Sunday, May 23, 2010

Gold Savers Will Get the Last Laugh

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For that's what this cycle is all about. Cleansing the system of debt is a process fought tooth and nail by the banks, which have encouraged profligacy among the masses and their governments to an extent not seen in the last few generations. Due to social mood (or whatever you think drives a phenomenon that recurs as regularly as the tides), the people and their governments were more than happy to oblige the bankers and take on enormous debt.

Those who tried to save money using conservative means were ridiculed. They were considered quirky and quaint. Who were those losers that saved up in order to pay cash for an item? Who were those wimps that thought home and stock prices were too high last decade and kept waiting for lower prices?

The reckless mood of endless debt has come to a close. There are many participants feeling the sting of the turn. Many of those who we all thought were rich are now poorer than before the boom started. Leverage cuts both ways. Savers are set to reap the rewards of their forethought and prudence.

This is why it is so maddening that many savers will soon be wiped out. Why is this? Because they insist on believing that a debt-based paper monetary system backed by nothing but too much debt is a good vehicle in which to hold one's savings. Cash in the bank and government debt will work as investment vehicles until the day they don't. And how can I be so sure that they will eventually fail when savers need them most?

Because government is the ultimate debtor and the majority of the population that votes has no savings whatsoever. How will we get out of this mess? Well, time is the main way. But we are an impatient herd, especially those with their greasy hands on the levers of power trying to control that which cannot be controlled. When global stock markets get back to the March 2009 lows and make a complete mockery of the paperbugs and their ridiculous beliefs in apparatchiks and bankstaz, will that be the trigger?

Or will it take a sound and scary break below the March, 2009 lows to initiate the trigger? Do you know what trigger I am talking about? I am talking about the trigger that causes the apparatchiks and their bankers to reach for the nuclear option.

That nuclear option is to change the rules of the monetary system. This rule change will wipe out the traditional prudent savers who used paper debt tickets as a store of wealth. Do you doubt it will happen?

Do you deny that it happened in the 1930s and then again in the 1970s? Do you deny that a 40 year cycle of monetary destruction is set to recur in the 2010s? The traditional prudent saver has fallen for the paperbug promise and will be pulled into the black hole of insolvency right along with the squalid debtors!

Now is the time for Gold. Gold, the hated asset that all of a sudden has become a bubble. Gold is money, has been for thousands of years, and will continue to be whether you think it's appropriate or not. It is older and more reliable than every sovereign currency ever created. Most of these man-made currencies have already fallen by the wayside. The sheeple accept the Euro as an important currency even though it's only been around for a decade or so! How quickly we forget the lessons of history.

The real prudent folks are those despicable Gold bulls who accumulate physical metal held outside the system controlled by those that will turn against and plunder savers. If the markets won't do it for them, the U.S. government will intentionally decree a devaluation of the U.S. Dollar before this cycle is over. That's actionable information. And in case you're wondering, no, you won't be notified in advance.

In fact, a devaluation will be favored by those who hold the reigns for the Yen and Euro as well. A coordinated "shock and awe" campaign may well help reset the debt morass in a surprising way. Those who hold real money will be rewarded.

Jealous paperbugs have drunk the official Kool-Aid and believe the apparatchiks will not let Gold bulls profit from their wise decision to buy physical metal held outside the financial system. This is sour grapes at its finest, but they concoct stories of confiscation, excessive taxation and Gold price collapses that will wipe out the Gold bulls.

I have news for this crowd (Prechter, Roubini and Denninger: WAKE UP!): no one with any form of money is safe when things get bad. How about property taxes and stock market taxes? How about a VAT tax? How about 401k confiscation? How about the score board after the first two big deflationary waves? Why does it take so many more paper debt tickets to buy Gold if King Dollar is getting set to win the clash of the titans contest? When will you all admit defeat and stop giving people bad advice on Gold?

Gold savers will have the last laugh as the asset price deflation in Gold terms continues essentially unabated other than the needed corrections that characterize every healthy and sustainable trend. The Dow to Gold ratio will hit 2 and we may well go below one this cycle. As a parting thought, never forget that the people and organizations who hold the most Gold in the world are the same ones who will get to decide how much to devalue paper against it!

"You have a choice between the natural stability of [G]old and the honesty and intelligence of the members of government. And with all due respect for those gentlemen, I advise you, as long as the capitalist system lasts, vote for [G]old."
George Bernard Shaw (1856-1950)

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