion

Taxes: -$4.7 billion

Are you starting to get the picture?

21 - Exxon-Mobil paid $15 billion in taxes in 2009, but not a single penny went to the U.S. government.

22 - Many wealthy Americans hide enormous amounts of money outside the country in order to avoid paying taxes.  According to the IMF, a total of 18 trillion dollars is currently being hidden in offshore banks.

23 - The number of traffic accidents spikes each year right around April 15th. The following is from a recent Bloomberg article….

Deaths from traffic accidents around April 15, traditionally the last day to file individual income taxes in the U.S., rose 6 percent on average on each of the last 30 years of tax filing days compared with a day during the week prior and a week later, according to research published in the Journal of the American Medical Association.

24 - Most of the tax debate is focused on income taxes, but the truth is that Americans pay dozens of other taxes every single year. The following are just a few of the taxes that many Americans pay….

#1 Building Permit Taxes

#2 Capital Gains Taxes

#3 Cigarette Taxes

#4 Court Fines (indirect taxes)

#5 Dog License Taxes

#6 Federal Unemployment Taxes

#7 Fishing License Taxes

#8 Food License Taxes

#9 Gasoline Taxes

#10 Gift Taxes

#11 Hunting License Taxes

#12 Inheritance Taxes

#13 Inventory Taxes

#14 IRS Interest Charges (tax on top of tax)

#15 IRS Penalties (tax on top of tax)

#16 Liquor Taxes

#17 Luxury Taxes

#18 Marriage License Taxes

#19 Medicare Taxes

#20 Property Taxes

#21 Recreational Vehicle Taxes

#22 Toll Booth Taxes

#23 Sales Taxes

#24 Self-Employment Taxes

#25 School Taxes

#26 Septic Permit Taxes

#27 Service Charge Taxes

#28 Social Security Taxes

#29 State Unemployment Taxes (SUTA)

#30 Telephone Federal Excise Taxes

#31 Telephone Federal Universal Service Fee Taxes

#32 Telephone Minimum Usage Surcharge Taxes

#33 Telephone State And Local Taxes

#34 Tire Taxes

#35 Toll Bridge Taxes

#36 Toll Tunnel Taxes

#37 Traffic Fines (indirect taxation)

#38 Utility Taxes

#39 Vehicle License Registration Taxes

#40 Vehicle Sales Taxes

#41 Workers Compensation Taxes

When you account for all forms of taxation on the federal, state and local levels there are many Americans that pay out more than half of their incomes in taxes.

We are being taxed into oblivion, and yet most Americans do not even realize that it is happening.

It is kind of like being killed by thousands of tiny cuts.

So what do all of these taxes buy us?

They buy us a massively bloated government that wastes money on some of the craziest things imaginable.

Millions of Americans work for the federal government, and yet most of them produce very little of real economic value.  The following comes from a recent National Review article….

By 2005, the federal government employed 14.6 million people: 1.9 million civil servants, 770,000 postal workers, 1.44 million uniformed service personnel, 7.6 million contractors, and 2.9 million grantees. This amounted to a ratio of five and a half “shadow” government employees for every civil servant on the federal payroll. Since 1999, the government had grown by over 4.5 million employees.

According to that same article, when you add in state and local government workers the numbers are even more dramatic….

According to the U.S. Census Bureau, there are 3.8 million full-time and 1.5 million part-time employees on state payrolls. Local governments add a further 11 million full-time and 3.2 million part-time personnel. This means that state and local governments combined employ 19.5 million Americans.

Yes, we do need some government.  For example, without any law enforcement at all our society would descend into complete chaos, and without any military at all we would be completely open to foreign conquest.

In order to have a stable, secure society we do need some government.

However, we definitely do not need the massively bloated government that we have today.

The truth is that most government employees are a drain on the system. Most of them just push paper around.  I used to work in Washington D.C. so I know what pushing paper around is all about.

And as I wrote about yesterday, there are millions of other Americans that enjoy a comfortable existence at the expense of the federal government without doing any work whatsoever.

Of course the biggest welfare recipients of all are the big corporations. All forms of corporate welfare should be eliminated immediately.

When are U.S. taxpayers going to get sick and tired of paying for all of this?

