Where did gold get its inherent tangible value? Why has it been so pursued throughout history by kings and kingdoms and those who would serve the realm?
To find gold's origin as money, at least as it relates to those who recognize the Holy Bible as God's word, we find that God wasted no time in conveying the importance of Gold. It's goodness if you will. The first reference to gold is found in Genesis, right after an account was given of the creation of Heaven and Earth, of man and then the garden within which man would reside.
Here we are given detail about the river that flowed from the Garden of Eden. As it flowed from the garden, the river divided into four headwaters, the first of which flowed through the land of Havilah where there was gold. And God said, The Gold of that land is good. - Genesis 2:12.
The premise God set here, that gold was “good,” served to direct man in the creation of a system of fair weights and measure. Because God said gold was good, gold became the foundation of that system. God’s word made it valuable. And so has it been for 5,000 years, that gold is money. You can't print it, it does not represent debts owed, nor can it be debased through inflation. You can trust it. IT IS MONEY!
Now the dollar.
As evidenced by the volatility of today's markets, there is a growing sentiment that all is not well with the economy and the dollar that fuels it. As each week passes, we lose more jobs, we inch closer to the outbreak of the Euro plague and we realize that relief from inflation is only transitory.
It's like a giant screw going into the ground. We lose jobs, the markets decline and as markets decline we lose more jobs. All the while, rising inflation takes another bite out of our purchasing power, housing takes another hit, which in turn shrinks the economy and puts more downward pressure on stocks. One more turn of the screw.
Wake up America! Smell the dead fish! The 2008 crisis came with little warning and wiped out trillions of dollars. Now the warnings are everywhere.
Honestly! Has any financial problem, arising out of the 2008 crisis been solved? Sure we kicked the can down the road, but the real problem of uncollateralized debt has not gone away. In fact, right now there is more of it and more keeps getting piled on.
There are two realities that must be faced. We either need to print more money in hopes that one of these extra trillions pumped into the economy will finally be enough to kick-start it, or, we have to default on debt and wipe some of it off the books. Great choices, eh?
There isn't a bigger rock or a harder place to be caught between as even cursory analysis of the two realities leaves only one truth. Default is imminent. If we print more money that is nothing more than a default on the value of the dollar. Printing money debases currency and when you repay loans with dollars that are worth less than those borrowed - that is default.
Realizing this helps to explain a lot. For example, central banks, who are flooding the world economy with printed money, realize they are likely to be repaid with currency that is worth less than that which was loaned. So, how do they hedge against that sure loss coming some time down the road? They buy gold. That's a pretty easy strategy to understand. If you get paid back the loan, your gold serves as a hedge against lost currency value. If the borrower defaults, you have the collateral used to secure the loan and gold to hedge against any lost value of the asset.
This may be the single best reason to own gold right now. There is no end in sight to central banks' efforts to pump more money into the global economy. It would be foolhardy to believe you can just print money knowing when you get it back it will be worth a fraction of what it was worth when it was released.
As Europe contemplates a money-printing solution to their own looming crisis, all markets remain at a veritable standstill. Gains one day and losses the next. We're a giant yo yo with Europe pulling our string. Will they print more money or default? Given the two choices for default, I believe printing money is the slower less obvious means to default. It appeases the global markets and the masses for a short time but the aftershocks are unavoidable. Debt will rise and the day of reckoning will arrive with much greater vengeance . . . some day.
If Europe prints more money, that opens the door for our own Fed to print more money. Nobody wants the strongest currency in the world. A weak currency is key to making your own exports more profitable. . . and then there's that debt thing. A weaker dollar makes it easier to pay off debt and, as Bill Gross of PIMCO reminds us from time to time, the true debt level of the U.S. is some $75 trillion, making the U.S. the largest debtor nation on earth.
As exposed in a new blockbuster video, The End of The Dollar, (it's FREE) the per capita debt in the U.S. is $45,000, not considering unfunded liabilities for Social Security, federal pensions, veterans benefits and so on. Throw that in and you get a number closer to $250,000 per citizen. In Greece that number is only $44,000.
As jobs data, housing prices and falling consumer confidence indicates, we are at the brink of total economic failure. That's why the Fed may have no choice but to make one final life or death trade, the life of the economy in exchange for the death of the dollar. What will you trust to carry you through retirement? Will you survive the End Of The Dollar?
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