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Monday, June 18, 2012

Physical gold and silver have been safe havens for 4,000 years!

As we sail into the uncharted waters of massive government debt around the world, one wonders how our children will deal with such debt as we are thrusting upon them by basically living beyond our means for most of the past 40 years. Our homes became our secondary bank, where you could dip into what seemed to be an ever increasing amount of home equity, every year to buy a new car, a boat, a vacation or whatever. No problem! Money was cheap and houses always increased in value. No more!

After a Trillion dollar meltdown in real estate, and trillions more squandered in a derivatives market which no one seems to understand, the major banks of the world stood on the brink in 2008, before governments came to the rescue. Now the question is, who will rescue the governments. Certainly not the insolvent banks who are still hiding Trillions of debt from the derivatives fiasco from their books and from share holders.

Governments, especially democratically elected ones, almost always take the path of least resistance when dealing with debt and deficits. It is, in most western democracies, political suicide to take a stand to say NO MORE, and begin austerity measures that might attempt to mitigate such huge debts. So, they push those debts down the road so to speak, and the road leads directly to our children and grand children, and it tremendously threatens their future well being, in every sense of the word.

In the U.S.A. for instance, the government is now showing a deficit of 15.4 Trillion dollars. This is, by any measure, a massive and mind numbing number, which will never truly be paid off. It is however, only a fraction of what the USA truly owes.  When the future promises of medicare, and old age security are calculated into the mix, the number reaches over 202 Trillion dollars. As a stack of $1 bills, that number would reach our moon and back again, several times over. It is truly staggering, and it cannot be paid, unless of course, our governments instigate rapid and possibly hyper inflation.  

At this writing, approximately 10,000 baby boomers will retire, every day, for the next 18 years!!!

With Europe on the brink of imploding, its currency soon to be an after thought, and the U.S. dollar (the usual go-to safe haven) building up to its own massive implosion, where could a lone investor turn for some sort of comfort!  Well, where people have turned for currency comfort for the past four thousand years. To gold and silver, that's where!

In 1964 one gallon of gas cost approximately 25c in U.S. currency. Today, that same 1964 quarter will buy you even more gas than it did then. There is only one reason and that is the silver content of that coin. That was the last year those coins contained 90% silver content. (today the melt value of that quarter is about $7) Over the next few years the content was reduced and eventually completely eliminated from coins.

 For the past ten years, gold has moved in lock step with U.S. Government debt.

Last year, the Chinese government began encouraging its citizens to add physical gold to their savings. For the past three years China has been buying more and more gold for its foreign currency reserves in lieu of American dollars (U.S. government debt, of which China still holds over $1 Trillion.)

You will hear great American investors like the venerable Warren Buffett chide that gold is a worthless investment that does nothing as you stand around guarding it. It is now a provable fact that, if Mr. Buffett could have sold all of his shares in Berkshire Hathaway stock in 2002 and just bought gold, he would now be 500% richer. How is that for holding value!!!

Today there are vested interests who will do whatever it takes to bring down the price of gold and silver, as their position in the financial world depends on it. Institutions like central banks and large banks such as J.P. Morgan, who have probably the largest silver short in history at present. Don't be fooled or afraid of these dealings. No one can hold back a river with a bucket brigade for very long. The flood is coming, bet on it!!

If you do not have physical gold and silver in your savings plan, then at least consider these thoughts. It may be the only way you will be able to leave value to your grand children as their generation is saddled with the most massive debt the world has ever witnessed.

HP

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