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How can I be sure the dollar is doomed?

*Dow Theory Letters, Richard Russell, August 21, 2006

“Now I want to say something about gold. I’m almost sick of all the analysis of every minor move in gold. “It’s overbought.” “It’s consolidating.” “It’s topping out.” “It’s getting too much publicity.” “The Commercials are doing this, or they’re doing that.”

I’ll let you in on a secret. I really don’t give a damn about all the daily comments on gold coming from the experts. Here’s what I’ve done. When I look at my total assets, I put gold in a separate column. I don’t place it in my asset column at all. I simply keep a total in my head. The “total” is deal with is ounces of gold that I own, and I don’t calculate the price. I do that because I have no plans ever to sell my gold, and I don’t care whether the gold price drops to 300 or whether gold rises to 3,000. I consider gold as an asset that I want to own no matter what.

You see, I believe the dollar is doomed. Just as every fiat currency ever created by man has been doomed, I believe the dollar is also doomed. I say this because it’s in the nature of politicians to spend a paper currency into worthlessness. Under the fiat paper system, there’s no restriction on what politicians will spend. After all, spending is the way the politicians give the electorate what it wants — spending is the way politicians get elected.

Thus, the demise of the dollar is not a question of whether, it’s a question of when. When Alan Greenspan took over the Fed the dollar seemed to be in fair shape and the US was a major creditor. But in the 18 year of the Greenspan reign, the dollar lost roughly 50% of its purchasing power. And today the US is the world’s greatest debtor. On that basis, I expect the purchasing power of the dollar to decline considerably faster than it did even under the Greenspan years.

This, then, is why I’m not personally interested in analyzing gold on a daily, a weekly, or a monthly basis. Frankly, I don’t care about the short or even the intermediate trend of gold. I know that ultimately gold will possess real purchasing power when the dollar is a worthless piece of paper.

I’m 82 years old. I’ve seen what has happened to the purchasing power of the dollar in my lifetime. That’s not going to change, and it doesn’t seem that politicians are going to change. So when it comes to gold, I’m only interested in one thing — how many ounces do I own, and whether I want to add more today or whether I want to wait a while before adding more.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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