Avalanche Eventually?

November 25, 2002

We all have seen a snowball begin at the top of a hill, and begin its downward trek, picking up speed and snow as it proceeds. The larger it gets, and the faster it rolls, the more destructive it becomes. Anything in its path, or at the bottom of the hill, total destruction is the result. A skier may wander into a forbidden area, or the snow pack may get too heavy, and an avalanche begins. Avalanches run at over a hundred miles an hour, once they get started, and their destructive power is awesome. You've all seen the film of horrific avalanches destroying ski lodges, and burying everything in their path. Between Silverton, and Ouray (pronounced u-ray) Colorado, there are dozens of avalanche paths that have scoured the mountains of trees. These yearly avalanches even have names. When I owned my hotels in Silverton, the morning after a heavy snowfall, we'd gather for coffee, and discuss what "ran" the night before. "Oh the Blue Point, Brooklyns, Eagle, and Irene ran, and the West Riverside also. They're going to shoot the Jenny Parker this morning." (Avalanche crews use WW II howitzers to shoot known avalanches, to try to get them to "run," so as to avoid tragedy or highway closings.) This type of thing was a common conversation piece.

I mention this, because when a snow avalanche, runaway train, or out of control tractor trailer gets going on a downhill trek, with no ability to stop, the results are absolutely devastating, and totally ruinous. Whatever lies at the bottom of the hill is as good as dead. Warnings, if given in time, can give potential victims time to escape. The more snow there is, the greater the avalanche danger. Often, after a couple of feet of snow the night before, we'd be snowed in, highways closed, and the common exchange was "everything ran." Now here goes the sermon.

Every single currency in the entire world, no matter what it is called, no matter whose picture is engraved on it, and no matter how impressive its appearance may be, is not worth a hoot in hell. No currency in the entire world is backed by anything other than legal tender laws, and the "full faith and credit of the -----government." Legal tender laws simply say that a currency must be used for trade. As a result of legal tender laws, items for sale are denominated in those currencies, wherever they may reside. Houses are not sold for 1,000 ounces of gold, but for $325,000. Autos are not sold for 5,000 ounces of silver, but for $25,000.

Stott's law: "The more of anything there is, the less they will be worth."

This especially applies to every single paper currency in the world, because their supply can so easily be increased…and is…continually. No nation on earth is in a non-inflationary state. None. America, it is said, increases its currency supply by 40 billion dollars a week. Avalanches of currencies are printed each week, all around the world. Get it? "Avalanches." Think of the word "avalanche," and postulate the eventual result, when enough of these currencies proliferate to absurdity, as did the German mark in 1924. In America, is has happened three times already, and the fourth time is now well under way. It could eventually be like a snowball turning into an avalanche. The pile of snow is increasing at the top of the crest; the snow being currencies. Who is at the bottom? Just about everyone. I really do believe there is a possibility of all currencies becoming so absurd, and prices in merchandise so high in them, that the world may just become sick and tired of the charade, and rebel. How to rebel? Simple! Barter! Like the avalanche, as the currencies go down in fictitious "values," citizens of the world, realizing that there is no stability or dependability in them, may decide to barter for life's necessities. The avalanche of currencies going down hill, ever faster, with no one able to stop them, will result in massive political upheavals, fratricidal warfare, no man's lands in large cities, and violence, to a degree no one can imagine. Any tangible will be barterable if this happens, but especially gold and silver.

If a soldier that died in World War II were to be resurrected, and see the prices in dollars now, compared to 60 years ago, he would probably say, "Put me to sleep again, this is insane."

Since legal tenders are used for trade, and must be used to buy things; and since prices in these tenders are constantly going up in these legal tenders, when one has a surplus of legal tenders, isn't it foolish to save in them? One should save in tangibles, not currencies, because all currencies are self debasing continuously, and while it is not an avalanche yet, it could be, and with no warning. Like a lightning strike, did the bad news of Global Crossing, Qwest, Enron, and even American Express, hit the news stands, and like lightning, did the Turkish lira be debased 50%.

All sorts of things happen suddenly in the world, and I don't mean just car crashes and auto accidents. Long Term Capital came down like a thud a couple of years ago, and the fed bailed them out by printing $3.5 billion. This seems like small time now. The dozens of trillions of dollars worth of derivatives held by Citi, JP Morgan-Chase, et al, could come down almost instantly. Financial chain re-actions are quite common. The slide down the hill of all currencies began decades ago. The only means there is to stop the crash, is for a government to balance its budget, back its paper with gold and silver, or even strawberries, but something; and act sanely. This would mean an abrupt cessation of welfare, warfare, and the inherent waste that is so common to all governments in the world. No government in history has ever been able to exercise self-control. This means that all currencies are doomed eventually, and trading one for the other, saving in them, and even prices in them, can be a futile effort, if they go down the tubes, either simultaneously or separately. One may last longer than another, or they may all pile in a heap as the rubble lies at the foot of an avalanche. Either way, the ultimate fate of un-backed currencies that can be increased at will by governments everywhere, is as sealed and undeniable, as anything can possibly be.

Sir Greenspan the other day, said that he has a lot of options if people refuse to buy government securities, which is another name for printing money. He said that he can print securities and buy them himself, meaning the fed. In other words, there is no limit as to the dollar's proliferation. None at all, because he can print them and buy them as long or often as he chooses, meaning hyper inflation might just be around the corner.

Placing faith in a stock that has a P/E ratio of 500, or none even, was just as foolish then, as placing faith in a currency or savings instruments denominated in them is now. T-Bills, government bonds, savings accounts, CD's, or whatever, is the snow in the avalanche. I use the term avalanche, rather than slow downfall, or creeping inflation, because in 100% of cases in history, when inflation of a currency has begun, it has never stopped until total collapse, and towards the end, its decline increased in velocity, almost as does an avalanche. I lie not. Look at the history of any currency, anywhere in the world, and name one that has survived, or that slowly declined at the end. There are none.

A characteristic of the beginning of the end, is usually a shortage of the fiat bills. This means that ever more of them must be placed in circulation, because prices in them constantly go up. Currently, $40 billion a week is being placed in circulation in America, and the rest of the world, I am sure is doing the same. The masses of people never realize what hit them, till it is too late, and they are buried. It has always been that way, and always will be.

Use the dollars to buy what you need and want. Use them for groceries, gasoline, mortgage payments, amusements, travel, tuition, and purchases of all kinds and types. Whatever you need or want, use dollars for their purchase. BUT, if there is a surplus of them, save in something tangible. I know of nothing tangible, which offers the universal acceptance, historic worth, compactness, and ease of conversion into currencies, that gold and silver do. Remember the golden rule! Whoever has the gold makes the rules. Protect yourself.

Gold is still being mined and refined at the rate of almost 2,600 tonnes per year.

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