Every single year, the federal government, state governments and local governments drain massive amounts of desperately needed money from hard working middle class families.

Then they take that money and spend it on incredibly foolish things.

When are American voters going to stand up and boldly declare that they have been taxed enough already and they aren’t going to take it anymore?

The current tax code is completely and utterly broken and it is beyond repair.

Unfortunately, neither the Republicans or the Democrats are proposing that we should get rid of it.

So we are just going to continue to get more of the same year after year, and it is the middle class that will feel the pain.

*Post courtesy of the Economic Collapse Blog.

We recently reported that gold was likely to surpass all previous price records by the end of 2012. As each day passes, more experts are coming forward with predictions that gold will eventually soar to $2,000 and beyond.

The Telegraph reported that it may hit $2,000 very soon based fears stemming from the situation going on in Spain. A $2,000 gold price would surpass last September’s record high of $1,900.23.

As the situation in Europe falls further away from a solution, gold demand is surging. Spain is the latest country to take some dramatic leaps towards protecting a drowning government. There will be a cap on cash-payments, leaving people worried about the value of fiat currency transactions.

The new Spanish PM, Mariano Rajoy, has announced that business cash transactions of over €2,500 are to be banned as an anti-fraud mechanism to increase tax income for the Government. Breaches of the rule will result in fines of 25% of the value of the payment. Sr Rajoy mentioned the reform in a Q&A session in Parliament, so more details will no doubt be forthcoming when the measure is formally announced.

Additionally, a third round of quantitative easing would also make gold more appealing to investors lacking faith in the central bankers and desiring a hedge again steeper levels of inflation.

According to Philip Klapwijk, global head of metals analytics at the Reuters GFMS consultancy: “A push on towards $2,000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year.”

If anyone doubted that gold’s 10+-year-long bull run was still running at full steam, Spain’s struggles are helping to subside those doubts.

Mr. Klapwijk did note that next year could be the “high water mark” for the global gold market depending, of course, on how the crisis in Europe pans out.

In the meantime, there has been an increase in gold sell-off in futures markets as people cashed in on their gold while the dollar gained a bit of stability.

Here’s what you can expect for gold price in the short term:

In the shorter term, GFMS thinks the apparent abatement of the eurozone crisis and reduced expectations for a third round of quantitative easing or “QE3” in the US could drive the gold price lower, perhaps below $1,550 in the next couple of months.

However, GFMS expects any softening in the price to prove temporary as “acute” fears over eurozone sovereign debt, focused on Spain, resume.

Meanwhile it will become clear that the faltering US recovery will force the Federal Reserve into extra monetary stimulus, GFMS believes, while the newer economic powerhouses of China, India and Brazil will also become obliged to loosen their monetary policy.

(Kitco News) - Eldorado Gold Corp. (TSX:ELD)(NYSE:EGO)(ASX:EAU) expects to reach an annual gold production of 1.7 million ounces, a growth of 160%, by 2016 after acquiring European Goldfields Ltd. in late February.

The company acquired four projects, located in Greece and Romania, from the transaction and will use these new acquisitions to grow its gold production, along with its current assets located in Brazil, China, Greece and Turkey.

“Over the next five years, through the investment of approximately $2 billion, (Eldorado) will increase its production by almost 1 million ounces annually to 1.7 million ounces by 2016,” said Paul Wright, president and chief executive officer of Eldorado. “This investment is occurring in the construction of new mines, in the expansion of existing mines and the case of the Olympias project in Greece, the refurbishment of a pre-existing mine.”

In 2011, Eldorado produced 658,652 ounces of gold from its assets.

The new assets include three projects located in Greece, Olympias, Skouries and Stratoni as well as Certej, which is located in Romania.

“Throughout the period, the company’s balance sheet will be constructed and managed to ensure our ability to continue to build out despite volatility in metal prices,” Wright said. “In addition to growing our production, we will be increasing our exploration efforts significantly, particularly in both Greece and Romania, where we see exceptional and compelling opportunities for short and medium resource and reserve growth.”

Olympias will undergo underground refurbishment and tailings treatment from 2012 to 2015, putting gold production at approximately 50,000 ounces per year. From 2016-2017, the company will focus on underground mining, raising production to 105,000 ounces of gold produced per year. From 2018 and onward, the company expects to produce 170,000 ounces of gold per year.

