The Gold Super-Spike

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• Oil hit its highest level ever last week. And now Goldman Sachs is predicting a "super-spike" in the price — to over $100 a barrel — and gasoline prices of $4 a gallon. It is coming, dear reader. But not necessarily as Goldman imagines.

• So, too, is a super-spike in the price of gold almost a certainty. As the world supply of "funny" money increases… the value of real money must increase too. All over the globe, the supply of money and credit is increasing at two, three… four… times increases in GDP. For now, the extra liquidity is going into asset prices. Property prices are still going up in most places.

In America, for example, increases in house prices added $6 trillion to homeowners’ net worth over the last four years. Americans were so delighted with getting something for nothing that they decided to enjoy it. The personal savings rate dropped to 0.6% in February. Why bother to save something so you can have something later on… when you’ll get something anyway? Lunch is always free, isn’t it?

But it will be a cold day in Hell when the laws of nature are repealed. Self-deceit can go on for a long time, but not forever. Eventually, the U.S. dollar will begin to look more like the Zimbabwean paper currency than real money. When it does, gold will spike. If we only knew when!

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.

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