Smart people will internalize this....

Sometimes it is really good to just keep things simple and it does not get any simpler than the plain truth spoken on this short post over at Mish GEA.  It says:

"With fiat money, there is no extinguisher of debt. Debts are paid using dollars, but the dollar is itself a debt. The dollar is just a bite-sized piece of the Treasury bond. Paying a debt with a debt merely shifts it around.  The debt must rise exponentially, by at least the accrued interest, and more if the government wants what passes for growth."

Please, please please internalize this.  This is the inescapable truth which I have been writing about in these pages for years now.  Here is a gem (if I do say so myself) from 2010 which explains the dangers of exponential math.  It shows that the US debt is an exponential function and it explains that normal life does not have exponents in it so we really are not used to dealing with them.  Thus, we "never see it coming" when something that is controlled by exponential math hits us the wrong way.

All of my retirement savings are in gold and silver coin.  If you listen to the folks at Elliot Wave International, gold is going to retrace to $700 or so before the deflation is complete.  These guys are not stupid by any means and I totally respect their work.  Still, I did not sell all my gold at $1900 and I did not sell any silver at $50 even though I was telling others it was a bubble.  

WHY oh WHY did I do that?  Am I some kind of moron?

Well, maybe.  But I have good reasons for my convictions and they are given above.  Exponential math takes people by surprise every time.  Those who are trading in and out with their retirement funds could get caught short.  If gold goes down to $750 an ounce I will simply load up even more.  Not only that, but I will be thanking God for the opportunity.  I will be happy, not sad if that happens because I have years before I can retire and the global debt Ponzi does not have that long before it collapses.  When it does, gold and silver will be the only things of value besides cigarettes, booze and bullets.

Models for gold rise and fall are fine but these are medium term considerations.  In the long term, the dollar must be inflated exponentially in order to service the debt and to grow the economy (or to try to recover from crippling global deflation even though such "recovery" will lead to hyperinflation).  The best plan for most people is to dollar cost average into metals for the long term and just laugh at the short term fluctuations of the fake money we call the dollar.  It is literally a joke but it won't be that funny when it all collapses.