The collapse of the world's largest financial institutions over the past several months has caused a spree of panic selling and forced liquidation. Investors have sold every asset class disrespectful of the underlying fundamentals and piled into the perceived safety of US Government Bonds and dollars. Commodity prices in particular are off over 70% since July of 2008. This has created a phenomenal opportunity to protect and profit from the severe inflation we will see in the years ahead.

Last spring the Federal Reserve cartel was in a difficult position. With the severe credit crisis, they could not tighten credit because it would have likely collapsed our economy. They were also unable to target lower rates with inflationary pressures building and the dollar breaking new lows. They had no other choice. They had to come up with a plan. Their plan included market intervention on a scale never seen before in history.  In the following months, this plan assisted in the destruction of trillions of dollars in wealth. It transferred the wealth into the hands of Big Government as investors sold their assets and moved into US Treasuries and dollars. The crime of the century was a success. The Government sold massive amounts of debt at the some of the lowest yields in history. They were able to cut the Fed Funds target to a record low range of zero to twenty five basis points.  
 
Now that the cartel has driven the “wealth money” into these debt based instruments, they will target these investors for their next round of wealth confiscation. Investors have piled into US Treasuries as if we will be in a deflationary environment for at least the next 10 years. They will be sadly mistaken. As the effects of endless money printing begins to settle in the markets, we will see the value of their dollar based fixed income investments plunge through the floor. Loses experienced will be severe. They will be in addition to the more than 50% already experienced in traditional stock, bond and real estate investments. Three of the most accurate and respectable advisors I have followed over the years estimate that by the time this is all over, loses to the traditional investor will be in the range of 90% of their life’s savings. These advisors include McAlvany Intelligence, International Intelligence and John Roubini. This massive transfer of wealth will benefit those investors who are positioned properly.

We are witnessing the largest monetary expansion in the history of the United States. The US taxpayer is will soon be feeling the effects of the 4.65 Trillion dollars in committed bailouts. The government has already pledged an additional $4.5 trillion over and above the $4.65 trillion bringing the total to $9.2 trillion. Over the next couple of years, trusted analysts are predicting that bailouts will amount to as high as 15 trillion. To put this into perspective, the inflation adjusted cost of World War II was estimated to be $3.68 trillion. This historic monetary expansion will wreak havoc on the value of fiat currencies around the world. The wealth will be transferred to those investors holding assets of tangible value.

Monetary expansion is the sole cause of inflation. The evidence can be seen in a study entitled "No Money, No Inflation---The Role of Money In An Economy." The longer term correlation between monetary expansion and inflation is about 99 percent. It takes about 6 months on average for the effects of monetary expansion to be absorbed into the markets. It is estimated we will see inflation grip the markets around spring of 2009.  Again, this drop in prices has no respect for the bullish fundamentals that underlie certain markets. Those investors who are looking to protect themselves and profit from the potentially devastating inflationary forces will have a historic opportunity to do so over the next several months.

Massive deleveraging and forced liquidation has taken crude down to 54 month lows. This market is currently trading about 78% off the $147 peak hit last July. We have arrived at the current price without respect to the bullish fundamentals that underlie this market. The mainstream pundits have sounded demand destruction. Demand has slowed, but is still growing.  The IEA estimates that world demand growth is still around 2.1 percent.  The real story is supply destruction with a current depletion rate of 9.1% as explained in November's IEA report. Companies are also scaling back production and projects further destroying demand.

We are witnessing a phenomenal opportunity to initiate or add to positions in the silver market.  For more information please contact Jared Irish.

If you would like to discuss trade ideas to help you participate in these possible opportunities or have any questions regarding this article feel free to call me at 312-324-0272 or email me at jared.irish@archerfinancials.com .

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