Clear the Air of Monetary and Economic Confusion

On September 18, 2007, the Fed made a significant announcement. It cut the Fed Funds Rate by half a percentage
point—50 basis points. As a result, gold surged to a 27-year high. At the time of the announcement, this issue of the newsletter was going to press. That means it was written, except for these two paragraphs. With that in mind, I
trust that, as you read this issue, your confidence in ITM will be further strengthened. I believe you will see clearly that the information in our newsletters has been consistently accurate and timely, including most of our forecasts, regarding all aspects of the various financial markets and their trends. Most significantly, I hope your faith in our wisdom of precious metals markets, particularly gold, will move you to action.

When friends and family ask me, “Is this a good time to buy gold?” — I tell them it would be foolish to acquire gold for the short-term, but it would also be unwise not to own some gold for the long-term!

KEYS TO THE ECONOMY

Interest rates, the US dollar, and, most significantly, the American Consumer are the three keys to the US economy.

During the 20th Century this great country built its wealth by manufacturing goods and selling them here at home and around the world. Today, China has taken over that role, and their wages are dirt cheap. The economic boom
that America has enjoyed since 1993 has been built on low interest rates and easy money. In other words, the very foundation of our economy has been built on debt, particularly since the early ‘90s. The US has accumulated more debt in the last 17 years than in the previous 214. How have consumers survived or prospered — by borrowing money using their homes as collateral. Take away the consumers’ ability to borrow, and the US economy is dead!

This is very troublesome when you consider what is happening in credit markets. Nearly 1.2 million foreclosure filings were reported last year. Commercial paper has lost over $300 billion, and it is estimated that $500 billion in adjustable-rate mortgages are coming up for reset through 2008. We are in the midst of a credit meltdown; and if the Fed doesn’t act by lowering the Fed Funds Rate and lifting restraints upon institutions to aid borrowers, the American economy is going down the tubes.

WHO KNEW

The recent meltdown in the subprime mortgage market should not have come as a surprise. Does anyone truly believe that the Fed didn’t know that we were headed for a meltdown? If they didn’t know, we are in big trouble. They would have had to have been in a coma not to have known! I warned of it, and many analysts were predicting it! But days before the financial markets froze to a standstill, the Fed and the Administration were still assuring us
that things were going to be fine.

Now, I am not blaming the Fed here, but you and I better understand that this is the way it works. In the midst of a known crisis, those leaders at the top are going to deny the inevitable until it becomes a fact glaring us in the face! At that point, it is too late for you and me to act. That is one reason we need gold in our respective
portfolios! There are many ticking financial time bombs floating around our universe; and if you are waiting for Fed Chairman Ben Bernanke or President Bush to put out an all-points bulletin, you are kidding yourself. It’s not going to happen! The Fed can’t come out and warn folks about a financial meltdown that is going to occur tomorrow. That would only contribute to the financial collapse, because every trader on the planet would begin selling
everything and anything that might be affected by the crash.

Imagine President Bush and Fed Chairman Ben Bernanke standing side by side at the podium, tears rolling down their pale, white faces when suddenly they proclaim, “Tomorrow at 7:00 AM EST, we will suffer a severe financial meltdown. The financial markets, as we once knew them, will never be the same!” There would be a mad stampede for
the exit door. Of course, Mr. Bush and Mr. Bernanke would have already sold out of their positions; and regardless of the size of those positions, they would be miniscule in comparison to, say, China. China holds a few trillion dollars worth of our (US) bonds. If they began liquidating those positions, KATIE BETTER BAR THE DOOR! Yes, when the Fed and the President speak these days, they aren’t just talking to you and me. They are putting on a good
face for the world, because panic selling by our foreign friends would be a disaster.