January 8, 2009
by Jake, the Champion of the Constitution
| Comment on the Blog
Although certainly it was not my intent to share investment ideas when this column was first started, some readers who took my advice this year are cackling with glee.
You see, James Turk of goldmoney.com in his latest newsletter noted that despite the losses in the commodity and equity markets, the price of gold managed to rise for the eighth year in a row in nominal dollar turns. The gains in 2008 were +5.8% as compared to +16.3% average since 2001. Silver had its first down year since 2002 with a loss of 24%, although its average since 2001 is a very healthy +13.7%.
The interesting take-away from Turk's report is that over the long run, other fiat national currencies are losing roughly 13% annually to the yellow metal, while dollar and British pound are noticeably worse at 16-17%. Why? Perhaps I am wrong, but history doesn't repeat, but it does rhyme. The shotgun marriage of the FED and Bank of England led the world into the Great Depression following the Great Inflation of the 1920s as I wrote about in this 2-part series, possibly in our contemporary time something similar is occurring.
One must remember the theory that I support, which is that the gold and silver markets are manipulated by the central banks. You can read about it in this 5-part series. What this means for the saver is that the price of gold could easily rise OR drop say $200 in a single day. However, remember a gram of gold one day is the same the next. However, this does NOT hold true for paper gold or silver, like the GLD and SLV ETF funds. STAY AWAY from the ETF's, these paper promises are not for savers, they are for day-traders who think they know what they are doing and central banks' bullion traders and large banks like the corporate raiders from the Great Depression, JP Morgan Chase.
In my humble opinion, physical gold at today's price is dirt cheap financial insurance and physical silver is super dirt cheap. One word of caution though: please do not expect to get rich by saving gold or silver. However, in the long run these silly feeble-brained Keynesians are barely able to think ahead more than a week these days, try thinking 5, 10 years gold and silver will protect your purchasing power. The paper Dollar, the paper Euro, the paper Whatever will not.
As we are learning in the Money Matrix series (hint I will write more if there are more comments), when a commodity becomes used as money or currency, its purchasing power increases. In this crazy Keynesian world, I suppose the closest example is the American petrodollar. Since it is still, to this day, used as the world's major reserve currency, and must be used to buy Middle Eastern oil, the dollar still has a monetary premium attached to it. In the event that gold and silver recover even more of their premium as monetary metals, it is possible that their purchasing power will increase.
At any rate, we can take another look in a year's time and see what happened. And, again, the above is just my opinion and I am clearly fallible, so trust your judgment, not mine. There may be trouble ahead, but possibly also a very, very bright future.
GO GATA!
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Jake Towne [send him email] "the Champion of the Constitution," is a freedom writer and publishes a column at the Nolan Chart. The column seeks truth in the ecopolitical arena, with the primary goals of helping to bring the "War on Terror" to an end and a new dawn of Honest Money. Jake is not a Populist Party member. Visit Jake's website at http://www.nolanchart.com/author481.html
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