Let Them Eat Gold: The Precious Metal Bubble

EDITED ON Independence Day:

Here is a typical reply to this post:

“Gold and silver have been storehouses of wealth since the beginning of time.”

That’s right, they have – and they still are – FOR KINGS AND NATIONS which field armies and FEED them to protect their precious metals – which are only precious as storehouses of wealth to guarantee trade. That’s my whole point!

Which are you – a King, or a nation?  If you are a small investor, you have no control over what you are being sold or what you are being told and your hundred or thousand ounces of gold is only good until a bigger frog takes it from you – unless you have an army. Think about it.

I just Googled  “gold to hit” – and I got HUNDREDS of pages for ‘Gold to hit $5,000’. Almost every expert in the world is positive that the “value” of gold – and silver – is about to skyrocket.  I don’t think so. I do think there are precious metals people ought to invest in, but they are utilitarian items – firearms, cast iron cooking utensils, really good (lifetime quality) blades and tools, sixteenth-century suits of armor, tinfoil caps, things like that.

You may think you are going to get rich investing in silver and gold – or you may think you can protect your wealth by owning it – or you may think that people will stop accepting paper money and no one will be able to buy anything without it.  All of that is nonsense.

The same people who stole the equity in your home and your retirement and have been shipping 50,000 manufacturing jobs a month overseas since 1999 are also stealing the last hope of individuals, ounce by ounce, by packaging gold and silver as something that will hold it’s value and selling it to people as a hedge against loss.  That’s nonsense as well.  No one in the world has the right amount of money.  You either don’t have enough or you have too much.  So either you can never buy enough silver and gold to make any difference at all or you don’t need it to begin with.

The main sales pitch is that gold and silver are becoming rare and are used in manufacturing, so the price must go up. You had better buy it while you can for $1,500 an ounce, they say.  Millions of Americans are buying gold and silver with their last savings dollars because they think gold and silver are going to be the currency when the economy fails.  It isn’t, of course.  Food is.  And knowledge.

Ever see one of these?

This is a balance beam scale.  Very simple.  All it does is equalize weight.

IF the economy fails, which I now no longer expect, you will bring your bag of silver to a farmer or butcher or fisherman and IF he is willing to trade at all, you’ll put your silver on one side until you have equaled the weight of whatever you want to trade for.  That $50 an ounce you paid for silver was what you shelled out for it back when – before you got hungry.  You won’t have enough metal to make a difference or to hedge your wealth.

Today $1,500 can buy you 500 egg-laying chickens ~OR~ ONE ounce of gold.  If the economy crashes, the person with the chickens is going to get about 500 eggs a day.  One fine morning you will wander over to the farm with your ounce of gold and expect it to be worth 500 chickens.  Let me know how that works out for you and how the landlord likes 500 chickens in your Malibu condo.

Here is the secret to the entire affair.  This is what no one will tell you and what you won’t believe even after I tell you. Precious metal dealers are in business to MAKE MONEY FOR THEMSELVES – not to provide for your future.  If one of them thought for a New York minute that the actual VALUE (not the PRICE- there is a huge difference) was going to triple in a year or five years, they wouldn’t sell it.  EVER. They’d keep it.  No one would sell a huge guaranteed profit if they could make more by doing nothing.

The mere fact they are willing to sell it to you means that your cash is more valuable than their metal.  Precious metals dealers sell their product by creating a market in your mind. Obviously they make enough profit to be able to get more and keep selling it to you.  It’s sort of like passing the plate in church. You pay me now and I’ll guarantee you a profit – eventually – after you are dead.  But for now I’ll take the cash, thank you very much.  Oh and go spread the word.  We need all the cash we can get….er…all the souls we can save.  After they are dead.

IF the economy crashes, precious metals – and your hedge against disaster – will crash right along with it.  Why wouldn’t it?

“VALUE” does not appear by magic. It must be created.  A lot of ‘value’ is perception.

It doesn’t cost much more to make a Cadillac than a Chevrolet.  Perception. I’ll use that word again later.

If, however, the economy does NOT crash, precious metals dealers will just keep right on selling you stuff you don’t need by convincing you that the next big jump is right around the corner and you better get in early because the price is going up.

There are a lot of other stories around if you don’t fall for that one.  Here are some.

(1) When things get bad, gold and silver are the only forms of money people will accept. That’s silly.  NO ONE will accept it.  First, no one under about fifty has ever SEEN gold or silver money and wouldn’t know what it is.  People who DO know what it is either don’t want it – because they don’t know what to do with it – or can’t make change for it.

