GOLD ECONOMY

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THE FALL OF THE US DOLLAR AND RISE OF PRECIOUS METALS

The Mortgage-Backed Securities Fraud., that has cost the US some $27 trillion in funds borrowed and spent to buy back the fraudulent securities, clean up the credit default swaps, and kept the Wall Street con-artists out of prison was the death blow to the US economy, back in 2008. The body is only starting to fall over now.

I’m not asking for a political or charity contribution, join a rally or sign a petition. I researched this situation and wrote this opinion for a few friends and for my Godmother who has taken her investment brokers advise for many years in buying Stocks and Bonds and I could not convince her previously to buy gold when it was $800 a few years ago while she has been losing equity since the dollar devalued.

Since removal of the Gold Standard, the US has been expanding its influence throughout the world based on the confidence of the American dollar. Several wars cost the taxpayers trillions of dollars and the recent Afghanistan and Pakistan conflict alone has cost $4 trillion. Along the way, the government has been selling Treasury Bonds to foreign investors and countries. But now with raising the debt ceiling and printing excessive paper currency, few investors see the dollar as stable currency to invest in. As the dollar devalues with less demand, interest rates must increase to attract fewer investors. Therefore, raising the debt limit only insures that interest payments on past debt is kept from default which would result in lowering the credit rating of the United States. It does nothing to prevent devaluation which is difficult to recognize by the general population since locally grown food is subsidized by the government in order that basic produce including the dairy and poultry industry don’t show the true value. And as imported produce must compete with locally grown subsidized food keeps the price down, the true value of the dollars is artificially maintained. To understand the real value of the dollar, one must understand that California lifeguards make $150,000 a year. Movie stars and sports figures make $2 million per TV episode and $10+ million for a sport season is more common than not. Artificially created celebrities make millions promoting perfume and clothing. The super rich will get richer.

Banks will increase their interest rates but most borrowers will not qualify because lenders don’t want to be paid back with devalued dollars over the long term of the mortgage. Home prices will continue to drop with fewer cash buyers having greater choices over a glutted market. Stock Markets will crash and investors with cash will accumulate some properties at bargain prices. With million of foreclosures, those families now cannot qualify to purchase another home and must rent, so the rental market will continue to grow with the better quality homes to those renters that still have a job. Those that are unemployed and unable to collect government subsidies will end up squatting in sub-standard housing or mobile homes. Small business loans as well as cash for car and house purchase will dwindle and available only to fewer qualifiers who do not need it.

It’s predictable that the government will start closing parks, post offices, libraries, prisons, schools, ambulance, fire and police 911 emergency services. Already, there has been a reduction in response to minor fires, burglaries, garbage collection, theft, unregistered sex offenders, drug arrests, forgery, embezzlement and vandalism.

The 9% unemployment rate is not realistic. That figure only represents those that are collecting government benefits which presently are extended but once they are off the roles, they’re not counted. Many unemployed are not even making the effort to find a job and they will find that when their insurance payment runs out, they will find it even harder to have the government help them find a job, because the government would rather help those people who are still on insurance payments especially those just starting rather than those that are about to expire or off the roles.

As the Federal Government cut back and stop funding States, States will stop making payments to Counties and Cities who will then stop making payments to Contractors who stop paying workers and they eventually all file bankruptcy. Attorneys will advertise and encourage every company and individual to take advantage of bankruptcy laws which they created to legally get out of paying their debts. And as many do so and not have to make the effort to pay their creditors, those businesses then can’t pay their creditors and are also forced into bankruptcy. Unions will continue to blackmail companies to pay higher wages or donate to the strong unions to prevent strikes until they realize that it’s not profitable nor logical to continue in operating their business in the United States and will join all the other companies in manufacturing overseas. Thousands of good companies have contracted with foreign manufacturers to produce their products in the quality they demand and simply keep a skeleton staff to warehouse and ship their imported product to their competitive world wide market. Those companies that have not done so, cannot compete with those that have already done so. Environment regulations have forced many other companies to move their operation out of the country to be competitive and minimal income only helps illegal immigrants who are glad to work for what they consider high wages compared to what they make in their own country while those US citizens with even a high school education wouldn’t even consider working unless it’s for a lot more than what they can receive in unemployment or welfare benefits.

The Federal Government has to raise taxes to give the impression that they are trying to reduce the rising debt but the super rich will always pay less than the shrinking middle class because they have the high price lawyers who know every loophole to pay the least amount of taxes legally. Did you know that the State of Nevada is considering a $5 million surcharge tax on prostitution? Ohio is considering selling off their prisons to a private enterprise? Chicago sold off their parking meters for cash to a Wall Street Company for 50% of its estimated value who then sold the rights to a Middle East Oil Co. Oakland tried to sell 4 licenses to grow medical marijuana on a large scale and guess who were the eager buyers willing to pay $1500 for the license and $50 per plant plus taxes. Next thing will be medical cocaine and heroin.

