Saturday, June 26, 2010

Man the Life Boats

In the past I have written quite a lot about public policy. I am going to be a lot more practical today. I am not going to warn you about the gigantic policy blunders that our rulers have made. Instead, I am going to advise you on specific steps many of you can take to protect your families against the soon-coming consequences of these mad blunders.

If I could use an analogy, I am going to quit trying to rally my co-passengers on the Titanic to elect new captains who will change the ship’s course. The ice-berg is about to be hit and new captains, even if any with sufficient understanding were available, can’t steer us away in time to avoid the collision. So rather than rally my co-passengers to steer clear of the ice berg, I direct their attention to the location of the life boats so that they might escape some of the consequences of what is about to happen.

My advice is not so much to the very wealthy, who may get through the storm in any case. Nor will it work for those poor already too far in debt to have anything left to salvage. I wish all people well, but it is the middle and working class, those who have been most betrayed by these policy blunders, that can most benefit from this advice.

The key thing to understand is that the dollar is doomed. A wise response to a collapsing currency is at the heart of my counsel. From the inception of the Federal Reserve System in 1913 to today the dollar has lost over 95% of its purchasing power. That’s about 100 years. I roughly estimate that it will only take about 10 years for the current dollar to lose about the same amount of purchasing power- if the dollar even lasts that long. In other words, what you can buy for a nickel or a dime today will require a dollar in just ten years from now. That means gasoline at $25 or even $50 per gallon. It means electric bills ten times or even twenty times the amount on the statement you opened last month. The same thing goes for groceries and other essentials. We have already seen significant inflation in food prices over the last year. Expect that to accelerate.

As hard as that may be to accept, something very similar has happened to every other country in history which has conducted its fiscal affairs in the manner in which our rulers, Democrat or Republican, have conducted ours. Those with good sense are not in a position to alter policy, so what do we do to protect ourselves from government incompetence?

Job one is to have savings that are safe. Savers are being punished by artificially low interest rates on CDs. Saving is good, but dollars are losing their ability to store value. Convert dollars, as you can spare them, into silver or gold. They are real assets and they will hold their value even when those pieces of paper backed by the “full faith and credit of the U.S. government” lose theirs.

I feel that a modest household should own at least 50 ounces of silver. You can get it (in shops or online) in handy 1-ounce rounds, old coins from when the U.S. government issued real money, or special new coins whose face value is far below its actual value in precious metal that they issue today for “collectors.”

Next week I hope to talk about what to do about land, houses, mortgages, and credit card debt.


Anonymous Rick said...

I agree Mark, there are rough times ahead. I got worried about a year and a half ago when I was unemployed sitting at the house wondering when I would go back to work and how to pay off my farm. I spent the last 16 months paying every extra dime to paying off my house and land, something I will accomplish in 3 weeks, and now wondering what to do with the extra money every month. Like you I don't think the dollar is going to survive and I am finished with the stock market unless I invest in oil or natural gas. Looking forward to reading your thoughts next week.

12:46 PM, June 26, 2010  
Anonymous Anonymous said...


In 1915 Germany a person could retire with 50,000 German Marks in the bank and live off of the interest. An ounce of silver was worth about 12 Marks.

The Germans were raped by the treaty of Versaille so badly that they had to pay their war reparations through inflation. By 1924, 50,000 Marks was not sufficient to keep a bank account open. An ounce of silver was worth about 1 Trillion Marks.

When the dollar dies in America it will collapse in a few short weeks / months. I think it will be dead within 24 - 36 months.

My an ounce of silver today and when the dollar collapses you'll be able to pay off all your debts.

Get to know your neighbors. Learn how to garden and can food. Start talking to people about contingency plans when the inevitable happens. There will be no police to protect you and your family. The more people that are prepared the better off we'll all be.

7:41 PM, June 26, 2010  
Anonymous Anonymous said...

