first majestic silver

The DC Maginot Line

December 20, 2001

Anyone out there old enough to remember the Maginot Line? The Maginot line, was a long fortress built by the French to keep the Nazis out. They figured if they built this long, high wall, with guns and other armaments, the Gerrys would be kept out. It looked so promising! It was totally wasted francs, and the Germans simply went around it, and eventually occupied Paris. They did not destroy Paris, but, realizing its beauty and history, they left it unharmed. The Maginot line can be compared to Washington D.C., home of buffoons, dunderheads, windbags, and "pro-forma" financial outlooks.

The head jackass in DC, as far as the currency supply and general ruination of our economy at the present time, happens to be Alan Greenspan, whose Maginot Line of interest reductions, and "liquidity infusions" has had absolutely no effect on the foundering US juggernaut. Our economy is toast, or will be eventually. A client of mine in Hawaii recently quoted a great phrase: "Just because it is inevitable, doesn't mean it's imminent." This is true. While I write with strong words, and my predictions will surely come true, it may not be tomorrow. It might not be till next month, year, or even decade, but they will come true. I am usually correct, even if a bit premature. When, on March 1st, 1980, I left the brokerage firm I started with 3 1/2 years earlier, I knew it was going bankrupt, and it did. I wanted no parts of its inevitable failure, or my clients either. It wasn't imminent, it turned out, but took a couple of years, rather than the few months I predicted. I couldn't take the chance of waiting till it was too late. I don't know how long the Greenspan Maginot line will withstand the irrepressible forces of the market place. Gold and silver owners are copying the Germans, by running around DC's Maginot Line. The Roman Empire ceased to exist 1500 years ago, due to exactly the same things that are now rife. The DC crowd is leading the charge…backwards. Perhaps Rome's demise had been predicted much earlier than when it actually happened. Maybe the Romans who predicted its fall, under-estimated its remaining time. They were undoubtedly correct, even if their timing was off. Maybe my timing is off, but I am preparing anyway, by not depending on green dollar bills, fallacious bookkeeping entries, or "pro forma" estimates, for my security.

The Roman Empire ceased to exist because of welfare, inflation, huge government and military waste and proliferation, and taxes that strangled the citizens into crime, theft, and lawlessness. Just as the graphs by my friend Adam Hamilton show our current stock performance to be virtually identical to 1929- 1933…so far; America's economy, governmental proliferation, and unconstitutional actions are identical to Rome's. We are going down, I hope not imminently.

So what are the smart guys doing? Soros, Gates, Buffett, et al, aren't stupid. Gates has bought a 50% interest in a silver mine, and all are buying huge quantities of physical silver and gold it is rumored. Smart people can think ahead, read history, and realize we are tracing history of 1500 years ago. Just as every single paper currency in history has failed, why should our sacred dollar be different? Most won't believe the dollar could fail, because they have always had them to spend, and they have 'always bought.' (The World trade Centers were 'always there,' also.) The dollar has 'always bought'…except it takes more and more of them to buy each month. Most do not realize that inflation always turns into hyper-inflation, because the pinheads that inhabit the halls of Congress and the various bureaucracies can't stop spending. They know nothing, other than re-election, spending more and more, increasing staff, building new gaudy buildings, and ceaselessly inventing attributes for themselves and departments, that do not exist, other than in their maudlin minds.

All this is happening so slowly…so far, that Joe Sixpack can't see the forest for the trees and Monday Night Football. Joe, and his unread family, watch inane sit-coms every night, and eventually will wonder what hit them. Some catastrophes cannot be predicted, perhaps such as Pompeii, but what is happening to us, slowly today, is easy. The pace will surely pick up, and this is absolutely true.

When a snowball begins its trek down a mountainside, and eventually turns into a killer avalanche, it always begins slowly. The dollar's slide began slowly. It increased its slide during WW II, and then slowed again. With each war, it slid more, and now slides on a daily basis, but still too slow to alarm the boob tube addicts, even though it is worth less than 5% of a hundred years ago. Its momentum is increasing, and eventually (not imminently?) will turn into an avalanche, just like all other paper currencies have in the past. The problem is, when something comes along to trigger it, the decline of the dollar will become avalanche like, very quickly. If you have ever seen an avalanche, it is truly awesome, fast, and supremely destructive. A single skier can start one. Is Enron a trigger? Are the hundreds of millions of ounces of non-existent paper gold and silver contracts, a trigger? Are the hundreds of trillions of dollars of derivative overhang, a trigger? Is the stock market, still getting further and further into the oversold-undervalued area, going to start the avalanche, when it inevitably crashes again? Will the next terrorist attack be a trigger? Who knows?

Don't buy silver and gold because you think you'll get rich next month, or the buck will become worthless tomorrow, even though it is remotely possible. Get out of dollars, simply because it is a failing institution. It is an inaccurate method of measurement…a shrinking ruler. Gold and silver are to preserve your wealth, assets, and security. Any sudden increase should be incidental. You want to save yourself from the sinking Titanic dollar, because even though you may re-arrange the deck chairs, it is going down. Let the orchestra play "Nearer My God To Thee," and pray all you wish, but it is going down anyway. History is repeating itself. Your silver and gold will allow you to PRESERVE your position, and any and all profits are…or at least should be…secondary. It is inevitable, but not necessarily imminent…although it just might be.

Calamity howlers are a dime a dozen, and I don't want to be identified with them. All I know is that tangible things, rather than pieces of unbacked paper with fancily imprimatured inks on them, are worth the same as newsprint. Thanks to legal tender laws, they must be used. They will continue to be used. I don't see bartering with silver and gold until the Huns are knocking at the door. I do see dollars becoming worth less and less, and tangibles becoming more and more expensive in dollars, or any other currency. The goods are the same. Only their price in unbacked currencies make them seem to be more "expensive." How can butter, homes, autos, or frozen broccoli become "more expensive?" They don't change! Only the currencies you buy them with, change in value. This is why you must get out of the currencies, and into other tangibles to save yourself, no matter how slowly the devaluation takes place. If it takes place quickly, because of any of or other than, the above mentioned triggers, you will be safe. Hindsight is always 20-20. All I am trying to do is to get you to look at history, current conditions, and possibilities. To think, in other words, and to use logic, rather than habit or custom. Those that prepared for an eventuality always have come out smelling like a rose.

A Chinese restaurant I love, had this inside the cookie always presented at the presentation of the bill. "Many a false step is made by standing still." I can think of no tangible, in which to preserve your wealth, that is any more beautiful, compact, or of historic wealth than is gold or silver. Play with stocks, and I wish you well. I hope you make a fortune! But preserve yourself for the long haul, to defeat the whistle brains in D.C. The best way to do it, is with anonymous gold and silver. I am off to California to visit my son for Christmas, and I'll be back December 26th.

I wish you all the merriest and happiest of Christmases possible! As my friend Dave in New York says, "Stay well." - Don Stott

Palladium, platinum and silver are the most common substitutes for gold that closely retain its desired properties.
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