As I see it, if you don’t own some physical gold and silver, you are going to be in a bad way as the impact of the MF Global collapse continues to ripple through the markets. All of us are facing some difficult times in the weeks and months ahead as this global financial bust plays itself out, but trying to contend with this fallout without owning physical gold and silver is like going into a war without any bullets. - James TurkThis current market "correction" in gold and silver is an absolute gift. I say "correction" because there is no doubt that the Fed/Wall Street is piling on in order to make the metals look undesirable to the unsuspecting. Time and again they've done this over the last 10 years. But to be able to go out and move more of your increasingly devalued U.S. dollars to acquire physical gold and silver at prices that are 15% cheaper for gold and 40% cheaper for silver cheaper than 8 months ago is an absolute gift.
I had an interesting conversation with a good friend earlier this week. He was thinking about liquidating all of his investment accounts and moving everything to cash, fearing that all "investments" were going to get annihilated. My response was, why would you move into a pile of cash that you keep in a bank? Do you really trust the banking system? Just like customer cash accounts at MF Global vaporized overnight, your bank account is nothing more than an electronic entry in a bank computer that is not really any more secure than an a cash account at a brokerage firm. Seriously.
But even more troubling would be the idea that someone would want to move into cash - into U.S. dollars. By law - a law which is in direct violation of the U.S. Constitution, mind you - all money issued by the Government is backed by the "full faith and credit of United states Government." Think about that statement for a moment. Let's break it down to its basic meaning.
"Full credit" of the Government. The credit rating of the U.S. Government was recently downgraded from triple-AAA by S&P. This means that the credit rating of the U.S. Government is deteriorating. It is actually deteriorating quite rapidly. In fact, if it weren't for the fact that the U.S. Government - unlike the individual countries of the EU - has the ability to print money in unlimited quantities, the actual credit rating of the U.S. Government would be "CCC-," which means that it is on the cusp of default. So when you keep your wealth in the form of U.S. dollar "cash," on a de facto basis you are storing your "wealth" in an "investment" that is on the verge of bankruptcy.
Now, let's examine the idea of "full faith" in the U.S. Government. This implies the notion that we collectively have complete "faith" in our Government and the leaders that implement our Government. Is that true for you? Do you have "faith" in the Obama administration? Would you have "faith" in a Gingrich or Romney administration? How about Congress? We know from recent polls that the approval rating for Obama is at an all-time record low for any President with one year remaining in his first term. Record low. We also know that the approval rating for Congress is now well below 10%. Do those ratings convey the idea that Americans have "faith" in their Government?
Now, I'm dead serious about this. IF the implicit credit rating of the U.S. Government is, realistically, near the level of default and IF the overwhelming majority of the people in this country have little or no faith in our Government, the HOW THE HELL CAN THE U.S. DOLLAR HAVE ANY REAL LONG TERM VALUE AND HOW CAN IT BE CONSIDERED A STORE OF WEALTH? Seriously? Why the hell would you want to move your wealth into U.S. dollar-based "cash?"
So what are the alternatives? Other than gold and silver, I really don't know of any alternatives. Actually, again I'm being serious, guns, ammunition, canned food and other "hard usables" would also maintain their value if things get really bad. But gold and silver have been "transaction/barter currencies" for the better part of 5000 years. This is not going to change. Despite what looks like a lot of volatility, or risk, with gold and silver, over the last 10 years the U.S. dollar has gone down in value 80% against gold and silver. 80%. It has another 20% to go before it goes where every other paper fiat currency in history has gone - extinct. On that obvious basis, why would you put your wealth in the U.S. dollar?
We have seen much worse market corrections/manipulated hits in the precious metals over the last 10 years. And yet, over that time period, gold and silver have outperformed every other possible investment. Every single one, without exception. But we're getting to the point at which you need to start looking at gold and silver as being the best shot you can have at financially surviving what is coming our way. 2008 was bad but what is about to happen globally will be even worse. Don't take it from me, consider what James Turk has to say. James Turk is one of the smartest, most forward-looking market commentators that I have ever come across. It just so happens that his views have paralleled mine over the last 10 years. Although I don't know what his "off the record" true assessment would be, his vision publicly is not as gloomy as mine. I think I'm going to be right. But here's Turk's latest comments from Eric King's daily blog interviews: LINK
Consider that, if you had a billion marks in the bank in Germany on November 13, 1923, when you woke up the next day you had one mark. That is the power of a Government that issues fiat currency by enforcement of law and that is trying to survive. But also consider that if you had all of your wealth in gold and silver, on November 14th your wealth position was the same as it was the day before. Our Government is trying to survive right now and yet it keeps increasing its deficits and debt load. Soon enough the Fed will be firing up its printing press yet again and your dollar in hand will become worth even less. Gold will soon be probing new highs even though it may not seem like it at this exact moment.
I have laid out the truth and the facts today as they are. My statements are backed by the events of history for 5000 years. If you think that it's going to be different this time, then go ahead and keep your wealth in U.S. dollars and Government bonds. But if you think and know, like I do, that eventually the ability of the U.S. Government to maintain any value in the dollar is going to disappear, then you need to use opportunities like the current one to move even more of your paper wealth into physical gold and silver. Not GLD, not SLV, not any other ETF.