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Wednesday, August 10, 2011

Excellent Analysis: When buying Gold becomes Life or Death

In a commentary on the above picture Jeff Clark (who works with Doug Casey, one of my favorite financial guys) points out the following:


Now, the price of gold has "gone up" but in reality the price of your paper currency has gone down... and down dramatically.

This is in an environment where everyone is hearing, and most are swallowing the bromide that "the dollar is the safest haven in the world." OK, but what about when it isn't? I mean, what about when the public (and I mean the WORLDWIDE PUBLIC, who holds dollars as their reserve currency, as kind of an international savings account), decides that the reason to buy gold (or silver, or ANY tangible commodity) is no longer that you think gold is a "good deal."

At that point in time, you won't be buying because you hope to profit and make more green pieces of paper. You will be buying because you think those green pieces of paper will go to zero, or close to it. At that point in time YOU WON'T CARE WHAT YOU PAY FOR IT. It will literally be about getting out of the giant fraud that the dollar has become, or suffering complete impoverishment, or maybe even starving to death.

If you read this and think "HA! fat chance! This is alarmist drivel." then that is VERY VERY GOOD. That public confidence is the ONLY thing that is allowing this game to go on right now. It gives those of us chicken little paranoid delusionists who are buying gold and silver more time to scoop some up and put it away.

From the article:

There are 101 reasons to own gold right now. You might buy because of the debt turmoil you see around the globe. You may think it wise, like the Chinese and others, to keep some of your savings in gold. Negative real interest rates may draw you to gold. You might buy because of the mere fact that demand is overwhelming supply. Or you fear inflation. Or deflation.

But most of these factors are missing one critical element: They're not yet personal.

Most reading this have not had to flee their country, been the victim of hyperinflation, or watched helplessly as their currency went poof! Longtime investors have made money on their gold investments, to be sure, but most of us bought the yellow metal as an investment and not because of a do-or-die situation.

It's doom and gloom to say this, but I think it's possible and perhaps even probable that at some point we'll all feel forced to buy gold, almost irrespective of price, due to a sudden and rapid depreciation of the U.S. dollar.

How do we get to that point? Simple: You go to buy something and realize you've just been priced out of the market, not because the item is too expensive, but because you suddenly realize the money in your hand no longer has purchasing power. Your reaction to that event is predictable: You feel cornered, maybe even scared, and the urgency to seek an alternative takes over.

When Buying Gold Becomes a Life-or-Death Question

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