Friday, November 30, 2012
Gold Silver Worlds
Financial repression is a critical aspect of today’s economic environment. In essence, it’s a perfidious form of wealth redistribution that benefits debtors and punishes savers. In the short term it alleviates the huge debt mountain, but long term it paves the way for a bigger crisis.
One pillar of financial repression is negative real interest rates, which the Fed has promised will continue in the US until at least mid 2015 (many countries are embracing near-zero interest rates). This shows that they are running out of ammunition with which to battle growing debt loads and economic instability.
Negative interest rates have always been the perfect environment for gold and silver. Unfortunately for investors, gold still carries the negative perception that was created in the 1980s and 1990s, largely because of phenomena known as cognitive dissonance and normalcy bias.
Sadly, most don’t care or understand what’s happening on the monetary and economic front. They only see the prices of daily purchases increasing, for which they blame governments, speculators and the ‘system.’ People simply don’t see the link between monetary policy, over-indebtedness and price inflation.
Gold shouldn’t be regarded as an investment; rather, it’s a form of money that has been around for 5,000 years, an alternative form of cash in its purest form. The last 41 years (since Bretton Woods) is a very short period of time when compared to the whole of monetary history. Just as 50 or 100 years ago nobody would have believed there could be one global fiat currency system without any gold backing, people today have difficulty imagining a currency system backed by gold. There will be a paradigm shift, however. The first signs are there: More and more politicians and economists are talking about a gold standard.
Posted by Unknown at 11:20 AM