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When to Sell Gold

Gold Prices show investors rejecting official currency...

WHEN I TALK about "The End of America", I don't mean the end of our political union – although I won't rule that out, says Porter Stansberry in Daily Wealth.

I'm talking about the end of the US Dollar as the world's reserve currency.

So how will it unfold? The collapse of the global fiat money system is already underway.

Gold Prices have gone up for 10 straight years. Gold is the counterbalance to fiat (paper) money. For 10 years in a row, investors around the world have been favoring gold. This trend is going to continue, and it will not stop until serious actions are taken to put a floor under the value of the world's major paper currencies: the Euro, Dollar, and Yen. And that can't happen because the governments backing these three currencies are all bankrupt.

The Euro will die first. Just look at the numbers...

Greece, Ireland, Spain, Portugal, and Italy have all made the same mistake. They responded to the collapse of real estate prices and debts by guaranteeing the private obligations of their banks with their country's treasury. (America is doing the same, by the way.) The problem is, the debts are vastly larger than the governments can afford to repay...far larger.

So for example, when Anglo Irish Bank failed, it announced it required $35 billion. That's equal to 25% of Ireland's annual economic output. And that's only one of Ireland's failed banks. Ireland will never be able to afford these obligations.

As a result, Germany, France, and the other Euro nations have put together a bailout plan. All of the European treasuries will act to save any member state.

Total debts owed to foreign investors in the so-called "PIIGS" are $2.6 trillion. The bailout package that's been assembled totals $1 trillion. That sounds pretty first.

But Italy and Spain have pledged $130 billion to the bailout. Where will they get that money? Greece has pledged $12 billion. Ireland, $7 billion. Portugal, $11 billion. Only about half this money will ever be raised and almost all that can be raised will come from France and Germany. Sooner or later, the taxpayers in those countries will say "enough" and the whole thing will unravel.

It will happen suddenly. And very, very soon.

Even if you pretend Europe can raise that size of bailout fund, the figure isn't nearly large enough to bail out either Spain or Italy. And both are likely to suffer a default if either Greece or Ireland defaults. That's why interest rates in Ireland and Greece are back to crisis levels, despite the bailout promise. That's why the Euro continues to fall. And that's why shorting the Euro is one of 2011's sure bets.

The collapse of the Euro will cause all kinds of big problems this year and almost surely lead to a huge correction in commodities and a rise in the Dollar. But does that mean the US Dollar's problems are just a mirage? Nope. Sooner or later, the US will face a stark choice...

If we let the Euro fail, there will be terrible short-term consequences. So the Fed will crank up the presses yet again. Quantitative Easing part III will be another $1 trillion effort, this time focused on buying European sovereign debt. The Fed must become the lender of last resort not only for the US, but for the world.

That's the last step before its eventual collapse. After that point, people will no longer flee to Treasurys when a crisis erupts. They will flee to gold.

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Starting with $650 saved from his newspaper round, Chris Weber began buying and trading gold at age 16. A millionaire by 20, he switched into foreign currencies and debt investments as the US Fed finally started to tackle inflation in the early '80s. Now he shares his trades and insights with private investors through the Weber Global Opportunities Report.

See full archive of Chris Weber articles

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