More About The Common Fallacies of Gold

We already covered 15 of the most common fallacies and myths behind holding and investing in gold held by the general public. Surprising, there are even more myths ingrained in the minds of people. However, holding a few of them shouldn’t stop you from purchasing and investing in gold, silver or other precious metals. Odds are, you already know the value of gold and silver, or at least, your parents or grandparents do.

More often then not the question is where to purchase gold, what types to purchase and how to store it safely and securely. I’ll return to that topic in another article.

Meanwhile let’s continue with some other common myths about gold and other precious metals.

Here are some more common myths about gold and owning gold:

16.  There is not enough gold in the world to use as money.

Wrong.  Twice as much refined gold exists in the world today as there was 30 years ago.

There is “not enough gold” only for those people who have none.  If that describes you, you should buy gold immediately!

If you are a liberal socialist, or communist, remember to avoid buying “more than your fair share,” which is 7/10ths of an ounce, or seven tenth-ounce gold coins.  At $320/oz., that’s $224 worth.  (130,000 tonnes, or 4.18 Billion ounces of gold in the world, divided by 6 Billion people, is .69 oz. each.)

Of course, that price reflects today’s low valuations.  If gold were to be valued the same as dollars (100 times more), then there would be $22,400 worth of gold (the same 7/10ths of an ounce) available per person on earth.

17.  There is too much gold in the world today to use as money.

Wrong.  With $8 Trillion dollars in M3 in the U.S., and $1 Trillion worth of Gold in the world (valued at today’s prices), there is certainly much less “gold value” in the entire world than there are dollars in the U.S.  Gold will jump up in price quite nicely for those who hold it.

18.  The supply of gold is not flexible enough to use as money.

Wrong.  There is always enough of gold to use it as money.  When there is little gold, the gold has more value, which, in turn, causes a mining boom, which brings out more gold.  When there is a lot of gold, it has less value, and mining slows down.  Gold is inherently both flexible enough, and stable enough, to use as the perfect money.

19.  Nobody accepts gold and silver.

Wrong.  As recently as 1964, 90% silver coins were in use in the United States, and for over a hundred years previous to that.  The U.S. Constitution says gold and silver are the only forms of lawful money.  Worldwide, gold and silver are probably more widely traded and recognized than the U.S. paper dollar.

20.  Gold is a bad investment because you can’t spend it, I mean, the supermarket will not take it.

That’s bad reasoning.  You can’t spend a bond, or a share of stock, or the title to a piece of land at the supermarket either, but those are all accepted as investments.  In fact, if you negotiate directly with any store manager or owner, you’d have a greater chance of getting them to accept precious metals as payment than any other investment vehicle.  Gold is the most liquid investment available; it is the very definition of “liquidity”.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.

More Common Fallacies of Gold

I’ve previously covered 10 of the most common fallacies and myths behind holding and investing in gold held by the general public. If you’ve been following this series of articles you would be way ahead of most people in realising the need to build up your financial reserves in inflation-proof commodities like gold and silver.

Well let’s continue with today’s discussion, here’s 5 more common myths about gold and other precious metals.

Here are some more common myths about gold and owning gold:

11.  Gold does not pay an interest rate.

Wrong.  From 1971 until 1980, gold increased from $35/oz. to $850/oz.  That was an increase of about 24 times, 2400%, or an annual increase of 34%.  Even a bond paying 34% would not be as good, because a bond paying that high of a rate would most likely default, and remember, gold can not default.  The best investor in the world, Warren Buffet, has only been able to increase his portfolio at an annual increase of about 20% over the years.  Gold, as an investment, for a certain time period, has vastly outperformed the best money managers in the world, and gold will do so again for everyone who owns it now.

12.  The world can never go back to gold and silver.

Wrong.  For over 6000 years, gold and silver have been money.  They continue to be money today (metals are loaned out at an interest rate, and are still used and held by banks and nations and wise investors), and will be the most popular money on earth again, (if it isn’t right now).

Under a gold standard, society prospers and human productivity increases, which causes the gold you own to be able to buy more and more over time.  Under a gold standard, entrepreneurs are better able to plan for the future, and invest wisely, and thus, create a better life for everyone.

13.  The banks are selling gold.

Yes and no.  Officially, they have sold a mere 10% of their reserves in the last 10 years, from about 34,000 to 30,000 tonnes.  And many banks have bought gold.  Besides, annual supply is 2500 tonnes, and demand is 4000 tonnes.  There is not an oversupply, but an under supply of gold in the world.

