Jim’s Mailbox

Posted at 5:55 PM (CST) by & filed under General Editorial.

Dear Jim,

The government likes to sell us on the idea that we are not in a recession. Even establishment figures like Paul Volcker say we are now in a recession. This is obvious to any observer. The recession could be a long and difficult one which I and many other observers will call a depression. At least 2 or 3 years of difficult economic times lie ahead.

In such times leverage in the world and the standard of living in the developed countries will decline. People will become more rational, and less egocentric.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Former Fed chief says U.S. now in recession

SINGAPORE (Reuters) – Former Federal Reserve Chairman Paul Volcker said on Tuesday the U.S. housing sector faced more losses and the economy was in recession even as authorities moved to stabilize the financial system.

Volcker said the priority for U.S. authorities in the credit crisis was to stabilize the financial system even though that meant heavy government intrusion.

“The first priority is to stabilize the financial system. It is necessary even though the cost involved is heavy government intrusion in markets that should be private,” he said in a speech at a seminar in Singapore.
“House prices in the U.S. are still declining. There are still more losses to come there. The economy, I believe, is in recession.”

Volcker is chairman of the board of trustees of the Group of 30, an international body composed of central bank governors, leading economists and private financial sector experts.

He is credited for battling double-digit inflation that flared in the 1970s.

More…

Dear Monty,

I always agree with the revered Volcker. He is one of the few that hasn’t spoken with the standard forked tongue.

You really think the hoard of Greenwich and Toronto hedgies will lose their egocentric character? You must expect them all to get bird flu, naturally or otherwise.

Your thoughts call for a review of the Formula.

Click here to review the Formula

All the best,
Jim

Dear Jim;

Today David Rosenberg, chief North American economist for Merrill Lynch, made a few very important points for all investors. Rosenberg has distinguished himself by being by far the most realistic US economist of any major investment bank. He was calling for a difficult economic period in the US months ago.

He agrees with me that we are currently seeing depression like activity in the US economy. His point today is one that you and I have often made, but he has Merrill Lynch and Bank of America listening to him.

He points out that over the next few years, the supply of gold will grow at a much slower rate than the amount of any fiat currency. He points out that the monetary base is growing at the rate of 19% per year, and when you add to that the swap lines that the US will institute to loosen up the world banking transactions, the growth rate will be much higher. He goes on to say, “the supply of gold is going to be rising at a much slower rate than the growth of fiat currencies, and likely buy a huge margin.” Thus, as an alternative to depreciating currencies, gold is a very a very attractive investment vehicle. He further states,” If gold, in real terms, were to retest its old glory highs of the early 1980’s, it would end up testing $2,000 an ounce”.

Over time, the wiser of the big investment company economists are starting to endorse what you and your website have long stated. With money supply exploding as it currently is, the massive amounts of money that have been created by many countries in Europe and North America (especially the US) will force currencies down and gold up. It is a simple example of the law of supply and demand.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

My Dear Friend Monty,

Amen to that Brother.

Respectfully yours,
Jim