James Turk continues:

“So 4.3-times more people started receiving food stamps in August than got jobs.  Even the miracle 175,000 monthly increase in jobs that was reported just before the election pales in comparison to the number of new people receiving food stamps in August.

What this shows me, Eric, is that despite all of the hype coming from the politicians and central planners, the US economy continues to deteriorate rapidly....

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“After all, if the economy were good, jobs would be plentiful, and the number of people receiving food stamps would be declining, not soaring to record levels.  The worrying point  here is that a bad economy means more money printing, which means more erosion of the dollar's ever-declining purchasing power.

Interestingly, and to follow-up on the point we discussed last week, the Fed has not yet started QE3.  It's balance sheet is still basically the same size it was when it announced this new money-printing scheme in September.  So it is understandable that the Dow Jones Industrials had fallen back below 13,000.  The stock market had been rising in anticipation of more money printing, not strong economic activity.

So the Fed has to follow up and put some action behind its words by buying US government debt, and thereby turn it into currency.  If it doesn't, the stock market will continue to fall.  I find the Fed's actions to be very curious.  Why isn't it buying government debt under their new QE3 plan? 

Maybe the Fed is indirectly putting pressure on the politicians to deal with the fiscal cliff.  Maybe it won't start buying government debt again and thereby expand its balance sheet until there is agreement in Washington to address the fiscal cliff.  If so, the Fed is playing a very dangerous game, and it is one that will only help the precious metals.

Note how gold and silver both soared last week, even though the Dow Jones Industrials were weak.  Stocks and the precious metals are going in different directions, which brings up an important point:  We all know and accept that markets today are managed.   One of the major components of the management of these markets is the psychological impact, particularly on gold and silver investors.

One of the early victories of central planners has been to fool gold and silver investors into believing that gold and silver can only rise if stocks are rising.  But if stocks are plunging, then gold and silver must plunge as well.  This is patently false. 

The Dow/Gold ratio is headed to 1/1, just like it was in the 1930s, and in 1980 at the end of those two financial busts.  In order to achieve this eventual 1/1 parity, gold and silver have to move in the opposite direction of the stock market, just like they did last week.

So don’t be fooled into believing the half-truths of the central planners and those who use government intervention to disrupt the markets.  The bottom line is that gold and silver do not need more QE to achieve higher prices.  Therefore, I think it is reasonable to look for gold and silver to continue repeating last week's performance by climbing higher as we move to the end of the year, regardless of what happens in the global stock markets.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The interviews with Bill Fleckenstein, Rob Arnott ($100 billion), Gerald Celente, John Hathaway, John Embry, Stephen Leeb and Don Coxe (BMO $538 billion) are available now.  Also, be sure to listen to other recent KWN interviews which included Rick Rule, James Turk, Egon von Greyerz and MEP Nigel Farage by CLICKING HERE.

Eric King

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