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If you haven't done so already, say goodbye to the American Dream. If the Fed has its way, inflation will destroy it to the point that most of us won't be able to afford nor recognize it. As Ron Paul makes clear, even though it appears that the money comes from thin air, it has to come from somewhere. Printing money has its own costs which are borne by the American people. In spite of official government pronouncements, the cost of the things that matter most, the things that contribute to a higher quality of life - food, housing, energy, medical care and education - have been and will continue to spiral out of reach for many Americans. Just look at the price of oil and gold: Oil recently hit an all-time high of $84 per barrel. Gold is now trading over $700 per ounce, and many think it will surpass its all time high of $850 by year's end. Do you believe the government when it says inflation is only 2%? Commodities are clearly signaling the inflation that the Fed is creating. And yet, some still maintain that this is just a bubble. After the experiences of the past few years, this is understandable: We've seen bubbles come and go in Japan, SE Asia, the Nasdaq, and most recently, housing. Surely, many people think, the best gains in the commodities bubble have already been had. It is too late in the cycle to get in, because the "commodities bubble" will soon burst like the rest of them.
As advanced as mankind's manufacturing apparatus has become, we still cannot make oil, copper, zinc, iron, lead, platinum, silver or gold. We rely on nature to provide them for us, but once they are extracted, they cannot be replenished. Without a radical breakthrough in science, monetary technology, or in human nature, these finite resources will be depleted over time. As a result, they can only increase in value -- when measured in dollars that have a potentially infinite supply. As Richard Russell puts it, the US government must 'inflate or die.' Federal debts are too big to ever be repaid, and since the government has no intention of dying, inflate it must. And that money must go somewhere. In addition to the fundamental factors that Balarie cites, monetary factors point to a continued commodity bull run. This being the case, how does one protect one's wealth from confiscation through inflation? Commodities markets remains a mystery to most people. Do commodities mean trading live hogs and pork bellies, learning new trading symbols and taking on excessive risk? Not necessarily. While Balerie has a chapter on trading futures, I wouldn't recommend it to the average investor. The leverage in futures trading creates risk levels that are simply too high for a novice to fully understand and manage. Fortunately, you can capitalize on the commodities boom through investments that are more familiar - stocks, mutual funds and exchange traded funds. Balerie has a chapter on each that can help you clarify your priorities and how to think about structuring your investments. And because of the towering importance of gold, he has devoted an entire chapter to the merits of gold and the different ways of investing in it. Part II: An Irrelevant Fed and the Return of Gold
Amen! Thank you Nathan Lewis for the reassurance that it is not me who is crazy. Nearly every book on the subject of the Fed, Money and Gold (Save Griffin's Creature from Jekyll Island) has given me conflicting ideas and reasoning, and left me slightly more confused than before. Lewis further states in his preface that:
Recent events indicate this may actually be happening. Ironically, a widespread rekindling of interest in gold and the gold standard may be sparked by Alan Greenspan's new memoir and his nonsensical ramblings on the subject of the gold standard in his many recent media appearances. Anyone who has read Lewis's book should have a powerful hogwash detector when it comes to listening to the words of the prior (and current) Fed chairman. For example, it is well known that former Fed Chief Alan Greenspan was a disciple of Ayn Rand, who believed in (among other things) unregulated capitalism. When interviewed recently on NPR's Fresh Air, Greenspan was asked if he didn't see some irony that, despite his own self-proclaimed libertarian beliefs, he spent much of his time as one of the world's most powerful regulators. Greenspan's response: Regulator? Moi? Here is a transcript of the actual exchange. (This comes in the last seven minutes of the interview):
In listening to his smooth, soothing voice, the meaning of his words can easily get lost. The man nearly puts you to sleep with what sounds like soothing wisdom. But in reading the above transcript, clarity returns with a vengeance. Allow me to clarify. What he said was: The gold standard was responsible for the tremendous growth during one of America's most innovative and productive periods, but unfortunately we "had to have" fiat money. (Really? We had to have it? Who made that decision for us?) Greenspan then goes on to admit that fiat money can be very inflationary, so it has to be regulated. However, in spite of the fact that he is the Chairman of the institution charged with regulating it, he is not the regulator. How can this be possible!? Because, he soothingly reassures us, he was simply emulating the gold standard! He would have us believe (if we did not have brains) that he was simply an automaton - doing what the gold standard would have been doing automatically anyway. Which begs the question: If this is the case - if the gold standard worked so well - why do we need the Fed to attempt to emulate it?? Why not just bring the gold standard back? Continuing along with this line of thinking, here is a short (7 minutes) but sweet clip of Mr. Greenspan on the Daily Show with John Stewart, talking more absolute nonsense. Once again I've transcribed the key exchange:
"Most people call it regulation," he says. But apparently Greenspan doesn't. However, the key point is that Greenspan flat out admits that, in his own words: "to the extent that there is a central bank governing the amount of money in the system, that is not a free market." The next logical question, which Stewart unfortunately did not ask (so I will ask): Can we have a free market in housing, automobiles, oil or anything at all if we do not have a free market in money? The answer, clearly, is no. Money is the common denominator of all of these otherwise non-related markets. If the money market is not free, then none of these markets are free. By Greenspan's own admission, the much-vaunted free market is a fraud. Which brings us back to commodities. Should we manage to maintain the economic status quo over the next decades - Emanuel Balarie will no doubt look like a genius. Commodities will continue to increase in prices measured in fiat dollars. But should the people manage to overthrow the current fiat money system - a system that Nathan Lewis helps to expose and clarify, and that Greenspan himself declares is not free - then look out below! The inflated prices of the global economy will be forced to deflate. In either event, gold is most certain to shine both in the short term and the long term.
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