STATE OF THE ECONOMY

Jim Sinclair is my mentor for understanding the economy and why gold is such an important investment. Here is what he has recently said:

"Gold weakness recently is predicated by the short covering strength in the US dollar.

Short covering in the US dollar is predicated by the Paulson program, the $4 billion raised by Lehman Brothers and the conclusion that the credit problems are now behind us.

The problems in credit are NOT behind us. The US dollar problems are far from over.

There are consequences to the increase in liquidity created to craft the appearance that no further major international investment and banking companies will need rescuing.

Gold will trade at $1650 before the second week of January 2011. I am offering a $1,000,000USD wager with a financially qualified party that this will occur.

Any party on Bloomberg, CNBC or CNN stating an opposite opinion on the price of gold should be informed of this challenge.

Please communicate to any vocal bearish gold expert that I challenge them to put their money on their views."

For 85 years, Bear Sterns operated as a successful and growing business. In less than a year it was crushed to virtually nothing, billions in personal wealth wiped out. The culprit was pure greed trumping common sense.

In this kind of environment, almost any company – no matter how much of a Wall Street darling it is – can leave you in the poor house. Just ask the 14,000 Bear Sterns employees who owned one third of the company. And Washington is no help. They’re pumping out so much cash to fix the problem the dollar could soon lose its reserve-currency status.

In just a two-year span the greenback has dropped 22.9% against the Canadian dollar. 25.3% against the Euro. And 25.6% against the Aussie buck. And with the dollar tanking, every purchase chips away at your wallet. Milk and Gasoline have soared to over $4.00 a gallon in some states. Bread is over $3.00 a loaf.

With respected financial institutions in ruins, inflation running out of control, and commodities selling for their weight in gold…there has to be a better way to make money as an investor today than risking it all in today’s shaky stock market.

I am going to research this more thoroughly, but I find it excellent because of the upside potential and STRICTLY limited downside.

A few months ago, The Philadelphia Stock Exchange introduced its new World Currency Options™ -- revolutionary new investment vehicles that allow you to seize the massive profit potential of the currency markets without high minimums and when buying options -- with strictly limited risk.

Founded in 1790, The Philadelphia Stock Exchange -- also known as PhilX -- is 217 years old, making it the oldest stock market in the U.S.

More than 7,000 stocks are listed there -- and every brokerage firm -- online and offline -- allows you to trade on the PhilX as easily as you trade on the New York Stock Exchange or American Stock Exchange.

• You can get started with as little as $100: Instead of being required to put up huge minimums, you can harness the power of the world's six largest currencies for as little as $100!
• Your Risk is Strictly Limited: You always know -- to the penny -- the maximum risk you're taking with each play:

• You pay a small premium to control a vast amount of a currency. For as little as $100 or $200, you can control ...
• Ten thousand Swiss Francs worth about $8,400 ...
• Ten thousand Canadian dollars worth about $9,500 ...
• Ten thousand Australian dollars worth about $8,600 ...
• One million Japanese yen worth about $8,500, or ...
• Ten thousand British pounds worth about $20,500!

There is no disagreement among economic observers that the actions taken by the Federal Reserve will act as a spur to inflationary expectations and behaviors. We can be prepared for an inflation conscious future by owning assets which benefit from inflation.

These include gold, precious metals, base metals, food related investments and shares in countries which can grow rapidly –such as well managed companies in China and Brazil.

IMF Cuts Global Forecast on Worst Crisis since 1930s
By Shamim Adam

April 2 (Bloomberg) -- The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.

States Are Hit Hard by Economic Downturn Many Cutbacks Felt by Most Needy
By Keith B. Richburg and Ashley Surdin
Monday, March 31, 2008; Page A01

NEW YORK -- In Illinois' Cook County, women in poor neighborhoods no longer have access to free mammograms from two mobile vans testing for breast cancer.

Three more major silver dealers are reported to be out of silver today: The U.S. Mint, Kitco, and Monex.  This, on top of the major dealers yesterday, Amark, Perth Mint, CNI Numismatics, and APMEX, all reported sold out.  Further, nearly all of Canada is reported to be out of silver, from Vancouver to Toronto.