Actually, the banks are selling gold, but they are doing it secretively, through loaning it out, but still claiming it as a holding and asset on their books.  The best estimates are that about half or less of the approximately 30,000 tonnes of central bank “official” gold remain in their vaults.

And why are they selling gold secretively?  The people who create and control the dollar (Alan Greenspan and the Federal Reserve) must attempt to force the price of gold and silver down to keep the dollar strong.  If people see gold and silver going up, they will be more likely to spend dollars for gold.  And if people flee the dollar, and buy gold and silver, the con game of paper money comes to an end.  But their con game will end, as they all do.

But the real point is that central bank sales or loans are not, and can never be, an infinite supply; but rather, a limited supply.  When that supply stops, as it must and eventually will, (and there’s no way to tell exactly when this will happen) it will create a huge and immediate “supply and demand” system shock and imbalance.  That shock will cause prices to skyrocket much faster than when the price of gold went from $35/oz to $850/oz when the United States finally stopped selling gold (redeeming gold for dollars and went off the gold standard) in 1971.

14.  The Federal Reserve, the United States government, and the powerful banks are all lined up to keep gold low, and they are too powerful to fight by investing in actual gold myself.

Wrong.  The default on the dollar in 1971 proved the vulnerability and fallacy of the attempt of the bankers to keep the price of gold fixed low.  It proved the fallacy of thinking one can use the printing press to create wealth.  Nobody can fight market forces forever, and market forces are the strongest economic force and reality.

I believe the powers that are systematically suppressing gold know exactly what they are doing.  They are using public companies to do the dirty work of short selling gold and taking on the gold derivative contract obligations.  This way, when the bullion banks such as J.P. Morgan and Goldman Sachs fail, the primary ones hurt will be the owners of those stocks.  In other words, the ones hurt will be the little guy who thought he could own “a piece of the house” in the rigged game played with dollars.

You are not alone if you buy gold.  You would ally yourself with the stronger and larger side of the market that is buying the 4000 tonnes per year, as opposed to the 2500-tonne annual mine-supply.

15.  We can determine when central bank sales will end.  If there is a 1000 tonne supply/demand deficit, and the central banks of the world have 15,000 tonnes left, then gold will not rise for the next 15 years.

No, it’s not that simple.  

First, the supply/demand deficit is not a static number; it is rapidly rising, which will cut the time substantially.

Second, not all the banks will sell gold until they have nothing left.  Back in 1971, the U.S. stopped selling when a third of the reserve still remained, so that will also shorten the time.

Third, many of the central banks of the world have no interest in helping the U.S. dollar stay alive for a few more months, when it is certain to crash.  They will want to hold onto gold, or accumulate more gold, to keep their own currencies strong, or to have a reserve in case of currency collapse.

Fourth, and most important, there is a tremendous supply of paper wealth that could pour into the gold market and absorb all supply at any moment.  The 15,000 tonnes of gold still held by the central banks, at $330/oz., is valued at a mere $160 Billion.  The world, in a panic, could buy that much gold at that price in a single hour.  In fact, there are many investment funds that control far more than $160 Billion in capital.  Thus, a single investment fund that realized the truths presented in this article could make a snap decision that would bring the investment opportunity of a lifetime to a swift end.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.

Clearing Up More Common Myths About Gold

Last week, we went into detail into some of the common fallacies and myths behind holding and investing in gold held by the general public. And we offered our reasons why these beliefs are false and erroneous, and even dangerous: You certainly wouldn’t want to be caught holding on to worthless pieces of paper when a depression or hyper-inflation starts, would you?

Today, we’ll continue with some of the other common myths about gold and other precious metals.

Here are some more common myths about gold and owning gold:

6.  The only reason gold might go up in value is a potential war in the Middle East.

Wrong.  Gold must go up for a long list of fundamental, long term, systemic reasons related to supply and demand factors.  The media falsely claims that war, or short term political tensions, are the only reason gold “might” go up because most political worries are temporary.  For the most part, political worries or rumors of war are distractions from the real risks, which are pervasive, systemic, and long-term.

7.  The U.S. government still has gold; and that still backs the dollar at least somewhat, right?

Wrong, and this brings us to the fundamentals.  If the 7700-tonne (248 Mil. oz.) U.S. gold reserve still exists (and some seriously doubt that it does), it would only provide an ounce of gold for about every $33,000 dollars that exist as M3, the most comprehensive measure of dollars available.

