Time to Own Gold and Silver
two consecutive six-year closing highs for the Gold Bugs (Basket of
Un-hedged Gold producers) Index (HUI), in the past week, the two-year
gold bull market goes largely unnoticed by investors and the media.
Instead investors and the media remain focused on promises of a cyclical
recovery by the Fed, and an invisible and imaginary revival of the technology
sector. Silver bullion recently made a three-year high, while the dollar
index recently made a new four-year low. Gold made a seven-year high
earlier this year, in February. These are indisputable facts that can
be seen on any price chart of these indices and commodities.
dollar would import inflation and result in higher long-term interest
rates, upsetting the pillar of the US economic strength; home equity
extraction and cheap easy credit, which has been used to continue addictive
over-consumption. With record bankruptcies even at these very low interest
rates, it is almost unfathomable what a 200 basis point rise in interest
rates would result in. Money supply responds as if in decline because
of a sharp drop in money velocity. While I have heard the excuse that,
“we are No Japan”, I would respond that in my experience,
the Japanese entered their deflationary period in much better shape
to weather a long period of declining prices and little availability
of credit due to their historically high savings rate. In our situation
we are at the mercy of foreigners to the tune of $3 billion a day, and
are not in control of our own destiny, ex the use of our military. It
appears that with deficits as far as the eye can see, on the state,
local, and federal levels we are in a very challenging spot. Gold should
now rise against all currencies and is an insurance policy that all
should own at this juncture.
In closing, we will end with quotes from two famous Americans, and one picture worth a thousand words:
“The Gold standard acted as a silent watchdog to prevent unlimited public spending…I can find no evidence to support a hope that our fiat paper money venture will fare better ultimately than such experiments in other lands. Because of our economic strength the paper money disease here may take many years to run its course…but we can be approaching the critical stage. When that day arrives, our political rulers will probably find that foreign war and ruthless regimentation is the cunning alternative to domestic strife.”
-Congressman Howard Buffet – (father of billionaire investor Warren Buffet)
“In absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard. A free society needs the rule of gold.”
-(Incredibly) – Alan Greenspan – 1966
The drafters of the constitution of the United States were well aware of how a government armed with legal tender powers could ravage the people’s liberty and prosperity. When Alexander Hamilton wrote the Coinage Act of 1792, he made into law the market definition of a dollar, as equaling 371.25 grains of silver. During the 20th century, the legal tender power enabled government to tell the people the dollar meant a piece of government–issued paper, backed by nothing except the promises of the government to maintain a stable value of currency.
at the following chart, and you, be the judge:
The policy levers being implemented by the Fed and the Government are reminiscent of those implemented by Germany in the early 1920’s. Look on the chart above to see the devastation caused by such measures.