HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
As I have been saying for some time, I think at least one thing that will mark the end of this still-unfolding financial disaster is when we return to a metallic/commodity-based and backed money.
This is certainly not a new or novel idea. From 1792, our pennies were copper, nickels were nickel, dimes, quarters, half-dollars and dollars were silver, and gold circulated freely. A dollar was fixed at $20.66 to one ounce of gold.
The first chink in our simple but elegant and effective system, the first step down the road to serfdom (to borrow the title of Friedrich Hayek’s famous work, on every list of the most important books of the Twentieth Century), occurred in 1913 with the creation of the Federal Reserve. The politicians created a system that allowed them to print paper money, to fund their “bread and circuses”.
In 1933, Roosevelt called-in (confiscated) the gold, which was immediately re-valued to $35, an instant 69% loss for all the law-biding Americans who did as they were told and turned in their gold.
In 1964, the US repudiated the silver standard. The last link to the discipline of a metallic-based currency occurred in 1971, when DeGaulle demanded gold for France’s rapidly-depreciating dollars. Nixon told him to shove it. Inflation exploded. The once-mighty US dollar was no longer as good as gold.
I write this now for many reasons. There was a piece posted on http://www.321gold.com
by Hugo Salinas Price on November 29. It provides an interesting discussion on how China might be able to introduce a silver coin.
Many central banks (except, it seems, the US) are buying gold. India recently purchased 200 tonnes. Chine and Russia are big producers, yet none of their gold appears on the world market. Even Iran recently purchased 340 tonnes of gold.
The international financial situation is deteriorating. Wall Street Journal; 12/1/10. The lead headline “Europe’s Crisis Widens: Italy, Spain See Bonds Sink, Portugal Faces Rating Cut as Faith in Rescue Ebbs”. Greece is still hurting; Ireland has received a handout. But watch out for Spain. It is big enough that a bailout would cause some real pain. The dollar’s recent strength against the Euro is relative; gold has made a new all-time high in relation to the Euro and is close vs. the dollar.
I was recently speaking with someone who is as well-connected as anyone I know. They said for the first time in their life they are worried about the basic health of the financial system (see several more comments below).
As I have emphasized since the beginning of my financial writing; watch the ratio of the DJIA/gold. When this is high, financial assets are dear and gold is cheap. At the bottom of the gold market in 1999 (coincident with Britain’s central bank selling one-half of their gold), it took 43 ounces of gold to buy the DJIA. As of last week, it took less than 8 oz of gold to buy the DJIA. Thus, in the last 11 years, the DJIA has depreciated 81% in comparison to gold. History shows that when this bull market in hard assets and bear market in financial assets is over, it will take less than 2 oz, and maybe as little as one ounce, of gold to buy the DJIA. Plug in whatever number you want for the DJIA to see where gold will go.
Several years ago, one of the Barron’s Roundtable members (I believe it was Marc Faber) said each person should be their own central bank. The message: I believe that over the next 5 to 10 years, the best way to protect your wealth will be with gold and quality collectables. I again recommend that the core position of your entire investment portfolio be US-minted gold coins in your personal possession.
You must be cognizant of where your money is domiciled; a point emphasized many times at the recent Barron’s Art of Successful Investing Conference. It would be even better to have some physical gold in a safe deposit box outside the US. The portability of your wealth is also an issue. I have attached Issue #41, June 2, 2008, where I reviewed Barton’s Biggs’ book Wealth, War & Wisdom.
Presuming the US still has its gold hoard (it has not been independently audited in more than 4 decades), I believe we, and many countries, probably lead by China, will (between 5-10 years from now) return to a metallic/commodity-based currency.
Why should we have a hard-asset backed currency? Because gold, silver, copper. oil, wheat, cotton, lumber; all commodities; may decrease in value, but they can never go broke (as compared to Lehman Brothers, Bear Stearns, Merrill-Lynch, Fannie Mae, Freddie Mac, General Motors, Chrysler, AIG, Citigroup, Wachovia). They can only be produced by the sweat of a man’s brow, not by the politician’s printing press.
To quote from the interview in today’s Barron’s: “We view (gold) as nature’s currency that can’t be printed and, thus, its value tends to go up when faith in the current monetary architecture is lowest”.
RMD
This year the Central Missouri Food Bank will distribute 27,000,000 pounds of food. That is 13,500 tons, approx 40 tons a day. Times are tough. A lot of good, hard-working people who want jobs can’t find them, or are under-employed, or one of the two wage earners is out of a job. Many people are hurting. Please be generous with your Food Bank, or Salvation Army, or similar organization.
Received a call from an old friend I haven’t spoken to in about 2 years; wounded and decorated in the Korean War. He is so worried about the financial situation that he wanted advice on how to move assets outside the US.
RMD comment: More and more mainstream folks are becoming concerned about the basic stability of the financial system and protecting their assets. I will discuss this topic in more detail as time goes on.
If that didn’t impress you, how about this: Today’s Barron’s: Former Fed Chairman Paul Volcker said we are caught up “in the most difficult economic circumstances of the post-World War II era and so is almost all the developed world…we are faced with broken financial markets, underperformance of our economy, and a fractious political climate”.
After my purchase of the Bingham painting “Mrs. George Caleb Bingham and son Newton”, I received a note from Patricia Moss (.(JavaScript must be enabled to view this email address)), an independent art historian, who helps maintain updated records of Bingham paintings with the Smithsonian American Art Museum’s Inventory of American Paintings.
She said” Your investment in Bingham portraits may prove to have high returns. Over the past decade, I’ve seen their value increase ten-fold”.
The Economist, “The World in 2011”. In the Obituaries, noting the imminent death of the incandescent light bulb. “A 4-watt bulb still glimmers in the fire-station in Livermore, CA, with a small American flag stuck under it, for more than 100 years”.
Site by Delta Systems powered by ExpressionEngine