About the Mess We’re In

I normally stay out of politics, but I can’t help it today.

Just a quick note. I have a friend who’s been buying gold and silver. You’d be amazed at how much gold you can get for $100. I mean how little.

Anyway, I decided to take a look at what the price of gold has been doing historically and especially in relation to the market swing of the past few days—just out of curiosity. As I did a google search though, I found a document that was making some good sense. It was written by Ron Paul in 2006. And while it wasn’t telling me much about gold pricing history, it was pretty interesting to someone who’s wondered about the dollar and the Gold Standard.

As I got deeper into the article, I read some things that blew my mind. Keep in mind this was Ron Paul in April 2006:

A soaring gold price is a vote of "no confidence" in the central bank and the dollar. This certainly was the case in 1979 and 1980. Today, gold prices reflect a growing restlessness with the increasing money supply, our budgetary and trade deficits, our unfunded liabilities, and the inability of Congress and the administration to reign in runaway spending.

The Fed tries to keep the consumer spending spree going, not through hard work and savings, but by creating artificial wealth in stock markets bubbles and housing bubbles. When these distortions run their course and are discovered, the corrections will be quite painful.

Then, probably the most telling part nails the bailout plan on the head:

Current policy guarantees that the integrity of the dollar will be undermined. Exactly when this will occur, and the extent of the resulting damage to financial system, cannot be known for sure – but it is coming. There are plenty of indications already on the horizon.

Me: hello, It’s here.

Even if it were recognized that a gold standard without monetary inflation would be advantageous, few in Washington would accept the political disadvantages of living with the discipline of gold – since it serves as a check on government size and power. This is a sad commentary on the politics of today. The best analogy to our affinity for government spending, borrowing, and inflating is that of a drug addict who knows if he doesn’t quit he’ll die; yet he can’t quit because of the heavy price required to overcome the dependency. The right choice is very difficult, but remaining addicted to drugs guarantees the death of the patient, while our addiction to deficit spending, debt, and inflation guarantees the collapse of our economy.

So what can we do? Pretty much…nothing. Maybe diversify a bit, buy some gold, start saving rather than spending on credit. While it’s no investment, it could be a great defense against the inevitable plummet of the dollar.

Oh—and maybe one more thing. Mr Paul says:

False trust placed in the dollar once was helpful to us, but panic and rejection of the dollar will develop into a real financial crisis. Then we will have no other option but to tighten our belts, go back to work, stop borrowing, start saving, and rebuild our industrial base, while adjusting to a lower standard of living for most Americans.

Anyway, I highly recommend the article. Take a 1/2 hour and give it a read, you’ll learn more than you ever did in that wretched Economics 101 course you took twice back in college.

And while our government continues (no matter who’s directing it in a few weeks) to create fake money in an effort to keep bubbles in the air, we might as well get a head start adjusting to the real world we live in. Tighten the belt, go back to work, stop borrowing, start saving, and adjust to a lower standard of living. Truth be told, you might actually find it to be more agreeable than trying to remember when your 0% teaser rate ends and what you’ll do with your balance then.