Commentary on Precious Metals Prepared for CoinWeek.com by Patrick A. Heller
The 30-year $400 billion agreement for Russia to supply natural gas to China without using US dollars for payment is just one of the opening salvos by these two nations to destroy the US dollar.
There are a number of other attacks on the US dollar and US economy in the works that are getting almost no coverage by the US media:
• The Chinese government has ordered all state-owned computers to stop using Microsoft Windows 8 software.
• Just days after the US government indicted five Chinese military officials on May 19 for criminal hacking, the Chinese government ordered all state-owned businesses to sever all relations with US consulting firms.
• The US firm Cisco has acknowledged that it has not received any new Chinese orders in a month.
• IBM supercomputers in China are being taken out of service.
• For more than a year, China has stopped adding to its holding of US currency and Treasury debt holdings and is slowly decreasing this position.
• In the past few months, Russia has dumped so many tens of billions of US Treasury debt onto the market, to be absorbed supposedly by Belgium but in reality almost certainly by the Federal Reserve, that the Federal Reserve’s claim to be “tapering” its quantitative easing program isn’t even worth the paper it is printed on.
• Russia and China are now making financial inroads with supposed US allies such as Germany, Saudi Arabia, and several nations in Africa and South America.
Foreigners can clearly see this economic war. Too many Americans don’t see it because they don’t want to. These Americans don’t want to see this ugly development because our politicians keep telling us we are a free nation and undergoing an economic recovery.
The timing is not coincidental. While the economic and political strength of China and Russia have been growing internationally, the United States has been declining. All that was needed was a pretext of the United States being the bad guy internationally for the major push of the economic war to begin. That pretext happened last year with the revelations that the US National Security Agency (NSA) engaged in extensive domestic and foreign surveillance of telephone calls and emails.
As commodity investment guru James Rogers said in a recent interview, decades ago China’s economy was about 80% controlled by the government while only about 20% of the US economy was government-controlled. Today, China’s economy is only about 20% controlled by government while America is up to at least 40%. Therefore, it should be no surprise that, because of the expansion of economic and political liberty, China’s economy is growing while the US stagnates.
Because the United States is the world’s largest debtor nation run by a government that operates with huge annual budget deficits, there is little that the federal government can do stop the development of Economic World War 3. The only practical beneficial step would be for the US government to remove the shackles on the private sector.
I just don’t see America’s politicians willing to return political power to the citizens of America. For that reason, the US dollar is almost certain to be crippled, if not destroyed, by the Economic World War 3. For self-preservation, every American should look at establishing an insurance position of physical gold and silver.
Patrick A. Heller was honored with the American Numismatic Association’s 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com). He is also the financier and executive producer of the movie “Alongside Night”.
shackles? Big business depends on the nanny state. Businesses need an educated citizenry, roads, police and military protection, semi-clean air,etc. This requires government. If the private sector paid better, less people would be on public assistance, eg Walmart. Capitalism equals less freedom. Just look at China
Joe and Patrick,
It is important here to realize that the interests of small businesses and large businesses now often diverge, unlike in previous generations. Large businesses now are as often on the public dole as “welfare queens” are. They just use different means.
I don’t know HOW we got away from the classic Henry Ford idea of a view on worker compensation, but I do know we have done so. My best guess is that large businesses no longer believe they need the domestic workforce as their core customer, instead relying on the elevation of third-world workers from crushing soul-stealing existential poverty to merely difficult poverty, all the while consigning the domestic workforce slowly, gradually, but still inevitably to the same fate.
Corporate giants have decided that as long as there are crunchingly poor people to rely upon, who needs an American middle class, right? I submit that is why they are in love with so-called “free trade”.
The opulently wealthy tend to morph into the insane and perverse. Look at the great mansions of the robber barons or the William Randolph Hearst estate in San Simeon. These people were so far removed from their roots and ordinary people that they considered themselves their own species (at least by their behavior). Consider the upper city of Fritz Lang’s Metropolis. I think those running these major corporations have so lost touch with their customers that they really can’t relate anymore. It’ll all crumble eventually. Sooner or later. I don’t know what having a sock drawer full of gold will do to protect my portfolio- when such a paradigm shift occurs.
There simply ARE NO protections for any asset for anyone when the fecal chunks actually do impact the whirring blades. I don’t care how much some people believe that gold is some magic elixir that protects wealth, but it hasn’t been so.
What happened to gold prices when the 2008 financial bubble burst? No, gold initially went DOWN along with every other asset. Then the goldbugs started their internal resonance chamber imagining hyperinflation being just around the corner, and THAT’S what drove gold to the stratosphere until the financial market big boys grew weary of playing the goldbugs like marionettes and cut the strings slowly starting in August 2011. The true believers (who are always out there [here?] 24/7/365) were taken for a wild ride and MOST of them lost money in the bullion markets.
But then there are always a few writers (Now where have I read one?) who ALWAYS believe now is the time to buy gold bullion. Guess what they do for a living? Yup, they sell it. Huh. Go figure.
I don’t agree with the nay-sayers that gold will not protect wealth. I will agree that paper gold will not protect wealth since every ounce of gold ever mined is owned by 40 other people. Possession is 9/10ths of the law and guy who has it, owns it. If you want it, you better be willing to give me something I want in return for it. That is wealth protection.
What drove prices down the last couple years were the paper gold holders selling into the market. They were selling contracts, not physical bullion. The holders of physical bullion saw their hoard loose value but they still have their hoard, the sellers have a fist full of worthless paper that if they continue to hold, will, at some point, loose it’s purchasing power even if the status quo remains the same. The difference is wealth ultimately destroyed, and wealth ultimately maintained.
A store of wealth is anything that someone will want to give you something for. For gun nuts it’s ammo, for people in Venezuela it’s toilet paper…
Gold is simply one option as a place to store wealth because of it’s possible use as tender in an exchange. Looking at the historic nature of gold it has always had some value that has transcended empires and borders. We are not so advanced to no longer see gold as a viable currency in times of severe economical turmoil, we have just been brain washed into thinking it’s worthless.
But to make your case you seem to say that any commodity will do. Which begs the question: why gold?