Gold & Silver: THE Answers to Escalating Financial Doom

Lorimer Wilson February 9, 2012 Comments Off on Gold & Silver: THE Answers to Escalating Financial Doom 3,218 Views

Every fiat currency known to man has failed at one time or another – every one – and ours will be no exception! What factors are contributing to this eventuality and what can be done to protect ourselves from this impending event? [Let me explain and provide you with links to 37 supportive articles to give you a complete picture of what is unfolding and why.] Words: 2700

So says Clare Reading (www.americangoldreserve.com) in an article written exclusively for www.munKNEE.com (Your Key to making Money!) which has been edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Reading goes on to say, in part:

Most every nation in the world today practices a fiat currency in which the printed notes representing money are just promises to redeem as legal tender. There is no backing of any asset, per se, to guarantee that these notes are going to be of value forever. On the other hand, most recognize that gold and silver at one time were used to ensure that value was always held in balance. These two precious metals have long since been removed from the picture as a store in value connected to the printing of currency. When the money supply is in the form of printed paper without backing that country runs the risk of using the printed matter to alleviate debt and stimulate the economy without basis. This is where the United States dollar and most international currencies reside right now.

What can be done to protect oneself and family from this impending event of seeing the dollar, and for that matter all international currencies, becoming worthless? The answer is in precious metals – specifically gold and silver. These two metals:

hedge against inflation,
protect against government policies that ignore fiscal responsibility and
provide a haven of sound money.

Since 2002 the price of gold has gone up 620%, from $278 per ounce to a high of $1,723 as of this writing. Of course, the value of gold really hasn’t changed – it still has the same purchasing power as it has held for centuries. What has changed is the value of the dollar or perhaps more accurately, the lack thereof.

[Read: Nick Barisheff: $10,000 Gold is Coming! Here’s Why in which Barisheff makes it clear that “Gold is not rising in value, but instead, currencies are losing purchasing power against gold and, therefore, gold can rise as high as currencies can fall.”]

It now takes nearly seven times (7x) as many dollars to purchase that same ounce of gold as it did in 2002 and many industry experts are now calling for gold to continue on this same trajectory (vs. the dollar), which would take it to $4,000 per ounce within the next five years. Some even think the curve will accelerate, pushing it to as high as $6,000 per ounce, or perhaps even higher.

It’s hard to believe that gold will go that high, that fast, however, when gold was $278 per ounce, many people couldn’t imagine gold at $1,000 per ounce either. It only took five years. It’s very likely that five years from now, we will all look back at $1,000 gold and wish for the “good old days” again.

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At the same time silver has increased even more proportionately. In 2002, silver was trading in the month of January at nearly $4.50 an ounce. At this writing, it is near $34.00, an increase of 750+%. Projections by numerous experts call for the price to continue to break records in 2012 and to be near $65 an ounce by mid October, 2012.

You may wonder what is behind such optimistic projections]… Below are 7 key factors that contribute to this cause:

1. Skyrocketing National Debt: The total obligations of the federal government include more than just the “national debt” or the “deficit” that we hear about so often on the news. In actuality, the government has some much, much larger obligations to contend with in the very near future – Social Security, Medicare, Veteran’s Benefits, Civil Service Pensions and so forth. The money that was collected (from us in the form of taxes) to pay these bills, has been borrowed by the federal government and spent – never to return! What remains in these accounts are I.O.U.’s, which, when combined with the national debt places us near $140 trillion in debt.

2. Fiat Money is Flawed Money: As mentioned earlier, the most significant problem with fiat currencies (which are not redeemable into, or backed by, anything of value) is that there is little to stop the issuer from simply printing up more currency whenever he wants to. Once the printing presses get rolling, the effects are cataclysmic. Consider Argentina’s overnight collapse in 2002, the Brazilian real of 1992 – 1994 dropping to zero, the Mexican peso of the same era (1994) devaluing to 50%. In 1996, the yen fell to 24% while a year later the ruble plunged 70%. All of these countries (and scores of others since World War II) have seen their currencies spiral downward in value (also known as “hyperinflation”) as a direct and inevitable result of the fact that their currency was fiat.

3. Slamming the Dollar at Home: Since the onset of the financial crises in the fall of 2008, Fed chief Ben Bernanke has “unofficially” declared war on the dollar, creating trillions of unbacked paper greenbacks literally out of thin air and dumping them into the economy…Despite all of Bernanke’s free flowing “innovations”, credit markets are tighter than ever. Students, buyers of homes and automobiles, and small business owners are suddenly unable to get loans under the same lax credit conditions of several months or years ago. As a result, large ticket retailers, home sellers, and many others are unable to sell property, services, and inventory at customary terms. In spite of all the Fed’s financial legerdemain, the economic crisis continues to unfold, exacting its brutal toll.

