“Barron:  “I saw some interesting numbers that came out of Turkey which showed there is still incredible gold demand.  The ECB also just lowered interest rates today and they were citing the fight against deflation as being the reason for the rate cut....

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“But the fact is that right now in Europe, Portugal is having a rail strike.  People are saying they are not being adequately compensated.  There is also a 24-hour general strike in Greece, protesting the austerity cuts.  This kind of thing is happening in various places in Europe, and it’s just evidence that the economy is struggling.  So, when the ECB says they are fighting deflation, they are fighting the forces of a weakening economy, and restless citizens in various countries. 

If we turn to the United States, in Seattle there is a move to raise the minimum wage to $15 an hour.  That’s pretty inflationary if it passes and gets adopted elsewhere in the United States.  But the bottom line is that a lot of people out there are finding it difficult to make ends meet.

In America right now there is a real disconnect between what the stock market is doing, hitting new all-time highs virtually every week, and what is happening in the real economy.  If you look at places like Detroit, you wouldn’t even think you were in the United States if you were there.

But as the ECB said, countries are still struggling with deflation, and the only expedient way for politicians to try to deal with this situation is to chuck money at it and continue to print.  Meanwhile, the propaganda machine that is the Fed continues to float rumors through the mainstream media that they are going to taper at some point.  The reality is that the US economy is simply too fragile for any tapering.  You already see businesses failing all over the place.

So, obviously things are not sorted out in the West.  Japan is still in some serious trouble, even with their loose money policy.  The world has just been hopping from bubble, to bubble, to bubble for more than a decade.  But the real hardship for the financial system is still to come.  So far we’ve only seen a couple of major banks go down.  The system has been rescued many times by massive money printing, but the underlying problems still remain in the financial system. 

The world still has to witness a ‘cleansing’ of all of these excesses that are still in the system.  They must be purged at some point.  There is no way around it.  The reason politicians keep running from this is because it creates incredible hardship for people.  When Herbert Hoover didn’t respond fast enough to the 1929 stock market crash, he had his head handed to him in the next election.   Politicians have learned that lesson.  So if you are a politician, you don’t turn off the spigots of money, and you don’t bring in huge austerity unless you want to lose the next election.”

Barron added:  “There is a great deal of rot in the system.  Despite the volatility we continue to see in the gold market, eventually this rot in the system will lead to hyperinflation.  We just don’t know what country is going to be the first to succumb to hyperinflation.

We have seen this many, many times in countries like Turkey, the former Yugoslavia, many African and Latin American countries, but not for a long time in the countries of the West.  But people should not think it can’t happen in the West.  In the last century the currency of France went to zero five times.  So this can certainly happen again in the West.  This is why you are seeing countries in the West trying to discourage people from buying precious metals.  They know what’s coming and they don’t want people protecting themselves.”

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