Monday, October 22, 2012

Wise Men Choose Gold...L&C

Whether you believe In the Gift of the Magi, the Democrats or Republicans, it would behoove you to be prepared for a new world order because the course of the present world leaders is one of irresponsibility to their respective nations as represented by their currencies. Each time the Fed or other central banker prints more money, they are in essence devaluing their currency. If you look at recent history the "Nixon Shock" would give you definite clues as to where these central policies will be taking us.
Gold Standard
was betrayed in 1913 with the creation of the Federal Reserve, however the final nail in the coffin didn't happen until Nixon ended the convertibility of paper-to-gold in 1971. This act allowed the central bank to control our currency directly, although the Fed was technically in charge since 1913.
The majority of the public were opposed to this act, but this one issue would not be the first or last time our elected officials have disregarded what is now termed "populist" thinking. In fact, I will expand on this concept in my election vote blog. Watch for it. However, this is about gold and why you should have as much as you can afford for your own economic benefit.
Gold was regulated and manipulated to a price of just $35 per ounce back in 1971. Central bankers did not care that it cost more than $35 an ounce to find, mine and monetize just as it is today at over $1725 per ounce. Not that it cost that much to find, mine and monetize, but in a relationship to dollars that are printed, gold's cost is way undervalued.
To refresh. The idea behind the gold standard was that gold represented a store of value for the currency and central bankers could only print money that had a correlation of one ounce of gold for each dollar printed. This same relationship held true for every currency that had value behind it, but fiat people soon controlled central banks in every nation until the US surrendered in 1971. Now, there is no store of value in any currency. It is just paper, baby!
Now, do a timeline from 1971 until 1980. Gold runs to $850 per ounce. Fed chairman, Volcker sets out to fight the flight to gold fearing it becomes  national issue. He, the status quo and the media establish that inflation is the culprit of the then, US economic woes. The Fed drives up interest rates to over 15% and everyone in sound mind puts their dollars in T-bills and gold dies on the vine. The Fed won, but realized it paid a heavy price. The first signs and pressures of deficit spending effects the government along with the protesters in the street against the war in Vietnam.You see nothing can be discussed in isolation because all things are related even though the powers-to-be say one issue at a time. Bottom line: gold falls to around $200 per ounce and off the public mind.
Dow/Gold Price
has a relationship. See, you could buy one share of the price of the Dow for one ounce of Gold back in 1980. The trend went against gold until the value spread reached 44:1 ratio at the peak in 2007.  That spread has since declined due to the stagnate global economy, money printing and loss of purchasing power. It is now at 8:1. If the trend is your friend, this is a no brain er. Want more facts?
30 Cities Warned
about debt in California alone. According to Milliman Inc.unfunded pensions in the US amount to over $1.2trillion. Who is going to pay for these problems? Where is the money going to come from?
The Fed. That's right! Want another one? The Consumer Price Index stated inflation was under 2%  and the Social Security Agency used that info to provide a cola of 1.7% for recipients. We already know that they don't count food and energy since the agency is run by aliens who do not need food or oil, but here is another not used, never mentioned tidbit, college cost and medical expenses. The cost for higher education has exploded to over five times the annual inflation rate and medical costs have jumped to twice the annual rate of inflation.
If in 1928 you had $100K and invested in the market, by 1938 you would only be valued at $10K. However if you purchased gold mining stocks in 1928, you would be worth over one million in 1938. I used mining stocks because FDR outlawed gold in 1933. It will be the same effect today, but with actual gold.
did I hear someone say, Yea? Wiseguy. The Fed divides the money it prints into different categories. To be brief, I'll use M1 and M2. M1 has grown from last year at 112% clip and M2 which contains M1 plus savings deposits and more like money market funds has jumped over 118% or $5.4trillion and that is a ton of paper and when you consider that this same money action is happening in Asia, South America, Europe, everywhere, gold can only go higher.
Liars and Crooks:Are you ready for your pop quiz? Clear away everything from your desk. Turn off all your devices. We have only one question and your grade will depend on how many correct answers that you circle. The second Presidential debate discussed which of the following. Circle every answer that applies. Give reason for your choice. 1)the Federal Reserve, 2)housing, 3) the dollar, 4)labor, 5)municipal bankruptcies, 6)pensions,7)fiscal cliff, 8) none of the above.
If you answered 8, congrats you got an "A." If you gave 8 and another number, I'll have to look at your reasoning as anyone can be fooled when one candidate says one thing and immediately, the other refutes that answer.