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October 29, 2012

We all remember the tale of the weaver who made a wonderful cloth which was invisible to one of royal birth or of the nobility. All the others of common status naturally could see the cloth, and if the Emperor wore his new suit, no one would think him to be naked. He wore his new suit, and everyone laughed, as he had no clothes. The Emperor was fooled, but the common folk were not. Today, the reverse is true. The Emperor knows he has no clothes, but the common folk believe that he does! I refer to currencies around the world as having no clothes, because they don't, and common folk, tragically, believe they do.

I have a client who called me last year tell me they wanted to get out of the stock market and their 401K.  Should they take the penalty, pay the tax and buy silver and gold?  I suggested that they do not buy treasury bonds? That would be like re-arranging the deck chairs on the Titanic as the ship was going to sink anyway. No currency in the world, be it dollars, yen, pesos, marks, or other, has anything backing them, other than the paper on which they are printed. The various nations have what are known as "legal tender laws" force their subjects to use these pieces of paper with ink on them to engage in trade. These laws do not give value, any more than the Emperor's new clothes gave covering for his body. I just looked up to see what inflation in America had been since 1980 and it is officially 299% or 9.34% a year.  In reality, it has been a lot more. When the dollar was backed by gold and silver, for 150 years there was virtually no inflation. Tangible gold and silver backed the pieces of paper with ink on them, gave them convertibility into something real, which required capital expenditures and labor to produce.

Is it not obvious to us today that everything we purchase at the store has shrunk while the price has remained unchanged?  A slick trick to get us to keep quiet and not make any noise about prices!  There are certain weights, areas, and devices with which we measure things that are immutable. Among them are the acre, mile, pound, ounce, ton, gallon, inch, foot, meter, degree, volt, ampere, angle, etc. The various currencies do not happen to be one of them. Suppose you were attempting to build a home, and every time you used your tape measure to cut a board, it had changed its length? Suppose you were in the oil business and every time you attempted to deliver a gallon of oil, the size of the gallon had been reduced? Suppose you were measuring your wealth, future prosperity and security, and every time you measured your situation, the measuring device had shrunk? There can be no accurate measurement of anything, if the tool used for measurement, varies in weight, length, content, or value. There is no choice, as the dollar is what we use here in America. However, this does not mean we should provide for our future security in these dollars, since they, nor any other currency has any stable value, but are merely pieces of paper with ink on them. Not all pieces of paper with ink on them are unbacked, as are currencies. A car title is backed by the automobile, and a home deed is backed by the home. A share of stock indicates a microscopic ownership in a corporation even, although that ownership is much diluted. A diploma is backed by hard work at college. Books are backed by the effort, talent, and research of the author, plus investment by the publisher. Go to a bank, borrow, and sign a note for a loan. The note says you owe so many dollars to the bank. The note you sign has a dollar value attached to it. But what is a "dollar?" Originally, and for over 150 years, a "dollar" was a twentieth ounce of gold, and printed at the top of each dollar was either silver or gold certificate indication, meaning it was redeemable in either silver or gold. The dollar today, says it is a "note." A "note" for what? No one seems to know, because there is no value attached to the dollar currency, other than by law we must use it for trade. The dollar is backed by, "The full faith and credit of the US government." Not much of a recommendation, and of no measurable, stable value.

The entire world is operating on fluff. Not a single currency in the entire world is backed by anything. None have any value, other than the legal tender laws, and none are convertible to anything, other than what one can purchase with them, which continually shrinks. The presses run night and day around the world, and currencies lose their purchasing power.  Our dollar boasts itself as being the world's trading vehicle, well not for long.  Habit and law forces us to accept the dollars, and when someone derides the measurement of "dollar", as I am now doing, the general public acts as did the Emperor, who thought he had a wonderful wardrobe. In reality he was naked.  I told my client that switching from a 401k to an EFT was merely switching from one instrument to another, and both used the same measuring device which is flawed and shrinking all the time. A terrible way to measure something! In addition, the supposedly 9% inflation rate we have had since 1980 doesn't even keep up with the interest earned and taxes that must be paid on that interest, so it is a sure way to de-capitalize one's self and impossible to get ahead.  The British Pound Sterling was $2.30 in dollars, and now is $1.44. Yet the dollar itself has shrunk perhaps by 95% so where does that leave the pound? The yen is worth less than a US penny, and that penny isn't even made of copper any longer. Suppose the entire world one day, simultaneously realized that their "money" was worthless, other than the paper on which it was printed? Everyone would want something tangible to trade with, and guess what it would be?

