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The Cloaked Economy

The commentary below is for the benefit of our readers from opinion makers and writers not associated with Euro Pacific. We do not guarantee the accuracy and completeness of third-party authored content. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific, or its CEO, Peter Schiff.
Gregory Wyche
October 8, 2009

In the original Star Trek TV series, we were introduced to the now-famous Romulan Bird of Prey, an enemy starship that was equipped with a 'cloaking device.' This device caused the ship to become invisible to the eye and also undetectable to other ships’ scanners. When the protagonists' starship Enterprise came upon the scene, it found only a battlefield filled with wreckage -- but no trace of what caused the damage. Although the enemy ship was still there, it was cloaked so they couldn't see it.

Today, a different type of cloaking device is being used by the world's various central banking systems and governments to keep the real economy invisible and undetectable to us. They are using their most advanced instruments: a low CPI, new housing starts, rebounding consumer confidence, and a rising Dow. They tell us that no economic Bird of Prey is out there; the sky is clear and full of shining stars.

But sometimes, when the crew of the Enterprise looked out the front-viewer, a slight distortion of the stars suggested something might be there. We see the damage left by the battle: high unemployment, bank failures, empty homes, and bare store shelves. But we are having trouble understanding what caused this mess because we are told all is well, and the scanners don't detect any threats. Just like the crew of the Enterprise, we can see some slight distortions in the stars -- the price of gold, continuing job losses, a declining dollar -- and a growing feeling that our instruments are not detecting all that is there.

In order to deploy its weapons, the Romulan ship had to de-cloak, fire, and then re-cloak. The ship didn't have enough power to fire while it was cloaked. Firing only took a moment, so the Enterprise continued to be damaged until it figured out where the enemy ship would show up next and fired on that location. The Bird of Prey was then damaged and became permanently visible. This is beginning to happen now as some world leaders call for a replacement of the U.S. dollar as the reserve currency and urge their citizens to buy gold and silver.

Eventually we will be able to predict what the cloaked economy will do next and call it out. Many have already been doing this by warning of inflation to come. As inflation grows, the energy (i.e. new dollars) it will take to keep the real economy cloaked will become unsustainable, and the Bird of Prey will be exposed. Responsible investors won't be surprised, and although the truth will be frightening to behold, those situated in hard currencies and other non-dollar investments will live to fight another day.

Many think this will be the worst time ever and are very afraid of what they don't yet see. Times will get harder, for sure; but in the end, the visible truth will lead us to a more honest and prosperous future.

Gregory Wyche is CEO of Perfect Pitch Media Relations Inc., a New York City-based firm that specializes in publicity for the investment community. Click here for more information.