February 8, 2007

Ah! That's the magic word now, isn't it? Everyone would love to be rich! Of course the term has taken on a totally different meaning than it had when I was a kid. I graduated from High school in 1952, (if you can imagine anyone being that old!), and if a guy had a $5 bill in his pocket, he could take a gal out for a swell time, including dinner and a show. If a man had $100,000, a new brick, three bedroom home, which could be bought for under $10,000 in a nice new neighborhood, he was set for life. In Washington D.C where I grew up, the Wheaton subdivision was then a-building, with under $10,000 prices for new brick homes It's probably a bad neighborhood now.

Rich, is what we all want to be, and I'm not talking about "rich in love" or "rich in happiness," or anything of that kind. I mean rich in spending dollars. First of all, the Puritans or the liberals will shout that being rich is evil. "You should take your riches and help the poor," might be their instructions. I say that poverty is for boobs. My solution for poverty is to have nothing to do with it. Unfortunately, poverty is becoming as common as silk hats in the day of John Pierpont Morgan, and that's awful. What's wrong with being rich? Nothing. Think about how rich people spend their money. No matter how rich one may be, he can only wear one suit of clothes at a time, sleep in only one bed at a time, or swim in one swimming pool at a time. A rich man, can consume only a couple of pork chops or a single steak, no matter how much he'd like to show off his riches. What do rich people do with their surplus assets? They help to eradicate poverty, that's what.

The richest men in American history, which were before confiscatory taxation usually, gave away hundreds of millions of dollars. John D. Rockefeller used to stand on sidewalks and give away silver dimes, which are the equivalent of dollar bills today. Andrew Carnegie built hundreds of libraries which he gave to the cities and towns in which he built them, and hundreds of wonderful pipe organs to myriad churches. J.P. Morgan actually bailed out the U.S. Government once with his wealth. They built railroads with their wealth. Commodore Vanderbilt didn't particularly like railroads. He was a steamship man, and ran his boats up and down the Hudson River and other places as well, but he saw an opportunity, and built the New York Central Railroad by combining dozens of smaller lines. He ran a train at 112 miles an hour in the early 1900's just to publicize his railroad. He was filthy rich. His nephew built America's largest mansion in Asheville North Carolina, it is open to the public today, and is a wonderful tour. Rich men then, and even today, as witness Bill Gates who never graduated from college, had an idea. Gates, Carnegie, Rockefeller, Morgan, and their mansions, did something very valuable, and that is they spent their money. When money is spent, people are hired and wages are paid, and poverty is eradicated. Swimming pools, fancy plaster work, gorgeous woodwork, fancy stonework, plumbing, landscaping and the like was performed by artisans hired by rich people. Work, not handouts.

Henry Ford developed the production line, which made his Model T Fords so cheap, that his employees could afford one, and especially after he doubled everyone's wages, which he did. Rich people have mostly found that they cannot spend as much as they have or are making. They then do nice things, such as build churches, parks, and museums. They develop new industries or improve on extant ones. They HIRE people, in other words. When people are hired to build, landscape, invent, or develop by rich people, the money stays at home and is spent at home. Otis made a pack of money with his elevators, and Whitney with his cotton gin. All the profits, after their owner had spent on themselves all they could think of, mostly distributed it among the community. Not with handouts, but with construction, development, and profit making businesses or trades. Welfare was virtually an unknown thing before FDR. Rich people spent their riches developing character, work habits, skills, and creating jobs, not handouts.

Many rich people imported skilled craftsmen from Europe to build their sumptuous mansions, who in turn trained and developed Americans with grand creative talents. Entire industries were created by rich people, which remain to this day. Thanks to riches, nations prosper. If there were no rich people, it's doubtful that there would be a middle class. Being rich is great, and is a credit to the nation as well as a huge benefit for the jobs it creates.

Alas, it seems to have withered. Wages today, as a percentage of the GDP are the lowest since 1947. Thirty years of $5 trillion in trade deficits have moved most of the manufacturing, middle class jobs overseas, and we are bombarded daily with the glories of the "Information age." Those nations who do not manufacture what they consume are in deep trouble, and now don't even grow what they eat. To get rich today, far too many individuals get rich by manipulating pieces of paper about, and trading futures and other indexes such as derivatives. Far too few men plow fields, screw in bolts, or cast steel ingots. While we all want to get rich, it is doubtful that riches such as Steve Jobs or Bill Gates can be realized, because things aren't made here any longer. Jobs and Gates at least still invent and make a good part of their items here in America. Moving containers from Pacific ports to the consuming Wal Mart customers is what the Union Pacific and Great Northern-Santa Fe does today, rather than hauling thousands of manufactured food stuffs, machinery, and other things, which are now imported. There are no more American made National Cash Registers, nor Philadelphia made televisions, radios, Stetson Hats, and Botany 500 suits. Kohler makes little of its fine line here, nor do other plumbing outfits.

In my Kiwanis Club today, the speaker was a member who just got back from China, and he was amazed at the construction ongoing there…as well as the hideous pollution. Everything which used to be made here, is being made overseas, or south of the border. How can anyone get rich today, when no one makes anything here? It is damned hard. One will never get rich flipping hamburgers, or doing menial work which used to pay well when such work was assembling manufactured items. Days of long ago. What to do? That is an extremely difficult question to answer. Here's a clue. I keep a sheet for every day I am open, listing spot prices and prices of all items. A big stack of sheets, going back many years. (I have been writing these columns for Gold Eagle for over six years now). As I write this on February 8th, I looked back to February 8, 2006 and guess what? Gold was $515 and silver $8.20. That is a ratio of 62.8 to one. Today the ratio is 47.74 to 1. Gold has gone up in paper dollars by 28%, and silver has gone up in paper dollars by 69%. How've your CD's done at 2% interest? I fully expect that the paper dollar prices of these items will have increased by about the same by this time next year. Silver has gone up 15% further than gold, percentage wise, which makes my past columns come absolutely true. A year from now, the fools who have kept their surplus assets in paper dollars and related paper instruments, will be moaning and groaning about hard times, while those of us who have had a scintilla of sense, may not be as rich as the Gurneys of Virginia, but we'll be a lot better off than those dollar hounds.

Are we crazy? There are a number of well certified indexes to the approach of senility, which your doctor or undertaker of choice will be glad to outline to you in some detail, but I say the symptoms of senility, are storing your surplus wealth in paper dollars or dollar related and denominated instruments. Those who foolishly do this, will surely hear the fluttering of angel's wings overhead, or the midnight croak of the raven. If they don't they surely should. They should, of course, protect themselves.

P.S. No column next week as I am taking off ½ day Wednesday, plus Thursday and Friday to celebrate my 73rd birthday in Las Vegas.

(Editor's Note: A very Happy Birthday Don…and many many returns)


February 8, 2007

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is

One cubic foot of gold weighs more than half a ton (1,306 pounds).

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