Written by admin
Thursday, September 2nd, 2010
The U.S. dollar is in decline both on its home front and as an international reserve currency. The price of gold, which runs inversely to the greenback, is clearly rising when you study the charts from year 2000 to 2009. Recent mortgage defaults in the USA, with more commercial defaults looming, have contributed to this situation as well as the government’s response: the massive overprinting of ten trillion US dollars by The Federal Reserve in order to fill in the holes and prop up the financial and automotive sectors of the economy.
These facts are truly shocking. Gold bullion is being bought up quickly by China, India and Russia as well as by astute investors in Japan and throughout both Asia and the western world. England and The United States had reduced their holdings of gold bullion decades after 1971 when Richard Nixon famously detached the American dollar from the gold standard. Looking back, this can be viewed as a monumental error because instability has occurred ever since the fiat currency or legal tender has been left to the ups and downs of financial markets, without a firm anchoring.
Investing in gold is a brilliant idea because it provides a hedge against inflation which really means that gold (and silver) is real money while legal tender, the paper money, can be debased and ruined by bad decision making by governments and central banks. Again, this is shocking to reveal. Paper money is merely a note that states a promise to pay at some indeterminate time in the future! Pay with what — with an ounce of gold? A bar of silver?
Governments like to maintain their paper money because it is easier to manipulate through reserve banking and digital money creation and there is now evidence that they have been suppressing the price of gold for a long time. Alan Greenspan admitted to this action before a senate committee. Remember the inverse relation between the strength of the dollar and the spot price of gold. Rising gold prices are a barometer for the American economy as investors flee to a safe haven when business slumps and money is pulled out of the stock market and there is a reduced demand for US treasury bonds due to falling confidence in that ‘promise to pay’ written on the bank note.
Gold did very well in The Great Depression. So reader, if you believe that we are entering a depression or a ’stagflation’ in the economy, then invest in gold bullion now while the price of gold is close to $900 USD an ounce as some pundits have predicted prices to go into multiples of this level. Just a word of disclaimer: The writer is not a financial adviser and anything given in this article is his personal opinion only. Do your own research and consult a licensed financial adviser if necessary. Do not rely upon my judgment only as I am a business writer.
Geoff Dodd is a New Zealand born businessman with a background in psychology, now living in Western Australia. He has had extensive Internet experience since 1996 and is a webmaster operating 35 web sites.
To find out more about creating your own Internet success, you can visit Geoff at his business site where he will give you support and a bunch of useful webmaster tools, as a thank you for your visit: http://www.home-business-residual-income.com/.
Geoff Dodd
Perth 6000
Australia