Source of M3: http://www.federalreserve.gov/releases/h6/Current/

Source of gold at the U.S. Mint: http://www.fms.treas.gov/gold/index.html

This is not opinion here.  Look up the numbers and do the math. (8.3 Trillion dollars in M3 / 248 million oz. = $33,467/oz.)  If you really think that U.S. gold reserve is backing the dollar, then you must value gold at over $33,000 per ounce as a necessary logical consequence of what the numbers actually are.  Stated another way, if gold is valued at $334/oz., only 1% of U.S. dollars (as M3) are backed by gold, and that’s IF the U.S. gold reserve actually exists.

Now the concept of “gold at $30,000/oz.” doesn’t mean that an ounce of gold will have the purchasing power that $30,000 does in the year 2002.  It will probably be much less.  One “myth” is that we tend to think of the dollar having a relatively stable value.  By the time gold hits $30,000/oz., the value of the dollar will be much lower.

And I am also not saying that an ounce of gold in the future will have the same purchasing power it does today.  Not all of the price change will be due to dollar devaluation.  Gold will probably be much more valuable than it is today, and that is extremely difficult to quantify, and it certainly cannot be quantified in dollars which are not a stable unit to measure anything.

Further, I am not predicting gold will be $30,000/oz., and then stabilize at that price.  By the time fraudulent dollar excesses are blown off between now and the time gold hits $30,000/oz, in all probability there will be further increases in the number of dollars printed, and/or added to the electronic banking system.  For example, it will take some time for gold to move from $300/oz. to $30,000/oz.  If M3 increases by a factor of 10 in that time, then the real target price becomes $300,000/oz.

But not all the U.S. gold is for sale.  That hypothetical gold amount of U.S. Treasury gold above is simply used to point out the problem, and calculate that theoretical target price.  Since that gold is not for sale, or if that gold does not exist at all, then the dollar will drop in value to a point where the dollar gold price is much higher than $30,000/oz. gold.

Additionally, if the vast majority of dollar holders decide, due to a sudden burst of rational thought, to abandon holding the dollar in favor of holding gold, the dollar price may well exceed a million dollars per ounce.  And again, this doesn’t mean an ounce of gold will have anything close to the value of a million dollars in 2002.

As an example of the difficulty in determining changing values, a silver quarter was once a day’s wage.  Suppose that in the future, a silver quarter will be worth a day’s wage again, or over $80 (a day’s wage) in 2002 money.  But then again, due to mechanization and increased productivity, perhaps a day’s wage in the future will not be one silver quarter, but perhaps 4-5 silver quarters.  In that event, an ounce of silver in the future may well be worth about $80/oz., as measured in 2002 dollars, up from $4.30/oz.

8.  Now that Gold and Silver are no longer backing the dollar, the metals are just like any other commodity, and are therefore no longer money.

That’s absolutely false.  Precious metals are unlike any other commodity.  They are extremely scarce, are not destroyed by dividing into smaller units, can be melted together again, and don’t rust away or spoil.

Most other commodities have less than one-year supply above ground, and are consumed or spoil in less than a year, and are unfit to use as money.  Grain is an exception, as it can be stored for up to 20 years, and grain was also used as money in historic times.

Gold has 50 times as much above ground supply (130,000 tonnes) than is mined each year (2500 tonnes).

GOLD IS MONEY, and remains as money throughout the world, used by banks, central banks, governments, and people.

If gold truly were just like any other commodity, then those people who create the economic propaganda would be just as pleased that “consumers are spending” whether they were buying gold or cars.  Obviously, gold is very different.

9.  Gold inflates just like paper currency.

No, it does not.  The supply of gold worldwide increases by about 2% per year, about the same rate as the increase in world population, so that the amount of gold available per person remains at a constant of about 7/10ths of an ounce.

So, while the supply of gold has increased by a factor of 2 in 30 years, the supply of dollars in U.S. banks (M3) has gone up about 30 to 100 times!  They say that the dollar inflation rate is low at about 3%, but those are government statistics that don’t include the cost of housing, fuel, and food; in other words, lies. 

A more accurate inflation rate for dollars created might be obtained by looking at M3 increases.  From 1980 until 2000, this grew at 6.7% annually.

And actually, the supply of Silver (available for sale at the COMEX) has decreased dramatically. 

In 1990, total world silver was an est. 1,340 million oz.