This is unprecedented, and is a perfect case of market manipulation in the paper market at COMEX and other futures exchanges to see silver prices continue to drop down to below $17/oz. today.  Paper promises can be created endlessly, but real silver cannot.

This is NOT a case of the dealers getting spooked, and selling out to the refiners just in time, at peak prices.  This is a case of the public buying up the stock at coin shops across the world ever since gold hit $1000/oz..  That event finally sparked a little of the public's buying of silver and gold.  Thus, the typical coin shop flow of silver to the refiners just stopped in the last few weeks, and especially the last two days. 

This is NOT a case of the public creating a top with 'everyone' in silver, because nobody's in silver yet.  In 2006, only $1 billion was spent on investment silver, which is 0.007% of the $13.5 trillion of money in the banks.  As I have long reported, the silver market is so small, there is no room for new investor demand, not even 0.1% of money could be spent on silver, because that would be $13 billion, which would push silver prices to $200/oz., and we are seeing only the tiniest beginnings of that. 

How long can it go on?  Until people stop trusting the paper exchanges, which could be after they default and fail to deliver silver.  Or we could see a severe backwardation, as people refuse to trust and buy futures contracts, which would thus sell at a discount to real silver. Then, the spot price will really go up, maybe about double or more very quickly.

Today there are too many dollars around --

But the world is questioning the viability of the US dollar. I understand there are places (China and India, for instance) where people do not want dollars. If they do receive dollars, they exchange them for another currency as quickly as possible.

The US has two sources of power besides our exports. One is our huge military. And the second is the reserve status of our dollar. If the dollar begins to lose its reserve status, we're in trouble. It would mean that we couldn't borrow, or if we could continue to borrow, we'd have to pay much higher interest rates. At some point, even higher interest rates wouldn't do it. Once our creditors are afraid of taking in dollars, no level of interest rates would convince them to lend to the US.

So-- what do you and I do about it? Here's is a simple suggestion. Divide your assets into three sectors. One third of the total can be in a home preferably owned – but at least with a manageable mortgage. Another third of your assets can be in gold, silver, and other liquid assets. The final third should be in cash, and it can be in dollars or even partly in a foreign currency. But over the longer-term I would lump all fiat currencies together, treat them all as a kind of junk --. because there's nothing backing any fiat currency but the full faith and credit of the respective nation. The viability of all fiat currencies is suspect.

Countries will lie about the worth of their money as long as they can get away with it. The US repeats its 'strong dollar' policy even while allowing the dollar to go down the drain. As we have already reported in past newsletters, oil-producing nations are quietly unloading their dollars. China will likely do the same. Gradually, the word will emerge - 'the dollar is a doomed currency.' Diversify as far as you can, and get out of dollars as quietly as you can."

A house is a place for you and your family to live in relative sovereignty. Gold is eternal wealth. Currencies are units of exchange. Having a house, gold, and cash -- what could be simpler? "

The fact that euros are accepted by many stores in New York City has made the news lately and is well known in gold investor circles. It is yet another symptom of the ongoing demise of the US dollar. The good news for these New York City merchants - and for all others nationwide - is that gold and silver will not be far behind and offer far better advantages as dollar-alternatives.

• China’s economy is still doubling every five years and will expand by 9.5% this year — over five times more than economist’s most optimistic forecast for the U.S. economy.
• India’s economy will grow 8% — over four times more than the U.S.

During the 1980s and 1990s, when commodity prices were low, mining and oil firms invested too little in new mines and wells, leaving them with little or no spare capacity. While they’re now rushing to increase their output, it takes years to find and develop new mines and oil fields — much longer than it used to, because of increasingly restrictive environmental regulations.

With Washington fighting an historic real estate bust and credit crisis tooth and nail, it’s clear that the dollar disaster and skyrocketing inflation we’ve seen so far are only the tip of the iceberg:

In 2007, the U.S. inflation rate jumped to 4.1% — the highest level since the 1980s ... and in January, it rose yet again to 4.3%.

