In the end, though, if you invest early enough, with the price of gold below $3000, there is little chance of losing. Gold should be the top investment choice till 2020.
More immediately, perhaps next year, I expect major defaults to play out that will go un-remedied by world banks and governments that are either disinclined to step in or unable to do so. All lenders will quickly retrench, just like the banks did four years ago. This time, however, would-be rescuers will make clear that there will be no safety-net and no subsidy for interest or principle. New government rules will be enacted in an attempt to stabilize the financial system. Real write-offs will be placed on ledgers; no more issuing of bonds and government bailouts. No winners, whether lender or borrower. A forced period of across-the-board austerity will be put in place. For the masses, there will be a global depression that will last for more than a decade. For the economies of the world, it will be much briefer. Businesses will quickly do what they have to do to survive and then thrive. Just as nearly everyone has been flabbergasted by the way corporations have sustained strong earnings over the last four years, they will underestimate the ability of companies to adapt in a more severe economic downturn.
The Normalcy Trait
The reason gold has not already taken off has to do with a human psychological trait that clings to the notion that everything will be as it was. It’s called the normalcy trait, and it makes it hard for us to acknowledge that drastic, unwelcome change can occur. This of course assumes you have lived in a stable environment all your life. That was why Jews clung to the notion that Hitler’s regime would be short-lived, and that its citizens would not attack one another. While most can understand the logical conclusion to this debt crisis, we still cling to the notion that somehow it will end without much change in our lives. We can see the data points and the almost irrevocable conclusion, but somehow manage to skirt reality and accept that our lives will continue in the “normal” way they always have. ]
“The Normalcy Trait” is probably the most important thing to take away from this blog posting as I have for years been trying to communicate this issue in a digestible fashion, and here it is. Nobody wants to admit how bad things are or how bad things may actually get. This causes the subconscious to create an alternate reality that is more palatable in order continue to keep our spirits high. This is a more comfortable zone to be in mentally as it allows the imagination to create a scenario where even though you can’t pay the mortgage this month you envision yourself winning the lottery and there for hitting it big. This allows for one to sleep at night and wake up refreshed tomorrow which in your mind will make you more able to hit the ground running and possible solve all of your problems tomorrow even though you had no real solution materialize during today.
This of course is not logical, yet we all do it. Take for example the medias explanation of how gold & the markets in general have been performing lately and you will see this alternate reality that allows the insanity to persist. When you hear that the European stock market is destroying portfolios overseas & investors are dumping 20% of their stock holdings you then see the “euro rallying against the dollar”. NO! What is actually happening is that let’s say a billion dollars that was suspended in European stocks has just been moved back out of stocks and had to be returned to the client by way of the currency of the land which happens to be the Euro of course. So the FOREX market shows that more euros are in demand than earlier in the day (due to the exodus out of European stocks) and so you hear “the Euro is rallying against the US Dollar” and so arm chair investors watching the business news channels for their investing marching orders rush into the Euro! Then you see that those investors who rushed out of European stocks actually wanted to buy US Treasuries with their money for a ‘safety play’ compared to the dropping stock market overseas so they jump out of Euros and into the US Dollar so they can buy Treasuries. Now the talking heads on the boob tube change their tune and start preaching that the “US Dollar is make a late day rally against the Euro” only to have those same arm chair traders now rush out of Euros and into USD! This transition of the Euro stock sale money into the dollar then creates a ‘stronger dollar’ argument and this is the talking point of the day. If you are holding a stronger dollar which in turn buys more than earlier in the day when the Euro was stronger, you then have a ‘weaker gold price’ as gold which is priced in those dollars “appears cheaper” in relation to the stronger dollar?!?!?! See the insanity?
So by the end of the day you have heard that the European stock market was falling, then the Euro rallied against the dollar, then the dollar made a late in the day rally against the Euro and then finally that gold was down on the day. The sad truth is none of this is really accurate. What is accurate is that the entire investment landscape is all built upon a piece of paper that is used to buy other pieces of paper whether they be paper monies, stocks, treasuries, bonds, or derivatives. Actually they ALL ARE DERIVATIVES!
So how do you ignore the “grass is greener on the other side of the next quantatative easing move by the FED” insanity? Get out of the Wall Street Kill Zone! Get into the one asset that will serve as a true hedge to to the disaster that you have been told everyday for 3 years is a recovery that just hasn’t made it’s way to you yet. Establish your “Plan B” in gold & silver bullion and stop trying to keep up with the herd. By the way, did you notice above that gold will be the best investment choice all the way through 2020?!? Did you notice the guy saying this was against gold as an investment for many years until he stopped listening to the business news channels and really looked at the facts himself? Maybe it is time for you to do the same thing? Did you notice that MAJOR DEFAULTS are coming also? Tick, tock.