Not our Fault (part three)

We've seen how the prices have gone up over the years, which merely means that the dollar has been inflated, or its quantity increased. Why? To pay the bills the politicians have run up to make themselves popular and get re-elected. Not our fault. As the dollar lost value, the citizens had wage increases to attempt to equal the price increases… to literally keep on living. The wage increases never kept up with the cost of living, so the standard of living gradually went down. It has been said by various economists, that we have a standard of living which we had close to fifty years ago. No progress towards a 'new world,' in other words, but rather a retrenchment. Not our fault.

Under FDR, a plan was wholeheartedly endorsed and voted on by those in office at that time, and it was and still is called, "Social Security." It all sounded so wonderful back then, but now has become a nightmare for the fed. Why? Because when the plan was begun, there were a lot of workers for each retiree, and now there are barely two, so far more is being paid out than is coming in, in spite of the fact that "contributions" (sic) have been increased by hundreds of percentage points. From 1% to close to 20%, and still Social Security is an economic disaster. As if that weren't bad enough, it was decided to subsidize medical care, and forced the individual states to do the same thing. "Medicare" and "Medicaid" were born, and have both proven to be a further economic disaster. If an insurance company paid out more than it took in, it would go the way of all flesh pretty quickly. Medicare and Medicaid come no where near the break-even point, and a dark cloud is on the horizon in the form of the 'baby boomers' retiring by the thousands every day, and making application for the benefits they have been paying for all these many years.

Social Security, Medicaid and Medicare, actuarially unsound, will be so far out of balance in a few years, that there will be only one solution. Know what it is? That's correct…they'll have to print the payments, or to make it technically correct, they'll have to sell debt, etc. If no one will buy the debt, they'll buy it themselves, as I believe they are already doing. Buy their own debt? Impossible as that sounds, it must be done to keep the system afloat as long as possible. Technically, to increase the money supply to pay the bills, they must print instruments to sell, so that when they are sold, the money can be printed. Technical only, because if no one wants to take a chance on the dollar's value over the years, and decides not to invest in dollar denominated paper issued by the Treasury, the Treasury will buy it themselves, which is no more ridiculous that the so called "information age," when 'wealth' is supposedly created by doing each others laundry and paying each other to do it. Since it is all a fraud anyway, why shouldn't the fed buy its own debt, thereby allowing the money to be printed? The bills have to be paid, and the retiring baby boomers will be demanding the re-payment of the dollars they were forced to put into the system.

Naturally, this will require even more printing press money to be produced to pay the retiring boomers. The more printed, the less they will be worth, so prices will go up, payments will be increased as the 'official' cost of living index increases. Since an accurate cost of living index means a shorter life span of the buck. The 'official' cost of living, as well as the 'official' inflation rate, are as phony as Santa Claus or the Easter Bunny. If a true set of statistics were coming out of D.C., it might set back the crumbling dollar as much as a couple of decades. If the true cost of living and inflation were used and published, the average Social Security check would probably be close to twice what it now is…or do you really believe the 1-2% 'official' inflation rate? The 'official' inflation and cost of living figures determine the increase in payments for Social Security. It save a lot of dollars if the payments can be kept low.

We've mentioned the expensive current wars in Iraq and Afghanistan, as well as all the previous wars which decapitated the dollar from a sound dollar, to probably 2% of its former glory. We've gone from production to consumption. America has gone from making what it uses, to buying from various overseas entities, what we use and even eat. Our capital has vamoosed with each container coming in full, and returning empty. Our capital, in the form of sound currency, has degenerated by increasing the supply of dollars, thereby making the dollar unsound. We've been hit two ways. First by an endless increase in the number of dollars in circulation, and second, by sending them overseas for things we want and need, simply to exist, and it isn't our fault.

Our jobs have vanished, simply because workers must be paid in dollars, and the dollar has gone down so much, that other nations can make and grow what we need at a far lower cost in dollars, than can Americans. Thus we import stuff, with profits going back to Japan, China, India, and any other place which has sounder currency compared to the dollar. China has no bureaucrats breathing down workers and factory owners' necks, and taxing them incessantly for everything they need, plus their labor. Admittedly it was started by Sam Walton's kids probably, who weren't satisfied with being the richest (by inheritance) kids in the world. They decided to become even richer by cutting the throats of the American factory workers. Wal Marts then began selling mostly imports, in direct contradiction of their old man's "Buy and Sell American" philosophy. Millions of factory jobs disappeared, and factories closed, never to re-open again. It wasn't out fault.

The Japanese began making excellent cars in America, with non-union labor in various southern area of America, but the profits went back to Tokyo, our former enemy. Mills went bankrupt, and cloth manufacture went overseas. Farm taxes and regulations became so onerous, that food began to be imported from countries with no regulations and heavy taxes on everything. Wonderful machines and electronics were invented here, and began to be made overseas with cheap labor, with American patents being ignored. With their new found wealth, foreign nations began buying American corporations and companies, with profits going back to whoever bought them. Columbia Pictures, Firestone Tires? Only a couple of the many. It is virtually impossible to find anything made in America today, and with each dollar spent on a necessity, which may be made in China, the profit goes back to China, and it isn't our fault. China now has one trillion US dollars in its treasury, all of which came from profits from stuff sold to Americans, and they're growing very leery of the dollar.

You'd be suspicious of an obviously bad investment, and the Chinese are becoming just that. Their purchasing our debt, has sharply decreased. Iran and a few others, will no longer take dollars, admittedly because they hate our invasion of their nations, but also because they know the buck is failing pretty quickly. They don't want to get caught holding something which is losing value. No one does! Really? I know a lot of people who are investing in bad things. Millions of people I am familiar with, are doing what foreigners are beginning to realize is a poor investment. Of course you know. It is DOLLAR INVESTMENTS!

A quick look at history, plus a logical look at what has and is happening to the buck, will surely indicate that saving in dollars or investing in dollar denominated securities, is economic suicide. Maybe a slow suicide, or maybe it will happen quickly, I don't know, but to think it won't happen, is absurd. How can a currency, which is backed by nothing, is being printed continually to pay the ever increasing bills of war, benefits, handouts, and various other forms of foolish spending, hold its value? How can a currency, which has already lost 98% of its value, regain strength? If a man is 98% dead from cancer or pneumonia, will his recovery be bet on by a sensible gambler? No, but 99% of Americans are betting on the dollar's recovery, or at least going no further down in value. An absolutely foolish stance. Why do Japan and China, plus others, still buy a few of our debts? Because we spend with them. Dollar savers in America, aren't willing customers to China, Japan, and India. Dollar savers in America, are totally different than the Chinese and others, who buy a bit of our debt to keep the buck afloat till they either get out of them, or develop enough customers with euros, gold, or whatever. This is the end of three parts of analysis, which shows without doubt, that saving and investing in dollars, and dollar denominated instruments, is crazy. Will you use these three parts as a sort of 'Bible" to show those in need of conversion? If just a few realize the folly of dollar investments, and buy gold and silver from some other place, I don't care. Just 'get saved' and get out of dollars, and into things TANGIBLE. (I don't mean to sound like an evangelist.)

Antiques? Surely, if they give you pleasure. Old cars? Whatever turns you on in something TANGIBLE. Old stamps? Rare paintings? Whatever you wish, but remember, gold and silver need little space, are universal money for thousands of years in all nations, and will continue to be so. Just protect yourself.

April 26, 2007

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com