Skouries is slated to begin production in 2015 and for the following five years will produce 130,000 ounces of gold and 28,500 metric tons of copper annually from an open pit. From 2020 and on, the company expects to produce 100,000 ounces of gold and 22,000 metric tons of copper per year from an underground pit.

Stratoni has been producing silver, lead and zinc concentrates since the fourth quarter of 2005. Proven and probable reserves stand at 200,000 metric tons of zinc, 140,000 metric tons of lead and 12.7 million ounces of silver. The company said that reserves will support a five-year mine life.

Certej is expected to begin gold and silver production in the second quarter of 2015, producing 130,000 ounces of gold and 660,000 ounces of silver annually over its 12-year mine life.

“This build out of quality assets continues to drive Eldorado’s low unit costs even lower, so much so that our costs are in the very low $300-350 (net-byproduct) per ounce range,” Wright said.

The company will also focus on exploration throughout the year. Eldorado will be putting $81 million toward its assets, with $13.1 million going toward its Greek assets and $3.9 million going toward its Romanian asset.

Operating costs are expected to rise above $750 million by 2016, while revenue will reach over $2.5 billion by 2016.

“I would highlight the difference between revenue and operating cost in 2016 at $1.8 billion reflects the metal prices that we projected at that period, which are $1,346 for gold, $26 for silver and $2.84 for copper.”

Wright also said that projection of cash flow in represents consensus metals forecasts costs, which assume significant decreases over time.

According to a consensus of metals forecasts Eldorado consulted, the concensus sees gold declining to $1,292 an ounce by 2017, long term $1,250, silver declining to $21.75 by 2017, and also long term at those levels, and  copper down to $2.63 a pound by 2017, and $2.56 long term.

Wright said that Eldorado’s gold production was slightly higher than expected in the first quarter of 2012, while cash costs were slightly below expectations. The company will release more details on their first quarter production shortly.

Since gold’s peak back in the fall of 2011, investors have been trying to let us know what the yellow metal is going to do next.

Some forecast a plummet in price immediately, others played it safe.

But since that time one investor has had the same mentality throughout, Marc Faber.

The publisher of the Gloom, Boom and Doom report says that investors should be selling stocks and gradually stocking up on gold.

As he’s said all along: in the long term, you can’t go wrong with gold. Stocks will be on the decline while gold rises down the road.

But as for now, everyone does not need to panic or rush to the precious metal immediately.

He believes gold will see some corrections and stocks will even have some nice buying opportunities in the near future.

But like most commodities, you play the long ball instead of the short game. Buying gold for your portfolio is (and should always be) a long term venture.

Stocks have posted a “huge bull run” since 2009, the famed investor says. “I think the [stock] market is very overbought.”

In Faber’s most recent newsletter he wrote, “Where investors were overly negative last year, they are now overly optimistic about the prospects for the U.S. economy.”

Since the record high in gold price hit in August at 1,889.70, prices have slowly dipped, especially over the past few months. Investors looking to cash in on the gold market could jump in now and wait out the prices. Faber points out that gold is not in a bear market but rather, is “still in a correction phase.”

“Individual investors should gradually accumulate gold,” Faber explains to Yahoo! Finance. “Hold some cash, hold some precious metals, hold some equities, and hold some real estate. If one asset class or the other declines substantially move money into that asset class.”

It sounds much easier said than done. But with the recent spike in gold prices coming off of the U.S. government’s poor March jobs report, the correction phase looks to be the time to get on board.

The March jobs report revealed the economy only added 120,000 jobs, a figure much below expectations. With concerns that the Fed will intervene with quantitative easing, global markets were scared into a frenzy.

Many felt – and still feel – that if the Fed moves forward with quantitative easing that the gold prices will most definitely rise against the dropping price of the dollar. We have seen it before and it looks to happen again.

Even the big investment banks are still riding the precious metal train amid all of this uncertainty. In one Goldman Sachs’ analyst’s research note to Reuters, they explained, “We still prefer gold despite an extended period of profit taking in 4Q11 and renewed volatility in 1Q12.”

