ALERT: Inflation has come to the United States of America. Commodity, Food and Gasoline prices are steadily rising.
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Precious Metals are Hard Assets
Drawbacks of electronic money:
1. On October 29, 2012 Hurricane Sandy hit New York City causing widespread flooding and power outages. The New York Stock exchange was closed the following two days. Stockholders across the world were unable to liquidate their stock positions during this time. For two days New York operations were down and a huge portion of the planet's money was illiquid. The scientists say that these storms will get more frequent and more severe.
2. How vulnerable is electronic money to other threats like computer hackers and computer viruses?
3. Lehman Brothers, financial services firm, filed for chapter 11 bankruptcy on September 15, 2008; the largest bankruptcy filing in US history with Lehman holding over $600 billion in assets.
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Precious Metals are Debt Free Currency
Stocks, bonds and paper money are all associated with debt. The Federal deficit continues to increase. When a country, municipality or company needs money, they print bonds, which are debt instruments that have to be repaid. Sovereign debt, municipal bonds and corporate bonds are all glorified IOU's.
As of March 25, 2011, the United States of America's total outstanding public debt was $14.26 trillion and was 97.3% of calendar year 2010's annual gross domestic product (GDP) of $14.66 trillion. In August, the pre - 2011 legal debt ceiling of $14.3 trillion was just increased by as much as $2.4 trillion. The Federal Reserve can now monetize this new debt by printing more money. Cick here: www.usdebtclock.org
As foreign countries demand higher interest rates for increasingly risky US debt, our interest liability will become much greater. How long can the US make these huge interest payments before it defaults on its public debt?
The Federal Reserve is a private corporation that prints money, supposedly manages the cash markets and supposedly keeps the economy stable. What is backing this electronic and paper money? Who is regulating these activities?
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The United States economy is based on our consumption of world goods in return for which, we trade government debt. How long will China send us products in return for computer generated Treasury Bonds?? The US government reported that foreign demand for US Treasury securities fell by the largest amount on record in December 2009, with China reducing its holdings by $34.2 billion. CNBC, February 16, 2010
Because the Chinese produce products and save money and Americans consume products and spend money, China currently holds about 1 trillion dollars ($1,000,000,000,000) in US currency reserves. If the Chinese government ever executes the "nuclear option" and begins dumping US debt, the value of our US dollar will free fall.
"The US trade deficit surged in May to the highest level in more than two and a half years, driven upward by a big increase in oil imports. The Commerce Department says the deficit increased 15.1 percent to $50.2 billion in May. That's the largest imbalance since October 2008. Exports declined 0.5 percent to $174.9 billion. Imports rose 2.6 percent to $225.1 billion." CNBC July 12, 2011
**On April 18, 2011 Standard and Poor's put a "negative outlook" on the USA's AAA credit rating, stating that there is a 1 in 3 chance the rating would be cut in 2 years.
**On Friday August 5, 2011 Standard and Poor's lowered the USA's AAA rating for the first time since granting it in 1917.
When you own Gold and Silver it is yours. There are no shareholders. There is no CEO manipulating financial statements. They can never go bankrupt. They are not mortgaged. They are debt free currency.
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The US Dollar/Fiat currency
The foreign exchange market (Forex, or FX) is a futures market in which world currencies trade against each other. The US Dollar index is priced against other countries currencies like the British Pound, Canadian Dollar, Japanese Yen and Swiss Franc. A strong US Dollar (USD) means we can travel to other countries and buy goods and services at an even (1:1) or discounted rate. A weak US Dollar, means that we have to spend more and more of our US Dollars for foreign travel, goods, and services.
When the Federal Reserve prints massive quantities of money for bailouts, government spending and universal healthcare they dilute the value of each US dollar; this results in a decline of the US dollar index. In simple terms our US dollar becomes weaker. This process is known in economics as inflation or decreased purchasing power. It is a hidden tax being levied against each and every US citizen. Does your life seem more expensive these days? Do you feel your paycheck doesn't go as far as it used to? The EU has learned quickly from the US. On May 9, 2010 they countered by printing 1 Trillion dollars out of thin air. Who will win the money printing race? The only logical result is that all paper/fiat money will ultimately devalue.
Precious Metals can never play this game; a country or government can't print Gold out of thin air.
Precious Metals are a measure of and a hedge against inflation
The historic price of Gold provides very important information. In January 2005 the average price of one ounce of Gold was $425. United States Dollars. On November 7, 2009 the same one ounce of Gold was valued at about $1100. USD. Gold acts as a barometer of inflation and clearly shows you how the purchasing power of the USD has decreased.
