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Saturday, January 26, 2013
Germany's central bank – the Bundesbank – recently announced it would bring back within its borders 300 of 1,500 tonnes of gold it currently stores with the Federal Reserve (and all of the 374 tonnes of gold it stores in France).
Germany repatriating its gold is one of the many warning signs we've had that the entire global paper-money system is collapsing under the weight of the colossal debts it has enabled. We've predicted that the dollar will eventually lose its status as the world's reserve currency. And as we lose the power to print money to pay our debts, America will face a severe financial crisis...
And that's the biggest reason why I don't use any leverage to buy real estate. I don't want to owe money to anybody in a world where the dollar could collapse overnight.
This isn't the first time our allies have demanded we return their gold...
In the late 1960s and early 1970s... as the Vietnam War was ratcheting up domestic spending and inflation... the world lost faith in the U.S. to cut its budget and reverse its trade deficit.
Keep in mind... This was a time when foreign governments could legally redeem their paper dollars for gold. So French President Charles de Gaulle began doing just that. In 1965, he took $150 million of his country's dollar reserves and redeemed the paper currency for U.S. gold from Ft. Knox. De Gaulle even offered to send the French Navy to escort the gold back to France.
Spain did the same... redeeming $60 million of U.S. dollar reserves for gold. Many other nations followed suit.
To stop a run on Fort Knox, President Nixon ended the direct convertibility of the dollar to gold on August 15, 1971.
I described what happened next in the January 2012 issue of my Investment Advisory:
Of course, at the time, the U.S. was the world's largest creditor... Today, we're the biggest debtor in history. So the consequences will be much worse...
Germany is clearly questioning if we're still a reliable borrower. Essentially... it's asking for its gold back because it has doubts that the Federal Reserve still has it. It's terrifying when one of our long-term allies essentially says, "We don't trust you anymore. Give us back our gold."
That's a big deal... It means that we're on the way to losing our ability to finance our government spending with debt. And when that happens, it's going to be an absolute nightmare.
I don't want to borrow money from banks because I'm afraid that they will have to call it back in an emergency. And I don't want to lend money to banks because I'm afraid they will all collapse.
And I sure as heck don't want to put my gold in a bank because I don't want them to seize it. So where do I hide my gold?
I store it in places where I know it's safe. And I keep it in multiple locations. Of course, I'm not going to tell you exactly where it is. But I will tell you... it's never in my house. So don't rob my home looking for gold. It's not there. I don't put my kids and my gold in the same place because I'm not stupid. It's not going to be anywhere someone's likely to look.
The other thing to remember... gold doesn't rust, so you can put it virtually anywhere. Put it in a shoebox and hide it in the back of your barn. It'll be fine. No one is going to look for it there.
I think anytime you've got a country that's as bankrupt as ours... that has a trillion-dollar annual deficit and no political will to stop the spending... it's a good time to buy gold.
By the way, this just came out last week... The U.S. Mint has run out of silver.
It ran out of silver Eagles and had to suspend sales. When the mint cannot keep up with demand for physical bullion (gold and silver), something is totally wrong with the spot prices. It makes no sense that there would be so much preference for physical bullion that the mint can't keep up with demand, unless the spot price is being manipulated to keep it artificially low.
Now I'm not a giant conspiracy theorist. But I know how economics work. The demand for physical bullion is a sure sign that the marketplace does not trust the futures price, period. The futures market pricing for gold and silver is becoming more and more irrelevant. And the shortages you're seeing in physical gold are sure signs that something has gone terribly wrong...
Date Range:1/17/2013 to 1/24/2013
Date Range:1/17/2013 to 1/24/2013