Don’t let the price correction of gold impact your long term outlook on your investments. Follow Faber and Goldmans’ lead and gradually add to your gold portfolio.

In President Obama’s campaign for reelection, he’s making the 1% a center of focus.

His proposed “Buffett Rule” is taking center stage in his campaign. The proposition would ensure that the wealthiest citizens are taxed more. Anyone making above $1 million a year would pay aminimum of 30% of their income in taxes.

“I’ve told you where I stand,” Obama said in a press release. ”Now it’s time for members of Congress to do the same.”

One of the President’s biggest concerns, according to his “Buffett Rule”, is the falling tax on the wealthy:

“The share of our national income going to the top 1% has climbed to levels we haven’t seen since the 1920s.  The folks who are benefiting form this are paying taxes at one of the lowest rates in 50 years.”

And this is because many of the wealthy receive their incomes from investments. Capital gains and dividends are taxed at a steady 15%, so big time investors can avoid heavier taxes altogether.

Presumptive Republican nominee Mitt Romney would be included in this group. A savvy investor, Romney makes roughly $21 million annually, mainly from dividends and capital gains, and is taxed 14%. Romney is opposed to tax increases of any kind, and these taxes, he said, will eventually hurt the small, local businesses that should be the job creators.

Even Delaware Democrat Chris Coons implored Obama to leave small businesses out of the tax discussion. Small businesses deserve “some carve-out where, if they’re investing, if they’re creating jobs, they don’t face a doubling of their tax rates.”

“The number one issue is jobs and the economy, so any proposal put forward has to look like it will advance that. I don’t think anybody believes that raising taxes ever grows the economy and creates jobs.”

The “Buffett Rule” will remain a proposal for the time being. A vote on whether it will be debated in the Senate at all must still occur. It’s unlikely that Congress will be able to pass the proposal before the election.

”Sadly, an administration that promised it would focus on jobs is wasting yet another day on a political event that won’t take a single person off the unemployment line,” Senate Minority Leader Mitch McConnell said in a statement.

“We should be focused on jobs and energy legislation that can pass—not tax-hike show-votes designed to fail.”

From the market peak in May 2008 to the market low in March 2009, the S&P 500 lost a whopping 52.8% of its value. More than eight million jobs were lost. The unemployment rate nearly doubled from 5.4% in May 2008 to 10% by October 2009.

But believe it or not, that wasn’t a real financial collapse.

Just ask any Argentinean.

Back in 2001, after decades of a repeated inability to repay its national debts, rating agencies finally declared Argentina in “effective default.”

And then came the chaos.

People rushed to their local banks to pull out what was left of their savings. On November 30, 2001, central bank cash reserves fell by $2 billion in just one day. The president was forced to freeze bank accounts for an entire year and imposed a strict $250 per week limitation on personal bank withdrawals. The next day, mass protests over the withdrawal restrictions began.

Unemployment reached a record-high 18%. Food shortages and the subsequent supermarket looting began just two weeks later. Supermarket owners threw food into the street to protect themselves from destructive and deadly stampedes of people charging through their doors. A week after that, Argentina’s president resigned.

By 2002, the country had 23.6% unemployment. An unbelievable 57.5% of the entire population lived in poverty. Annual inflation – which was low or negative all throughout the 1990s — grew to 41%. An Argentine peso, worth $1 USD in 1991, was worth only a quarter of that just months after the crisis began.

I’ll bet many Argentines wished they kept some physical silver on hand. Their wealth would have been protected, because unlike paper currency which depends on a stable government, silver is held by a worldwide value standard that no single government can control.

Though a severe currency collapse might not happen in the U.S. anytime soon, we’ve had our own battles with inflation. And as you probably already know, like gold, silver is a great inflation hedge.

From 1970 until the early 1980s, inflation reached double digits and the S&P 500 flat lined. Meanwhile, silver skyrocketed nearly 1,800%, eventually settling at a still-impressive 330% above its 1970 price by the time inflation subsided.

Owning physical silver isn’t just smart, it’s easy. 

And with the precious metal trading at around $31 per ounce, it’s far more affordable than gold. You could buy 51 silver coins for the price of just one gold coin.

