How strong is our currency?

The Market Gage - Dillon Gage's Precious Metals Newsletter

Ronald Reagan once said, “No great nation that ever abandoned the gold standard has remained a great nation.”

Alan Greenspan wrote: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”

I encourage you read again the “Market Gage” article from Monday, October 3rd. regarding the Chinese Yuan, where I wrote, “China has been accumulating their gold holdings for years and I don’t think anyone really knows how much they are holding. One has to think that the most powerful currency will be the one with the most gold holdings and the smallest debt.”

Currently, our Government continues to print money backed by the good will for the U.S. to meet its obligations. But, like every American who has credit card debt when do we and the government reach our credit limit?.

The U.S. debt is approaching 20 trillion dollars. Will congress continue to raise the debt ceiling or will someone in Washington
have the guts to stand up and tell the American people enough is enough? They know it will be political suicide as the only way to address this never ending increase in debt, is to address entitlements and raise taxes.

So how strong is the dollar and what will keep it as the premier world currency? I believe that real monetary reform will only come after the damage is done.

I do think there are many smart investors in the country who believe diversifying their portfolios to include gold and silver is a smart choice. This is proven by the incredible increase in gold and silver ETF holdings this year. Smart, but not brilliant. The brilliant investor will buy the physical product. Why? In the event of an economic meltdown I would rather have the hard asset in my hand then a piece of paper representing the product.

Going forward, is the dollar in jeopardy of collapsing? How long will the rest of the world continue to invest in our equity markets as they have in record numbers, as America continues to increase its debt and Congress continues to refuse to acknowledge the problems facing this nation?

Faith in money is critical to a successful economy. So, to reiterate my point if I may, if the U.S. government continues to spend money foolishly and not control its debt, when does the rest of the world lose confidence that we as a great nation can’t control our debt? The same thing that happens to a family who can’t pay their bills and reduce their credit card debt. They go bankrupt. Sure we can print more money backed by nothing, but without the good faith that the U.S. can meet its obligations, what’s left?

Have a wonderful Friday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.