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Stock Ideas Investors Daily Edge A Logical Solution to an Illogical World
Stock Ideas Investors Daily Edge A Logical Solution to an Illogical World 
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| It's been said that if you spend 15 minutes a year trying to figure out the direction of the economy, you're wasting 13 minutes. Of course, that's true – for at least two good, practical reasons. | |
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| A Logical Solution to an Illogical World |
| Friday, 04 April 2008 | ||||||||
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Last week I talked about the gold standard. For those that don’t know, the gold standard is basically money backed by gold (a real asset), rather than the good word of Ben B. and the U.S. government. Except when I talked about the gold standard, I didn’t talk about how we need to get on it. What I did say was that the gold standard would never work in this day and age. And I said the reason why was human nature. This fatal flaw is the biggest reason I didn’t suggest we get back on the gold standard. Now, some of you took me to task on this. But I want to make sure everyone understands me here. I only think the gold standard wouldn’t work because of human nature. Now with that, one reader sent an e-mail saying… Charles, What have you been smoking lately? Surely for a man who values gold and silver (you did some fabulous research on silver in that Silver Report I bought from you) you have apparently strayed from your former convictions. How is that? To sum up what James Turk recently wrote, “Have the prospects for the dollar improved this past week? Have the politicians in Washington, D.C. finally begun to do something consistent with all their talk about a “strong dollar”? I haven't seen anything to change my view that the dollar is on the same downward path. It's a path well-worn by many fiat currencies before it. It's the path to the fiat currency graveyard. Unless the US government changes its ways, the dollar will sooner or later get there. For this reason, it is better to own metal than paper. Can I get a hearty “AMEN” Charles?
Carlton, I’m not denying that owning metal is a great investment. It has been for the past few years, and it should continue to be in the future. But nobody can point to a metals backed currency that didn’t go to the same exact graveyard that fiat currencies went into. Of course, the difference is that governments debased their backed-currencies until they became un-backed fiat currencies. And then they inflate the money until it dies. It’s a pattern that happened in Great Britain, Germany, the U.S, and even ancient Rome. Would this pattern repeat itself if we got back onto the gold standard? Of course it would. Instead of going on the gold standard, the government should put in place practical mechanisms to make sure it can’t overspend. If it can’t overspend, then fiat money wouldn’t inflate the way it does. But I guess wanting something as logical as controls on money is something the government couldn’t stick with for very long. Hell, the government got rid of pay-as-you-go rules and they jack up the debt ceiling nearly every year. Come to think of it – all of these things are the very reason why gold backed money didn’t work. And the truth is, if the U.S. keeps up its current habits, there’s no style of money that could prevent the eventual fall. So why don’t we use our knowledge about the way money works to help ourselves? We know that overspending is bad. We know that having precious metals is good. And we know that we can profit on the dollar’s fall from grace. So why don’t we save more, put some precious metals in our portfolio, and start buying assets that go up as the dollar falls? These are perfectly logical solutions to deal with a perfectly illogical world. Charles P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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