QE2: The Road to a Gold Standard (Incredibly important economics read re. impending Hyperinflation)

Kitco ^ | February 23, 2011

[Zakeet]

---

QUICK SUMMARY

This is a piece written by a leading commodities broker/analyst. He uses some technical terminology with an emphasis on the precious metals market while making the following main points:

• Libtard Rats and RINO's have irretrievably ruined U.S. currency.

• The United States is about to get a lot poorer as the economy crashes ... really bad this time.

• Both hyperinflation and U.S. debt default are inevitable.

• The only way to restore order and sanity is to return to the Gold Standard ... woldwide.

• Until then, Freepers are well advised to prepare accordingly.

Unfortunately, the author makes such a compelling argument that I am unable to rebut any of his main points.

[CaptainK]

And what are the steps to prepare accordingly?

[FromLori]

2011 Tipping Points

[Lazlo in PA]

And what are the steps to prepare accordingly?

Stockpiling

[circlecity]

Ping for later

[agere_contra]

Buy Gold and Silver. Both physical metal and mining shares.

Also shares in hard asset production: e.g. Uranium mines.

For choice: choose Canadian companies where the shares are priced in a hard-asset currency.

Also the usual domestic precautions: guns, food, water and barbed wire.

[Leaning Right]

Let’s see. A website that sells gold and silver is saying here are the reasons why you should quickly buy gold and silver.

There is much truth in the article, but understand that it has a biased view.

[Zakeet]

And what are the steps to prepare accordingly?

Quick answer: God, gold, guns and grub

Longer answer: Read THIS from someone who has been there and done that

[fso301]

A gold standard only works in a stable population. As a population increases, the money supply cannot keep up unless more gold is mined/acquired and placed into the treasury.

Belief that gold is rare and valuable is fundamental to a gold standard. Once someone invents a means of turning sand into gold, the currency suddenly hyperinflates and everyone becomes poor like zimbabwe.

This is no different from a fiat currency.

Belief and trust is as important for a gold standard as it is for a fiat currency.

[agere_contra]

The guy is dizzyingly breathless all the way through but yes, he's not wrong.

He uses a weak form of words when talking about Gold going to infinity: no, it won't go to infinity: it will simply rise to very high levels.

But he's right otherwise. Your Fed is locked into money printing, and whatever happens (if they stop or carry on) the 30 year T bill will race over 5% and America will suffer a sharp dollar devaluation. Nothing can stop this before 2013. America has huge debt in a time of saturated debt and the White House is not currently willing to sell assets or cut spending.

Here's the thing. America will recover from this. The dollar will begin to come back once sensible people are in charge. But anyone in cash during D-month will be wiped out.

[Free Vulcan]

No doubt this is part of the reason they are sucking up gold. I have no doubt they are looking for new reserve currencies, and who can blame them? We screwed ourselves.

Seriously though, I had about 600 ounces of 1 oz silver coins I bought back in the late 90’s. I sold all but 20 of them. Why? Because I felt living self-sufficient was more important. You can’t eat, drink, or stay warm with precious metals.

I think the economic disruption will be harsh. Be prepared to live Amish and live in isolation for 10 years. I’m not kidding. This is how I’m thinking. If you can do that and still have money left, by all means get it out of the dollar. But you could give me a half-million dollars or more and I guarantee you I could spend every dime and more on preps.

Gold and silver are only good for trade if someone is willing to take it. That requires some kind of local economy. You may not be that lucky. Otherwise gold and silver are good as a store of wealth for better times.

As I said, unless you are a multimillionare, it is way smarter right now to buy things like seeds, grain grinders, water purifiers, wood stoves, and camping equipment. Get back to the land, learn how to survive.

[agere_contra]

Once someone invents a means of turning sand into gold

This is your reason why a Gold standard can't work?

It won't succeed because someone will discover Alchemy?

There is no font large or purple enough to describe my suprise at this argument being used on FR. Awesome post!

[fso301]

This is your reason why a Gold standard can't work?

I'm not sure when or where you learned to read but I was taught to read from left to right, top to bottom with more important content generally appearing earlier than later.

There is no font large or purple enough to describe my suprise at this argument being used on FR. Awesome post!

Peoples lack of depth and perception never ceases to amaze me either.

[Presbyterian Reporter]

It was quite a wild week in the metals markets. But at the end of trading on Friday the silver price as measured by the etf SLV was only 44 cents below the high price of $33.00 set earlier in the week.

There is so much potentially bad news in the offing that sometimes I consider staying in bed all day.

With Jimmy ‘Barack Hussein’ Carter at the helm, all hell could break lose.

[Brandybux]

There is much truth in the article, but understand that it has a biased view.

One can find many whose business is not buying/selling gold/silver who are saying the same things. You can hardly blame a grocery store for advertising its wares to those in danger of hunger if they do not lay in some stores.

As for what to do, Gonzalo Lira's blog offers a number of specific strategies.

No, I am not Gonzalo Lira. Google "Gonzalo Lira blog" if you want to check him out.

[weef]

But anyone in cash during D-month will be wiped out.

I assume D-month is when the sharp dollar devaluation occurs but how do we stop being wiped out at that time? Investing in physical gold and silver only?

[Georgia Girl 2]

“The US Economy can become more competitive if the USDollar declines hard and worker pay scales fall hard.”

Not to mention stealth default on the debt. The Fed thinks of everything. Except us.

[agere_contra]

Why would I query your first sentence? That made sense.

There are indeed problems with establishing a Gold Standard.

The only 'monetary standard' that has no fiat basis is one where actual precious specie is passed from hand to hand.

But how would one handle credit in such a system? How does one handle stresses of supply as the population grows?

So there must always be some fiduciary aspect to a modern economy. The thing to do is deal with fiduciary runaway before it happens. Limit spending, or crash and burn.

Fortunately this happens automatically for all other countries except those with artificial stressors like e.g. a common currency (the Euro). And it will happen automatically for the US once the dollar's reserve status is removed. So no Gold standard is required. Just one currency per country.

But, see, then you derailed your post. You made an excellent point about money and then said, in effect, that Gold wouldn't work as money because Unicorns would start laying eggs made of it. Ah well, we all make duff posts from time to time: not to worry.

[agere_contra]

My perspective is that the Dollar crash will be like all the other devaluations in history, albeit more traumatic. Those in cash will get wiped out, and there will be a sudden increase in dispossessed and desperate people.

I don’t (however) believe that the world will turn into a Mad Max film for a decade. Stocks and shares will still exist: the laws of property will still generally be in force.

So: top of the list is “Domestic precautions”. You know better than I what you need to protect your life and family against an influx of entitled locusts, and how to deal with up to two years of highly variable food prices.

After that: hard assets. Any kind of hard asset. Precious metals (NOT diamonds) are an excellent choice due to portability, but also consider shares in miners and energy commodities. Also consider ‘World Beater’ companies: e.g. JNJ, EXXON. When a company has billions in hard assets and no debt it is a different kind of “too big to fail”.

If you buy physical Gold/Silver, tell only one person where it is, don’t store it all in one place and don’t put any in a Bank.

[ml/nj]

In the real word supply and demand are always equal. I'm sure one could also suggest that the supply of Champagne is also much less than the demand for it.

Kitco sells gold and silver so no one should be surprised that they produce articles that try to drive prices higher.

I'm waiting for an article that deals with the likelihood that our government will prohibit gold and silver transactions between private citizens; and maybe seek to confiscate gold as St. Franklin D. did some 80 years ago.

ML/NJ