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[baymare]

Precious Metals: The Only Alternative

Jeff Nielson
13 February 2012


http://www.gold-eagle.com/editorials_12/nielson021312.html

No Other Choices


From a personal standpoint it was never my intention to become as heavily focused in the precious metals sector as I am presently (between 80% and 90%). As with many other precious metals bulls I am a big believer in the overall "commodities" story (from a long term perspective). This is based on the obvious big-picture fundamental that much of the global population (the so-called "emerging markets") are still in the early stages of what will prove to be the longest/largest economic growth boom in the history of our species.

At the same time, the collection of corrupt buffoons presently running (ruining) Western economies have betrayed their own peoples and so grossly mismanaged their economies that they have maneuvered themselves into the worst economic catastrophe in the history of our species. And we can "thank" the Banker Oligarchs who have steered these stooges every step of the way along that road to economic suicide. "Zig" one way today and Western economies will be consumed in a hyperinflation conflagration which is literally beyond the comprehension of any of us. "Zag" the other way, and these debt-saturated economic Ponzi-schemes will implode into domino-like debt defaults.

Literally only one investment can protect investors from both of those nightmares: precious metals. While the virtues of gold and silver in shielding people from the ravages of high inflation are generally well understood, conversely very few investors (or commentators) understand that gold and silver are equally necessary/effective in protecting people from the opposite economic Hell.

Commentator after commentator fail miserably in their analysis of gold and silver in any "economic crash" scenario. The mistake they make is in comparing what will be a totally unprecedented event in human history with past economic episodes which bear no similarity to our present circumstances.

Never before in history has the majority of the global economy (according to GDP) all been simultaneously poised to default on its debts. Thus when commentators talk about recessionary conditions or even depressionary conditions (of the past) they are totally missing the boat. They are talking about (mere) "deflation" when what we are facing are (serial) debt-defaults. There is no comparison at all between the two scenarios.

The enormous difference between the two scenarios could not be simpler: in the debt-default Hell looming before us "cash is trash" (implying the same thing for bonds). Our (unbacked) fiat currencies are nothing but the IOU's of the government issuing them. What is the value of an IOU from a bankrupt debtor? Zero.

Similarly, the debt-default scenario looming before most Western economies implies bonds going to zero. How much are Greek bonds worth today? About 30% of what they were worth one week ago (and fading fast). And as I have reminded readers frequently, in fundamental terms the U.S. economy is obviously more insolvent than that of Greece.

Any economic crash scenario also implies a sickening plunge for the broader economy, meaning that most categories of equities can be expected to crash as well, along with most of the commodities - except where severe shortages exist. The question then becomes: as $trillions in various forms of banker-paper plunge to zero, where will the paper-refugees flee with what remains of their wealth? For nearly 5,000 years, the answer to that question has been gold and silver.