New information...

Well, the European banks that have shorted gold in an effort to save themselves and drive the price down (which convinced me the price WOULD go down) may have a BIG problem on their hands. India has already started to buy oil from Iran using gold instead of the dollar. Beijing has indicated an interest in getting on board with that while Russia says it will buy Iranian oil with currencies other than the US dollar. Gang, this is TOTAL WAR! The effort to kill the dollar (which is trying to kill the euro) will mean destruction of supply (read food, clothing, heating oil and other stuff like that) that has only occurred in the past during a full-scale war. This time there is no shooting but the casualties will be civilians who can't eat or keep warm. Oil will be scarce and expensive and the currencies to purchase oil will be scarce and expensive. Iran is threatening to close the Straits of Hormuz, which would cut off the flow of oil from that region and the US is countering with the threat of military force to prevent that. The currency wars are threatening to become shooting wars. What a mess. If you haven't thought of what you would do to protect your family in case of severe shortages, this would be a good time. Change your mindset. Check my other blog at www.survivorscache.blogspot.com for some ideas and links to other valuable information. Read "The Creature from Jekyll Island" (see the link above) so you know what's behind all this. Ultimately, only you can take care of you. I've provided some ideas and there are plenty of others on the Internet. Make use of it. Precious metals may be the only good short-term refuge. Long term will be to be able to grow your own food, make your own clothes and get your own fuel. Don't wait.

Trusting currency...

There is a popular belief that currencies are okay if people trust them. Really. Let's look at that. What does currency let you do? Currency is a measure of value. If inflation weakens a currency, it takes more currency to measure the same value. So where does the value come from? If you think about it, value comes from the ground: agriculture or mining. All else is derived from that. It takes labor to manage either i.e. planting, weeding, harvesting, packaging and transportation for agriculture and digging, processing ore, refining and maybe machining for mining products. All these steps are value added and the value comes from human effort, also known as labor. Currency allows you to trade labor value with someone else. Currency that is not redeemable in something like gold, silver or other commodity can only be redeemed by someone's labor. That makes unbacked currency a promise to pay (redeem) someday in the future. Historically, all such promises end up being broken. Someone who labors to get, refine and coin gold or silver (or other metals) is creating value by working to purify the metal and put it into a usable form. There is no promise to labor someday because the labor has already been done. Trust is not an issue. The coin can be weighed and tested for purity. In fact, historically, coins have been made and "reeding" (the small vertical cuts in the edge of the coin) was added because any filing of the edge would show up instantly alerting users that someone has tampered with the coin. Central bankers and governments hate gold and silver (or any other metsl backing for that matter) because the limited amount of backing prevents them from determining the currency's "elasticity" (ability to inflate secretly) allowing them to steal purchasing power from the population. Fiat (created by governmental edict) currency allows just that. If someone can secretly reduce the value of the currency you use, you are paying a secret tax. Precious metals prevent that additional tax, preserving the purchasing power of the people. Don't let the bad guys kid you, they hate gold and silver because they force governments and bankers to be honest. Trusting government more than gold or silver is truly folly.

Energy money...

If you have been following the international markets, you have probably read how oil settlements may soon not include dollars. People with real assets (like oil) don't want depreciating assets (Federal Reserve Notes) unless they can dump them quick for something else. Not only that, we are being told that there is a finite amount of oil in the ground so that's why we have to fight for control over limited resources. Guess what? New evidence shows that we'll never run out of oil because it's being formed continually in Earth's mantle where pressure and heat cause the linking of methane gas into chains that result in hyrdocarbons. Methans is one carbon molecule with 4 hydrogen molecules attached. Carbon is unique in that it can accept 4 molecules of something else and certainly can bond with other carbon molecules. An 8-carbon chain with the attendant hydrogens is called "octane". Sound familiar? It should. I once had a manager for a large defense contractor tell me that the oil fields in Saudi Arabia are so large that new oil is constantly being created. I shoulda' realized then what's going on. So, the politics of limited oil are nonsense. On top of that, the US Dollar is a hot potato both politically and economically. I personally know of oil pumps in the midwest that were ordered shut off by the government so we would buy oil from the MidEast. Why? Ostensibly to exhause their oil fields and preserve ours. Well, if new oil is being created there, it surely is being created in the good ole' US of A, too. If we went to our own oil and stopped buying MidEast oil, that surely would do our foreign policy a world of good. It'd be good for the dollar, too, providing the gangsters in Washington can be held accountable.

