G20 Super Currency? Don't forget silver

When I began this blog, I recommended silver. At that time it was around $9. It has quietly risen to 13 plus in 3 months and I have not lost faith in it.

China is pressing for a world reserve currency and cautioning the US not to borrow so much money that they devalue the US Treasury bond.

Yet at the same time we learn that the Government has rejected GM's plan, and have pushed out Waggoner, GM's CEO. As long as the recession continues, there will be more and more borrowing to have the government spend our way out of depression ala owning GM.

Is the government good at running a private enterprise? Look no further than the post office to answer that question. Therefore, I doubt that the government's intervention in GM is going to come to any good, and only Ford will remain as a viable, independent US auto company.

But if GM goes bankrupt, another wave of layoffs is going to stimulate even looser lending by the FED, who have recently promised more than $1 Trillion in Treasury bill and FNMA backed securities to be purchased this year.

Currently, yields on FNMA backed 30 year securities are around 3.9 percent.

The US consumer, housing and the economy will not recover until 30 year Jumbo mortgages are under 5%. Only then will refinanced homes with lower payments become a source of spending money for the US. This should happen by this fall as the recession continues. By 2010 demand should be raging for everything from houses to remodels to cars and solar panels. Then we should see demand pull inflation rearing its head as the super supply of the dollar causes it to drop in value.

Will the fed tighten in time to rein in the economy, or will the fear of a depression linger so long we have inflation over 10%? I think the fed will stay too loose too long.

Will the world create a super currency? I don't think so, it's in everyone's interest to keep their currency low and improve their economy by selling cheap products to the world markets.

Without a super currency and with an over supply of dollars, I think gold will be at least $1500 by 2010 and silver at least $20. These two metals are already the super currencies that China wants. US citizens are going to vote with their feet as they see inflation occurring and each buy a little precious metals position.

But a flash flood is built one small rain drop at a time, and if enough people buy a "little precious metals position", it is going to push precious metals to new highs. And don't forget penny mining stocks. They are currently the buy of a lifetime. Don't forget, some mining stocks went up 1,600 times in value in the late seventies. And this time, inflation is going to be worse. $500 invested now in CDE, MDW, UXG and especially STVZF, all stocks I own, may well pay off your house mortgage in 4 years.