Friday, October 23, 2009

A Review of Gold, Silver (Final Settlement) and Economic Basics

If you think through the reality below, you'll see that ownership of gold and silver in your own hands is a no brainer:


Start some basic 'ol reality:

If you are going to go to work in the construction trades, there are some simple basic things you need to learn no matter, literally, which trade you choose.

Some of these are:

1. How to determine if something is level (perpendicular to the pull of
2. How to determine if something is plumb (in line with the pull of gravity).
3. How to make something 45 degrees from plumb or level

If you are going to go to work in any field in life, or you choose to be a dead beat or dilettante, still, there are some simple basic things you need to learn no matter what you choose. Particularly if you're a dead beat or diletante that is starting out with a grub stake that someone gave you, and you need to maintain and/or increase the real value of it because you are planning 0n never working again in your life.


Start some more basic 'ol reality:

Let's call economic basics simple 'ol basic reality:

The more wealth a person has or a group of people have, the higher the standard of living he/they have.

Wealth is:
1. economic goods and services
2. that people are willing to pay for.

Wealth is not money, currency or government fiat tokens. Gold would not have been of value to Robinson Crusoe when he landed on the island.

However, money, currency and government fiat tokens can be stores of value.

Value can be converted into capital.

Capital is the means of production.

Capital can only come from savings
(Before there is capital, there has to be savings).
(The process of tranfering value from savings to capital is called investing.)

Capital plus the use of human minds and hands create wealth.

There is no theoretical limit to the creation of wealth.

There is a limit to how much debt a financial/economic system can take on.

It is impossible to increase one's wealth by borrowing to consume (Borrowing to invest to create wealth is another whole story).

Borrowing to consume merely decreases one's future wealth because of the interest expense that has to be subtracted from future possible savings, and because of the principle payments that have to be subtracted from future savings. No increase in savings, no increase in wealth. Too much borrowing relative to wealth creation and you actually consume capital, become less wealthy.

Statist governments screw up this process time and time again. Sometimes they hurt the process particularly badly which is what is going on in the US right now. The government is actually working to decrease the wealth of the US, thus its standard of living. It is borrowing for consumption purposes. Big time, when that is exactly what caused the problem in the US and many other countries to begin with.

Regarding the US dollar; the US Treasury is broke. To continue much of its spending it has to borrow dollars to pay off existing debt that is due. To increase spending to "stimulate" the economy, it has to barrow even more US dollars that it does not have. Its last resort is to borrow from the Fed. The Fed can create them out of thin air after it takes on new I.O.Us from the US Treasury. This increases the assets of the Fed composed of debt and increases the debt of the US Treasury, making even more broke.


Inflation is the increase of the supply of a money, currency or government fiat token. Inflation causes/effects rising prices eventually. No systemic inflation, no systemic rising prices, like during most of the 1800s in the US. Inflation did not start for real, in any systemic sense till the Fed was started in 1913. It has been up, up and away ever since.

Money (gold, silver, packs of cigarettes, women's nylons), Currencies (silver and gold certificates/notes, or other notes/financial instruments redeemable in something), and tokens (government fiat paper and digital bits redeemable in nothing) have 3 things in common:

1.) Medium of exchange
2.) Store of value
3.) Unit of measure/account (they measure value)

And they are different from each other in three ways:

A. Money does not have any liability attached to it.
It ***is*** final settlement.

B. A currency has liability attached to it. It is redeemable in something specific.
It is ***not*** final settlement.

C. Government fiat paper and fiat digital bits while not redeemable in anything, can not be created without debt/credit being created at the same time due to the nature of the current fractional reserve banking system.
It is ***not*** final settlement.

Inflation, depending on the degree of:

1. Causes people to shy away more and more from using what is increasing in supply (US dollar loosing its reserve status amongst central banks).
2. Steals/robs stored value.
3. Shortens the yard stick (unit of measure) while people still use it as a full measure, screwing up their financial and economic calculations for the future (mal/bad investments).

So, what is the no-brainer protection from what is going on at central banks and their treasuries? Or is it treasuries and their central banks?

Gold, silver and other atoms in your own hands.

The more they create government fiat paper and fiat digital bits (most US dollars are just digital bits on a hard drive, and that hard drive sure as heck does not belong to you), the higher in price gold and silver will go.

Here is something to think about. If you deposit dollars in a bank, where exactly are those dollars once you have deposited them in the bank?

Just like it is impossible to own real estate in the US now a days, you can only rent it from a government (what you buy is limited control over real estate, not real estate). So, too, you can not own your dollars that are in the financial system. You do not have access to root on the server nor own the server that houses and controls the dollars. You are merely allowed limited controled use of "your" dollars.


Reality is what it is. Reality doesn't care if people don't care what it is, or have totally forgotten what it is, or have no knowledge of it.

The world's monetary system is in the process of big change. It's in the process of breaking. There was too much ignorance amongst the masses that allowed too much fraud to develop in the government run and controled monetary system.

Now the Piper is insisting on being paid. The Piper always gets paid.

Those that educated themselves about reality and did something about it, took concrete steps as early as possible (as in buying gold and silver at least), will probably weather what is coming and may even prosper.

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