Letter from my Dad (May be important)

I hope everyone loaded up on gold (now up 50%)and silver (up 85%) and is happy, because the flip side is very gloomy. The dollar continues to lose value and the resulting decline in American wealth looks like it will cause class warfare. Whether it is only economic warfare making everyone poor or whether it develops into physical violence is still not clear.

Since the US government decided to use central planning to control interest rates instead of the free market and the gold peg, the dollar has lost more than 93% of its value. For centuries the dollar value of gold hardly moved. Then politicians created the FED early last century.

Do you remember $35 an ounce? I do, and now it's $570. When Alan Greenspan went before congress last year, he was asked how was the US Government going to be able to finance its obligations regarding Social Security (i.e. pay retirement checks).

Greenspan's answer was that it was no problem, they would just issue Government checks. When the senator looked confused, Greenspan added, 'the problem is whether these checks would buy anything of value'.

The economically challenged senators still didn't get it. What good is a monthly check for $10,000 if a loaf of bread costs $10,000.

At his State of the Union speech, Bush lamented he couldn't get Social Security reform through congress. The Democrats, led by Hillary Clinton cheered.

I hope that tape is replayed when retirees riot over their worthless SS checks. But, at least this gives us someone to blame.

Americans aren't saving for their retirement, instead they are going ever deeper into debt, confident the Government will give them a nice retirement check.

Both Republicans and Democrats are spending like drunken sailors. No worries mate, we'll just borrow some more.

Now that Americans aren't saving enough to finance this debt, we have to borrow from foreigners at the rate of $2 billion a day.

The amount of wealth we will have to transfer to these foreigners to repay this $8 trillion debt will bankrupt a whole generation. Unless, of course, we just issue worthless Government checks and inflate away the value of the dollar.

But who are our central planners going to blame. There must be someone. How about Wal-Mart. Maryland central planners are going to force health care costs for employees, their spouses, children, parents, relatives, pets, etc. onto Wal-Mart. Maybe we can have a windfall profits tax to pay for our debt.

The central planners in Russia and China never let windfall profits happen. Maybe we just won't let foreigners spend the dollars they so foolishly accepted. We can call it National Security and not let them buy Unocal and not let them operate our ports. When they stop accepting our dollars, we can be happy with all our paper money, happy and poor.

I still think the best protection from our central planners are hard assets like gold, silver, oil sands, gas, etc. Then you don't have to worry when they let the printing presses roll.

Lo siento, let's format that: Hi Guys,

Greater than 93% drop in the greenback - Since the US government decided to use central planning to control interest rates instead of the free market and the gold peg, the dollar has lost more than 93% of its value. For centuries the dollar value of gold hardly moved. Then politicians created the FED early last century. Do you remember $35 an ounce? I do, and now it's $570. When Alan Greenspan went before congress last year, he was asked how was the US Government going to be able to finance its obligations regarding Social Security (i.e. pay retirement checks). Greenspan's answer was that it was no problem, they would just issue Government checks. When the senator looked confused, Greenspan added, 'the problem is whether these checks would buy anything of value'. The economically challenged senators still didn't get it. What good is a monthly check for $10,000 if a loaf of bread costs $10,000.

At his State of the Union speech, Bush lamented he couldn't get Social Security reform through congress. The Democrats, led by Hillary Clinton cheered. I hope that tape is replayed when retirees riot over their worthless SS checks. But, at least this gives us someone to blame. Americans aren't saving for their retirement, instead they are going ever deeper into debt, confident the Government will give them a nice retirement check.

Both Republicans and Democrats are spending like drunken sailors. No worries mate, we'll just borrow some more. Now that Americans aren't saving enough to finance this debt, we have to borrow from foreigners at the rate of $2 billion a day. The amount of wealth we will have to transfer to these foreigners to repay this $8 trillion debt will bankrupt a whole generation. Unless, of course, we just issue worthless Government checks and inflate away the value of the dollar. But who are our central planners going to blame. There must be someone. How about Wal-Mart. Maryland central planners are going to force health care costs for employees, their spouses, children, parents, relatives, pets, etc. onto Wal-Mart. Maybe we can have a windfall profits tax to pay for our debt. The central planners in Russia and China never let windfall profits happen. Maybe we just won't let foreigners spend the dollars they so foolishly accepted. We can call it National Security and not let them buy Unocal and not let them operate our ports. When they stop accepting our dollars, we can be happy with all our paper money, happy and poor.

I still think the best protection from our central planners are hard assets like gold, silver, oil sands, gas, etc. Then you don't have to worry when they let the printing presses roll.

Tom

This is not true though it is often repeated. US issued notes are good and represent among the most stable assets on the earth. If a population of people perceive something to be of worth-- then it is. The dollar and the US economy which it represents has been a strong investment since WWII. The best estimates are that it will continue to be a great investment-- increasing in size from 13 trillion dollars to 20 trillion dollars by 2020. The European economy will decline in relative size. China and India will have increasing economies.

In the 1980s, people said the very same thing in relation to Japanese financing of US debt. Guess who was right?

Buy gold if you want, because enough people "perceive" a panic-- they will indeed buy up the price. Gold is not however the economic panacea its proponents suggest. The US economy is a good investment.

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