Crocodile tears...

Well George Soros is upset. He is quoted saying that the European Union is "undemocratic to the point where the electorate is disaffected, and ungovernable to the point where it cannot deal with the crisis that it has created". Undemocratic? He's gotta' be kidding! George Soros is well known to be a monopolistic capitalist which is indistinguishable from a socialist. He thrives on hidden currency deals, insider information and stirring up trouble as in the Occupy Wall Street riots. This guy is funding trouble around the world and profiting from it. It's time to call him (like in poker call him) and stop his trouble making. He is a socialist because he expects to control the governments through the magic of his currency deals and live the good life. The heck with you wanting to have a good life. He needs slaves for his and if you don't have a plan to prevent that, he wins. So call his crying about "undemocratic" stuff what it really is: "crocodile tears".

Oh the games governments play...

It seems that the currency markets are subject to many factors but now something has come to light that really is ridiculous. China, as you know, owns about $ 800 billion of debt guaranteed by the US government and there is a lot of worry about how China will act if the debt doesn't get handled correctly. Well, now we find out that China owes about $ 750 billion to US citizens from just before the communist takeover by Mao and company which is in default. Imagine that. US citizens invested in China at the encouragement of the US government because "China is a good investment". Now with the commies in control, those debts have been defaulted but never repudiated. In fact, China's demands have put them in a box that gives them no wiggle room. In 1987, China agreed to pay some of those bonds (from prior to Mao and thus validating them) to British citizens when they were informed they would be kept out of British markets unless they paid up. Then, when Saddam Hussein's government in Iraq was toppled, China insisted that any subsequent government would have to make good on the debt that Saddam accrued. The UN concurred and so now we have precedent in international law, which China helped to create. Oops. What does this mean? Well, not sure yet but it will have an impact. Oh yeah, a lot of those old bonds were denominated in gold. Heh, heh, heh. That means China will have to produce and there is a lot of short selling of gold right now by European banks (for dollars). I still expect the price of gold to drop in the short term but when China finally is held to account for the gold denominated bonds and starts buying, look for panic among the banksters because the price of gold will really rise then. Serves 'em right.

Gold as a hedge against inflation

It seems smart money keeps trying to demonetize gold or run it down as a hedge against inflation. Keynesian bankers don't want gold to be a monetary metal because it keeps them from inflating currency and getting the benefit of the purchasing power of the currency without having to actually work for the money. (As an aside, the purchasing power they get is STOLEN from you. But that's another story.) Checking the Consumer Price Index (the calculation of which is constantly restructured to keep US government liabilities from increasing too fast) indicates that from 1913 (the formation of the Federal Reserve System) to 2011, the price of something that was $ 1.00 in 1913 now costs $ 22.72 which is an inflation rate of 3.24% (roughly). That means, if gold has no real value other than as a commodity, the price of gold should have risen from $ 20.67 to $ 469.24 if only to cover inflation. Well, we all know the price of gold is now $ 1,667.00 which is an investment rate of return of 4.58%. BUT, don't forget that for the years from 1913 to the gold confiscation by FDR in 1933 (20 years for the mathematically challenged among you) the price of gold didn't change AT ALL! After the deadline, FDR raised the price of gold to $ 35.00 and basically stole that value from US citizens. My how the powerful play! Well that means the real investment period should be from 1932 to 2011 and the rate of increase in value of gold in the same period is 5.715%. So, the conclusion is, if the CPI is correct, gold really clobbers inflation. If the increase of the gold price indicates the true inflation rate (which I believe is actually a bit low because of market manipulations), then the US government is not being honest about its contractual obligations. What do you think?