14.3 Trillion Reasons And Counting To Own Gold

February 6, 2010
Starting a journey into the future with dollars is no better than setting off into the desert with a camel that has no hump

The government has a newly approved debt ceiling of $14.3 trillion which is both a grand illusion and a daunting reality. The illusion emanates from the belief that the debt can one day be repaid. The daunting reality is that this debt is placing increasing pressure on taxpayers as well as the functionality of the world's economy.

A combination of ongoing deficits, increasing interest rates, demographic speed humps, stratospheric unfunded liabilities and the phenomenon of compounding, will force the Federal Government to renege on its promises. Alternatively it will cause the nation to implode in its efforts to meet those promises. Either way the message is clear:


If you are in any doubt then you must have missed the recent and distinct mating calls that the Government has been making at your 401(k)'s and IRA accounts. It is incapable of retiring debt and in the process will deprive you of your own retirement.

The bottom line is that the government's debt is the greatest non-recourse loan in the history of mankind. Yes, it is a non-recourse loan, because it is not secured by a mortgage on the White House or a floating charge over the navy's vessels. It's a credit card advance where the cardholder keeps increasing the limit in order to keep itself spending.

To put it politely, the Government's financial situation would entitle it to food stamps if it were human. Even so, governments are economic cannibals that consume the present and the future. The day will come when the financial system and all the expectations that attach to it, will implode. At that time if you are not holding gold and silver you may as well emigrate to Afghanistan.

The balance sheet of the Federal Reserve is no better. Such is its toxicity that the EPA should have closed it down without waiting for Ron Paul to convince a largely myopic congress to do so. There is however one small but significant asset holding of the nation.

  • From what we are told there are 8,135 tonnes of gold in Fort Knox and other repositories inside the USA that are owned by the government. The amount of gold used to be over 20,000 tonnes before spendthrift administrations and smarter foreign governments stripped it almost bare. The remaining gold would seem insignificant in terms of present value, but it has two attributes that cannot be overlooked:
  • If the USA ever defaulted on its debt, its present or future currency may not be accepted, but its gold always will be and
  • Despite it being reduced to 8,135 tonnes it still represents the largest single gold holding in the world.

The first proposition is backed even by Greenspan and the second is a fact.

If the USA has not disposed of its gold, if India, Russia and China are adding to their holdings, if mining companies are de-hedging and if other central banks have stopped selling - what does this tell you?

Do not be fooled by commentary that would have you believe that gold is in a bubble and do not be spooked by $50 drops. Anyone who panicked into selling on such cues in the last 10 years simply missed the further ascent of precious metals.

As I have previously written:

"The truth is that gold and silver were the first central bank of civilized man and required no act of parliament, no monarch's seal, no standing army, no common language or numbering system. Their values were universally maintained and accepted without question for centuries. I repeat: there is only one real central bank. It has no offices and no headquarters. Above all it has no need for a Chairman."

Not owning gold or silver in the current environment is like being lost in the desert having neither water nor compass

The present fiat monetary illusion has been created and maintained by an infrastructure of government, powerful vested interests and servile or misinformed segments of the media. Political spin doctors reinforced by laws and law enforcement ensure that we are being stripped of the fruits of our labour. The daunting reality is that such scenarios end badly for the nation as its people lose their entrepreneurial and intellectual spark.

The only way to steer clear of the latitudinal and longitudinal constraints of such a crucifix is to have a free and inquiring mind that above all else answers to God and conscience. On a temporal level I repeat once more, that it is also advisable to have a portion of your wealth secured by gold and silver which are free of counter-party risk and for which there are no corresponding liabilities.

We have seen the destruction of real estate values, the near collapse of nations and currencies, political upheaval, rising tensions between superpowers, continuing wars and terrorism from all sides, a badly smashed stock market and rocketing gold prices. How much more do you need to see before doing the obvious?

Sydney Australia

The first use of gold as money occurred around 700 B.C., when Lydian merchants (western Turkey) produced the first coins

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