4. Foreign Entities Shun the Dollar: For some time, governments around the world have threatened to diversify their currency reserves away from the dollar. Recently, as they have watched the value of their dollars decrease as much as 20% in a single year, they have started investing in other currencies and hard assets (such as precious metals) instead of holding dollars or dollar-denominated assets. Foreign investors are joining foreign governments in the attack on the value of our money by selling their dollar-denominated investments and even simply dumping dollars en masse. In recent news, Russia and China tag-teamed to try to undermine the dollar and establish an alternative system as the new world “reserve” currency. If their efforts are eventually successful and the dollar loses its current position as the “reserve” currency, the result will be a devastating loss of confidence in the dollar, and its subsequent accelerated devaluation, potentially down to zero. Members of the G-20 (which includes our own government) are already planning the devaluation of the dollar and many other major world currencies as part of a new world monetary system. Additional global leaders, the International Monetary Fund, the World Bank and even the United Nations are pitching — even demanding — that the dollar be replaced as the world’s reserve currency, a move that legendary investor Jim Rogers says could destroy up to 80% of the dollar’s value. As recent as October 5th, a London news story “The Independent,” cited that “Gulf Arab (states) are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, and GOLD.

5. Central Banks are Buying – and Controlling – Gold and Silver: There’s no money bigger than the central banks of the world, and they have turned into net buyers of gold for the first time since 2000, buying 14 tonnes (400,000 ounces) more than they sold in the most recent quarter alone, according to the World Gold Council. The point is, if central banks, (read: the big boys) are buying, one should quickly draw conclusions that the market may be taking off. Central banks have been notorious for hedging against brunt scenarios.

It has been said that everyone who owns gold is fighting against every central bank in the world…In recent years, the largest concentrated short positions…[ever] have been taken in both gold and silver by fewer than five banks known as “ the bullion banks”. Increasingly, each time the price of gold or silver has started to go up, these banks have stepped in and sold (short) futures contracts on millions of ounces…and this enormous selling has the net effect of pushing prices down, the same as with any other commodity – an oversupply of sellers forces the price lower. This manipulation of the markets continues to give the illusion that the economy and prices are stable (not increasing) because the otherwise increasing values of gold and silver are held in check each day…The reason this illegal activity has not been stopped is that it plays into the hand of the government’s strategy of quietly and almost imperceptibly devaluing the currency while all the time reassuring the citizenry that all is well.

6. Limited Resources Impact Prices: The recent year’s financial crisis really crunched exploration budgets for miners of all types. Worldwide, exploration budgets dropped by 40 percent year over year, according to a study from Canada’s Metals Economics Group. According to the CPM Group, the total silver supply in 2011, including mine supply and secondary supply (scrap, recycling, etc.), will total 1.03 billion ounces. Of that, mine supply is expected to represent approximately 767 million ounces. Multiplied against the current spot price of US$34/oz, we’re talking about a total silver supply of roughly US$35 billion in value today. Additionally silver is finding new and highly demanded uses in biotech, textiles, and other developing industries, for which less than 6% of the total, or fewer than 46 million ounces per year, is available at current production levels. Any increase in demand from any of these sources, or any reluctance on the part of investors to sell, will further push prices higher as demand outstrips production capacity.

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7. International Effects and Demand Elsewhere: HALF of the world’s population is in China and India and they are experiencing explosive…GDP growth rates and [China, in particular, is very] active in its attempts to corner the resource markets in our backyard, driving resource investments through the roof.

Since the fall of 2009, China has tilted the precious metals market by making it LEGAL for its private citizens to own gold and silver, and actually encouraging its citizenry to acquire gold and silver. Practically overnight, this added 1.6 billion consumers to the demand side of the ledger for gold and silver. These middle-class Chinese are each individually directed by their government to hold a minimum of 5% of their personal wealth in gold and silver. This huge added demand has the potential to dramatically increase prices as China’s burgeoning middle-class continues to buy and hold the newly-legalized precious metals.

Deflation and Inflation

The two main economic conditions that make people anxious are deflation and inflation. Most people think that deflation means “falling prices” and inflation “rising prices.” Actually, rising and falling prices are symptoms of deflation and inflation. The root cause is simply a decrease (deflating) or increase (inflating) of the money supply. When a nation is using a fiat currency such as the dollar, these decreases and increases are the direct and inevitable result of government action. It is precisely because the government cannot print or invent gold or silver that these metals have the remarkable ability to store value in both deflationary and inflationary times.

Save for the Future with Gold and/or Silver

Any ONE of the above SEVEN forces could drive gold, silver, or other natural resources higher [in and of themselves but] the reality is that they are ALL combining to wreak havoc on our economy. It is easy, then, to see why precious metals play an important role within any savings plan. By owning gold and silver, investors can harness these forces and use them to compound their wealth in the face of chaos.

Insurance against chaos

Many investors who own gold and silver think of their precious metals as insurance against chaos, rather than simply as a way to “make money.” They view precious metals as a store of value virtually independent of economic conditions. Unlike shares of corporations or government bonds, gold and silver have always, and will always, retain value and, best of all, even small investors can easily acquire them.

Hold the metal itself – not a certificate

Some companies offer to hold your gold or silver for you and send you a certificate stating that you do, indeed, own it. However, what if our perpetual wars or more economic tightening cause you to be unable to import your metal if it is held in your behalf in another country? What if tariffs are so high it is not worth trying to bring your property home? What if you only own stock in a gold or silver mine? What happens if there is a repeat of 1929?

The philosophy of American Gold Reserve is to offer the ability to have the property you purchase shipped directly to you. If you should need to trade it for something else of value, you won’t have to wait while ‘cashing in’ a certificate, even if there are no extra costs. Thus, come what may, you’ll be okay.