Worse, they announced that wholesale prices were up a total of 7.5% in the last 12 months, the fastest pace in more than 26 years.

The fact is, there is, quite literally, no end to soaring inflation in sight. Why? Because the Federal Reserve and Congress are committed to fighting the real estate bust and credit crisis by throwing still more money at it — whatever it takes.

And remember: Every new dollar the Federal Reserve creates decreases the value of every dollar in circulation — the very definition of inflation.

(AP) -- A vast array of pharmaceuticals -- including antibiotics, anti-convulsants, mood stabilizers and sex hormones -- have been found in the drinking water supplies of at least 41 million Americans, an Associated Press investigation shows.

To be sure, the concentrations of these pharmaceuticals are tiny, measured in quantities of parts per billion or trillion, far below the levels of a medical dose. Also, utilities insist their water is safe.

But the presence of so many prescription drugs -- and over-the-counter medicines like acetaminophen and ibuprofen -- in so much of our drinking water is heightening worries among scientists of long-term consequences to human health.

In the course of a five-month inquiry, the AP discovered that drugs have been detected in the drinking water supplies of 24 major metropolitan areas -- from Southern California to Northern New Jersey, from Detroit, Michigan, to Louisville, Kentucky.

Here are some of the key test results obtained by the AP:

• Officials in Philadelphia, Pennsylvania, said testing there discovered 56 pharmaceuticals or byproducts in treated drinking water, including medicines for pain, infection, high cholesterol, asthma, epilepsy, mental illness and heart problems. Sixty-three pharmaceuticals or byproducts were found in the city's watersheds.

• Anti-epileptic and anti-anxiety medications were detected in a portion of the treated drinking water for 18.5 million people in Southern California.

• Researchers at the U.S. Geological Survey analyzed a Passaic Valley Water Commission drinking water treatment plant, which serves 850,000 people in Northern New Jersey, and found a metabolized angina medicine and the mood-stabilizing carbamazepine in drinking water.

• A sex hormone was detected in the drinking water of San Francisco, California.

• The drinking water for Washington, D.C., and surrounding areas tested positive for six pharmaceuticals.

The Berkey water filter system is so revolutionary that it removes pathogenic bacteria, cysts and parasites to non detectable levels, removes harmful or unwanted chemicals to below detectable levels, and reduces nitrates, nitrites and unhealthy minerals such as lead and mercury without removing the healthful and nutritional minerals that your body needs. www.berkeyfilters.com

The Katadyn water filters are known to be the best made. They have been manufactured in Switzerland for over half a century. Their system is based on microfiltration through a 0.2 micron microporous ceramic filter element. All harmful cocci, bacteria, protozoa, fungi, cysts and parasites are totally removed, including the chemically resistant infectious agents of Giardia, the amoebic and shigella dysenteries, and those causing typhoid, cholera bilharzia and a long list of other dangerous diseases. www.katadyn.com

• Parts of Georgia and North Carolina could actually run out of water this year, unless they get torrential rains. The situation is so bad that Georgia is trying to move its border with Tennessee to annex part of the Tennessee River.
• A water crisis is also building in California. The Los Angeles region has enough natural water resources to support one million people; the population today is closing in on 20 million. According to the California Department of Water Resources, if more supplies aren't found by 2020, the region will face a shortfall nearly as great as the total amount consumed today.
• The UN reports that the Himalayan glaciers that are the sources of Asia's biggest rivers — the Ganges, Indus, Brahmaputra, Yangtze, Mekong, Salween and Yellow Rivers — could disappear by 2035 as temperatures rise. About 2.4 billion people depend on that water.
• Less than 15% of the Chinese population has access to clean drinking water; China's government will spend $128 billion on water infrastructure in the next five years.
• Americans spend more on bottled water than they do on movie tickets or the latest gadgets — a whopping $15 billion last year. And as much as U.S. consumers complain about the rising cost of gasoline, they willingly shell out two or three times that for an equivalent amount of bottled water!