In 1995, total world silver was an est. 850 million oz.

In 1996, total world silver was an est. 700 million oz.

In 1998-99, total world silver was an est. 400 million oz., and people were predicting that in five years, there would be no more silver. 

I’ve been watching silver since 1998, and I’ve watched COMEX inventories fall from 400 million oz. down to a low of 70 million.

10.  Gold does not do anything; it just sits there.

Wrong.  In contrast to all other paper investments or paper contracts, Gold can never lose all of its value.  That’s quite an amazing accomplishment, and a very unique and valuable property.  In contrast, every paper currency ever created in the history of the world has always gone to its intrinsic value, which is zero.  Gold keeps men honest, and prevents the theft of your wealth through inflation.  In fact, gold cannot even be taxed away, (like land), because governments have no way of detecting whether or not you actually own any gold. 

Those are three amazing qualities of gold, that when considered all together, make something wonderful; gold’s value can’t go to zero, and it can’t be inflated away or taxed away.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.

Exposing the Common Myths About Gold

 Many false ideas about gold, silver and other precious metals prevent many people from investing in them or even owning them.  Today we shall refute some of these common myths so that everyone can protect their wealth against inflation by owning gold. 

False ideas about gold have been systematically put forth through the schools and universities, newspapers and TV for generations.  These myths are deeply rooted in the minds of many people, having become a part of popular world-view of American culture.  Only a few people see through the myths to recognize self-evident truths easily.  Others need more help, which is the purpose of today’s article.  Most people will only begin to wake up to reality when they see the price of gold move far higher than they thought possible, and they start struggling to understand what is going on.

 Here are some common myths about gold and owning gold:

1.  I can’t afford the risk of investing in gold.

Wrong. The real risk is in not having any gold.  If you do not own gold, you have put 100% of your portfolio at risk to go to zero.  Every investment is a risk.  The value of cash can go to zero with runaway inflation.  The value of stocks can go to zero after bankruptcy.  The value of land can go nearly to zero in a depression when there are no buyers, and you have no ability to pay an assessed property tax, and the government puts the property up for auction to pay the tax.

Today, in the fall of 2002, the United States is experiencing large trade deficits, which is putting very strong pressure on the dollar to devalue about 30%, or more.  So there is a huge risk for holding cash or bonds.  The flat out truth is that gold and silver are the very safest investments you can own.

2.  U.S. Treasury Bonds are the safest investments in the world, my broker told me so.

Wrong.  Your broker does not work for you; brokers work for investment banks.  The banks are partners with the government, and the government has bonds to sell.  Bonds have a risk that gold does not have.  Bonds can drastically swing down to zero value in two different ways, either due to inflation or default.  Gold represents “payment in full,” and it cannot default, it will never be inflated away, and it will always be worth something substantial.

The U.S. has actually defaulted on its monetary obligations numerous times in history.  In the revolutionary war, money to pay the soldiers was printed up that became worthless.  In the civil war, greenbacks were printed up that became worthless.  Then, the fed defaulted on the dollar in 1933 and later in 1971.

And even if U.S. Treasury Bonds are paid off by printing more paper money, who is to say that the paper dollar of the future will have any value at all?

U.S. Treasury Bonds are a con game that has two purposes.  First, bonds enslave the government to the ones who issue the debt, because the borrower is the servant to the lender.  Second, by offering bonds to the public, bond purchases help to siphon money away from people in the economy who would otherwise have no other option but to either save their money, or to invest directly into the economy which would allow them to prosper and accumulate wealth.

3.  I’ll buy options or futures contracts on gold when the time is right, not gold itself.

Don’t be deceived.  Options and futures contracts are not the same as gold, and are no substitute.  They are contracts that will be defaulted on when gold makes the big move up.  Futures contracts in platinum already defaulted in the year 2000 when there was a platinum shortage. 

4. Why do I need gold if the dollar is still backed by gold?

The dollar is not backed by gold, or silver, though it once was.  Dollars could no longer be redeemed for gold within the U.S. since 1933.  The overseas dollar defaulted on the promise to be redeemed in gold in 1971.  Since then, there is absolutely NO gold backing the dollar whatsoever.

5.  Ever since the U.S. won WWII, the dollar is supported by our military might, and oil, so we don’t need gold to back the dollar.

In point of fact, there is a huge supply and demand deficit in gold.  But the most important point of all is that the U.S. can’t make war on everyone in the world who buys gold or refuses to hold paper dollars.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.