Wednesday, August 28, 2013

Why You Must Own Physical Gold

All debts are paid, either by the debtor or by the lender.

That's a good place to start today. Can you think of any debt, anywhere, that is not subject to that statement? I can't. So I think the premise is sound. All debts are paid one way or the other. I believe that and I cannot disprove it.

If you can think of a debt not subject to that premise, please comment on this piece down below.

Last week, when I was reading the FOFOA blog about the hyperinflation event- it suddenly struck me. That is the only way for the US and other great debtor nations like Japan, to get rid of their existing debt. A hyperinflation event. In fact, it absolutely has to happen. There is no other way of getting rid of that debt.

For years, I have struggled with how the US was going to dispose of that 17 trillion in debt with another 100 trillion due and payable in the next 20 years. We will continue to run deficits and even as I write this- the US is about to engage in another war with Syria. Do we have the money for that? No, of course not- but that has never stopped our politicians. They simply tap that unlimited credit line at the FED and stick you with some more debt.

When this country sells debt in the form of treasuries- the only collateral the US has- is that they have the ability to tax citizens. Do we pledge Florida as collateral? Think about that. What happens when the citizens run out of money and quit paying?

The whole fucking Ponzi scheme comes crashing down. That's what happens. Think of a poker game where every player buys in for 100 bucks. Ten players means there is 1000 dollars on the table. The house rake is 5% meaning that they take 5% of every pot. They deal 20 hands per hour with an average pot size of 50 bucks. The house is taking 2.50 x 20 hands per hr. which equals 50 bucks an hr. In 20 hours time- the house will have every last cent on the table.

That's how casinos operate, that's how bankers operate. Now you can dig into your wallet, buy more chips, and extend the game a little bit. But sooner or later- the game ends when everyone is broke.

In the United States, we've been broke for many years. Instead of stopping or ending the game, we simply borrowed money at interest to keep playing. Who is going to pay that 17 trillion?

Answer- nobody. The only thing Japan can do with their 1 quadrillion yen debt, or that we can do with our 125 trillion dollar debt, is hyper inflate it away. There is no other course of action. We cannot outgrow a debt of this size when we have no capacity to (50 million lost jobs over 20 years) with a terribly large, aging, and non working demographic. Remember- taxes are the only way to pay this debt back.

Well we could always sell Alaska and Hawaii.

During a hyper inflation event, let's say gas costs 100.00 a gallon and a bag of groceries is 400.00. If you are on some sort of fixed income during the hyper inflation event- you are pretty much screwed. If you have what wealth you have tied up in savings or retirement accounts or in paper instruments like treasuries or equities- you are going to lose that wealth. Gone.

Now I am not predicting some Mad Max scenario where roving gangs of hideous human beings are killing everyone- but there will be a full bore panic. People will not be able to survive. All of their income will barely buy necessities. They will park cars. Quit paying bills. Every debt they owe will go into arrears as they take what little money they have and use their money to survive.

How likely is the hyperinflation event? It is absolutely, 100% certain. All we are talking about is when. Will it happen in the next two years or the next 20? Nobody knows. But this is what I do know.

When we leave the standard inflationary mode and transcend into hyper inflation, you will not be able to buy much of anything- let alone gold. This country will be busy spending what little money they have on the bare essentials. Gold will get priced into the stratosphere and it will simply be unavailable to anyone but the central banks and the wealthiest people. Of course, they will already have the bulk of the available gold when it happens because they know it has to happen. Central banks have been net buyers of gold for several years now. They don't broadcast that fact too much.

The only way to protect yourself during a hyper inflation event or more importantly, after the money system is reset with a gold backed currency, is to have the gold in your possession before the reset occurs. I think you will make it through rather easily compared to your peers.

This is a case of prevention and history. History rhymes and it does tend to repeat itself. Just because it hasn't done so in your lifetime- doesn't mean that it won't repeat itself and in fact, it might mean that the reset is probably closer than you think.


Anonymous said...

"Well we could always sell Alaska and Hawaii."

How about California and New York instead? If anyone would buy them.

Anonymous said...

Brian and all readers of this blog. Please take a few minutes and watch today's interview with Karen Hudes who worked at the World Bank for 20 years. The interview will surprise you and help gain some additional perspective.

Marcus said...

What gets me is that the government contracts a private firm (the FED) to create the money it needs, and is then placed in the position whereby it must pay the money back to that private firm with interest (interest which can only be paid by going ever deeper into debt). Fucking insane. If the government is unwilling or incapable of considering a gold standard in some way, shape or form, then why not shut down the FED and print the money it needs (not wants) or privatize the FED? Cut the usurious middleman out of the picture and do the job yourself.

Brian said...

I read the link and watched the video. I agree with her generally speaking but there were parts, like her stating that Obama was trying to save us, that were completely off base. No way is Obama part of the solution.

Brian said...

The story of the FED, the Creature From Jekyll Island, is such a fantastic story that it is actually pretty interesting.

This country operated quite fine with a fiat currency printed by the government. It was called Lincoln's greenback. Bankers did their very best to get rid of it. There is no reason that we could not print our own money. The problem is...

That Congress would no longer have an unlimited credit line to spend on wars, pork, subsidies, grants, student loans, and their crony lobbyists and special interests would throw them into a tailspin. Getting rid of the FED would actually be the first thing I would want to do in order to reform Congress.

Anonymous said...

So, ultimately, bankers were behind Lincoln's assassination?

Brian said...

No, it was the Romulans that had Lincoln knocked off.

MizuBob said...

I hope silver will be just as good. Gold is awfully pricey these days.
As always, your blog rocks. Thanks for posting.

Anonymous said...

I think her point on Obama was a little bit contradictive. In one breath she claimed and I agree that Obama like those before him(excluding JFK) are paid actors. Then she claimed that Obama was trying to help but, he was hamstrung by his employers. I don't think that Obama has the character to be a stand up guy. The most interesting part to me was the involvement of the Vatican involving the banking business. I don't think people realize how religion is used to manipulate. That using peoples religious faith as a tool against them to enrich themselves. That I guess is hypocrisy and why society is crumbiling.

Brian said...

I'm game but who would want them? China said we have to get rid of the communist running NYC before they would be interested.