Why Do Economic Bubbles Keep Happening

The economic bubbles keep happening because the economy is being run by money junkies.

The US economy goes through these bubbles because of money junkies and power junkies. The money junkies are the super wealthy such as Warren Buffet and the power junkies are the politicians.

There is no difference between Republicans and Democrats anymore. Both of these political parties want more big government and want to see quantitative easing solve the nations problems.

The quantitative easing being done by the Fed today by increasing our money supply is the last ditch effort to hold back what they did during the internet bubble and the real estate bubble which would have created a natural free market correction called a recession if they had left things alone.

To prevent US hyperinflation that will trickle to the rest of the world the federal funds rate needs to be increased from it's current zero percent rate to 6.3 percent.

We believe the US government will not raise the federal fund rate to prevent hyperinflation.

Instead one of the largest short squeezes in history is about to happen as almost a dozen of the largest US banks are short 325,000,000 oz of silver which they will eventually have to buy back.

These banks will have to buy back these short contracts eventually. The problem is that there are more short contracts out on silver than what physically exists in the market keeping silver artificially low.

Silvers all time high in 1980 of $49.45 per ounce would equal $138 an ounce in today's dollars. If you account for how the governments CPI index understates inflation silvers real inflation adjusted high in 1980 was $440 an ounce.

If we see a COMEX default as silver investors cash in their silver contracts for their real hard asset of silver this would be known as a short squeeze. As people see that their dollars are becoming worthless this will become more and more a real scenario.

The price of the real silver could rise astronomically from its real level of $35 an ounce.

Based on golds current price of $1500 per ounce and the historical gold/silver ratio of 16:1 a silver price of $72 an ounce could be realistic as soon as the alleged JP Morgan silver price manipulation comes to an end.

In the case of a disastrous fiat currency crash that sees the Euro and the US dollar race down to being worth nothing middle income earners may find themselves unable to pay for necessities.

Things like energy, electricity prices, water bills, home rent, groceries, and other commonly affordable things will not be able to be paid for using worthless Euros and US dollars.

A smart hedge against this possible scenario is to purchase a few physical gold coins and several physical silver coins. If and when hyperinflation sets in you will have savings stored in a physical commodity rather than a worthless fiat currency.

last time modified: Sept. 14, 2011, 4:59 p.m.