Don StottThe mark of intelligence is the ability to change one's mind if facts demand it. I think I am intelligent, and what I am about to write, will outrage a lot of you, but I have given this a lot of thought, and as a result believe it to be true. Is the dollar a stable paper money? No, because it is being printed endlessly, and as Stott's law states, "The more of anything there is, the less they will be worth." Obviously, this means not just dollars, but virtually everything. The more tomatoes there are in summer, the less they will sell for, because they are plentiful, and of course, the more dollars there are, the less they will buy, meaning they are constantly worth less. But collapse means they are worth nothing, and I don't think this will happen. Why?
There are according to Ted Butler, $50 trillion worth of bonds, and $40 trillion worth of paper money in the world today, and getting higher all the time. When the last major currency went to zero, or at least the one we all use as a reference, it was in 1924, with German Reichsmark. Why did it go to zero? Because, as is current with the dollar today, they printed it endlessly to pay their bills. The bills consisted of reparations for the damage they had done in WW I. While the Germans were printing like mad, other nations weren't. During the Revolutionary War, young America did the same, and the continental paper currency became worthless, and the phrase, "Not worth a continental," came into existence. During the War Between the States, the North and South both did the same, and both currencies became utterly worthless. No arguments there either.
(Editor's Note: A 20 million Reichsmark bill issued during the 1923 hyper-inflation. During this period paper money was not counted but weighed - e.g. two wheel-barrels of paper bills for a pack of cigarettes)
Today, we live in a world which has instant communications. No secrets can be kept any longer, and what goes on in the world of economics especially, is almost instant knowledge…everywhere. The next fact I wish to bring to the surface, is that there is not a single currency in the entire world which is backed by anything. The euro is supposedly backed 15% by gold, but I don't believe it. When currencies went to zero in the past, there were always other currencies which were backed by gold and silver. In our own history, when our three currencies went to zero, the world still had a lot of currencies which were backed by gold. We were isolated, communications wise, and when ours went to zero, the world continued to live on as if nothing had happened. When the Reichsmark went to zero, the Germans suffered mightily, but the rest of the world continued on undisturbed.
Since everyone is printing, and I do mean EVERYONE, it follows that all around the world, inflation exists. Some nations may have more inflation, and some will have less, but all national governments spend far more than they take in, and all use the printing press to pay their bills. This means that prices of everything, will always go up in any currency…without end probably. All currencies are being printed at the whim of their respective governments, so all prices in those currencies will go up. Inflation will be more severe in some places, and less so in others. The inflation in the U.S. will probably be more severe because of the stupid war in Iraq and Afghanistan, plus endless governmental waste and perpetual handouts to the undeserving.
Does this mean that one shouldn't protect one self by getting out of dollars and into a different denomination, such as ounces of gold or silver? Absolutely not. How about speculating in different currencies? That is gambling, and most gamblers lose. Isn't getting gold and silver a gamble also? Not really, and for one simple reason. Pieces of paper with ink on them, are only as good as the issuer of that paper, be it Enron, a real estate deed, car title, or paper money. Gold and silver depend on no government, no law, no economic conditions, or wars. Gold and silver are not dependent on politics, or which political party is in office. They stand alone, all by themselves, with no dependence on anyone, or any condition.
Why then, don't I think the dollar will collapse? First of all, it already has collapsed by 98%, in the last 75 years, but, haven't the other currencies done the same, more or less? I think so! "If all you have is a hammer, everything looks like a nail." "If all you have are bills, payments always look like a printing press." Has there ever been a government which spent what it took in, and not a farthing more? Has there ever been a government which never borrowed from its citizens, or from whoever would loan? Nope. Has there ever been a government that was fiscally sane? Nope. So they all print, and all prices go up at the same rate as they print. The dollar n umbers, according to one wag is increasing by 14% a year. Will one of them eventually fail? Maybe a minor one, such as in Zimbabwe, but not the dollar, euro, pound, ruble, peso, or the like….in my opinion anyway. The percussive boom of the D.C. trumpets, in the form of White House press releases, news conferences, Congressional utterances, and the like, all covered in detail by C-Span, Fox, NBC, et all, make interesting music….to some. I consider it all dissonance, lies, and froth. But all governments are doing the same! If we were the only nation going awry with the incessant drum roll of constantly increasing currency supplies, frosted with all sorts of government lies which make bad things appear OK, the dollar might go to zero. But all nations are clattering the airwaves with their propaganda, and glittering lies about how wonderful everything is, but in reality aren't.
For goodness sake, do not save in dollars, do not buy whole life insurance policies, and do not buy annuities. They are a guaranteed loss. Nothing has changed, except everyone is doing it. When everyone is doing it, the merry go round may continue ad infinitum, or as long as the sheeple believe. And believe they do! If they didn't believe, there wouldn't be $50 trillion in bonds out there in all nations. A bond is a belief in a currency. If $50 trillion in believers are out there, they may be fools, but that figure is at least a bit of a hint that it isn't all going to come down in a gigantic dollar heap. There doesn't seem to be any limit on the babble, lies, and trash which governments can release in order to keep the suckers happy and content. The fools are everywhere. They believe the claptrap their various Pooh Bahs spout forth, which the media promptly publicize. As long as they believe, their currencies, at least the major ones, won't go to zero. Just close to it, and the process will continue.
Save in dollars? Trust dollars? Absolutely not. Think that the dollar's total collapse is just around the corner? Not me…any longer anyway. Look fellas, 95% of Americans live in the same type of house, drive the same types of cars, watch commercial TV, eat at McDonalds, and the list is endless as to how much they are all alike. They all trust and have faith in the dollar too. They save in dollars, open savings accounts and buy CDs in dollars. $40 trillion in currencies and $50 trillion in bonds, means quite simply that this paper money, and paper everything else, is not about to go the way of all flesh any time soon. Just continually degrade and self debase.
All prices will continue to rise everywhere. All currency presses in every nation will continue to hum, and turn out basically worthless scrip which EVERYONE ACCEPTS. That fact means that the process will continue. It is dishonest, fraudulent, and packed full of lies and deceit, but haven't governments always acted like that? Did Roosevelt, Churchill, Hitler, or Stalin tell the truth in WWII? Have any governments ever told their citizens the truth about the value of their money and their 'balanced budgets?' Currently, the large majority of Americans think Iraq is hopeless and want troops to come home, but the politicos just voted $140 billion in scrip to keep them there for a couple more months. Truth is non-existent in national governments around the world, and most of their citizens eat up the lies as if they were prime rib. The readers of this know it is a fraud of the most gigantic proportions, but we are in the minority. We are smart and protect ourselves. We try to convince others of the utter futility of saving in dollars, but as is usual, they won't listen. As long as we are in the microscopic minority, we can protect ourselves at a reasonable cost…in dollars or whatever currency is in use. When a couple percent of the populace wises up, our protection will go up. There is a finite supply of gold and silver, but there is no shortage of trees with which to make paper, with which to turn out bogus dollars. So…protect yourself.
May 31, 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
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