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Saturday, October 1, 2022

It's Time To Protect Yourself

 About 10 years ago, I bought 5 ounces of gold for about 6000 dollars. Today, gold closed at 1668 dollars an ounce. That means my 6000-dollar investment is now worth 8340 dollars.

Did I make money? The answer, quite obviously, is no.

For many years, I used to ask friends and family a simple question. Where does money come from? 

Nobody knew the answer. I used to get all sorts of crazy answers. The U.S. Mint. The bank. My employer gives me checks. I don't know.

When I told people that money was loaned into existence, they rarely ever asked me a follow up question. The topic just didn't appeal to them nor did they seem too interested in listening to any explanation from me. I'm ok with that. 

In the early 70's, runaway inflation began in earnest. From 9% in '73, to 16% in '74, to a staggering 24% in 1975. That is a cumulative 49% rise in prices in 3 years.

To be fair, those were the inflation rates for the UK. In the U.S. the dollar was the reserve currency, allegedly backed by 8,000 tons of gold nobody has seen for 70 years. Inflation rates, around 10% smoothed per year, persisted from '72 to '80.  

Please try to remember that if you have 10% inflation for 8 years, it is cumulative. You will be suffering from an 80% rise in prices. Prices generally do not go back down once inflation is stopped. They just level out.

When I was 12 years old, I remember an old man in the checkout line at Bernie's pharmacy in Butte, Mt. I was buying a 10 cent Butterfinger candy bar. He told me that one day that Butterfinger would cost over a dollar. I thought he was nuts. That was 1973.

I wished I had been more curious. I wish now that I would have asked him why. But I was a kid, not too inclined to listen to random old men. Not unlike those people I used to question about where money came from. Not interested.

You know what scares me? We are just at the beginning of this inflationary event. The FED Reserve Bank is cornered. Based on the current inflation rate they should have already jacked up rates twice as much as they have. Inflation doesn't just magically stop on it's own. The central banks create it with excessive, cheap lending and only they can stop it.  People are still taking out 6 and 7% loans here. The creation of money continues. People simply don't remember the history from 50 years ago. 

I remember. The 70's were bad. If we are in for a repeat of the 70's then I think it will be worse this time. We are at the beginning and looking for help from political cowards like Biden, Yellen, and Powell. 

Imagine sitting there with 50k in the bank and watching it's value erode. You get some paltry interest rate that doesn't come close to compensating you for the dollar destruction that is going to occur over the next 5-10 years. Are you prepared to watch your 50k worth of 2022 dollars get cut in half? That's what's going to happen. The best CD rate I could find yesterday was 2.75 percent. Laughable. A 2.75 interest rate still leaves you with a 7% inflation loss. Just for this year.

In 2004, my truck cost 30k. In 2022, my truck costs 200% more. 90k. That's dollar destruction.

I have plenty of reserves. Generators, fuel, food storage, water, prescriptions for 2 years, plenty of guns and ammo. Although I'm not sure you ever have enough ammo. I have plenty of silver and 125 pounds of copper.

How do you protect your money against a government and a central bank hell bent on destroying what's left of our currency?

Gold. 

At 1670 dollars, gold is a screaming buy. I used to allocate 20% of short term net assets (cash) to gold. I am currently upping my personal allocation to 40% gold. That's right. Remember that 50% rise in inflation that Britain experienced in from '73 to '75? Half of your buying power wiped out in 3 years time. It happened here in the 70's and trust me, Jay Powell is a steer. He doesn't have the nuts Paul Volcker had. Volcker raised the Fed funds rate to 20%. The prime rate went to 21.5%. 

You want to stop inflation? You have to aggressively hike rates and stop lending dead in it's tracks. Our central bank can't do this. Can you imagine having to finance 31 trillion in debt into that kind of scenario? The U.S. will be completely exposed as the bankrupt country that we are. We couldn't service the debt interest into those kinds of rates. It would be in the trillions annually.

Now do you understand why they hired 87,000 IRS agents?

How much money did my gold make? Nothing. I haven't sold it. If I did I'd be trading it for the same worthless currency I am trying to protect myself from. I never bought gold to make money. I bought it for currency destruction and I am currently buying more. Don't worry about the 100 dollar premium you'll have to pay the brokers per ounce. A hundred bucks will seem like nothing- especially if they quit selling gold. I've seen them run out.

Remember gold is inverse of the USD/inflation. The more buying power is lost with the USD- the higher the price of gold will climb.

When the zombie minions of America finally wake up and realize that they only way they can insure their savings against currency destruction is gold- the second greatest gold rush in American history will begin. It would be nice to see you get there first.

It's the only way you can protect yourself. It's an insurance policy against a government that has been screwing it's citizens since the Vietnam War.

Here's a great piece from Alistair Macleod. He explains it in great detail. I stole his 1970 UK inflation numbers. https://www.goldmoney.com/research/gold-has-never-been-so-attractive







4 comments:

Anonymous said...

Good article. Everybody needs to take heed to this. Simple. Simple. Simple. But, most never will - too stuck in the system.

Anonymous said...

I was born in 1978, so I don't remember most of this firsthand.
I do, however, remember my Dad speaking of mortgage rates on the house he built before I was born being over 15%. I don't remember what the rate was (16? 17?) but at the time he reported it was "decent for the time, not good but not great".
He passed in 2014 so I can't ask, but Mom concurred it was someplace in that % range.

As for gold, I can't claim to have much, I snapped up a couple 1/10th oz coins "just to say I have some gold". Spot was about 800 then, so probably 2006-ish.
I do have some of the old US pre-65 coinage. For years, back in the early 2000's you'd find it in coin rolls once and again but those days are in the past, I can't remember the last time I found one like that. I snapped some of that up here and there.
Your "copper" thing...pre-82 pennies are a handy way to accumulate that. That hasn't left the coin drawers and I don't go a week without getting a dozen or so just at my work.

Is there an "enough"?
I don't think there's a way to measure that.
Problem I have is, living in a town, right next to a city, having canned foods is probably smart, and starting a garden is something I should've gotten to last year.

I also wish I'd reproduced earlier.
My boy is 13.
The way things are going I don't anticipate life being the same for him in 5 years as it was when I turned 18.
I do joke "they should change the driving age to 18 since they want to raise the age to purchase a gun to 21", but figure, in 5 years, will people drive as much?
Probably "to work and home", assuming they're employed.

Bear Claw Chris Lapp said...

It was 85 I just got out of college and was seeing my girlfriend at her parents house.

Her little sister was already married and they were discussing mortgage rates as they were trying to buy a house. I think it was 12 percent. I remember the 70's but that one statement shocked the hell out of me being a mediocre finance major but I started paying attention that day.

I really woke up when bush jr. never talked about tax cuts. That really bothered me, and 9/11

Anonymous said...

I raised5 kids from 1966 on. I fought back with 1 full time, 2 part time jobs and sold blood. I ended up bankrupt in 1980. I was raised by my grandparents who had lived through the 30’s. I felt like I had it worse. Since 1980 I’ve never borrowed a dime. By preparing for another 1979 I sitting pretty safe today. Savings in land gold and silver. I’ve tried to explain to my kids why they should prepare but only one has. Oh well we all have our ten years of war and 10 years where the FED robs us.