In previous Dollar Death Ray we saw how size of U.S. Federal Reserve balance had exploded. That financial frenzy continues. In most recent report, Federal Reserves balance sheet, after appropriate adjustment, was 46% larger than a year ago. Most of that growth has come recently during bank bailout scheme. Rarely, if ever, has central bank of a major economy so lost control of its balance sheet, or monetary policy. That expansion of reserve bank credit is now feeding the growth of U.S. money supply, M-2. As shown in graph, U.S. money supply growth is now running double digits.

This monetary expansion is highly inflationary, and should put to rest all talk of deflation. True issue today is neither deflation nor inflation, but relative value of national currencies, and what they will buy on world markets. Deflation was a unique issue of 1930s, as was inflation of 1970s. Currency values are the issue of today. If your wealth is denominated in wrong currency as time and events unfold, it may wither away. Choices are only Chinese Yuan or Gold. Only Gold is available to world investors.

U.S. dollar is in a parabolic rise, just as price of oil recently experienced. All parabolic rises end in near death experiences. Saudi's ratcheting up oil production just slightly, crushed oil prices. Fed's actions are similar, and will do the same to the dollar. Dollar's recent rise was due to a shortage of dollars in financial system as lenders and investors have been unwilling to lend dollars to anyone. Federal Reserve is remedying that shortage with massive asset purchases, and a now expanding U.S. money supply. The dollar's parabolic rise will implode, and Gold will begin Wave V. That makes the question fairly simple. Is your wealth mired in 1930, or will your Gold allow it to live in the future?

Ned W. Schmidt,CFA,CEBS is publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. To receive these reports simply go to: http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html.