"Convert dollars, as you can spare them, into silver or gold." Please for the love of money don't tell me to buy inflated commodities to secure my future. As with any investment cycle it starts with the innovators
who seize a opportunity then come the imitators who soak up most of the profits left in the market then come the idiots trying to make money where there is none. Speculating in gold is in the idiot phase of the game. A total collapse of the dollar is foolish thinking. Even the Chinese would prop up greenbacks against that.

It's hard to make money in gold when the excessive fees associated with most gold retailers are considered.

8:07 PM, June 26, 2010  
Anonymous Anonymous said...

Maybe you should try reading the article before you comment on it. It did not say anything about making money. It was about preserving wealth. Dollars don't hold wealth like they used to, and it is getting worse faster.

And did you notice the article was heavy on silver rather than gold? Maybe you are just a bot that throws up this kneejerk response when certain keywords appear in an article.

8:58 PM, June 26, 2010  
Anonymous c.b. said...

I'm curious... Do you personally prefer silver to gold?? And why??

6:40 AM, June 27, 2010  
Anonymous Anonymous said...

Anon 8:07,

Famous French economist Voltaire stated centuries ago a truism that you need to learn:

"Paper currency always returns to its intrinsic value."

The Chinese are indeed propping up the federal reserve note (the greenback as you call it was Lincoln's currency during the Civil War era which was actually at least a United States Note - i.e. the gov. did not pay interest to Jewish bankers - Rothschilds, et al., on paper currency backed by nothing but the faith of fools). However, the Chinese will not prop it up forever and to think they will is lunacy. When they pull the plug, it's over for the dollar and then gold and silver will assume their true market value compared to the federal reserve note. There is no question that the value of gold/silver will skyrocket compared to the federal reserve note (as they did against the German Mark).


The reason one should purcase silver currently now as opposed to gold is because of the silver gold ratio. Right now spot silver is trading at approx. a 65:1 ratio with gold. In other words it takes roughly 65 ounces of silver to equal the value of one ounce of gold. That ratio, if you will look at historical charts has fluctuated throughout the last several centuries between 16:1 and about 90:1.

So knowing that the ratio will fluctuate over time you can purchase silver when the ratio is high and when the ratio dips, say back to 16:1, then you can swap your silver 4 to 1 (assuming you purchased when the ratio was 65: 1 when you purchased. In other words the volume of ounces of gold that you could acquire would be 4 times what it would have been had you bought gold at 65:1.

Likewise, when the ratio dips, you should buy gold and then when the ratio get high you should swap to silver.

Gold and silver are not a stagnant investment. You can pay yourself handsome dividends if you invest and hold for the long term and swap when the ratios dictate.

7:43 AM, June 27, 2010  
Blogger Mark Moore (Moderator) said...

I do prefer silver to gold right now. There seems to be some doubt about that. I guess I did not make it clear enough in the article.

Bear in mind that the price of both can be and I believe has been manipulated. They can take it down- for a while. But they can't keep it down.

The reasons for the preference for silver is 1) Gold is at an all time high in nominal (though not true inflation adjusted) dollars. Silver is far below even its nominal dollar high.

2) In the worst case scenario, when the dollar loses value daily, I can forsee people using silver and gold directly for purchases. Gold has too high a value per ounce to be useful for most such transactions. I can see going to a produce booth and paying an ounce or two of silver for a weeks worth of produce. With gold, some sort of "change" would have to be available. Dollars maybe? But then you are stuck holding dollars until your next purchase.

3) The government has never made ownership of silver illegal. It has done so with gold.

4) Silver has more industrial uses. If we get one more false boom then its value could climb in real terms, not just nominal dollars.

4:57 AM, June 28, 2010  
Anonymous Anonymous said...

See link for FDR's executive order which outlawed private holdings of both gold and silver.

8:44 AM, June 28, 2010  
Blogger Mark Moore (Moderator) said...

That's not the real text of exec order according to Wiki

10:51 AM, June 28, 2010  

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