“The US dollar must be devalued in order to shrink the destructive power of debt”

Richard Russell, author of Dow Theory Letters – the world’s longest-running daily investment letter – devoted a relatively large portion of his latest edition to gold’s role in the global financial system.

Russell, who has been bullish on gold for most of the past decade and encouraged his subscribers to invest in gold near the start of yellow metal’s bull market in 2001, reiterated his positive outlook in light of news earlier this week that two of the world’s most prominent investors recently added to their gold positions.

In addition, he offered some strong suggestions for U.S. policymakers on ways to deal with the nation’s looming debt problems:

The US MUST do something about its deadly compounding debts.

I note that John Paulson and George Soros have increased their positions in gold. I have to believe that Soros receives the best information available. Both of these men like BIG plays. What could Soros be thinking? The forces of deflation are weighing heavily on the US, and Fed chief Bernanke will absolutely not tolerate deflation.

The US holds the world’s biggest hoard of gold. The simple, obvious move would be to unilaterally raise the price of gold. This would devalue the dollar and all other currencies overnight.

In the meantime, the US has been encouraging its people to buy and hold gold. The US even came out with a beautiful new pure-gold buffalo coin. If the price of gold is raised, the fellow with three gold coins will feel good when the value of his three coins booms to ten thousand dollars. Ideally, before raising the price of gold, every US citizen should own a quantity of gold coins. In this way, everybody would be happy if the dollar value of their coins boomed.

I think this is the way matters are fated to go. The US dollar must be devalued in order to shrink the destructive power of debt. I think George Soros and John Paulson are well aware of this. Soros might even have received inside information on this subject. Steve Forbes in Forbes magazine writes editorials about gold in almost every issue — we must go back to the gold standard and revise the current unworkable and unstable monetary system. America’s debts are compounding even as you read this.

As I write, the price of gold is back over 1610. You can’t keep a good currency down. All my subscribers should have some kind of a position in gold, preferably gold coins. There — that’s the way I see the world and the US today.