Saturday, July 25, 2009

Gold, Silver and Other Atoms

Gold, silver and other atoms are protection from governments and their borrowings thus also protection from their deficits.

Many people believe that their government's increased borrowings will be paid in the future by their children and their children's children.

Not so. The increased spending by their government will be paid by them, usually in 1-2 years, in the form of higher prices. The US government is slowly being cut off from lending by the rest of the world. The rest of the world is getting fed up with lending to the biggest, baddest, record breaking debtor in the world that simply can't pay back all its debt and has no current intention to stop borrowing. The other reason is that the world economy has slowed down and therefore has little, or a lot less, savings to loan to the US federal government. No problem for governments with central banks. The US Treasury will simply borrow from the Fed. The US Treasury will create I.O.U.s out of thin air, send them over to the Fed, and the Fed will simply create US dollars out of thin air in return for the I.O.U.s and send them over to the US Treasury.

The more there is of something, the less it is worth. The more US dollars there are, the more of them people will want for the same amount of gold, milk, KWs of electricity, carrots, imported goods and services, gasoline, etc.

So, rising prices in the long run are a sign of the devaluation of the unit of account (of value) or unit of measure (of value) that something is being priced in; not a rise in the value of that something that is being bought.

Your taxes might not go up but your government has its butt covered with a central bank. You will pay higher prices instead of higher taxes. The point is: you will pay and you will not have long to wait to pay. Most people do not understand this therefore do not understand the importance of gold and silver as protection from what is going on inside the US right now. The US governments deficit has already hit the freakin 1 trillion dollar mark and will probably end the year with a deficit of around 2 trillion. This is borrowing with reckless abandon.


... further explained by Howard S. Katz at The Gold Bug

Now here is something that is very important to understand (and yet is understood by virtually no one). Every time the government runs a deficit (of any size at all) it creates money. This began with the origin of democracy (in England in 1689). The new democratic government wanted to spend money like water. As the old monarchical goverment had done. but unlike the old monarchical government the new democratic government was subject to the legislature, and the legislature was subject to the will of the preople. The people said "NO NEW TAXES."

So the new government invented the paper money system. The Bank of England was created (1694). It printed up paper money and lent this to the government. The paper money caused an increase in prices. Thus the people paid for the new spending via higher prices for the necessities of life when they had just refused to pay via taxes.

[or in other words that Howard Katz wrote in another piece:]

Many Americans understand that the Federal budget has to be balanced, but they do not realize how crucially important this is. They think that; when the Government runs a deficit, then the money needed gets borrowed from the wealthy people of the country and that it will have to be paid back by our children. But this is not true. Except for very small budget deficits democratic governments cannot borrow from their own people. An excellent example of this occurred after England became a democracy, in 1688. England immediately got into a war, and soon the King needed money to fight the war. He asked Parliament for a tax increase, but Parliament was getting pressure from constituents and voted down the taxes. (Although England at the time still had a king, he had little power; thus we consider the country a democracy.) So the King tried to borrow the money from the wealthy citizens of the country. However, his demand for money was so great that it pushed up interest rates to unacceptable levels. The King was not willing to pay those rates, and the businessmen of the country were also hurt by them.

Then a gentleman named William Patterson had an idea. He started a bank, the Bank of England. Patterson got some friends together and raised £72,000 in gold and silver. He then printed what are called bank notes (pieces of paper redeemable in gold or silver) to the tune of 16 2/3 times his £72,000, a total of £120,000, and he lent these bank notes to the King.

The King was delighted because he had gotten his money. The Parliament was delighted because they did not have to raise taxes. Patterson had seemingly created £120,000 out of nothing. However, the enemy spread nasty rumors that Patterson’s bank notes were no good. Holders of the notes rushed to the Bank of England and said, “Give me my gold/silver.” Patterson could not pay. His bank notes were indeed no good. But the Parliament appreciated Patterson because he had helped them out with the money for the King. So they passed a legal tender law. This said that the piece of paper upon which the bank note was printed was just as valuable as the gold and silver which it had promised (but now could not deliver). Essentially, the King got his money by simply printing up pieces of paper.

To cut a long story short, this same thing happened whenever any democracy needed to borrow money. An institution similar to the Bank of England (called a central bank) was set up, and it issued paper money (declared legal tender). Then the issues of so much money depreciated the value of the money, and general prices went higher. In the Civil War, for example, the U.S. issued legal tender greenbacks, and the average level of prices doubled. A similar thing happened in WWI.


Just the cost of the gigantic insane bureaucracy required to run the new proposed government take over of the medical industry plan could give a powerful kick start to hyperinflation, particularly since most governments have a problem organizing a dozen of donuts, and particularly since this government has a treasury that is literally broke and has been broke for some years.

Most people do not know it but just the proposal of this plan screams that people need gold and silver right now. Just the proposal of this plan shows how ruthless and insane TPTB (the powers that be) are.


Today's car repair costs 5-10 years from now may look like Model T era repair costs. Despite higher storage costs, a Model T in excellent condition would offer similar protection as gold and silver although its storage costs would be more and it would not be as easily convertible.


From ATLAS SHRUGGED, by Ayn Rand, page 387:

Rearden heard Bertram Scudder, outside the group, say to a girl who made some sound of indignation, "Don't let him disturb you. You know, money is the root of all evil—and he's the typical product of money."

Rearden did not think that Francisco could have heard it, but he saw Francisco turning to them with a gravely courteous smile.


"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich—will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt—and of his life, as he deserves.

"Then you will see the rise of the double standard—the men who live by force, yet count on those who live by trade to create the value of their looted money—the men who are the hitch hikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law—men who use force to seize the wealth of DISARMED victims—then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

1 comment:

chrisliv said...


Nice article.

So, US Citizens are punishing their own children within their own lifetimes.

I suppose some of those children will eventually awake from their Statist Idolatry, which they inherited from their parents and the communized Public Schools.

So, it seems a little late in coming, but a grand Idol may soon fall.

Hopefully there won't be much violence in an attempt to overthrow the current Central Govt., like the early American Colonists espoused in the so-called Declaration of Independence (i.e. the right of violent revolution), only to quickly replace the British Crown with another Central Head, which is now (and it was, even as soon as the Whiskey Rebellion) far worse than George III and his redcoats were.

I think a Global Depression may be the most peaceful way to quell the pseudo-Empire of Wash DC, with its 750 foreign military bases and installations.

The collapse of the USD as the global reserve currency will undoubtedly help quell Wash DC actors from threatening many of the poorer peoples (or the Russians) around the globe, and on the North American continent, too.

Peace to you all,
C. Livingstone