Time to Abandon the U.S. Dollar and Go for Gold?

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"It will not take long for investors to catch on and this flood will be channeled into the narrow gold and silver markets creating huge price increases."

Everybody knows that 'quantitative easing' or printing money is just around the corner, and the Bank of England yesterday was the first central bank in the world to receive government permission to go ahead.

Such is the size of the coming U.S. budget deficit amid market interventions on an unprecedented scale that turning on the printing presses will be the answer. Karl Marx would likely see this as capitalism in its final death throws, but his face is still unlikely to appear on dollar bills.

However, it is a very socialist turn in world affairs and every experiment with socialism has ended badly; often with inflation ravaging the incomes of the poorest and retired in society.

Printing money guarantees inflation. More money is, by definition, inflation. So what is holding up the U.S. dollar? Why has it rallied recently against every major currency?

First, this is a reflection of the even worse economic performance of national rivals; and second, as global financial markets have sold (and continue to sell) off, assets are liquidated mainly into U.S. dollars. This creates a demand for dollars that supports its relative value.

So when will the inevitable impact of printing money catch up with the greenback? It has to come when financial markets reach a bottom and end their sell offs. That could take a matter of months but almost certainly not as long as a year.

Once money is piled high in dollar bills and treasuries, and stocks have a clear 'buy' sign over them, the stock market will rally and the dollar will crash in value along with bonds.

That will be the point at which you want your money out of the U.S. currency and into hard assets like precious metals, which will then be the currency of last resort.

It will not take long for investors to catch on and this flood will be channeled into the narrow gold and silver markets creating huge price increases.

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