Tuesday afternoon, after hours, the phone rang, and an 82 year old man said that someone had told him to call me. He is very wealthy, and has gobs of money in CD/s and actual cash on hand. At least he says so, and he does talk like it. He was a successful businessman, and worries about his cash. He, rightfully believes the dollar is insecure. He considers himself old fashioned, has no computer, and we had a long talk. He agreed with everything I said, and told me to fax him something to read. Not having any brochures or anything outside of hundreds of columns I have written for Gold Eagle, I had to sit at the keyboard and write to this man, whose name and address I know not. I may never hear from him again, but what I wrote may be of interest, even though it is well plowed ground. All I have done is delete the area in which he lives.
To the 82 year old man near ……!
Where to start? I think we covered most of it in our conversation yesterday, but briefly, I firmly believe that the dollar, which we measure our wealth by, is sliding in value, purchasing power or what have you, and most people either refuse to believe it, or think merely that "prices are going up." I well remember 10 cent trolley rides, nickel Cokes, phone calls, and ten cent hamburgers and ice cream cones.
Why does the dollar go down in value and purchasing power? Because "The more of anything there is, the less they will be worth." Be it hay, corn, copper, Model A Fords, homes, lumber, water, or used cars ands trucks. The more of them there are, the less they will sell for, and the less they will be worth, in currency anyway. Their value, of course remains the same. . Since the D.C. politicians always spend more than they take in, they simply print more dollars to pay their bills. This is a simple way of explaining it. The stupid war in Iraq, as well as the stupid wars in Korea and Vietnam also caused lots of dollars to be printed, and prices went up proportionately, because these wars fought with printing press money. The money became worth less during and after these wars, and prices of goods went up in dollars because of this. World War Two made prices exactly double, so expensive was this war. My parents bought a new Plymouth in 1940 for $660, and in 1949 a New Ford for $1950.
The War Between the States saw the North as well as the South print paper money to pay their expenses. So much did they print, that both currencies went to zero. The Revolutionary War saw the same thing happen, and the continental dollar went to zero also. Germany was forced to pay for the damage they did in WW I, and they were broke. But they had printing presses, which they used, and the Reichsmark went from 25 cents, to a millionth of a dollar, and were used as insulation, fire starters, and even bathroom tissue. It is happening every single day, and there is nothing we can do to stop it other than to protect ourselves.
We vote for the right persons, but they are always in the minority, and have no power. History has shown that this always happens! Governments always grow and grow, and grow, and always go bankrupt, taking their currency and citizens with it. The smart thing to do is to get out of a failing currency, and into another denomination, be it square feet of home, acres of land, gallons of oil, tons of steel, bushels of corn, or what have you. While these things are BOUGHT and SOLD in dollars, they are denominated in other measurements. As dollars go down, these go up in dollars. Gold and silver are compact, easily stored, bought, sold, and throughout history have been real, tangible, beautiful MONEY, in all nations and in all years. Here in America, very few understand this, even though it is undeniable. Today, everyone considers dollars to be valuable, and they store their surplus assets in them, even though they constantly lose value (prices go up). Very few understand this. They simply fret about "prices going up," and haven't the slightest idea of what to do about it!
The thing to do is to get out of a failing currency. Get out of a falling building or sinking ship. Get out of something which is unstable and falling in value. Stocks? Yes, if you know which ones to pick from out of ten thousand, and can realize that the "insiders" are the ones who usually make the profits, rather than Joe Blow, who has no inside information. With gold and silver, there are only two choices to make, rather than ten thousand. Simple! Not paper gold and silver, but real, shiny, beautiful, tangible gold and silver, which you hold in your hands. There is something very comforting about having real gold and silver in ones' safe. Security personified.
Pieces of paper, in order to have value, must be backed by something. Car titles are backed by the car. Deeds to homes and land are backed by the home or land. A share of stock, may mean you own a hundred millionth of a corporation, and the future of the corporation is in the hands of the CEO, board of directors, and their skill, brains, and decision making capability. Dollars are backed by nothing. Gold and silver require no CEO, or bard of directors. Gold and silver require no government legislation, and no backing.. They are self backed! They are valuable themselves, and require no laws, votes, or support from anyone or anything. They are themselves actual wealth, all by themselves.
Which to buy? Gold is far more compact than silver, and requires less storage space. Silver, as it returns to its 16 to 1 historic ratio, may go up, percentage wise, three times as far as gold, but it requires a lot of storage space. As recently as 1980, the ratio was 16 to 1, and throughout history that ratio has been common. I say buy both, but it is the buyer's decision to make. I think one should get the most gold and silver for the least dollars, and this is usually the gold Krugerrand or 100 silver ounce bar.
The possibility of the dollar crashing to zero, quickly, and abruptly, I think is remote. However, the dollar's decline will continue, and if foreign nations who have been buying our debt, decide to stop, the dollar's rate of decline could increase. The Chinese are slowing their dollar purchases, and so far, one oil rich mideast nation has decided they want no more dollars in payment for their oil, which isn't a good sign. As wars in Afghanistan and Iraq continue and increase in size and cost, the dollars flow endlessly to fight these wars, thereby causing a huge increase in their number, and conversely their lower value and purchasing power.
It's sort of like a Monopoly Game in a way. One wins in Monopoly when their opponent is bankrupt. With D.C. they can't lose because they can print all they need to pay their bills, support their wars, and give endless handouts in the form of welfare, earmarks, programs, and subsidies for everyone and everything. The eventual bankruptcy is in the dollar currency, with which they pay, and which numbers they constantly increase to win the game. The game will be won, but the dollar may eventually become Monopoly money. The reason it is not declining faster, is because all currencies in the entire world are printing as well as America. However, other nations aren't fighting wars, and don't have earmarks, as far as I know. All currencies are going down in value, not just the dollar. The dollar is just declining faster than the euro, for instance. The euro has gone from 82 cents to well over $1.30, but prices are going up in euros also. Just ask anyone who uses them. No currency is safe from being inflated, because no one has yet figured a way to force governments to balance their budgets. This might explain a few things, and if there are more questions, feel free to call me!
Don Stott, Colorado Gold
That, unedited, is what I sent to the 82 year old. I hope he protects himself!
June 21, 2007
Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com