When?

Do you gamble with gold and silver physical? I mean, when it seems to have reached a 200 day moving average or better, do you sell and buy back when it goes down? Lots of people do, and I admit they mostly make some dollar profits doing it. It is taking a chance of course. I get free interest loans from credit card companies all the time, and I could use the free interest loan to buy gold or silver when I think it's low, and then sell enough to pay off the free interest loan and keep the balance. I have a few clients that do just that, and so far have done very well gambling with OPM or "Other People's Money." I have never done that, and almost daily, I tear up free interest checks which have been sent me. Guess I am really a conservative geezer, and don't want any debt of any kind.

99% of the world refuses to admit that history does repeat itself. 99% of the world seems content to place utmost confidence in their respective governments and politicians. I don't. I think that politicians are interested in but one thing, and that is getting re-elected, plus the power and ego trip which holding office gives one. Power never has appealed to me. I firmly do believe that history does repeat itself, and although it does so in different forms, it does repeat itself. I also firmly believe that those who will not learn from history, are doomed to repeat it, and when things happen, they will be caught in a severe vice. I am a firm believer in mathematics also. Simple mathematics. Mathematics, such as two and two making four. I believe in "Stott's law," which says quite simply that "The more of anything there is, the less they are worth."

So where is all this leading? It's like musical chairs in a way. Eventually, in all of history, all paper monies have become worth zilch, zero, nada, or worthless. No exceptions. All have become worthless. 99% of the people in the world think that because their respective governments have a lot of guns, soldiers, police, lawmakers, and law enforcement powers, that these governments can stop history from repeating itself. "The government will protect us," is a feeling that 99% of the subjects of the world's governments believe. These people believe that the power of government will protect them from all sorts of consequences, such as invasions from foreign armies, predation by their neighbors, and things of that sort. Governments are supposed to protect their citizenry, I agree.

Governments protect their citizenry by buying police and armed forces with the currency they obtain from taxation…supposedly anyway. In history, governments have, in 100% of the time, gotten out of hand, run amok, and increased their size to such an extent, that taxes could no longer support their excesses. This has been true in 100% of history, including Greece, Rome, the Soviet Union, Germany, etc. ALWAYS, governments have become too big for their britches, and become insolvent due to excesses in spending. Mostly, the excesses came from foreign entanglements, which our first President, George Washington, warned about in his farewell speech. Foreign entanglements, or wars, cost a lot of taxpayer monies, no matter which nation indulges in them. America seems to have been the biggest spender in foreign entanglements in the entire history of the world. The empires of the past, got that way by spending manpower and sheer force of numbers, which didn't cost the king too much of his money. Just the lives of his citizens and troops. America's wars have also cost us dearly in manpower, but all the wars we have engaged in have devalued our dollars by huge amounts. 50% in WW II alone.

American government's politicians have discovered that the more benefits they promise and actually give from the public treasury, the better chance they have of being re-elected. So it has happened, beginning with FDR and his Social Security of 1933, just to name one. Since the time of FDR, government has not only fought three vicious, expensive, currency debilitating wars, but handouts from the D.C. Gang have reached epic proportions which our ancestors couldn't conceive of or believe, if were they resurrected. Money, money, money, is spent so recklessly and thoughtlessly, that it all has to come to an end eventually. It has begun already. Begun, because the billions a week we need in loans from foreign governments and investors, has started its downslide. Since we are so hopelessly and helplessly in debt, and will not show any signs of repentance or fiscal integrity, would be loaners are ceasing to loan.

Our debts are not new. Our nation's debts are old hat, but their amount is new enough, and out of control enough, that it is becoming increasingly difficult to borrow money to even pay the interest. In other words, we are a bad risk. Our credit score is perhaps 200, rather than a perfect 900. Would you loan to a bad risk? Eventually, there will probably be no more loaners, and the presses will run 24/7, just like they did in Germany in 1924. Why has it taken so long for us and such a short time for Germany? Because after WW I, Germany was forced to pay for the damage it did, and the world wanted its restitution then, not over many years. Germany didn't have any reichsmarks left, as they had spent them all trying to win the war. So they just printed the payments, and made their money go to zero pretty quickly. The dollar has had a long time to slide since FDR. As always happens though, the process of devaluation increases in speed as time continues. It becomes really critical when no one will loan anymore, and the handouts and wars become huge and unmanageable. The dollars just fly off the presses and into government checkbooks for dispersal. Mortgages are created out of nothing, as are bank loans. When FDR was in office, and for a long time after that even, there were no credit cards, Medicare, HUD, FHA, and dozens of other alphabet soup agencies which gulp down money as fast as a hound dog eats steak.

Undeniable laws of economics say that it all has to end eventually, and it won't be pleasant. It will make millions and millions of people go absolutely broke, and not know where to turn. It will eventually be so hideous and earth shaking, that life won't be at all pleasant, even for those of us who have real gold and silver money. We'll survive, and dollar holders won't. When will this all come about? I have no idea, but if it walks like a duck, looks like a duck, and quacks, it must be a duck. If the money supply is ever increasing, because expenses, wars, handouts, benefits, and every other kind of outgo continually increase, the time of the end may not be visible, but the evidence of it is unmistakable. The thought of dollar holders and savers being made destitute is not pleasant and absurd to most, but the logic is inescapable.

The process will not be sudden and obvious till close to the end. As the end draws near, more and more people will take the cheap money and pay off all debts they have. By that time, gold will probably be $5,000 devalued dollars per ounce. If they have no debts, they will convert their fading dollars as fast as they can into food, gold, silver, fuel, guns, a generator, or anything tangible which may be useful when all hell breaks loose. Wise people do that now, while gold is $650 and other prices comparable. If you gamble by selling at peaks and thinking you'll re-buy when it goes down, you may get caught. It's a gamble I won't take. Can government, with all its guns, laws, regulations, police, armed forces, planes, tanks, and artillery save the dollar from collapse? Can government force protect us from the eventual worthlessness of the dollar, with which we measure our net worth? No, and that's why, when I get extra dollars, I convert them into tangible things such as gold and silver. That's why I do as I always say, and that is protect myself. Government may think it protects you by fighting foreign wars, and disbursing trillions of dollars in welfare, foreign aid, and warfare, but the so-called aid and protection in itself, is what has made the currency go down in value, and with ever increasing speed. If the bucket leaks, don't store your water in it as you hike in the mountains. Don't store your water in a leaky bucket anytime. Why then, store your surplus assets in a leaky dollar currency? The comparison is apt, believe me! So don't be stupid as most are. The majority in history, are usually wrong. They are stupid today, by saving dollars in CD's, savings accounts, or simple cash under the mattress. None of these protect you, and government can't stop the dollar's decline. Since no one nor government can or will, you must therefore…protect yourself.

August 4, 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