On The Edge?

September 29, 2002

We all know about the hundreds of billions (literally) in credit card debt. It is frightening, but true. Imagine a picture of those who have this debt. They must keep up the impression of wealth. They must have great cars, new clothes, a wonderful home, and eat at nice restaurants. What if they don't make enough to do all these nice things? Simple! Use a credit card. Live it up. We can always go bankrupt, or take out a 2nd mortgage and continue with the opulence. The bankruptcy rate is skyrocketing, as are mortgage foreclosures. Still, the spending has not stopped, although it has taken a dive, which explains why shops are empty, K-Mart will go the way of all flesh, and even China Marts are having a bumpy time. Credit is so easy and encouraged. We can't let the bubble pop.

I get a new credit card solicitation every day or so, with promises of huge credit limits. Do you realize how close to falling off the cliff, the American and world economies are, at the present time? It isn't just America's consumer debt. The government's debt is much higher, except it can create dollars out of nothing to pay its continually increasing bills. The dollars created out of nothing, add to the national debt, which no one in DC seems to care about, or even notice. The government debt alone is over twice the GDP. Heroditus once wrote, "Of all men's miseries, the bitterest is this: To know so much and to have control over nothing." We, the readers of Gold Eagle, know it's just a long drop to the bottom of the abyss, and we are at the edge, and can do nothing about it, other than protect ourselves as best we can.

Non governmental debt, commonly known as consumer debt, is at an astonishing level of over $7 trillion. This includes mortgages, credit card, auto loans, etc, and is so high, that it will probably never be repaid. Instead, lenders will go bankrupt, foreclose, bite their nails, or be bailed out by government with more paper money. Monsoons of paper bills will flood the world as never before imagined, bringing their values to zero…eventually.

The American government owes more than any other nation on earth. Its citizens owe more than citizens of any other nation on earth. Between DC and the citizenry, the debt is incomprehensible. Do you have any idea of what a trillion dollars is, even in today's inflated state? A trillion, is a thousand billion, and a billion, is a thousand million, and a million, is a thousand thousand. A million dollars, is ten - $100,000 homes. A billion dollars, is ten thousand - $100,000 homes, etc. Between consumer debt, mortgages, national debt, unfunded future Social Security, Medicaid and Medicare, and the like, more is owed, than the combined worth of everything in America. $8 trillion was lost in the recent stock market crash, according to Sir Greenspan, and the losses continue. When America goes to war in Iraq, kiss more hundreds of billions of debt hello. Not only that, but America's factories are defunct, for all practical purposes. Boeing has parts made in communist China, and other parts come from low cost labor nations. What parts of Fords and Chevys are made in America? You'd be surprised. It is impossible for a complete car to be made with American made parts. Steel, parts, fabrics, and accessories are made around the world. How can we fight a war, when our factories are closed, rusting, or torched by arsonists?

The edge of a precipice is a scary place to be, whether one has fear of heights or not. A gust of wind can make one lose their balance. Locally, a 20 year old fellow was standing on a concrete platform overlooking a irrigation canal. He was no more than 6 feet above the water. He lost his balance, got carried away, and as of now, his body has not been found. The canal was running fast, and he was swept away instantly. Things like falling in a canal, a fire, auto accident, burglary, currency devaluation, or other calamity can happen pretty quickly, and we are always unprepared for such eventualities. Some of us prepared for Y2K, which fortunately didn't happen. The Turks, last week, suffered a 50% devaluation, meaning their lira will buy half as much one day as they did the previous day. The precipice we are now standing on the brink of, is not new. Business Week, on September 7 1929, wrote the following:

"For five years, at least, American business has been in the grip of an apocalyptic, holy-rolling exaltation over the unparalleled prosperity of the "New Era," upon which we, or it, or somebody, has entered. A North American millennium is imminent. We have seen an amazing increase in man hour production in industry. We have seen new industries rise like rockets and old ones grow tired and die. We have seen the machinery of distribution formed and reformed into patterns changing every day before our eyes. We have seen security prices soar out of sight of earnings. Broker's loans swell till they absorb a third of banking resources of the country. Banks merge and emerge in chains, trailing trusts and holding companies while industrial corporations pay dividends not by producing goods, but by buying each other's stock and by borrowing and lending everybody's money in the market." Change a few words, and it is today.

This was written before government could create money out of nothing, dollars were backed by gold, and coinage was 90% silver. This was written before the initial crash, and a couple of years before the real depression set in. The same time frame is with us today.

Some say I am "doom and gloom," which may be correct, but I simply cannot help it. I live near, and love the town of Silverton, Colorado. Silverton, now has less than 500 people in it, but at one time had 5,000. It had 4 narrow gauge railroads running out of it, and produced billions of dollars worth of gold and silver. The mines are now all closed, but their remains and fond remembrances are handily adjacent to the quaint little town. Rugged tram lines hauled ore to the mills, and miners to the mines. These tram lines, many well over a mile long, and strung with thick two inch cable, still stand. Their buckets still hang from the limp, unused cables, although some of the towers have collapsed. A huge mill has been donated to the San Juan County Historical Society, and a tour of it provides a great insight into the difficulty and capital required, to produce a gold bar or coin. The mill is in perfect operating condition, but there is no ore to mill. The steam engines and huge multi-horsepower electric motors that powered the mines, compressors, mills, and trams, still linger on in rust, to be seen and photographed by the curious. Mining towns blustered, and beckoned for a full century, and as the poet Cy Warman said of another town, "It's day all day in daytime, and there is no night in Creed." Silverton had 37 saloons, and dozens of ladies of the night, who had hearts of gold, even though they weren't allowed on Main Street. This was when gold was $20.67 an ounce.

Gold is now over 60 times that price, headed for $500, $1,000, or ? In today's dollars, those mines invested hundreds of millions to get the $20.67 per ounce of gold out of the ground, milled, smelted and coined. Gold was very desirable at $20.67 per ounce, just as it is today at $330. The mining towns of Colorado produce no more, with one exception, even though there is much ore left to mine. Your government has seen to it that such endeavors will not happen, and revenue is achieved by tours of extinct mines that once poured forth rivers of gold and silver. We in America, import our underwear, TV sets, steel, and tools. 99% of Americans shun true money, which is gold and silver. They depend on artistically crafted pieces of paper, engraved with multi-colored inks. There is value inferred by the producers of this paper, but there is none. Value of paper currencies is as fictional as a Hardy Boys novel.

Detractors of holding gold and silver as true wealth, say, "Well, nothing has happened. When is it going to do as you say?" It has happened, and is happening. Gold is up 26% in the last year, as is silver up…in dollar prices. What more could one ask? $8 trillion has been lost in the stock market, and consumer debt is $7 trillion, while gold and silver are up double percentages. Is this not a good return? The economic system of the entire world is on the edge of a 2,000 foot precipice, and will fall over eventually. When it happens, there will be a mad scramble for anything that is tangible, owes nothing, and has true value. Model A Fords can't be traded for a loaf of bread or a pound of hamburger. Original oils can't be traded for a tank of fuel oil. A one ounce silver or gold coin will be in such demand, that they will indeed be priceless…in paper currencies. Nothing else is as compact, universally recognized and accepted, as is gold and silver. Nothing. In all of history, and in all civilizations, tangible, physical, gold and silver have been true money. They still are, and those that place trust in things other than tangibles will be very sorry…eventually.

Say's law states, "Supply creates its own demand." There is an unlimited supply of paper currencies, and the degenerates who produce and attribute value to them. They get re-elected and re-appointed every day. Protect yourself, because they won't.

The total world's holdings of gold could be transported by a single solitary oil tanker.

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