Wednesday, February 12, 2014

Market Update Article - Why Gold is not Money

Market Update has published one of the best articles I have ever seen to explain what the proper role of gold is in modern society. It does so in easy to follow language which is often not the case when discussing this topic. This is a MUST READ article in my opinion if you want to understand all that is going on around us today and why it will be important to understand any coming major changes in the monetary system. If you are a gold advocate don't worry about the title, just read the article.

I cannot stress enough how important it is for everyone to start making an effort to understand these issues. The current system is already overwhelmed with debt. It is going to get worse and worse until it simply cannot be sustained (we'll talk this weekend on how to look at the time frame in a common sense way). Even though the mainstream media and financial leaders today do not often openly admit that there is going to have to be major change, we know using common sense it is coming.

Just use an ordinary example for the average person. Let's say you work hard and earn $40,000 per year income. You have a family of four and that is expensive these days. Unfortunately, your annual expenses are twice what you are able to earn ($80,000). In order to keep paying your bills, you have to borrow $40,000 every year. Obviously, you can't keep doing that forever. At some point no one will keep lending you another $40,000 more each year because they don't see enough income coming in to get paid back. To keep this going you would need to be able to counterfeit money in your basement. Suppose you could actually do that. And people would keep taking the money awhile longer because you can make it look like real money to them. You aren't a bad person, but your only other option is to go bankrupt. That will hurt a lot of people very badly as well as your own credit rating.

This keeps things going awhile longer. But we ALL know how this is going to end. Someday you will have put out so much money (that you did nothing to earn) that people won't take your money any more (and they are working to earn their money). Word will get around that not only can you never repay the debts you are building up, you don't have near enough income to even pay the interest on all the debt you have already piled up.  Too extreme an example you say? Look here. Did you know that the debt obligations piled up by the US exceed the total estimated value of ALL of the combined assets in the US? Look at the bottom two lines of the National debt clock linked right above. It is clear as day: Total Unfunded US Liablities is greater than Total US Assets. Do you really believe this will go on forever with no changes in our system?

While simplistic, the above is a reasonable representation of the situation the US (and a lot of the entire western world) is in. Everyone knows it on some level. It is the elephant in the room, but we can't talk too much about it because if everyone gets concerned about it at the same time we know what could happen. A panic could ensue and then everybody loses very quickly. Everyone would try to get what money they have back as soon as possible.

This blog is dedicated to being a place to help increase awareness and understanding of how important all this is. We believe major change is coming. The more people understand why it is happening and how to deal with it, the better chance we all get through it and can move on to making the future better. Gold will be a part of this whole process for sure, but not like a gold standard of the past. So we need to understand how and why. The above linked article is a great place to get some background on it in my view. Gold won't be money (you won't buy bread at the store with a gold coin) but will be used to restore confidence in whatever money is used for daily life. And maybe along with other valuable assets.

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