"I know", you say, "You just want me to put my life's savings into gold and silver, which aren't going anywhere, and pay no interest. Hell, you are a precious metals dealer, so you write this drivel to convince me to invest in the stuff you deal with."

"Correct, but there are hundreds of dealers both large and small, besides me, and this may benefit them as well as knocking some sense into your head," might be my reply. My reply also might be to ask the scoffer to name one single unbacked currency that has survived.  I have literally millions of dollars of currencies my father brought back during World War II that cover a large frame in my office.  It is nothing but wall paper today!  Admittedly, gold and silver have gone nowhere lately, in currencies. This is merely a golden buying opportunity! Don't you wish you had bought that home before it went up, or stored a thousand gallons of gasoline at a dollar a gallon (it spoils)? Don't you wish you had bought that roast beef that was on sale at half price last week at the super market? Due to the manipulation of the metals by central banks, and the likes of Goldman-Sachs, gold and silver are at or below their cost of production. Gold and silver are so ridiculously cheap in currencies today; it is like a big "inventory clearance" sale. To me, anyone who does not get all they can, while this anomaly lasts, is a fool. "Those that will not learn from history are doomed to repeat it." Smart investors knew the stock market bubble had to break and it will again only no one knew just when to bail out. Smart investors know that the metals manipulation will have to cease eventually, only no one knows just when the manipulators' bubble will burst. It will, of that there is no doubt, but before it does and the birds come home to roost, for goodness sake, take advantage.

To say that a tangible thing requiring effort, capital, exploration, and skill, to produce, and which has been a symbol of actual wealth for thousands of years, cannot go "up" in fake currencies, is to say that the sun will not rise tomorrow. To say that a beautiful, eternal, desirable, fungible, thing can "go nowhere" for much longer, is absurd. To you unbelievers, have fun as your dollars lose purchasing power ever faster, because their numbers increase daily. The presses are well lubricated, the chainsaws are cutting the trees to make the paper for your bucks, and the electricity shortages will not be a hindrance to their continued increase in numbers and decrease in purchasing power.  Just look at history anywhere, but America in particular. Just like Jay Leno my dad bought a new Ford Galaxie 500 in 1966 for $3900. Does that tell you what has happened to your beloved dollar? Yes, they do look virtually the same, but that is what fools everyone. Looks aren't everything!

If you don't like gold and silver, fill your home and backyard with store-able food, fuel, wood, coal, chickens and goats, a cow, propane gas tank anything that you may need.  Save in "gallons" of gasoline, fuel oil, or something measured in "gallons," because "gallon," as a measurement will not shrink. Save in "acres" of land, or "square feet" of home, as these are stable measurements. Save your surplus assets in "ounces" of gold or silver, since "ounce" is a stable form of measurement. The "dollar" is a lousy measuring device, and those thieves in Washington know it. You think Ben Bernanke doesn't know the dollar is a fraud? He knows, but at his age, he hopes it won't come crashing down while he is still around. He's got a big job, being the one of the most powerful man in the world.  It is not easy to convince someone that a long held belief in the currency of a nation is a false belief, and that surplus assets MUST be stored in some other form of measurement. Admittedly this piece may be preaching to the choir, but it must be repeated over and over again…till it sinks in! Protect your family before it's too late!


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Spot prices accurate as of
Fri Jun 23 15:48:14 PST