The end of the world as we know it

The bad news for me is that i often sound like a crazed lunatic when I start describing my beliefs of the coming economic collapse.  The good news is that I’m in good company.  When people ask where I'm investing, i tell them that I’m mainly into gold and oil ETF’s, since I want to preserve what little savings I have.

I often get the question “What good is Gold?”, and “It’s just a perceived value.”  I am not good at countering that argument, especially since I’ve only been buying it for 6 or 7 months, but I do like to refer to this article by former US Federal Reserve Chairman Alan Greenspan (written in 1966, twenty years before he became fed chairman).  The last two paragraphs really hit home with me:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

 

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

  The article is titled “Gold and Economic Freedom”, and it goes into great depth of why Gold is real money, and the best form of currency.  A Currency that is backed by and redeemable in Gold cannot be inflated.  In fact, for most of the history of the United Stated of America,  Gold, along with Silver, was the primary asset backing “gold certificates” and other certificates of deposit.  Up until 1971, the US Dollar was redeemable for a fixed amount of gold – not to Americans – FDR made that illegal when he cut the value of the US dollar in half in the 1930’s.  The first three sentences of the Alan Greenspan quote above bears repeating:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.

The US eventually had to drop the Gold standard because they were printing money without actually acquiring the gold to back it up.  Foreigners, who could own Gold, were redeeming their US Dollars for the stated exchange rate, causing the real value of the US Dollar to drop.  Had the US not made it illegal for it’s own citizens to own Gold, then the US government would never have been able to print money without Gold to back it up.

Gold is real value, paper money is not.  If the exchange rate of paper money to Gold goes up (more paper money per ounce of Gold), then it’s obvious that the paper money supply is being inflated.  It seems very apparent to me that the real indicator of inflation should always be the the exchange rate of Gold to the US Dollar.

Alan Greenspan says “Deficit spending is simply a scheme for the confiscation of wealth.”  Which brings up this chart of the past and projected US Budget Deficit:

And then there’s Gold:

It’s a lot easier sounding like a crazed lunatic when the numbers are on your side.  I think I’ll continue to put my savings in Gold.