by Benjamin T. Moore, Jr.

Golden Fleecing

There is little doubt that the global economy is extremely volatile right now. The markets are doing a remarkable impression of a world class roller-coaster. If you’ve been working all your life and have a retirement plan that contains investments in the Stock Market, being on edge is quite understandable.

In the United States we’re crawling our way up out of a recession – no thanks to the Republicans – and things are quite fragile in our economy right now. Ask anyone old enough to understand the global economic crisis and invariably you will hear similar expressions of unease.

Be afraid… be very afraid!

It is this very unease that creates a market niche that companies dealing in “precious metals” are eager to fill. Have you been paying attention? It seems to me that ever since the big “Y2K” scare, when all our computers were going to crash and send us back into the stone age, we’ve had one threat after another. Without putting my tinfoil conspiracy theorist cap on, one could almost get the impression that someone(s) were orchestrating global events to keep everyone right on the verge of panic.

First Y2K, then the “911 Attacks,” then two wars, one totally unnecessary and against a nation that had nothing to do with the “911 Attacks.” This led to a highly strained U.S. Economy. Next the wealth of our nation was siphoned off into the European banking houses through the “Real Estate Débâcle.” One thing after the other. There is small wonder that right about now, for a segment of society, visions of a post apocalyptic future seem all too real.

We see this with the proliferation of survival shows such as, “Dual Survival,” “Les Stroud’s “Survivorman,” “Doomsday Preppers” and others. Don’t get me wrong, I am a firm believer in preparation and self-reliance. There is a fundamental flaw in the logic of people who sincerely believe that gold is going to be of any value in a world that has totally gone to Hell.

Thinking The Unthinkable

Nobody ever thinks about toilet paper. How much do you have stored up?

Let us go there for a moment. Let us embrace with open arms this fantasy scenario wherein we are all in survival mode, fighting to protect our loved ones, foraging and bartering for food and the needed essentials. Suppose I had a large supply of toilette paper. If you doubt it’s value, imagine going a few weeks without it. After you’re good and chafed, you’re going to want to buy some toilette paper.

Will you attempt to give me a gold coin for a roll or two? I’m probably going to ask, “what else you’ve got?” Why? Because gold isn’t of much value in the type of scenario you’re imagining. As of today, the price of 1 oz. of gold is roughly $1,606 US. However, if the world goes to hell, there won’t be any markets artificially inflating that price. I’m certainly not going to part with $1,000 worth of toilet paper for your one coin. Breaking off a piece of that coin would make it even less attractive as a bargaining chip. The simple truth is, a handful of .22 caliber bullets would have more intrinsic trading value than a handful of gold coins. You might even be able to negotiate a one bullet per roll price.

Gold Scams And The Precious Metals Market

The first thing you need to know is, the precious metals market is largely unregulated! Read that again. Convicted felons can and have opened precious metals brokering companies. There are no reporting requirements. No agency inspects the gold to make certain it is of the purity levels claimed. For all you know, you could well be purchasing a gold plated lead slug… and that’s if you actually opt to take possession of the gold you believe you’re purchasing.

Many companies try to push you into what they call a “secure storage contract.” This is supposedly a highly secure storage vault where they will store your gold for a nominal fee. The beauty of this is you never see your gold, you never take physical possession of your gold, all you get are quarterly statements – a piece of paper – claiming how much your gold is worth based on the current market price. What could possibly go wrong?

In point of fact there have been criminal enterprises wherein people have been duped into converting their entire retirement accounts into gold. The broker took the money, and never purchased any gold with the money. People were told their non-existent gold was secure in their vaults and began receiving quarterly statements on their non-existent gold. When that “rainy day” came, as it always does, those poor souls discovered their retirement savings were all gone and in many cases the broker had skipped out with their money. It was only then they learned that gold is not insured under the FDIC.

What about gold backed securities? You’re investing in the stock market and that is regulated so you should be safer right? Here’s the problem with this theory. You never buy high in hopes your stock will go higher. Gold – just like the salesman says – is at an all time high. Will it go higher? It might. However, it also might go lower. All investments carry risk. If you decide to cash in your investments, you’re going to be paid in good ol’ U.S. dollars. If the dollar crashes as the profits of doom are predicting, you’re still back to trying to get value for those dollars.

The simple facts are if the United States goes under, gold and dollars aren’t going to do you a lot of good. You’re back to the example I gave with regards to toilette paper. If a gold coin has no value to me, a paper dollar surely won’t.

Gold Scams – Ugly Truths About Gold Investing

Talk radio is rife with hucksters predicting the end of the world as we know it. “Buy gold” they say. Isn’t it ironic that almost every group prophesying the end of the world or the end of the United States, always seems to want your money to tell you all about the horrors to come. If the United States, or the world is coming to an end, what good is money?

You can hear expert after expert(?) pointing to the beginning of our demise as being the point where we got off the “gold standard.” I’m not advocating the Federal Reserve system by any means. However, we need to interject some reality and some facts. You simply cannot have a global economy based on the gold standard. Money is transferred all around the world in the blink of an electronic eye. This is necessary for our economy to compete.

Nations with whom we do not have an established rate of exchange, we are negotiating with – sometimes minute by minute – the exchange rates between their currencies and ours. You simply cannot ship gold around the world fast enough to keep up. It can’t be done. The global economy would grind to a halt. You might not like this, but this is the reality in which we live. Very few U.S. Citizens are in love with China, yet the isles at Walmart are full all day long with people buying cheap Chinese made goods.

When you go to the grocery store and purchase fresh fruit in December and January, corn on the cob, strawberries and broccoli, precious little of that was grown in greenhouses on U.S. soil. You are reaping the benefits of a global economy. That global economy requires the ability to transfer funds at electronic speeds. You simply cannot do this with gold.

Most of the people lamenting about the U.S. leaving the “gold standard,” simply do not understand economics. They’re no better than the hucksters trying to get you to invest in gold when it is at an all time high, and trying to get you to place your hopes in an unregulated market. We supposedly regulate our Stock Market and you see how it almost destroyed itself and the rest of the American economy. Imagine what could happen to you in an unregulated market.