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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