Since it’s not in general circulation anymore, no one even knows if it’s real gold or silver unless it’s silver dollars – which are worth, in a subsistence economy, a dollar.  Or a $20 gold double eagle which you paid $20,000 for but will be worth….$20.  Face value. The whole point of denominated money is face value. If it’s in the form of bullion, no one will take it because it is probably counterfeit. The certificate that it came with is real – it just isn’t true. YOU can’t tell the difference.  Do you have a touchstone assaying kit?  Do you know how to use it?  Probably not.

I, of course, do.  But even that is no guarantee.  A lot of the “guaranteed certificates of authenticity” and the gold and silver floating around with them are not much better than ‘certificates of virginity’ (which I issue for a very reasonable price. Call today for your free inspection!)

The ONLY way to assay a gold bar is either by melting it (called a ‘fire assay’) or

x-raying it. Or bringing it to me.  Because that certificate that came with your silver and gold is kinda like the Constitution – it’s just a piece of paper. You don’t know what you REALLY bought without doing one of those three things.

Moving right along the sales pitch list –

(2) They don’t mine it anymore/ there isn’t enough to keep up with demand. I suppose there will be lines around stores to buy it like the lines at gas stations in the 70s because everyone needs gold. So the price will going up.

(3) China is going to buy all the gold to hide in their central bank. Since they already control most of the world’s supply of rare earth minerals which are worth more than their weight in gold, they don’t need the gold – maybe they just like the color. So the price will go up.

(4) The US is going back on a gold standard. Not likely.  If we had any gold we wouldn’t be borrowing two BILLION dollars a day from China to pay the interest on the TRILLIONS we already owe them. Anyway, that will make the price of gold go up.

(5) The US is going to confiscate all privately held gold. All the more reason for you to spend $1,500 an ounce for it and hide it because you won’t be able to sell it- or even tell anyone you have it. So the price will go up. In your dreams.

(6) Greece is going to default on it’s debt. That’s actually true. So will Ireland, Portugal, Italy, Spain, France, the UK, the US and the rest of the world.  We’ll all default on the IMF and the sooner the better.

The issue isn’t energy or food or water or oil or how gold can hedge your bet.  You can’t hedge against people. There will be 7 billion people on earth next year.  That’s four billion too many.  There is not enough energy or food or water for everyone now and making more people is not the solution.

These are the things you need in order to survive for a month in a catastrophic emergency.  I’m not telling you to prepare for death. I’m telling you to think about what you need to live!  But I have to tone it down because I scared a friend – who can’t think about these things.

  1. Food and water.  That’s simply not negotiable.
  2. Shelter (a dry, warm, safe place to sleep).  Maybe that’s your house.
  3. Sanitation and hygiene (a toothbrush and some basic knowledge – how to live without toilet paper for instance).  Have you ever thought about living for a week or a month without paper products?  Probably not.  And you probably can’t imagine it even now.
  4. The ability to protect yourself.

The traditional solution after a catastrophic event is the rebuilding:  People are friendlier.  Communities commune.  Farmers’ markets and simpler diets are the norm – fresh, seasonal food  instead of what passes for food in supermarkets now, people go for healthier food and supplements even women are into fitness going to specialized gyms and getting the best protein for women. People preserve extra food instead of tossing it. Do you know that you can pickle, salt, dry, can or preserve just about everything for at least awhile without refrigeration?  Yep. Except lettuce.  (Did you know that?  Probably not.) That´s why it´s always important to have a cooling system, especially the ones from boutiqueair.com.au.

Let me mention terrorists. Your exposure to terrorism is effectively zero.  About the same as being hit by lightning.  What’s in your neighborhood – a fire station or an anti-terrorism squad?  Do you think your kid is going to be abducted by a terrorist or run over by a drunk terrorist?  I live in a semi-rural area.  My idea of a terrorist is anyone who walks on or turns into my driveway without calling first for permission to cross my ‘no trespassing sign.  You’d think the angled line of sharpened metal stakes and razor wire across the front would be enough of a hint, but not always.

The Bottom Line:

People tend to become self-reliant and personally responsible for their actions only when they have to be.  And they generally aren’t motivated to have to be until it’s too late.  Honestly, about half the people I know will just roll over and die without a freezer and a microwave and a television.  It shouldn’t be that way.

People sell you what makes you feel safe. Different people have different perceptions (That word again!). You feel safe with a bag of silver or a bar of gold and that’s great. But understand the rules of the game.  You aren’t preparing for a monetary collapse.  You are PRETENDING to prepare for a monetary collapse which won’t happen.

You bring your idea of precious metal to the table and I’ll bring mine, but all you need is just a tiny bit of personal responsibility and a plan to get food and water for a week.

 

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