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Purchasing Power: Past, Present, Future- Part 5, by L.M.

If one was to purchase gold and silver as insurance and track the spot price at kitco.com on an hourly or even weekly basis, one is missing the purpose entirely. Do you review your health, home, or automobile insurance policies weekly? Of course not. You review it before you purchase it, put the policy in a safe place, and bring it out when you need it.

Then there is the camp that loves to argue that silver and gold are a worthless store of value and that good stocks with good dividends are the way to protect your purchasing power over the years, to be a store of value. Stocks are a superior alternative to precious metals, they insist. Besides, Warren Buffet stated, “Gold is a barbarous relic.”

In reality, the U.S. dollar is the barbarous relic. It is worth only paper and is used as currency by faith and tradition. Gold and silver have never been worth nothing. Even more confirmation of this is here: Gold still compares favorably with stocks and inflation [1]

There have already been eight, yes eight, devaluations of the U.S. currency since 1933. In 1933 FDR outlawed the private ownership of gold. Most people foolishly turned theirs in. When all of the gold that was going to be got (wink, wink) was turned in, FDR devalued the dollar 59%. He raised the price of gold from $20.67 an ounce to $35 an ounce. In 1971, President Nixon raised the price of gold to $38 an ounce, and in 1973 it was raised to $42.22 an ounce. Wow! That’s three devaluations. Then the U.S. government ordered the Federal Reserve Corp to eliminate the silver from the coinage, which was another devaluation. Then the slow grind of the rising money supply from 1973 to 2006 forced couples to work just to live in a similar manner as their parents. Now, we have QE1, QE2, OPERATION TWIST, and QE3, which were ALL devaluations. That is exactly what the world and in particular, the Chinese, see. Everyone that bought our bonds is losing their value because of the creation of U.S. money. That is called monetizing the debt. It’s great for us, but it stinks for everyone else.

To understand the banking world you are forced to live in, this is excellent! This is your primer to understand way more than your friends or the typical American. Arm yourself with knowledge! It is a great intro [2].

Experts are telling you what they are about to do! Right now, today! This brings us to the end. (I think I already said that). I have paid attention and studied worldwide macroeconomics for over 35 years. This is the first time in history where we have every nation in insurmountable debt. Most all are in extreme debt, meaning that their debt surpasses their nation’s ability to produce income or Gross Domestic Product (GDP), as it is known. The U.S. has a GDP of approximately $17 trillion. Of course, you have heard that the U.S. debt is $18 trillion. And you may have heard that the U.S. unfunded liabilities, Social Security, Medicare, Medicaid, Fed Gov Pensions, et cetera is over 240 trillion. Okay, when speaking of ridiculous numbers and concepts such as the debt, who gives a hoot. There is no proof of the validity of any of these figures, nevertheless when I go to the grocery store and buy coffee I see the difference in package sizes. Remember?

At this point, it is best to conclude by reflecting on the long career of one of the best macro economists still alive today, Alan Greenspan. As head of the Federal Reserve Corp., he was horrible. Overseeing the transfer of manufacturing capacity and manufacturing jobs to China, he did a great job of gutting the USA. Of course, not to be outdone, the witless Ben Bernanke oversaw the transfer of 100s of tons of gold to China and the purchase of the JP Morgan worldwide banking headquarters located right next to the NY Federal Reserve Corp. The building has a tunnel to the NY Fed Reserve building! The Chinese bought it for under a billion $$$ when the complex was valued at over 5 billion $$$. Hmm.

Let’s get back to Greenspan. Before he was appointed as Fed Chairman, in 1966, he wrote the following:

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

Check out the rest here [3].

Greenspan went on to be the fed chairman from 1987 to 2006. During that time he did not speak of gold like he did in the 1960s. However, he did deliver what we call forewarning signals at crucial times, and every time he was correct. To recognize these, one must listen to their speeches and decipher the meaning. For example:

But what a pleasure it was to rediscover the old Alan Greenspan, before he turned his coat and forked his tongue. Back in 1966, when he still believed in free markets and sound money, he expressed himself clearly.

This is absolute insanity! How irresponsible of this thing called the federal reserve!

How are you going to impact your purchasing power?

Median Income Example

All income tiers added together with the median for all:

10 10 11 11 12 12 13 13 14 14 15 30 35 80 85 = 365 / 15 = 24

After the end of the year, most all household income increased. Raising the median:

10 11 11 12 12 13 15 16 17 18 18 38 42 119 120 = 472 / 15 = 31

The lower tier of households. In our example, from the graph on page 11, below $200,000:

10 10 11 11 12 12 13 13 14 14 15 = 135 / 11 = 12

After the end of the year, most all household income increased. Raising the median:

10 11 11 12 12 13 15 16 17 18 18 = 153 / 11 = 13

The top two tiers with the median:

80 85 = 165 / 2 = 82

After the end of the year, most all household income increased. Raising the median:

119 120 = 239 / 2 = 119

Now do you see why they used the median as an indicator? The top tiers influenced the median, while the bottom tiers barely had an impact! After inflation is deducted, most of the bottom tiers went backwards.