by Jim Clark
Like many Americans (more than 111.5 million to be exact) I’m looking forward to watching the Super Bowl this weekend. And like many of these Americans, I will be enjoying the game at a Super Bowl party at a friend’s house. This year’s Super Bowl has been plagued by scandal, “Deflate-Gate”. This scandal has been front and center in the news for days. But, for a long time, Americans have been the victims of a much larger and more insidious “Deflate-Gate”, one that is not covered in the daily news, namely the devaluation of the dollar. Though the Super Bowl Deflate-Gate has had a negligible effect on American lives, the Deflate-Gate of the dollar has cost Americans millions and millions, as the value and purchasing power of the dollar has plummeted. So the Super Bowl XLIX party is going to cost a bit more now than it did in 1967 at Super Bowl I. The $3.98 bag of chips was just 25 cents in 1967, and the $4.99 six pack of beer was just 99 cents at Super Bowl I. And during the same year, the average American home cost $24,600, and you could buy a Volkswagen Beetle for $1,500. The dollar has certainly shrunk! There is one currency that has maintained its value and will still purchase the same amount that it purchased in 1967-that currency is gold. As the dollar has been devalued, gold has grown in value. Let’s look at gold this week and the forces in the economy that make gold good economic insurance.
Gold made a correction this week, dropping to a low of $1,252 on Thursday, but rallied on Friday to close at $1,285. As I said last week, the world is in the middle of a currency war. Singapore is joining in the long list of central banks that are trying to encourage higher inflation and stronger economic growth by loosening monetary policy and depreciating their currency. The list already includes The Bank of Canada, the Danish Central Bank, The European Central Bank, and the Bank of Japan. Instead of trying to support economic growth through sound fiscal reforms that increase prosperity, these nations are instead debasing their currencies for short-term gains. By expanding their balance sheets, the central banks are creating systemic risk in financial markets, creating price bubbles. The central banks have masked risk by buying risky assets. When the market starts to crash, gold will be the winner. Gold always wins in a currency war.
Germany continues to repatriate its gold from New York and Paris. It has now transferred 23% of the total 674 tonnes. Russia’s gold reserves grew in December, having tripled its gold reserves since 2005. The European Central Bank announced a large QE program that will further damage economies of high debt countries, and may signal the break-up of the euro. China’s yuan became the fifth largest world payment currency in November overtaking the Australian and Canadian Dollars as China strives to internationalize their currency. The U.S. mint January sales of silver American Eagle coins surged in January to new highs signaling strong investor interest in silver.
I strongly encourage you to consider gold to protect your retirement savings. Do you realize that 15.3% of your salary has gone to fund Social Security and Medicare? These programs hold massive trust funds, and the trust funds are required by law to buy U.S. government debt. The official U.S. debt is $18.1 trillion. The 2014 trustee reports for Medicare and Social Security indicate that nearly ALL of the trust funds are sliding towards insolvency. So, the U.S. taxpayer is one of the largest owners of U.S. government debt. The Fed is the biggest lender to the US. government, holding over $2.4 trillion of U.S. government debt. It does this by printing money. The Fed has created so much money over that last few years that it is now borderline insolvent. There will be a level of monetary expansion that is too much. When that happens, where will Uncle Sam go to buy his debt? Well, the government is already showing that it is looking at your retirement account. There is close to $19 trillion in individual retirement accounts in the U.S. President Obama announced his MyRa program in his 2014 State of the Union Address. The MyRa is an IRA that invests directly in government bonds-in other words, U.S. government debt. How much longer will it be before a portion or all IRAs are nationalized? A market crash would be an ideal time to announce a new program for retirement savings that require banks to invest in the “safety and security of government bonds” and pushes businesses to sign up employees. So protect yourself and learn about rolling all or part of your savings into a gold IRA. Call one of our experts this week to find out how easy it can be.