The market wants Italian Premier Silvio Berlusconi out... When the European Union (EU) pressured Berlusconi to present a turnaround plan for Italy, he balked. "No one in the EU can nominate themselves as special administrators and speak in the name of elected governments and the European people," Berlusconi said. "No one is in the position of giving lessons to his partners."
After more pressure, Berlusconi recently pledged to resign after the Italian parliament passes financial reforms. However, the market is wary of what will happen before then. (The process can take up to two weeks.)
Italian bond rates soared to a new high of 7.4%, up 0.82% from the previous day. (Greece and Portugal were bailed out after borrowing rates reached 7%.) Commenting on the world's third-largest sovereign borrower, Barclays said, "Italy is now mathematically beyond the point of no return."
Shares of Italian bank UniCredit, our favorite bellwether for European banks, are down 8% today to $0.74.
These latest developments are nothing new to regular S&A Digest readers. We've been predicting this blowup for a long time.
What most readers aren't familiar with – that our elite S&A Alliance readers are – is how Europe's troubles are making our "slam dunk" bet of shorting the euro (depreciating paper money) versus gold (real money) a big winner. The euro is getting crushed today, while gold is rising in value.
The chart below displays the price action in this trade. It displays gold in terms of the euro. Gold is close to breaking out to a new all-time high versus the euro. It should be a matter of weeks or months before it reaches this new high.
As gold soars to new highs against the euro (and eventually the dollar), it's important to keep one major thing in mind…
Governments hate gold. They will soon take steps to make it more of a hassle to acquire, transport, and store. They might even, as some suggest, try to tie the idea of gold to terrorism.
The idea might be farfetched, but a desperate, bankrupt government is like a dangerous, bankrupt man. Its capacity for surprising stupidity should not be underestimated.
Why do governments hate gold, you ask? It's simple.
Gold is the "anti-paper currency." Unlike paper currency, gold has real "inherent" value and cannot be created on a political whim. In contrast, paper money has no real value... beyond the faith society puts in it. People must have faith that the money will remain relatively stable in value over time. They must TRUST the money.
Governments around the world exploit that trust to commit a huge fraud against their people. The fraud is that a government can spend incredible amounts of money, take on unlimited entitlement obligations, and support a bloated military empire without bankrupting itself and impoverishing its citizens.
Governments hate a soaring gold price because it alerts the world that their massive spending and borrowing plans are out of control. A rising gold price unmasks how all their campaign promises, bailouts, handouts, loans, wars, and entitlement programs constitute a huge fraud.
That's why the current set of political leaders – from the socialists in Europe to liberal East Coast Democrats to red state Republicans – will do everything in their power to keep citizens believing in paper money.
And since gold is "real money" – with real, intrinsic value – that has been used for thousands of years, it represents a tremendous threat to political elites like Barack Obama, John Boehner, and Nancy Pelosi.
Do you worry about the government's view of gold and the possibility that it will make the metal harder to acquire... or as happened in the 1930s, confiscate it? Let us know at feedback@stansberryresearch.com.
Today is your last chance to sign up for our Project to Restore America conference at the early bird rate.
The price doubles tonight at midnight. Again, the aim of this group is to put forward three simple amendments to the Constitution: Balanced budgets at every level of government, sound money backed by gold, and the right of every American to keep 80% of his or her income.
The speakers at this first-ever conference include Porter Stansberry, best-selling author and Boston University economics professor Laurence Kotlikoff, and Republican presidential candidate Gary Johnson. We're holding this conference on November 19 in Baltimore, Maryland. Please show your support for the cause and register here...
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New 52-week highs (as of 11/8/11): None.
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Regards,
Sean Goldsmith and Brian Hunt
New York, New York and Delray Beach, Florida
November 9, 2011
Why the government hates gold... Our slam dunk trade is doing great... Italy gets hammered... Early bird discount for Project to Restore America... Fannie Mae takes more government cash...