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Why fiat paper money is always trashed in the end

January 7, 2010 2 comments

Because govts can.  So they will.

Which is why gold and silver are God’s money, real money, honest money, money to have in a crisis like today, money to hold in your own hands secure in the knowledge no embezzling shyster is going to take it away from you or counterfeit it or overprint it.

As Jeff Clark explains here:

Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.

This reckless activity has spooked our foreign creditors, weakened our global standing, diluted our currency, is punishing savers and retirees, and ultimately sets us up for a level of inflation this country has never seen before.

Yet, what is the guardian of our economy and money telling us now?

“Will the Federal Reserve’s actions to combat the crisis lead to higher inflation down the road? The answer is no; the Federal Reserve is committed to keeping inflation low and will be able to do so. In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.” (Ben Bernanke, December 7, 2009).

This is pure rubbish. If inflation could be controlled by just thinking stable inflation thoughts, then Ben should be able to grow a full head of hair by just thinking scalp follicle thoughts. This is so ridiculous, it’s insulting.

Government actions make a mockery of their words; what they say and what they do are diametrically opposed. It’s clear that inflation is not a question of if, but when.

Any level-headed individual has to conclude that there will be a steady – and likely accelerating – decline in the dollar’s purchasing power. It’s inevitable.

The great masses don’t quite understand it yet, but they will. There will be no escape from the cold, hard slap in the face citizens will receive when a high level of inflation arrives. And when it does, it will make a mockery of any opposing viewpoint.

So the question before you is simple: Will you be a prepared survivor for what lies ahead, despite what our government leaders tell us, or will you be a complacent victim of the biggest financial deception of the decade?

For me, there’s only one solution. Don’t kid yourself into thinking a man-made asset will protect your purchasing power. This is the time to be overweight gold and silver. I advise letting them serve their purpose for you.

I don’t like the term “man made”.  Everything is man made, and valued by man.  I prefer this expression: “Don’t kid yourself into thinking an easily debased paper asset will protect your purchasing power.”

Because in the end, it never has.  Ever.  In the history of paper currencies every single one has eventually ended up worthless.  Every.  Single.  One.

Think about it.

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Silver: The Bargain of the Century!

January 6, 2010 Leave a comment

Let me add an addendum to my Trade of the Decade: 

Silver, the longtime poor cousin to gold, is $et to $oar!

There are so many industrial applications for silver it’s not funny.  They are growing by the day, especially in nano-tech.

The shorting of silver by the bullion banks is insane and unprecedented.

The historical gold:silver ratio over the last 700 odd years appears to be around 30:1.  Some say it’s as low as 16:1.  It’s currently around 70:1.

Wow.

Admittedly, the Makian Distribution predicts massive volatility in commodity prices with increased leverage/debt, and that’s exactly what we’ve had in the silver market over the last 50 years.

But something tells me silver is due to switch across to the right hand side of the bifurcating normal distribution very, very soon.

I would love to see a short squeeze in the silver market.  It would be like watching fireworks on New Year’s Eve.

Charles Goyette proves I am not insane

January 4, 2010 Leave a comment

I’m not as alone as I thought!

As you begin to appreciate the gravity of the situation Charles lays out in a most eerie fashion what the most likely scenario awaits us and builds a strong case for why he believes the dollar will collapse. At this point most readers not familiar with economics or America’s history of debt may begin to panic and pass out from fear, as Charles’ arguments are extremely convincing. From a long term perspective there is very little to argue about, our fiat pyramid of debt has to and will eventually collapse – the only question is of timing. This question is crucial to properly answer as it will spell out the direction of the next several years. While Charles attempts to answer the question with an open mind, his views can be best described as inflationist and he firmly believes that the forces in charge of our destiny will turn to the only tool available to them – currency depreciation.   Once again, in the long run this may be true, but for the time being America finds itself in a unique situation where our dollar is still the reserve currency and is still trusted around the world. Certain technical reasons also suggest that the dollar may strengthen in the coming months not so much due to any internal policy, but the systemic failures in other parts of the world. Still, as Charles poignantly argues our status as the reserve currency is on borrowed time and can change with a blink of an eye.  For this reason the book’s last section presents advice valuable for every American regardless of what one’s prognostication may be.

