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Gold in the Land of the Free (Lunch)

Written By Brian Hicks

Posted August 10, 2011

I hate writing this column.

Not writing Wealth Daily in general, mind you. That’s a blast.

These weekly conversations about herdthink and the markets really are a lot of fun. And I particularly enjoy the feedback you folks provide.

Memetics’ roots may go back a hundred years, but that doesn’t mean we can’t make major improvements to the science today.

(Which reminds me: You can always contact me at And you folks with Twitter might want to check out my Viral feed at AdamLass1.)

Waiting for Bernanke

No, I hate writing this column for two good reasons.

First, because as I sit to write, I am waiting for one colossal meme to slam into the herd’s collective brain.

I’m talking, of course, about the Fed. The Federal Open Market Committee is desperately ginning up a policy statement that will save the world.

But I have a deadline to make, which means I have to write this column before the Grey Men of C Street speak their piece… and it will be published after they are long done.


Yesterday, President Obama tried to jawbone the markets back off the ledge. Unfortunately, he pretty much just confirmed that he is impotent in the face of this thing. In fact I believe we set a record fall while he was still talking.

No, the herd does not want to hear platitudes about how mighty we are in the face of such difficulties.

What they do want is free money — totally and completely guilt-free, repercussion-free, inflation-free, debt-free free money. And billions of it, thank you very much.

No — make that trillions!

And they’d rather these trillions not be borrowed. No bonds or T-notes or such, because they don’t want to have to pay it back to anyone. That’s not what “free” means.

Like diamonds, free is forever. Also like diamonds, free is a total bulls*t fantasy.

The Lie

This is the other reason I hate writing this column: Because I am going to spell out some hard truths here. And it may cost me some readers, and perhaps even some friends. Heck, it might even get me arrested. (Seriously. More on that in a moment.)

I don’t know what the Fed will say, but I know for a fact what they will do. They will print more money.

Consumer InflationHere is their excuse. It is a chart (left) published by the St. Louis Fed “proving” there is no inflation right now.

It’s crap. They achieve these results through “hedonic” book cooking.

But we have long since left the real world behind. Now it’s just a matter of them selling the fantasy.

The Real ThreatDollars in Circulation

And here is what the Fed is doing, indeed has been doing for years now. This is a chart for M2 (right).

It’s not a perfect measure of dollars in circulation. M3 was better, but they stopped tracking M3 years ago because it was just too damned embarrassing.

Note that in the last few weeks since the Fed “stopped” its QE2 money printing program, the increase in dollars in circulation has gone from steep to vertical.

The Fed calls this “qualitative control of its existing portfolio.” That’s crap, too. They are writing checks to buy treasuries. These checks are drawn against NOTHING. Thin air. Nada.

The Real Result

Dollar CrushedThis is what the dollar has been doing the whole time the Fed has been on this printing binge.

This is why it costs $50 to fill your car, why it now requires collateral or a co-signer to buy a week’s worth of steak, eggs, milk, and toilet paper.

This is why the stock rally of the past few months was a total lie. Stocks didn’t go up; the dollar on the right side of your chart went down.

No Free Lunch

Because there is no such thing as a free dollar.

When you print more of them, they are worth less (worthless?).

You cannot “print wealth.” Period.

Today, the Fed will promise somehow — one way or another — to do exactly that, to print our way out of this problem. It may be in the bold statement upfront. It may be hidden where only Wall Street insiders can find it.

It isn’t working anymore. But it is the only thing they know how to do, and so they will keep doing it until the dollar is useful only for toilet paper and kindling.

The PayoffGolds Latest Spike

So here is a chart for the GLD gold ETF, since I began asking you — no, begging you — to buy calls against same.


It’s a simple play: Buy an at-the-money GLD call with a month or two to run. Sell it when you are satisfied with your gains. Then buy another one, and another one… until the day Washington forces us by law and by gun to give up gold and keep worthless dollars.

The Man

As for me?

The last time I talked about this sort of thing in public, I got a visit from some folks in black suits with badges, briefcases, guns, and an attitude…

Not the local cops. Not the SEC.

The FBI.

No joke.

Next week, I will tell you why they came, what they told me, and why I expect to them to come knocking again real soon. Meanwhile…

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily