Saturday, March 13, 2010

Jim Sinclair's History Lesson: In 1979 For 24 Hours the Dollar Was Not Accepted in Europe - Setting off a Rush into Gold and Silver

"Loss of confidence in a currency (which is NOT an economic event), always leads to hyperinflation. Credit Default Swaps are now being used to slaughter currencies. The intent is to destroy for profit. Confidence in currencies will fall everywhere and gold will rally" - Jim Sinclair
In a highly information interview that recently aired on King World News (link at end of post) Jim Sinclair peer's into the future by revisiting history. In late 1979-early 1980, gold prices skyrocketed from under $350 in 1979 to a peak of $850 in 1980 (see chart below). According to Jim there was a massive panic out of paper currency into gold, after Europe suspended acceptance of the dollar for 24 hours - this lit the fuse for the stampede into gold and silver. 
The website offers a historical perspective:
It may seem like ancient history now, but only because we know how the story ends. At the time, the Soviet invasion of Afghanistan, which began around Christmas 1979, was a terrible global shock. The Soviets had just signed a "bilateral treaty of cooperation" with Afghanistan in 1978, but by the next year relations had deteriorated, and on December 27, 1979, 700 troops, including 54 KGB spetsnaz special forces troops dressed in Afghan uniforms seized all major governmental, military and media buildings in Kabul, including their primary target - the Tajbeg Presidential Palace, where they killed President Hafizullah Amin. [Before this was even completed,] the Soviets announced on Radio Kabul that Afghanistan had been liberated from Amin's rule.
It was a slap in the face to a cold war America already weakened by high inflation and unemployment, a struggling economy, and high energy prices. The future of the American economy and American power did not feel at all certain. As a safe haven in times of panic and strife, gold simply reflected that fear.
After the crisis was over the buying panic subsided and gold prices collpased marking the beginning of a 22 year bear market in gold.

LISTEN To JIM SINCLAIR's Interview on King World News here: Part I & Part II

No comments: