The following is an excerpt from Richard Russell's Dow Theory Letters
"If you don't know history, then you don't know anything. You are a leaf that doesn't know that it is a part of a tree." Michael Crichton
Question -- Central banks the world over are spewing out their respective currencies over the world. If this continues, won't there be an eventual panic out of fiat currencies?
Answer -- The answer is yes, but before that, interest rates will be rising, and that will halt the machinations of the various central banks. Political pressure will force the central banks to curb their currency creation.
But I want to talk about something else. The action of the big money, the sophisticated money, tends to lead the markets. In view of that, let's ask ourselves what the "big money" is doing now. We hear that classic art pieces like the Klimpt painting and Munch's "The Scream" are going for well over $100 million. We hear of wealthy individuals buying wildly-priced apartments in New York and London and Hong Kong. All of this adds up to the "big money" placing their paper money in rare one-of-a-kind tangible items. These are items that will be considered items of wealth even if their respective currencies go the way of all fiat currencies, which is a way of saying these items will be deemed items of great value even if their respective currencies become worthless.
But what of you and I, what of the man on the street? You and I can't afford to buy expensive collectibles. How can we protect our purchasing power if the purchasing power of our fiat currency continues to plunge? Ah, this is the basic question. You and I can't buy a thousand acres of land in Montana. What can we do instead? The answer is that we can do what the Chinese and the Indians and the Vietnamese are doing, we can go to what I call "the common man's rout," we can buy gold and silver. Joe six-pack can buy one gold coin a month or an even smaller denominated coin. So in a strange way, gold is the "poor man's protection" against a collapse in the purchasing power of his respective fiat currency.
Think about it -- in the entire history of man, no fiat currency (with nothing but a government promise behind it) has ever survived! And you think our current Federal Reserve notes will be the great exception? If the current Federal Reserve notes survive for another sixty years they will be making history, they will be doing what no other intangible fiat currency has ever done.
Ah, you see, the smart money know this. Which is why you are seeing great works of art, rare collectibles, classic cars, arable land, apartments in upper East side Manhattan, gem quality rubies, emeralds, diamonds and sapphires going for prices that most experts can't believe.
Smart money doesn't care what a one-of-a-kind red diamond costs. Smart money knows that this same diamond will be an item of great value a hundred years from now.
So my advice to my beloved subscribers is -- follow the smart money, follow the people who can buy the best advice on the planet, and think ahead, think ahead to the time when there will be a panic out of Federal Reserve notes and a frenzy to own items of tangible value. Think of "the poor man's item of eternal wealth," think of gold.
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