When? Part two

I am not an extremist, or at least try not to be. Paranoia runs deep in most of those of you who read these columns or invest in precious metals, as it should. I don't think it is paranoia to investigate the murder of JFK, visit Dealey Plaza several times, read all the books concerning it, and come to the conclusion that the Warren Commission was a fraud and total cover-up. After looking at tapes and photos of 9/11, and doing all the research I can do, I don't think it is paranoia to think it is a national disgrace and total cover-up. Now that "From Freedom to Fascism" is in theatres, will millions become full of paranoia and stop paying taxes? Maybe, but the reason I mention paranoia, is that since history proves that all currencies not backed by gold or silver reach absolute zero, without question, the matter of "WHEN?" comes to the surface.

It is sheer paranoia to believe that it will come tomorrow. Chicken Little said "The sky is falling," and maybe it will…eventually…but not now. Let's see why other currencies have fallen to zero so quickly, and see if the buck may do the same. How about the good old USA? Why not, since it has happened three times here already? The first time was during the American Revolution, away back in the late 1700's. The war was very expensive and if you have ever read a biography of George Washington, heart breaking. The Brits were commanding every battle it seemed, and Washington and his brave troops were retreating at every move. There were desertions, and not enough food and shoes. Soldiers were freezing. The tide began to turn when Washington crossed the Delaware and caught the Red Coats by surprise in New Jersey. There wasn't enough money in the fledgling US treasury to adequately equip, pay, and feed an army. What did they do? Simple! They printed the money to fight the war. The nation was young, had little populace, few states, and the war cost a bundle. It didn't take long for the printed "Continentals" to become worthless. But we had beat the Brits, so all was well. Poor Cornwallis surrendered at Yorktown, in utter disgrace. There weren't too many savings accounts then, so there wasn't much damage to the average citizen. Did you know that about 50,000 "Loyalists," who sided with England, left America, went to Canada, and those descended from them are considered high society in Canada today?

The second and third times were when the War Between the States was fought, more correctly called "The War of Northern Aggression," and incorrectly called the "Civil War." Once again, the war was horrendous, and 620,000 were dead by its end. Damn Abe Lincoln who started it. The South as well as the North fought valiantly, and can you possibly imagine 620,000 men dead? The nation had yet to celebrate its 100th anniversary, and the population was scant compared to today. The war was totally debilitating to both sides. So much so that both sides spent every farthing they had, and it still wasn't enough. So they did what the Revolutionaries did, and both sides printed their way through that conflict. The North's Greenbacks and the South's Confederates both became worthless within a couple of years. Actually, a real Confederate hundred dollar bill today, is worth its face value in dollars, which goes to show you than antiques make sense.

So much for the three times a U.S. currency has become absolutely worthless, and then not worth the paper on which they were printed. How about since then? I mentioned last week that World War Two cost the buck 50% of its purchasing power, and it did. A car, home, or sofa cost almost exactly twice what the same things had cost five short years before. Why did that war debase the buck so much? Factories were turning out one B-17 every hour, just to mention one fact of WW II, which cost America 362,000 lives and millions injured and maimed. The cost was astronomical, to put it mildly, and of course the presses printed "savings stamps" and bonds by the billions, thereby decreasing the dollar's purchasing power by 50% in less than five years. In grade school, we used to buy ten cent savings stamps to help the war effort.

Then there was Korea and Vietnam with over 100,000 dead, and enormous costs, which further decreased the buck's purchasing power by at least another 25%. Printing press money again, and lesser and lesser backing of the buck with gold. No more silver coins after 1964, and in 1951, Nixon removed the last backing. The buck could be freely printed then, with no holds barred…and it has. So does this mean the end is in sight? Not by the skin of your chinny chin chin. Why not? Because during the past times when the US currency went to zero, there were always other currencies which were backed by, and convertible into gold or silver. Today, there are none. Not a single currency in the entire world represents real, tangible value or convertibility. They're all just pieces of paper with ink on them.

With all the world's currencies not worth a ticket to a carnival side show, and comparable in other ways as well, for one to become worthless, it would drag the rest with it. There are two main and a couple of other currencies which are in wide circulation. The mains ones are the euro and dollar, with yen, pounds and yuan around there somewhere, with all of them fiat. The result is that all of them are losing purchasing power, because all of them are being printed by their respective governments and nations as they see fit to pay their bills not covered by tax collections. There will be a few minor ones which go to zero along the way, mostly in Africa, but not the dollar and euro. They just go down like a bucket with a dripping leak will eventually be empty. But it will take time, no question about that.

It is possible that the dollar will go first of the major ones, because the dollar's numbers are being increased faster than the euro anyway, and possibly the yen, pound and yuan (aka Renminbi)? The U.S. has the largest military in the world, and thinks nothing of involving itself in other's business. A Harvard study has proven that Iraq, with direct and indirect costs, has cost TWO TRILLION DOLLARS so far, not the three hundred billion which is the figure bandied about. Incidentally, a trillion, in hundred dollar bills stacked on top of each other, would be 96 miles high. America has debts promised and contracted for, by the latest estimate, of $65 trillion. Quite obviously, this means that the dollar will eventually become worthless, but will take time.

Suppose all the currencies in the world were printed with wild abandon, as the dollar is and will be…to pay debts? It is impossible for the D.C. Gang levy taxes to collect $65 trillion, because that figure is more than the total worth of every square inch of America and far more than it's GDP could ever be. If all the currencies in the world, and especially the major ones were printed like the dollar must be printed, they would all go down in purchasing power together or close. Then all prices in the entire world would go up in proportion to the press output. Tires could cost $10,000, and other tangibles comparable. Would it all end in a huge crash? No one knows, but whatever prices were, in wherever currency, those who had saved in them would be out of luck. Those who had turned their surplus assets, in whatever currency, into tangibles as the years progressed, would be safe. Those saving in the various currencies would have lost their savings and even net worth perhaps.

Those who own a home would probably be safe, as well as gold and silver holders. Renters would see their rents go skyward, and even home owners would see their property taxes and insurance go up in the same proportion to the currencies' inflating, but the price of the home would too, so a home is still a good investment. Neighborhoods change, fires and floods do occur, so there are bad things which can happen to a home investment, but I still love and own mine.

A small town is a far safer place to live and own than big cities, I do believe…if you can make a living in one of them. $10,000 a year in property taxes for an average home in a high tax big eastern city is not unusual. The taxes on my home are $1140 a year in my small western Colorado Town. Here, you can buy a new home for about $200,000. It makes sense to move out of a high tax, high crime, high humidity, polluted in various ways area…if possible. I have never regretted moving out of Filthydelphia. Protect yourself.

August 10, 2006

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