Markets between fear and panic despite bailout
By David Bradshaw
Editor, Real Money Perspectives
Oct 6, 2008
"Imagine for a moment that you have the ability to create any amount of money, without ever having to produce anything. Is there anyone or anything you couldn't buy? Probably not. Sound impossible? It should be, but it isn't. Just ask your local Federal Reserve banker - they do it every day." –Rediscovering Gold (2001) By Craig R. Smith
The Dow has now fallen 40% since its 2007 peak of 14,000, in the wake of the worst credit crunch since the Great Depression and the biggest bailout in history. Don't panic, own gold.
"Every economy in the world experiences cycles of expansion and contraction. These cycles are healthy and as regular as the tides. When attempts are made to alter these cycles economies run into major trouble. This time is no different. There are certain rules of the universe that just cannot be violated," writes Swiss America CEO Craig R. Smith at WND.
The markets have come to the sobering realization that the Bush administration's $800 billion rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. Investors are exiting stocks and moving money into government debt and gold.
"We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars," reports Telegraph.
"In 25 years on Wall Street, I have never seen things this bad. Sell everything. Nothing’s working. Revisit when the prices are adjusted for a big recession and a crushed consumer," says Thestreet.com founder and perma-bull Jim Cramer.
We will either build our own economic worldview or swallow someone else's.
Most people find the study of economics a rather "dismal science", perhaps even boring. The result is that the public is prone to accept “expert” advice without first having a sound, free-market economic foundation or worldview.
This lack trust in the free markets helps to explain why the public is intuitively against further government bailouts, rescues or hand outs, despite the pleading of Bush, Bernanke, Paulson, Buffett, et al.
For example, the majority Americans (and mainstream financial journalists) believe 'credit equals money' because both can be created with the stroke of a banker’s pen. Likewise, most believe there's no consequence for abusing this "debt-based" system such as a U.S. dollar or housing crash.
By swallowing the popular, but misguided "debt-based" worldview it helps to fuel the pernicious credit cycle which leads to both booms and busts! Many investors, trying to outrun the credit cycle, are driven toward riskier and riskier investments, undergirded by an over-confidence in paper currencies, Wall Street hype or government bailouts.
However just as hot summer days are now fading into cold winter nights, the economic over-confidence has been transformed into economic under-confidence. What follows could range from a mild to nasty recession... to runaway inflation... to the worst of both: stagflation.
The key to keeping your money safe today is to discern the changing economic seasons and take action right now.
21st CENTURY SUPER-CYCLE CHANGE
The year 2000 brought with it a very different global change than most expected. Instead of computers driving our nation into a widespread blackouts and chaos, the market cycle began a fundamental shift toward commodities and away from equities for the first time in nearly two decades.
By 9-11 the cycle was already in motion, as energy and metals began to show signs of serving as 'the canary in the coal mine' foretelling of a shift away from stocks and into tangible assets. Since then oil and gold prices have tripled.
The residential real estate price explosion of 2001-2006 served as a powerful example of "asset inflation" -- fueled by artificially cheap money. This asset inflation generated phony collateral for runaway consumer debt and lured the consumer into unprecedented debt excesses, which has now turned ugly.
Today one in 100 U.S. homes are either in foreclosure on headed for it. The housing ‘wealth effect’ of recent years (which has propelled the global economy) has abruptly slammed into reverse. The extreme sellers market of 2005 is now on its way to becoming the extreme buyers market in 2009.
History teaches us that asset deflation usually follows asset inflation in the historical boom-bust credit cycle. The bigger the boom, the bigger the bust. This is just common sense.
Millions of investors are now looking for alternatives to the "priced-for-perfection" U.S. stock and housing markets. Many are now rushing into cash, thinking the U.S. dollar is (and will remain) "king".
But if that's true, why are so many central banks and big investors dumping dollars? Perhaps because the emperor has no clothes, except those on the American consumer's back.
One major reason U.S. gold and silver coins are becoming a popular component in a well diversified portfolio is simply because they are assets that you can own 100%, and the value is not controlled by government nor Wall Street, but by you alone and the simple law of supply and demand.
'OWNERSHIP' VERSUS 'LOANERSHIP'
Further adding to the deception of the debt-based worldview is the concept that Americans can really fully own most assets. True ownership mean full control, and neither real estate, stocks, bonds nor even your own car are ever fully yours.
For example, while most home-"owners" hope they can one day "own their own home" once that nasty mortgage is paid off, I would remind you that state and local property taxes will always be due annually. This illustrates that the government is the true final "owner" of all property in this country if you fail to pay your property taxes.
The same is true of stocks or bond gains. Fail to pay the taxes yearly and it becomes clear who really owns your gains. Even your car cannot be wholly owned unless you plan to drive only on your own property... otherwise, the car must be registered and insured or off it goes to government impound.
My point is that most of us are content with hold assets of "loanership", that is, assets which we use for our benefit but at a price -- either for a periodic dollar amount or with a price of some loss of freedom and control.
In the world of modern investment collectibles, such as U.S. gold and silver coins, stand virtually alone as assets of full ownership, full privacy and full control. For this reason alone, they should be included in every portfolio by every investor that seeks to control their own financial destiny.
Loanership assets are always somebody elses’ liability. Loanership assets must be dressed up, you know, 'put some lipstick on' to be made attractive. Not so with precious metals and collectible coins, they are most beautiful in their original state. All that must be done is to certify their authenticity and rarity. The investment and esthetic beauty of numismatic coins shine from within.
A PERSONAL GOLD STANDARD
“America’s current problems started with the closing of the gold window, progressed with the unsustainably of Bretton Woods II, and reached the point of insanity via the complete lack of regulatory oversight that epitomized the Greenspan years. That U.S. financial markets are in a state of panic today is not surprising. That the powers that be have been able to keep the game going this long is," reports Fall Street.com.
If closing the gold window back in 1971 is the root cause of today’s crisis, it is just common sense that putting yourself back on a personal gold standard is the fundamental solution to today’s crisis for the average investor.
United States gold and silver coins, the famous 'old world' currency are fast becoming the 'new world' currency because they offer the missing link in all paper currencies: a "benchmark" store of value.
Tangible commodities and high quality collectible investments are not only a safe haven but are also on track to outperform stocks, bonds, real estate and CDs again in 2008, just as they have every year since 2001!
The time has come for prudent investors to diversify a portion of their money into hard assets and then relax. I exhort those who've ignored gold's call to financial preparation can take action now before the world officially recognizes gold as the new global monetary benchmark.
The ultimate form of true wealth beckons wise investors again today. Gold and silver will help provide you with the insurance you need, the growth you seek, and the peace of mind you deserve. But start by getting educated here.
Read the full story in this FREE Special Report BAILOUT NATION: Truth AND Consequences