Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Stock Review : Markets : News Wire : Quotes : Radio : Silver : Stocks - Main 
  
 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold Gains While Stocks Fall
By: Chris Mullen, Gold-Seeker.com

Seabridge Gold A Top-Tier Development Company
By: Tickerscores

Sprott Fund Manager Jason Mayer's Guide to Resource Stock Profits
By: The Mining Report

The Golden Kiss
By: Stewart Thomson

Silver, Gold, Debt and Taxes
By: Gary Christenson

Gold and silver will never go up again
By: Bill Holter

COPPER vs SILVER MANIPULATION: The Tale Of Two Metals
By: Steve St. Angelo, SRSrocco Report

Home Healthcare Cuts Threaten 500,000 Jobs and Put Female-Owned Businesses at Risk
By: Dennis Miller

Gold & Silver Market Morning
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch

Gold, Silver Bullion Coin Sales Robust Despite Sell Off
By: GoldCore

 
Search

GoldSeek Web

 
Gold, Paper, and a Train Wreck



-- Posted Thursday, 15 November 2012 | | Disqus

Begin with a few facts and assumptions and follow the logic:

  • Gold has been a store of wealth for more than 3,000 years. Silver has been used as money in most countries of the world. Both are still valuable.
  • All unbacked paper money eventually reverts to its intrinsic value of zero. Throughout history, there have been no exceptions to this statement. The world’s current experiment with unbacked paper money is only 41 years old and looking rather strained.
  • A person, business, or government cannot increase their indebtedness forever by spending in excess of revenues. This seems self-evident. Eventually, the person, business, or government will become unable to find anyone willing to lend under those circumstances. “Deficits don’t matter” is nonsense.
  • “If something cannot go on forever, it will stop.” This is Stein’s Law and seems obvious, but we often act as if we don’t believe it.

  • Politicians and governments will do everything possible to retain current power, even if it is destructive in the long term.
  • My belief is that most people will agree with these simple and straight-forward statements.

    We know that the United States (and the rest of the world) uses an unbacked paper currency which has lost perhaps 90% of its value in the last 40 years. We know that the official US government debt exceeds $16 Trillion and is growing rapidly – approximately 12% per year for the past five years. We also know that the present value of unfunded obligations of the US government for Social Security, Medicare, Medicaid, military pensions, and other commitments is $100 Trillion to $220 Trillion depending upon who is counting. It does not matter which calculation is correct since it is impossible for the US government to fund and pay either present value estimate.

    The current debt exceeds $16 Trillion and will increase at current growth rates to about $25 Trillion in another four years. Interest rates on the national debt are historically low because the Federal Reserve continues to “print money” and then makes huge purchases of government bonds. Assume a modest 5% interest rate on $25 Trillion of national debt in 2016. Do you believe that our economy can generate $1.25 Trillion in annual taxes just to pay the interest on the debt? How about funding a 6% interest rate on $35 – $45 Trillion in national debt by the year 2020? The interest payments would be about $2.4 Trillion – approximately the entire revenue for the government in 2012. “If something cannot go on forever, it will stop.”

    Our politicians will probably address the budgetary problem, as created by them, by taking the easiest way out, by angering the least number of voters, stalling, blaming others, appointing committees, and by concealing the problems and consequences as best they can. Possibilities include: printing $Trillions and blaming the resulting inflation on a convenient scapegoat, defaulting on all debt owed to foreigners, means-testing Social Security, Medicare, and other programs, forcing pension funds and IRA’s to buy T-Bonds, higher taxes, higher inflation, and reduced military spending. Many more creative suggestions will be set forth, but they probably will not include balanced budgets, fiscal sanity, or debt repudiation.

    If paper money eventually declines in value to nearly zero, the national debt is never repaid, government will continue to borrow and spend in excess of revenues, and this process can be extended for only a few more years, what should we expect?

    • Assume the dollar will decline in value against all commodities. Food, energy, metals, and practically everything you need for survival will substantially increase in price. Jim Sinclair calls this “currency induced cost-push inflation.”
    • Assume that government guarantees, programs, and promises will be changed, reduced, eliminated, or devalued. How much good is receiving Social Security income if your monthly benefit purchases only seven loaves of bread, a few fishes, and a tank of gasoline?
    • Assume that taxes will increase and our standard of living will decrease.
    • Assume that most paper wealth in the form of debt instruments, T-Bonds, T-Notes, state government bonds, and corporate debt will substantially decline in value and purchasing power.
    • Assume that gold re-enters the global monetary system in some form, not because politicians and central bankers want it, but because they are forced to include gold in order to create a credible monetary system that will inspire confidence in the new currency.

    This begs the question, how do you prepare? Perhaps we should cash out all paper investments, buy gold, and hunker down on rural farmland. This will not work for most people. Further, while most people know much is wrong in our economy, they are not ready to abandon their current lifestyle. The problem is that by the time it becomes clear that economic disaster is upon us, it will be too late for most people to protect themselves. A partial solution is simply to buy physical gold and silver – NOW!

    People riding a runaway train can party and remain oblivious to the fact that the train is about to crash into a huge obstacle. Our runaway financial train is about to destroy the status quo as it crashes into the obstacle of mathematical consequences – the inevitable financial train wreck. “If something cannot go on forever, it will stop.”

    When will the collision/collapse occur in the United States? Jim Sinclair, one of the premier financial intellects of our time, thinks we may have until perhaps 2015 – 2017 before the collision. He recommends physical gold bullion – in your possession or perhaps stored in a secure private storage facility. I think silver coins and bullion stored in a secure and private facility are also a wise investment.

    But because we don’t know when the crash will occur, it makes far better sense to prepare now, even if early, than to wait and hope. If all of these potential disasters miraculously disappear and our financial world continues as it has, preparation will be, at worst, inexpensive insurance. “Buy that insurance” while you still can.

    Are you prepared? Do you have enough financial insurance – physical gold and silver?

    GE Christenson
    aka Deviant Investor

    http://www.deviantinvestor.com/


    -- Posted Thursday, 15 November 2012 | Digg This Article | Source: GoldSeek.com

    comments powered by Disqus



     



    Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

     news.goldseek.com >> Story

    E-mail Page  | Print  | Disclaimer 


    © 1995 - 2014


    © GoldSeek.com, Gold Seek LLC


    GoldSeek.com Supports Kiva.org

    The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

    Disclaimer

    The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.
    OilSeek.com