“In the end my survival vehicle will be gold”

The global economy is moving into a “survival period” in which gold will provide one of the few areas of protection for investors, according to Richard Russell.

The publisher of Dow Theory Letters – the world’s longest-running daily investment letter – and a long-time gold bull, Russell reiterated his bullish case for the yellow metal and gold-related investments this week.

“I now think of compounding in terms of debt and the compounding of that debt load,” Russell wrote. “Today we deal in trillions. Example — Bill Gates, the richest man in America, has about $6 billion in assets. One trillion equals 1,000 billion. The US national debt is $15 trillion and counting. But it’s currently compounding at historically low interest rates.”

“Meanwhile the Fed and the central banks of the world are creating new money at prodigious rates,” he added. “It’s only a matter of time before all this new money sets off inflation, no matter what Chancellor Merkel is trying to do. I expect this inflation to appear in the next year or two; with the rise of inflation, comes higher interest rates. Rising interest rates are death to compounding debt.”

Russell went on to say that “My advice. We are moving closer and closer to what I call ‘survival period’ — the period where the magic of compounding turns into what will be the poison of compounding. This isn’t a time for timing. This is a time for action. Reduce your exposure to bonds and all items that provide fixed interest rates. Similarly, reduce your exposure to stocks except the gold miners. Look to expand your positions in inflation-protected assets, especially gold.”

“Those who are holding stocks in the hopes of the usual rebound are going to be terribly disappointed in the years ahead. This bear market is going to be unlike anything we’ve ever seen before. In the end my survival vehicle will be gold. I say again, timing is hopeless. Gold will have purchasing power and true wealth as almost everything else is destroyed by this unprecedented bear market.”

Lastly, Russell once again spared few punches in criticizing America’s policymakers.  ”The US Government is now so loaded with ever-growing debt that it has become a mathematical freak. We return to different times, when rising interest rates will eat up the US government. With $55 trillion in assorted debts, the US is in no shape to deal with rising interest rates. We are in a state of reverse compounding, leading to inevitable bankruptcy on a massive scale.”