This past Wednesday, November 11, 2015 was Veterans Day. To all veterans of the US Armed Services: Thank You for your service to our country.
FROM RON PAUL – LESSONS YET TO BE LEARNED:
- Increasing money and credit by the Fed is not the same as increasing wealth. It in fact does the opposite.
- More government spending is not equivalent to increasing wealth.
- Liquidation of debt and correction in wages, salaries, and consumer prices is not the monster that many fear.
- Corrections, allowed to run their course, are beneficial and should not be prolonged by bailouts with massive monetary inflation.
- The people spending their own money is far superior to the government spending it for them.
- Propping up stock and bond prices, the current Fed goal, is not a road to economic recovery.
- Though bailouts help the insiders and the elite 1%, they hinder the economic recovery.
- Production and savings should be the source of capital needed for economic growth.
- Monetary expansion can never substitute for savings but guarantees mal–investment.
- Market rates of interest are required to provide for the economic calculation necessary for growth and reversing an economic downturn.
- Wars provide no solution to a recession/depression. Wars only make a country poorer while war profiteers benefit.
- Bits of paper with ink on them or computer entries are not money – gold is.
- Higher consumer prices per se have nothing to do with a healthy economy.
- Lower consumer prices should be expected in a healthy economy as we experienced with computers, TVs, and cell phones.
THE REALITY OF U.S. DEBT
According to David Walker, the former head of the Government Accountability Office (GAO) under Presidents Clinton and GW Bush, the national debt of the US Government is far greater than the $19.6 trillion or so of popular media reports. He says that when you consider all of the US unfunded liabilities including social security, Medicare, civilian and military pensions and other miscellaneous unfunded liabilities, our national debt is closer to $65 trillion. These unfunded liabilities grow automatically, unlike the highly publicized and utterly fictitious budgeted debt that grows when congress increases the illusory “debt ceiling” every year to stave off bankruptcy and default.
To paraphrase former US Senator Everett Dirkson, “A trillio here, a trillion there, pretty soon we’re talking real money.” In Dirkson’s day, he referred to billions of dollars. In government terms, billions of dollars is no longer a relevant measure of government spending (debt). Let’s bring this into perspective, one trillion dollars is one thousand (1,000) billion dollars. In Dirkson’s day, the last year that the US minted silver quarters was 1964. In 1964 a silver quarter would buy one gallon of gasoline. Today, a silver quarter will buy one and a half gallons of gas. Preserve your wealth and purchasing power with gold and silver.
DECEMBER RATE HIKE
Will the Fed raise rates in December? The markets have already discounted the much anticipated December rate hike. The real question is should the Fed raise rates? Writing in the Financial Times, here is what Larry Summers, former Treasury Secretary has to say:
“With credit becoming more expensive, the outlook for the Chinese economy clouded at best, emerging markets submerging, the U.S. stock market in a correction, widespread concerns about liquidity, and expected volatility having increased at a near-record rate, markets are themselves dampening any euphoria or overconfidence. The Fed does not have to do the job. At this moment of fragility, raising rates risks tipping some part of the financial system into crisis, with unpredictable and dangerous results.
With her recent comments to congress, Janet Yellen has provided cover for both an increase in the Fed Funds rate and a decrease to negative interest rates (addressed in last week’s blog). The Fed is driving at 100 mph while looking in the rear view mirror. We will not have long to wait. Anticipate sideways markets in all assets until this question is resolved.
GOLD IS A STORE OF VALUE
Although the gold price may fluctuate, over the long run gold has consistently reverted to its historic purchasing power parity against other commodities and intermediate products. Historically, gold has proved to be an effective preserver of wealth. It has also proved to be a safe haven in times of economic and social instability. In a period of a long bull run in equities, with low inflation and relative stability in foreign exchange markets, it is tempting for investors to expect continual high rates of return on investments. It sometimes takes a period of falling stock prices and market turmoil to focus the mind on the fact that it may be important to invest part of one’s portfolio in an asset that will hold its value.
Contact your broker at RME to discuss how you can take advantage of current gold prices. While the price is down, the value remains- it is still the same gold that does exactly the same thing as it did at $1900 per ounce: Diversify, protect, and secure your wealth.