Hang on to Your Gold

19 01 2010

Money…it started out as an attraction to pretty things, namely gold and silver.  It became a means of efficient bartering.  It was coined and standardized.  Then it was replaced with paper as a substitute.  Then the paper was not a substitute but the thing itself.  Then the paper was represented by an abstract number.  Soon, the number will be the thing itself.  But the number will not be strictly under control of the people who use it, but, instead, it will need to be managed by a central industry, a governing authority.  The people will not own it.  The government will be in complete charge of it.

In 1933, our dear late president Franklin D. Roosevelt banned the ownership of gold.  The penalty was up to ten years in prison or ten thousand dollars’ fine for those who failed to comply.  Contracts that were insured against inflation by using the gold standard for adjustment could not longer use the gold standard.  The purpose was to make people rely entirely on the toilet paper being produced by our benevolent government for use as money.  It would be worth whatever they told us it was worth, and when they needed more, they would simply print more.  The New Deal (raw deal) was an artificial economy, giving great boatloads of people some manner of employment, where there was none.  The catch was that these jobs did nothing to actually promote the economy.  The government is not a participant in the law of supply and demand.  The economy must be powered by the private industry.  An all-public economy is a cannibalistic system that keeps recycling the same value over and over, until it diminishes into nothing.

So how did the New Deal survive?  It lived off of the backs of what was left of the private industry, not through taxation, but through inflation.  When the government produces money like a wild drunken counterfeiter, it has plenty to spend, but the value of everyone else’s money drops like a rock.  The dollar amount in the bank is an arbitrary number that means nothing.  The real value is an abstract concept wrapped up in that dollar, and the government can take it straight from our accounts without a single tax or fee.  We cannot easily track it.  We hardly notice its absence, until the price of everything at the store increases.

Until 1933, gold was that bastion of wealth that retained its value in the face of inflation.  When a square foot of dollars was worth less than a square foot of toilet paper, people might buy gold and abandon faith in “money,” because money isn’t really money.  The government stole everyone’s gold in exchange for fewer dollars than it was worth.  Then it cranked up the presses.  Had World War II not spurred on private contracts and actual manufacturing in the private sector, we might have ended up like post World War I Germany.  In the years since the war, government has striven, to our great relief, to stabilize our monetary system.  Under Allan Greenspan, the dollar was probably at its most stable point in recent history.

All of that is about to change.

Advertisement for your gold is at an all-time high.  The government is buying it up as fast as it can.  Fortunately, the acquisition is currently voluntary.  Whether it will always be so remains to be seen.  Hang on to your gold.  When the government is in a frenzy to buy gold, it intends to pay its debts through inflation.  The less gold you have, the less recourse you have.  For FDR, it was an attempt to force people to put their trust in paper.  But then and now it was also the government’s insurance against getting hurt by its own inflation.

So what happens to all of this gold?  Foreign investors, like China, don’t like putting their money into American interests, when they know that the return will be worth less, even though they get more dollars back.  They won’t want dollars.  They’ll want gold when the dollar is no longer a global standard.  When you sell your “unwanted” gold to some of these private firms out there, it goes to the federal reserve, and from there it makes its way out of the country.  If you plan to buy a wedding ring, then you’d better buy it now.

So who gets hurt worst?  Anyone who holds ownership of cash gets bit.  Money under the mattress evaporates.  Money in the bank leaks away.  All lenders of any kind get hurt.  The good news is that you’ll be able to pay off your fixed-rate mortgage easier.  The bad news is that the rate on your adjustable rate mortgage is going to go way up.  Interest rates of all kinds are going up.

As it is, every penny costs two and a half cents to produce.  Congress hates to make the stuff.  Nickles are also worth less than they cost.  Inflation is coming, and it’s coming hard.  Government buy-out of gold is the canary in the mine, telling us to grab our stuff and get out.  This could be the move that makes pocket change unfeasible.  If the coins go, then it will be one step closer to a monetary system without substance.

I don’t know when electronic money will hit the system, but when it does and wealth becomes nothing more than a number in the government’s ledger, then everything we do could ultimately be subject to our lord President’s dictates.  Who buys and who sells, what they buy and what they sell will all be subject to government control.  This, in light of some environmental policies seeking to outlaw the incandescent light bulb, black cars and the internal combustion engine.  We already know that the government is to the point of controlling things that it has no business meddling with.  I mention electronic money because the last time our dear Big Brother took that nasty dangerous yellow ore from us, it intended to permanently change the way we do business.

You will be hurt if:

  • you have much money in the bank or under the mattress, in CDs or bonds or loaned out to anyone.
  • you borrowed loans on a variable interest rate.
  • you need to get a loan in the future.
  • you sell your gold (or they take it from you).
  • you need to buy gold in the future (even now it is already more expensive).

Further, you will be hurt simply by living in the United States, because our economy will be drained to pay the whims of our government.  Look out, China, because we’ll be the cheap labor, now.  Learn to make a home from mud and sticks (I jest, I hope).

And if the government takes the notion to force your gold from you, I advise civil disobedience…but be careful.

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