Wednesday, November 18, 2009

The Dollar Obituary

The spot rate of gold continues to set record highs this year. Conversely, the value of the dollar has continued to erode. Why is that? Gold is just a precious metal, right? The price of something is only relative to what people are willing to pay for it, yes? Well, this might have a direct correlation to the reason WHY the value of the dollar is sinking like the Titanic. The world is not stupid. Everyone is aware we as a nation cannot sustain printing, spending, borrowing money to infinity without consequences. If the answer to achieving prosperity for a nation was simply devaluing your currency into nothingness.... then why did the Weimar Republic (1918-1933) not become the epicenter of wealth when they inflated their money supply like a hot air balloon?

The dollar is just a piece of paper that individuals accept as a medium of exchange for goods and services. Up until 1970, the dollar was backed by gold. Now, all we have is a fiat (paper) money currency, which other nations have also adopted with their own central banks. My research has shown that the fiat money system was adopted in favor of central planning of foreign central banks to set exchange rates. Our founding fathers knew fiat money was bad idea and why they explicitly declared in the Constitution that only gold and silver should be accepted as legal tender. Why we drifted away from this type of monetary policy is totally illogical to me since fiat money is susceptible to government manipulation and political purposes.

Up until this year, I thought owning gold was a ridiculous idea. I mean, someone cannot go shopping in Walmart to buy a 6-pack of beer and a loaf of bread with gold nuggets or bullion. But, then it dawned on me. If we have a currency crisis that somehow happens overnight without any warning or caution signs, could the dollar become worthless in the blink of an eye? Well, yes I believe it could. So, if the dollar is not worth anything, how would people be compensated for their labor? To me, it seems clear that we would resort to a barter system until a new currency could be established. If that happens, commodities such as food, water, shelter, clothing, gas, guns, and other essential items become just as valuable as gold or another currency to barter with other citizens.

In addition to stocking up on essential those goods, paying off any and all debt is extremely important. Now, most people have a mortgage and is critical to keep your payments up to date. But, closing out all other non-essential consumer debt is vitally important to not being a slave to anyone else. Because, when you cannot pay your creditor, they look to liquidate your assets to make good on the debts you owe them. Be self-reliant and insure the safety and security of yourself and your family.

Money (whether it's gold, silver, or fiat paper) is just a form of delayed consumption of purchasing goods, services, and assets. Money is not wealth and never has been. You can't just create new money and expect people to become more prosperous. Wealth comes from production, savings, and accumulating assets and property. These are the principles and concepts we must educate and share with each other so that when the dollar does collapse (and I hope it does not), we can all know the reason we got here and the solutions to return our nation back to sustained prosperity.

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