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More Fiat Follies

April 24, 2000

It's the fiat money stupid. Exactly what will it take for the American people to see the linkage between fiat money, inflation, political and economic corruption? All they have to do is look overseas for yet another example of what happens when fiat money goes south. We've seen the exact same pattern in Indonesia, Russia etc. etc. etc. Yet, we persist in believing that our fiat money experiment will end differently than all the other historical ones. Americans have forgotten that our first fiat money experiment, the Continental, ended in disaster. Such a disaster that the stench of fiat money lasted for several generations. Such a disaster that the phrase, "Not worth a Continental", entered the American vocabulary. Butas the Bible says, "a generation arose that knew not these things."

I could give you yet another South American country (Ecuador) where the local fiat money has collapsed to the point of being replaced with the global fiat money, the dollar. The ultimate in bankruptcy- replacing one fiat paper money with another. However, for the purest example of what happens to fiatmoney, to all fiat money eventually, take a look at Afghanistan this month. Sure they are a bunch of loonies trying to set up a medieval society. Sure they are brutal and have a well deserved reputation for savagery. Other than sending in a few cruise missiles recently most Americans don't even know where Afghanistan is, much less what happened there this month. We should. We should take a hard look at a recent Associated Press story of April 19, 2000 entitled "Taliban shut down money market to stop freefall of Afghan currency." You heard it here on first. Any time that any government feels a serious threat to its fiat money it will react with savagery. All governments at all times have reacted this way. It's a no brainer. The reason they rant and rave against gold is because it is independent of their control. Gold and silver make their owners immune from the kind of things going on in Afghanistan recently. Considering what is going in the United States markets, are we so sure that it won't happen here?

The story goes on, "The ruling Taliban shut down Kabul's money market Wednesday to stop a freefall of the Afghan currency, which has nose dived 30 percent in three weeks." A flour dealer is quoted as saying the fiat money, the Afghani, has become like "toilet paper." Later the story says the price of flour has increased 40 percent in three weeks. The exchange rate went from 55,000 Afghanis to one US dollar on March 31st to 75,000 on April 19th. The Taliban blames the rise on a Russian campaign to destabilize Afghanistan. Could it be that our Rasputin, recently back from hobnobbing with the Queen of England, is restarting the Afghanistan war? Just because he looks good in a suit doesn't mean he isn't a monster.

Continuing, the story comments about "people lugging bags of Afghani notes trying to find a money dealer who would exchange their currency." It was said there were "no buyers.-everyone is after dollars or Pakistani rupee." The flour dealer is quoted as saying, "I think everything has gone crazy here." This man has uttered a profound statement that goes well beyond the Kabul money market. But we know that this could never happen in America. We know that our fiat money could never suffer the kind of hyper inflation that has happened historically to all, repeat all, fiat money. Why not? Because, because, we say it won't. I wish, I wish, I wish and therefore it is. We're Americans. We're the best and all these petty rules about reality don't apply to us.

Everybody all over the world will always want our fiat money dollars. Everybody all over the world will always accept our political, cultural, and economic arrogance. They will always do this for the next thousand years. We have created the thousand year economy. No need for such barbarous relics as gold and silver, because we know that all this documented economic chaos over the last few years can never, repeat never, happen to the United States. Our dollar will never, repeat never, be challenged. Our dollar will never, never, never suffer the historical fate of fiat money. If you believe that then far be it from me to try and change your mind. You are entitled to your opinion. You are also required to prepare for the kind of catastrophic fiat money collapses that have happened historically. The kind that are happening with distressing regularity these days. The question is: how will you buy a bag of flour when the price goes up 40% in one month? You may say that it will never happen here, even though it routinely happens in other countries. That is your right. You can also go through life without any fire, auto, health or life insurance. And then you can hope that nothing ever happens.

So one more time people who buy gold and silver are shown to be wise. They are shown to be prudently prepared for a potential economic disaster. Just because we have convinced ourselves here in America that nothing can ever happen, doesn't mean it can't. Buy gold and silver or don't. Understand this though. We live in unstable times economically. If the NASDAQ charts were mistaken for heart charts, the doctor would be convinced he was viewing a heart attack. The only reasonable way to prepare for this instability is to buy precious metals. Precious metals are the only money that will insulate you from the kind of economic instability that is rampant in the world today. There is much else I could say, but what is the point. While I certainly don't think that precious metals will "save you", they will buy you some economic time. Time to regroup. Time to think out a rational response to a crisis situation. If you don't have this golden buffer, then you will be overwhelmed and destroyed financially. It's that simple, or complex depending on your viewpoint. If you don't have this buffer, you won't have a chance. Every American should have $1000 bucks in gold or silver; then hope you never need it to buy flour that has gone up 40% in three weeks.

According to the Talmud you should keep one-third of your assets each in land, business interests, and gold.
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