The Federal Government will cut back on education, national defense, housing, energy, social security and student loans. They will reduce retirement and medical payments and raise the retirement age until it reaches the average life expectancy of 85.

The one tool that the Feds have over State and Counties is the fact that they can print money as needed when they cannot borrow money cheaply, or sell off Fed assets and they don’t have to keep promises because they can change the law to suit their needs, which is what States and Counties cannot do.

Up to recently, countries like Nicaragua, Columbia, Cambodia and China accepted US dollars in exchange for local currencies. But things changed when China which held $3 trillion, was high bidder for San Diego’s closed navel base they desired for a shipping port, Congress rejected their bid, China then decided that if they couldn’t spend down their US dollars, then they want to be paid in gold and not over printed surplus US dollars that the US won‘t let them spend down. The last purchase of 50 Boeing jets China made was one way they could spend down their US dollars even though they paid more that they could have purchased Air Bus for a lot less. The US closed down their space program because they could not compete with China who was able to put up satellites for third world countries for 1/6th the cost.

World financial institutions use to accept US dollars as the most stable currency because of “confidence in the United States” and that it was as “GOOD AS GOLD”. Now with the printing of $700 billion for the financial bailout and the raising of the debt limit, confidence has eroded to the fact that gold has appreciated 30% just in the last year and is expected to grow even more when charts show that it inflated from $30 in 1950 to $1700 today. Investors don’t want to lock their money in US Treasury Bonds if the dollar is going to be worth less tomorrow even with high interest. Japanese YEN after the war was 360Y to $1US. Today it’s 80Y to $1. 5 years ago, China’s Yuan was 8.50Y to $1 and today it’s 6.5Y to $1. For each dollars printed means that the previous dollar is worth less and foreign lenders are repaid with cheaper dollars so why would they want to buy Treasury Bonds?

China use to be the largest purchaser of Treasury Bonds but now that they don’t want to continue, so will other foreign countries and financial institutions. For middle class Americans thing will get worse because as the dollar depreciates, prices must go up even if the government subsidizes farms because imports will take more dollars to purchase.

History has documented that the Russian Ruble was worthless after the revolution, the Greek Drachmas devalued to 1 billion to $1US. The National Chinese advertised and purchased gold for double the official rate but after 1949, their paper currency became worthless. The German Mark after the war became worthless and used as wallpaper. And most recently, Zimbabwe went to $1 trillion to $1US.

GOLD has been used as a standard of wealth for over 5000 years. If we use gold as the world standard instead of the dollar, its easy to see how much the dollar has depreciated in just the last few years. And if all the paper currency was divided into the total amount of gold that the US government claims it holds, it would represent about $25,000 per ounce. The politicians authorized the printing of $700 billion to bail out their campaign supporters such as the insurance and financial institutions and armament manufacturers, at the detriment of the American citizens and pushed the country over the brink causing creditors to lower our country’s credit card rating and confidence in the all-mighty dollar.

At its height, Rome produced gold and silver coins but when they also ran out of capital, they simply reduced the precious metal content in their coins and eventually replaced the precious metal with worthless copper, lead and bronze until it was worth less than 4% and merchants began to refuse the coins and reverted to barter. Soldiers were paid in salt and food. Taxes was collected in livestock and produce until the Roman Empire collapsed over 200 years later and their coins became worthless except to coin collectors.

In the last 50 years the US dollar has lost 95% of its value if compared to gold. In 2008 the politicians already knew that it didn’t have enough money to bail out the financial institutions, so it simply printed massive amounts of paper currency. People complain that oil price are high but if you consider that in 1950 one ounce of gold worth $30 could purchase 3 barrels of oil. Today one ounce is worth $1700 and can purchase 17 barrels of oil. So is oil more expensive today or is the dollar worth less?

The Federal Government is about to print $3 trillion to raise its debt limit but who will buy their Bonds? In Eastern Europe, Germany and Austria printed currency to finance their war and as prices rose, people started hoarding food and fuel by drawing their savings out of their banks and reverted to barter in order to preserve their assets and survive. Those who suffered the most with devaluated paper currency was those who invested in stocks and bonds because they were locked in on the fixed low interest while inflation exceeded the interest and devalued their principal until it was worthless. That is the reason why banks don’t want to give long term loans today because as the dollar accelerates devaluation, they will end up getting back pennies on their dollars value.

People who are advised by their investment brokers and money managers to trust the people who guarantees these securities must consider who’s doing the guarantee and who is earning a commission and not looking at their best interest.

The amount of paper money doubled in 1920. Then a year later it rose 5 fold. Then as each dollar bought less and less, the government printed more and more. Bank deposits, stocks and bonds devalued while food and clothing rose until the depression of 1929 wiping out the whole middle class. The government deceived the people on the face value of money as life savings was wiped out. Medical services demanded pre-payment at inflated prices for fear that the money paid would depreciate the next day. House rentals were only offered on a month to month bases with each month increasing as the cost of living index compounded. Food riots led to outright revolution.