Based on a $31 spot price, here are some silver bullion price quotes that I found on Kitco:

[The "premium" is simply the price an authorized silver dealer adds to the spot price of silver. The premium typically includes the dealer's commission plus the production cost to actually melt/mint that form of physical silver.]

Silver Bars: The majority of .999 fine silver bars come in 10-oz and 100-oz sizes, with the most popular brand names being Engelhard and Johnson Matthey. A brand name bar ensures that the silver weight and purity is verified and recognizable.

Investors interested in a lower premium cost can purchase bars in a much larger 1,000-oz size. (Note that a 1,000-oz bar of silver weighs 68 pounds!) Typically, these large generic bars are delivered commercially and are labeled by COMEX or LBMA (entities that hold large amounts of gold and silver).

While bars typically have some of the lowest premiums of any physical form of silver, many find it difficult to move and store them. If storage is a concern, it probably makes sense to pay a higher premium for smaller forms of physical silver.

Silver Rounds: Silver rounds resemble coins at first glance, but they are produced by non-federal, private mints. They’re a popular choice among investors because they’re easier to store and trade than silver bars given their smaller size.

Silver rounds are less expensive than silver coins based on the amount of silver they contain, but they aren’t legal tender — meaning you can’t pay public or private debts with them. It’s also more difficult to verify the weight and purity of rounds versus coins because they are produced differently from mint to mint.

Silver Coins: Silver coins are minted by the federal governments of many countries, including the United States. Silver coins have an official guarantee of weight and purity made by their respective mints.

Currently, the American Silver Eagle is the only official silver coin minted in the United States. Expect to pay a higher premium when supplies are limited (as they currently are), and a lower premium when supplies are high.

(You can verify a dealer’s American Silver Eagles here to confirm authenticity.)

Other popular federally-minted silver coins include the Canadian Maple Leaf, Canadian Silver Cougar and the Austrian Silver Philharmonic. All are recognized and traded internationally.

Because official silver coins are nationally recognized and promoted by trusted federal mints, coins typically carry a higher premium than rounds or bars. Regardless, silver coins are popular among investors looking to buy just one beautiful silver coin at a time instead of a larger silver bar that may cost several hundred dollars.

Proof Coins: Special edition silver coins like the Special American Eagle MS 70 Coin, are stamped with finely polished dies that produce a mirror-finish look. Each of these collectors-edition silver coins is sealed with a certification number that validates its authenticity and quality.

When quantities are in very short supply (as they are today), these special-edition silver coins have significantly higher premiums than their regularly circulated counterparts. The melt value of a proof coin is exactly the same as a normal one-ounce silver coin, but because of its mirror-proof, finished condition and quality, special edition silver coins tend to be valued more highly among collectors.

Junk Silver: Another form of physical silver sometimes overlooked by investors is called “junk silver.” With a name like that, you may think you’ll have to do some dumpster diving. But junk silver is simply the name for the widely-used (and now collectible) U.S. coins minted before 1964.

Containing 90% silver by weight and volume, junk-silver coins are far from what their name suggests. And if you can find a dealer that sells it, junk silver usually has the lowest premium of any form of physical silver available on the market.

The Investing Answer: Buying physical silver is just as easy as shopping online. Kitco and First Federal Coin are two great places to start. Or, to save on shipping costs, visit your local dealer instead, but be sure to check the U.S. Mint’s webpage to find a list of verified precious metal retailers in your area.

For the beginning physical silver investor, I suggest purchasing federally minted silver coins or rounds — by far the most affordable way to get started. Many dealers will let you buy them by the coin so you can invest a little each month to slowly build up your investment collection and take advantage of today’s bargain silver price.

*Post courtesy of Christian Hudspeth at Investing Answers.

But not in the way he might like.

Last Tuesday saw the release of Federal Reserve’s latest Federal Open Market Committee minutes which brought a halt to the current stock market bull rally.  The reason? From Seeking Alpha:

On April 3, 2012, at 2:00 p.m., the Federal Reserve Board and the Federal Open Market Committee (FOMC) released minutes of the committee meeting held on March 13, 2012. Gold fell about $35 immediately. Silver, oil, bonds and stocks and other commodities all fell. The U.S. dollar rose.

A large number of market participants were expecting QE3. Such investors were neither paying attention to the strong economic data that has been released over the last five months nor were they reading statements from the Federal Reserve.

