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The Round Rock Wealthbuilder's Meetup Message Board › John Williams: How to Survive the Illusion of Recovery (Part 2)

John Williams: How to Survive the Illusion of Recovery (Part 2)

Dan Caldwell - Wea...
user 3188546
Round Rock, TX
Post #: 184
TGR: If there is no real recovery, will the Dow drop or stagnate?

JW: A weaker economy is not good for corporate profits. The government will try to compensate, which will just worsen the liquidity crisis, and sovereign solvency issues will increase. At some point, the global markets are going to turn very heavily against the U.S. dollar. That will spike domestic inflation, which will lead to higher interest rates. Again, that is all generally bad news for the financial markets, but good for gold.

TGR: Another place where reality often shows through is energy prices: gas and electricity. What did you see for inflation in energy prices in 2012 and what is the outlook for the energy commodities and the stocks behind them in 2013?

JW:  I'm looking for (higher gas prices and) a weaker economy with higher inflation—driven by bad monetary policy reflected in a weak U.S. dollar—which will have a big impact on dollar-denominated commodities.

TGR: What is your overall prediction for 2013 inflation and would that change if quantitative easing ended?

JW: I can't give you a hard number but I expect inflation to increase rapidly. It will certainly be picking up by the end of the year. It is unlikely that the Fed will be able to back off its quantitative easing.

TGR: Based on this outlook, what can investors do to protect themselves? If we know the truth, how can that help investors prosper—or at least survive?

JW: First, concentrate on preserving the purchasing power of your wealth and assets. The best hedge is physical gold, silver and other hard assets outside the dollar. Look at stronger currencies. I still like the Swiss franc, the Canadian dollar and the Australian dollar as hedges.

You need to hold the hedge through the tough times. If gold is up at $100,000/oz, don't get excited and take profits, because the gain there just reflects maintenance of your purchasing power. It suggests the magnitude of the purchasing power you've lost in the dollars you did not put into hard assets. Remain liquid so you can get through the tough times. If you preserve your wealth and you are liquid, you will have some of the most interesting investment opportunities that anyone has ever seen, once the system recovers. I can't put any timing on that, but it's not likely going to be a couple of months. It's more likely going to be a period of years.

Full Article: http://www.theaurepor...­
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