WHY THE WORLD IS ABOUT TO START LOVING GOLD ALL OVER AGAIN / MONEY & MARKETS

Why the World Is About to Start Loving

Gold All Over Again

by Larry Edelson
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I have important ground to cover with you today, so let me get started right away. First, with a warning I want to get on the record ...

No matter what happens in the world today ... no matter what happens in the markets ... no matter how bad the economic news may be ...

Nor how positive it may seem at times ... get ready to buy gold again.

Let me explain: There are only two possible economic scenarios that could unfold going forward.

Scenario 1 (least likely): Bad economic news continues to abate ... the stock market’s recent rally continues ... talk of a double-dip recession recedes ... the U.S. economy begins to recover further. Even Europe starts to look better.

All looks hunky-dory. The Federal Reserve’s efforts to save the U.S. economy and financial system succeed. The U.S. dollar even begins to strengthen.

So what happens next under this, albeit the least likely, scenario? The banks start lending more money ... credit flows through the pipelines ... and the trillions of paper dollars the Federal Reserve has created begin to work their way through the system.

Normal credit creation fully resumes. Our fractional reserve banking system takes over and begins multiplying the lending again, up to $9 for every new dollar created by the Federal Reserve.

Nearly $27 trillion of largely watered-down money begins to flood the U.S. economy. But because it was money that had no reason for existence to begin with and was merely monopoly money printed up by the Federal Reserve, guess what happens?
 
The dollar begins to depreciate again as inflation takes off to the upside. And no matter how hard the Federal Reserve tries to reverse its policies and rein in inflation, prices for almost everything begin to move up sharply.

Obviously, gold would soon bottom and start moving up again.

Now consider ...

Scenario 2 (most likely): A slew of bad economic news starts to come in ... the U.S. economy goes from OK to bad ... and it becomes painfully clear that governments’ and central banks’ rescue efforts have failed.

Here and in Europe, economies slump further, and sovereign-debt defaults steamroll across the globe.

The Fed and other central banks pump trillions more dollars into their economies. But to no avail, because it also becomes painfully clear to almost everyone that countries in Europe and the U.S. are BANKRUPT. And so are their central banks.

What happens under this scenario? The euro, the Japanese yen, and the U.S. dollar race each other to the bottom of the heap of paper currencies that have failed. All major currencies dramatically lose purchasing power ... and the entire Western world plunges into a depression.

The world’s monetary system is effectively destroyed and collapses in a quagmire of debt that can never be repaid. A new monetary system is ushered in.

   
The Bottom Line


In Scenario 1, I see gold soon bottoming, then starting a path higher toward my MINIMUM TARGET of $2,300 an ounce, the inflation-adjusted high that would be equivalent to what $850 gold was in January 1980.

So, to me, $2,300 as a minimum target for gold is a fait accompli.

But in Scenario 2, gold could easily exceed $2,300 an ounce ... and head to $5,000 an ounce or even more.

So, you see, no matter how you look at it, gold is soon going to BOTTOM and head higher, for the simple reason that gold is insurance against a global economy that really has only two future scenarios right now, as laid out above.

Put another way, investors all over the world are soon going to start loving gold, all over again.


Larry Edelson