Spending cuts and broken promises would not get politicians re-elected. Mobs of protestors would attract police lines and looted stores - just like recently in Greece, Spain and England and throughout the Middle East this year. Continuing running the printing presses gives the illusion that things are going well for another day and keep the politicians in office for another term at the detriment of our grandchildren.

When politicians say that they need to raise the debt ceiling and they promise to reduce spending and will eventually eliminate the debt, don’t believe it because that will never happen. The printed money will pay the interest on the bonds but not repay the principal. Once its printed, its impossible to take currency out of circulation and they will continue to print more money to cover new debt and grants for friends and unnecessary government employees.

For the country to recover the lost manufacturing jobs and small business enterprises, two things must happen. 1. Outlaw Labor Unions and 2. Print new money and value it below Third World Countries so that the incentive to World Trade will be competitive to all other countries. Of course, that will never happen so the only winners are the Super Rich and everyone else will live in poverty. We need a new government run by successful retired business entrepreneur and not by popular vote that is controlled by corrupt capitalists and former mafia.

My recommendation simply is to move your money out of harms way:

1. Preserve your cash assets including (401)K by converting it to gold and silver because the government is considering seizing these assets. They once outlawed owning gold and may force 50% of all IRA to purchasing government bonds, which would raise $6 trillion but the value of the bonds will devalue as the dollar collapses. They can also raise $4 trillion in (401)K and $8 trillion in IRA and pension plans.

2. Do not rely on your pension because low tax revenue and massive pension and retirement promises will force the government to default.

3. If unemployed, start home business because that’s better than trying to find a job when there is massive unemployment and UI run out of funds.

4. Avoid living in areas that have high crime, drugs and potential riots.

5. If you hold Treasury Bonds, Certificates of Deposit and/or government backed stocks and the government cannot pay when they become due, you may only be paid the interest and forced to roll it over again. In 1982, the Mexican Government printed excessive currency to stem off 40% unemployment and food and services increased by 100%. When Mexicans tried exchanging their worthless pesos for other currencies, the government prohibited that along with the purchase and sale of gold, silver and precious gems. The same thing happened in Malaysia, Venezuela, Russia and several other countries.

Leonard Rivero is a freelance writer who researched this information from the internet and public library and expresses his opinion without compensation or profit. Constructive criticism and factual information is welcomed by contacting: lenrivero@msn.com

 

 

LOST CONFIDENCE IN THE US DOLLAR

by Leonard Rivero

 

As a businessman and world adventurer, I listen to the opinions of many people outside of the United States.  My overall conclusion of their general consensus is that the majority of the people feel that the United States is failing and the American dollar is going to continue to depreciate in value.  Therefore, the US Dollar is no longer the world standard of value that all other countries use to judge their currency.

Consider that an ounce of gold was once set at $20.67 per ounce by the US Government until 1933 and then $35 until 1971, it decided that it no longer wanted to use its gold reserves to value its paper money.  At that time it took about one ounce of gold to purchase three barrels of oil.  Recently, gold hit $1,000 per ounce and with just one ounce; it can now purchase about 10 barrels of oil.  So is oil more expensive now than 30 years ago if we use gold as the world standard of true value?

The US stock market has been raped by the Big Boys.  All the profit has been taken out and now it is doomed to fall.  All those people on fixed income, pensions and had invested in treasury bonds or 401-K will be devastated.  The US Federal Government will bail out the financial institutions, big automobile manufacturers, Fanny May and Freddy Mac but it can’t keep printing money indiscriminately to help all the other institutions.  Any major disaster can bankrupt the big insurance companies.  And ending the war in Iraqi will end the war equipment manufacturer’s profits and thousands of jobs.

It doesn’t matter if the Republicans or Democrats win the upcoming election because they are being financed by the same Big Boys who control the advisors that surround the President and lobby Congress and the Senate with bribes and blackmail.  Countries that hold trillions of US dollars don’t want any more because when they want to spend it, Congress votes to refuse their highest bid offers.  They want to be paid in gold and not printed money.  Their money is not increasing in value, it’s the US dollar going down and that is why they want gold.  As the demand for gold keeps going up, it will take more US dollars to buy gold.  I predict that gold will be at least $1,200 by the end of this year.

SOLUTION:  Buy gold, especially the gold bars and coins from the Bank of Nova Scotia  because it can be purchased for only about $15 to $25 above its gold value.  It can be easily transported, traded or used as collateral to borrow at prime interest to buy more gold.  If you parlay your gold equity to 300% and gold increases in value 10% in one month, then you would have made a profit of 30% and as long as you don’t sell your gold, you never have to pay tax on capital gains.

I would like to know your opinion of my prediction: lenrivero@gmail.com