Quantitative Easing 3, which would be the third installment of monetary base expansion since the financial crisis in 2008, is being craved by Wall Street as it would mean another injection of cheap money. As the following chart by Ed Yarni demonstrates, the stock market has been kept afloat by mad money printing since 2008:

The following chart from Northern Trust shows the extent at which Federal Reserve credit influences credit within the banking sector:

Chart 1 shows the year-over-year percent changes in monetary financial institution (MFI) credit. Private MFI credit is made up of the sum of loans and securities of commercial banks, savings & loan associations and credit unions. Total MFI credit is private MFI credit plus assets on the books of the Federal Reserve, i.e., Fed credit.

Notice the dip in total credit, which includes Fed credit, and the subsequent dip in private credit at the very beginning of 2011?

A virtual decade of money printing in the face of falling asset prices (often called the Greenspan Put) has warped the financial sector into a literal easy-money junkie.  Today on CNBC, author Harry Dent humorously described this dynamic as “a market on crack only wants more crack”
 
The Austrian view of depressions which follow the bursting of previous inflation-fueled bubbles is that such downturns are not to be feared and prevented but warmly welcomed. If further inflation and government spending are pursued in lieu of allowing the market to correct itself, the distortions will continue, fresh malinvestments will occur, and the depression will be delayed for another day. As Murray Rothbard writes:

Mises, then, pinpoints the blame for the cycle on inflationary bank credit expansion propelled by the intervention of government and its central bank. What does Mises say should be done, say by government, once the depression arrives? What is the governmental role in the cure of depression? In the first place, government must cease inflating as soon as possible. It is true that this will, inevitably, bring the inflationary boom abruptly to an end, and commence the inevitable recession or depression. But the longer the government waits for this, the worse the necessary readjustments will have to be. The sooner the depression-readjustment is gotten over with, the better.

Bernanke may be holding out on QE3 for the time being but as the minutes reveal, he and the rest of the FOMC members stand ready to print should the need arise:

In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to maintain the existing highly accommodative stance of monetary policy. In particular, they agreed to keep the target range for the federal funds rate at 0 to 1/4 percent…

If the stock market should continue its downward trend or the economy begins once again to turn south, there is no doubt whether Bernanke will intervene. Central bankers have one thing and one thing only at their disposal: the printing press. None of this goosing through printing comes without a cost though as the price at any given gasoline station proves. Many predict that despite persistently rising food, commodity, and energy prices, QE3 will arrive come June when the FOMC meets again.

The latest stock market sell off is another sign of the vast control just a few men have over the economy. With so many words, Bernanke and co. can literally dictate how markets around the world will act. Keynesians and statists, for all their praise of democracy and “rule by the people,” make no protest over a few unaccountable planners running the nation’s money printer. Their collectivist rhetoric is masked by an overwhelming desire for societal control and totalitarianism. This is why the likes of Paul Krugman never elude to the true origins of the Federal Reserve or the fact that new money is always funneled through the big banks they claim to despise.  They cry foul over a few wealthy businessmen running the show but simply want them replaced with intellectual superiors fully cognizant and in tune to the need of millions even if, as Friedrich Hayek wrote, such men don’t and can’t exist.

The cure for any recession is for market actors to rediscover natural prices; including the price of money. Central banking apologists hold disdain for such an unrestrained and seemingly chaotic process. But it is in fact the centralized planning these constructivists endorse which creates distortions and chaos in the markets. Bernanke has thus far been credited in the press with saving the world in the wake of the financial crisis when, in effect, all he has done is zombify a banking sector already addicted to cheap liquidity.

When the next crisis comes (and it most definitely will), his supporters will be just as clueless to the cause as they were in the fall of 2008.

*Post courtesy of James E. Miller at Miller’s Genuine Draft. He is an editor and contributor to the Ludwig von Mises Institute.

*Post courtesy of Charles Vollum at Priced in Gold.

An active investor in gold and silver since 1980, Charles slowly began to realize the importance of having a standard of value not tied to any country’s currency and monetary policyâ that in fact, rising and falling ‘gold prices’ were really more accurately viewed as falling and rising ‘currency prices’, measured against the relative stability of gold.