WHERE DO YOU "RUN FOR COVER"?
November 7, 2012
If all the roads were closed, would you trade in your Chevy for a B.M.W.? If there is a food shortage and milk goes to $7 a gallon would you buy new dishes? If the stock market tanks would you buy bonds? In other words if you "need to be safe" would you continue to trade your I.R.A. for good paper stocks or buy Treasury paper?
ABSOLUTELY NOT! That would be the definition of insanity, continuing to do the same thing and expecting different results. Switching from one dollar denominated piece of paper to another isn't "safety" at all, but re-arranging the deck chairs on the Titanic. When on looks at the debt figures,even if you could trust a government issued statistic, it is simply frightening, and indicates what is obvious to even the most economic dullard. All governments before this one, which have started to inflate their currencies, will end in collapse eventually. Maybe not this year and maybe not 2014, but throughout history, no currency that has been produced by the flick of a printing press switch, has survived.
In America, it has already happened three times. First during the Revolution when the "continentals" were printed to help win the Revolutionary War. The expression, "not worth a continental" originated when the currency became worthless, due to its not being backed by anything. During the war between the states, both sides printed with hearty abandon, and the North's Greenbacks and the South's Confederates became worthless, and all who saved in them lost their assets. If you decide to hang onto your dollars till this all shakes out I estimate you will have to wait a hundred years to get anything out of your $100 bill, antique value only at that point.
Saving one's surplus assets in stocks, gives one perhaps a teeny tiny partial ownership in a huge mega-corporation. When that corporation becomes another corporation or retains some value, the stock in that corporation goes down in price, and the equity you invested vanishes. If you left the stock market, hopefully at a profit, and invested in federal government paper, you have not engaged in "running for cover," but rather exchanging your faith in a large corporation, which has tangible assets, you now have placed your faith in a piece of paper with absolutely nothing to back it except the "full faith and credit of the U.S. government," and surely you know they are not to be trusted, right? Of course that "investment" will earn you interest, which is duly reported and taxed. But if that instrument earns a .5% interest, and you pay 35% income tax on it, and the dollar it is denominated in loses its value at the rate of 3% a year (government figures), you have profited nothing, but have merely earned your broker a nice commission.
If you get out of dollar denominated items and into items denominated in other forms of measurement, when the dollar (peso, yen, franc, etc.) loses value (prices go up), the tangible you have invested your surplus assets in goes up in the price of that currency. If you need the currency to purchase food, you sell your tangible asset, and you have "hedged." yourself. There are many forms of tangibles to invest in, which will insure that you have "run for cover", meaning you are out of currencies backed by nothing, and into a tangible which needs no backing, as it in itself has value, although it pays no interest.
A cord of firewood, an acre of ground, 150 pounds of dog food, a tank of gas, a gallon of oil, or an ounce of gold or silver. Note the denominations of "cord," "acre," "pound," "gallon," and "ounce." These are not denominations of dollars which have no actual value other than what they may purchase now, but will surely require far more of such to purchase an equal amount of goods in the future. By getting surplus assets out of currency denominated instruments such as 401 K's, mutual funds or T-bills, and the like, you will have "run for cover" and safety.
Admittedly land has taxes to pay, dog food can get mice in it, and termites can eat your firewood, but ounces of gold or silver are universally regarded as real money, are compact, beautiful, and well, you know the arguments. No they don't pay interest but they may go up in value. Precious metals owe nothing to anyone, as they are valuable in themselves, and require no faith in any government. Currently, silver is 51 dollars to 1 for gold ratios and manipulated by governments and various financial houses. If you need things of interest, try tools of all kinds, jewelry, stamps, cars, rare art, or whatever strikes your fancy, but anything in short supply and which is a literal tangible will do. These things may be difficult to sell if the need arises, whereas gold and silver won't, but admittedly gold bullion coins aren't very interesting...just safe. Whole life policies, savings accounts, certificates of deposit, bonds of all kinds, or other securities denominated in dollars will go by the way with QE4 continuous.
Prices don't go up, currencies go down. Is a quart of milk worth more at a $3 dollar, than it was at a dollar when I was a kid? No, as it is the same milk! Only the currency has gone down; the milk has not gone up. Get out of currency denominated things and into tangibles deniminated in other forms of measurement. While this is a simple explanation of basic economics based on common sense, it totally escapes most minds, as perhaps it is too logical. A life insurance policy I might have bought when I was 25 with a value of $10,000, seemed to be a lot of security then, with gas at $1.50 a gallon and an apartment renting for $400 a month, both of which are accurate figures. Today, that life insurance policy would still be worth $10,000, and it was paid, over the years,with constantly decreasing value dollars, and today it is basically worthless, compared to the effort and work paid into it.
After WW I, the Germans who had saved their surplus assets in savings accounts or whole life policies, lost everything they had because they saved in marks. The same thing happened to them again 24 years later and they hadn't learned. Saving surplus assets in government controlled, unbacked, currency denominated vehicles, no matter how much they are touted by supposedly well educated, respected, admired brokers, is placing your faith in things that historically have become worthless sooner or later, and are taxed, and manipulated in the mean time. Leaving one's assets to one's kids or grandkids becomes rather sticky, taxable, and complicated, but if non-deeded, non-titled tangibles are handed down anonymously, it is rather simple. Some measurements are firm, set in stone, and virtually infallible. Pounds, ounces, acres, gallons, tons, and the like cannot be manipulated, or their values changed. Dollars, euros, yen, pesos, francs, etc. can be debased with glee by our stupid politicians and the privately owned federal reserve. Manufacturers and stores are in cahoots attempting to fool us by shrinking the sizes of all the items they make and the stores are complicite by keeping the prices of items on their shelves the same as in years gone by but no one can mess with universal measurements. Now go and protect your family!
Spot prices accurate as of
Wed Jan 29 13:49:18 PST