The US Dollar is the Reserve Currency of the World
Currently the US Dollar (USD) has the priviliged status as the World's reserve currency. This means that when transactions take place, the currency must be converted into US Dollars to settle the trade. Example: If Japan wants to buy oil from Saudi Arabia, the Japanese Yen are first exchanged for US Dollars, then the Saudis are paid for their oil. The Saudis can keep the US Dollars or convert into another currency. This results in other countries have huge cash reserves of U.S. Dollars.
- On November 18, 2007 OPEC members met in Saudi Arabia and expressed interest in converting their cash reserves into a currency other than the depreciating US Dollar.
- On November 3, 2009 India’s central bank bought 200 metric tons of Gold from the International Monetary Fund. They paid an average price of $1045. USD per ounce, at a time when Gold prices were at a historic high. Did India think the price of Gold was going to go down? India, not so quietly, paid a premium price for Gold and diversified out of 6.7 Billion US Dollars.
- On November 11, 2009 China departs from the Yuan's Dollar Peg, stating that it would allow Yuan appreciation after an 18-month hiatus, considering other major currencies, not just the dollar, in guiding the exchange rate.
-The Mexican government bought $4 billion worth of bullion between January and March 2011 as it looks to reduce it's US Dollar reserves. CNBC "Mexico seems to be following the trend established by several other central banks recently and is moving toward restoring a prior balance between gold and currency reserves." WSJ
- On April 14, 2011 the 5 BRICS nations (Brazil, Russia, India, China and South Africa) expressed concerns about the huge US trade and budget deficit and called for a World reserve currency other than the US Dollar. These nations agreed to establish credit lines denominated in their local currencies, not the US Dollar. They also called for the International Monetary Fund's Special Drawing Right (IMF's in house accounting unit) to be considered for the World's reserve curency.
Asia, the 13 member OPEC cartel and the rest of the world are diversifying out of U.S. Dollars. When the US Dollar looses it's privilege as the World's reserve currency the price will descend rapidly and the standard of living in the US will decrease dramatically.
Precious Metals are an insurance policy against the depreciating Dollar
Gold and Silver are priced in U.S. Dollars so they become more expensive when the U.S. Dollar declines. Because of the inverse relationship Precious Metals are less expensive in other currencies. Precious Metals are the go to asset class when paper and electronic money stability is questioned.
**Please think for a moment. What do you spend on insurance each year?: Homeowners, automobile, life, disability, business, malpractice, long term care, etc. We gladly pay thousands of dollars each year in premiums, hope we never have to use the insurance and never expect to have premiums returned to us. Precious Metals will always have retained value. They are beautiful, collectable and have amazing energy!
Precious Metals are World Currency
Standard Bullion Metals (Platinum, Palladium, Silver and Gold) are universally accepted worldwide as monetary units, irrespective of the value of the United States, or any other countries government issued paper currency. The International Organization for Standardization (ISO) has defined three letter currency codes to describe the different world currencies. The Precious Metals standard world currency codes are: Gold = XAU, Palladium = XPD, Platinum = XPT and Silver = XAG.
The "Euro", the official currency of the European Union, was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. The "Amero", is the proposed currency for the North American Union (Canada, United States, and Mexico). Private, proposed preliminary designs are shown below. Eventually a world currency will have to replace the inherently unstable national currencies. History documents and Alan Greenspan confirms (see below) that Precious Metals are the only logical choice for asset based currency.
The Amero
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Why Precious Metals?
The United States was moved off the Gold standard in 1933. Since then "fiat" money, paper and electronic money not backed by hard assets, has been created and used by the Federal Reserve and the large financial institutions. At some point the system will have to equilibrate back to assets that have internationally recognized value. Precious metals have been utilized as currency around the world since ancient times. Article 1 Section 10 of the United States constitution clearly states: “No state shall…coin money; emit bills of credit; make anything but Gold and Silver coin a tender in payment of debt.” This monetary system is known as an honest hard money system, opposed to the existing soft (and getting softer) paper fiat monetary system of Federal Reserve Notes.
Alan Greenspan, Former Federal Reserve Chairman, stated in his essay "Gold and Economic Freedom":
Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving. The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible. What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.
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. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process.
On September 15, 2010, Alan Greenspan made a speech to the Council on Foreign Relations. An editorial in the New York Sun, Greenspan's Warning on Gold, reported that he made the following comments with respect to Gold. "Fiat money has no place to go but Gold. Gold is the canary in the coal mine. It signals problems with respect to currency markets."
Basic economics teaches the importance of a diversified portfolio and advises that a certain percentage of your assets be placed in Precious Metals.
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