Charles is partial to value, a concept easy to grasp when you realize just how worthless the dollar can become. Therefore common sense approaches involving gold, silver and oil are presented. Charles makes a deliberate effort to provide options for any would be investor regardless of experience and if you are under the impression that you must build a ten ton safe and start hoarding gold ingots then you are mistaken, it is easier than you could ever imagine.  Several sections are also devoted to address other popular investment strategies like equities and treasuries and why you should think twice before you invest in these increasingly risky asset pools. A rather amusing analogy between America’s credit strength and a shady uncle constantly looking to borrow should be reprinted and distributed all over the Internet.

The Dollar Meltdown is a unique and valuable book, offering the complexities of economics in order to explain where we are and how we got here while presenting investment strategies for those people interested in taking control of their financial feature.  If you prefer eating glass over reading economic text or think Wall St. is a prerequisite before making investments, then this book is a must read for you and your family.

Gold wins gold: Best asset to hold this decade

December 26, 2009 1 comment

One picture truly can tell a thousand words:

Merry Christmas and Happy New Year

December 23, 2009 Leave a comment

To those readers who have tolerated my rage against the machine, thanks for sticking with me.

As the Buddha stated just before his death, “Everything is Change” – so I am quietly confident things will get better in 2010 (they could hardly get worse).

I leave you with Lew Rockwell’s sage words regarding God’s money and the connection between faith, truth and sound money: 

Fiat money with central banking… tempts corrupt politicians and bureaucrats, and it also further corrupts them. It is the great occasion of sin of our public life. The tragedy is that their use of the printing press not only corrupts them; it imposes dreadful and intolerable costs on the rest of society, in the form of price inflation and business cycles.

We’ve seen the corruption grow worse over time. We are living now in the 37th year of fully fiat money with central banking. The politicians of the past were a bit reticent to use all the power they had. They are becoming ever more brazen. The sense of shame seems to be gone forever, their consciousness completely papered over by the ominous power they possess. The pundit class is following them, believing that there are no limits.

In truth, all these bills must be paid. To realize that is to realize the necessity of radical reform. It can be overwhelming to contemplate the glorious results of a full gold standard reform. Inflation would stop eating away our purchasing power. The business cycle would be tamed. International trade would not be disrupted by wild swings in currency values. But of all the benefits, this one is the greatest: it would stop arbitrary rule, dead in its tracks. It would force the government to curb its ways. It would shore up our freedoms.

For this reason, the policy of sound money is very much linked with morality. The Hebrew scriptures, in the nineteenth chapter of the book of Leviticus, warns “you shall have just balances, just weights…” The twenty-fifth chapter of Deuteronomy issues a similar warning: “You shall not have in your bag differing weights, a large and a small.” Proverbs says the same: “A false balance is abomination to the LORD: but a just weight is his delight.” Another passage says: “Diverse weights, and diverse measures, both of them are alike abomination to the LORD.”

All of these relate in some degree to the need for sound money and condemn the act of fraud and monetary debasement. The consequences of monetary sin cannot be contained to the sinners only. They are spread out all over the whole of society, destroying its economic basis and corrupting the morals of society. They foster crazed illusions that we can magically generate wealth through the act of printing money, and the attempt to do so has catastrophic consequences. As Mises wrote: “Inflation is the fiscal complement of statism and arbitrary government. It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism.”

I find it sickening that there are so few voices outside the Austrian School that will stand up to this policy. And I fear that the consequences of this policy will be felt for many decades into the future. There is still time to reverse course. There is nothing inevitable about despotism. We are not being forced down this road. We can embrace freedom. If we understand that freedom is inseparable from sound money, we can embrace that too. Until then, we will continue to place our trust in the political establishment to do what is right. Call me a gold bug if you will, but I trust hard money far more than our rulers. And that, ultimately, is the choice we must make.

Merry Christmas and Happy New Year.  Let us pray for sound money to return in our lifetimes.

Jim Willie (a.k.a. The Golden Jackass) nails it

December 15, 2009 Leave a comment

Fantastic blockbuster post, predicting multiple, cascading sovereign debt defaults, a run on US debt and a final run to gold and silver.

I agree with all of this analysis, as can be seen in previous posts on gold, silver, fiscal Armageddon and other entries.

This is the best current synopsis on what’s coming that I’ve seen to date.  The question is timing.  I cannot say this will happen in 2010.  But it will happen.

The only question is when.

$ilver set to $oar

December 15, 2009 Leave a comment

$ilver is gonna blow at some point.  It’s impossible to keep the short positions going indefinitely in the face of physical demand and supply shortages.

The question is: When?  I don’t know, but Butler thinks it might be soon.

Categories: Investment tips, Silver