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Why is it that more and more people are creating their own personal gold standard?

*Dow Theory Letters, by Richard Russell, April 14, 2010

America is at a most critical juncture. I think about half the US population is at the state where they fear their government. This is the expected state in a nation that is gradually turning socialistic. Conversely, we’re at the state where the government fears the people, which is the normal state of a government that is on a path that is anathema to a large sector of the population. The five words that those who make up the US government fear the most are, ‘Throw the bastards out.’  From that the ‘Tea Party’ has formed.

Then there is a huge majority that sense that the system is broken, and that it must all end in chaos.  I call this the chaos party, and they are only certain of one thing — the shape of the coming storm is unknowable, but after the storm only one item will be standing.  That item is gold, the eternal intrinsic measure of wealth.

The chaos party has given up on the thesis that ‘everything will turn out all right.’  They agree that since WW II the US has prospered based on decades of borrowing and debt-building.  They realize that debt-building must have an end.  We are now in a period of deleveraging, and this cannot bring prosperity.  Everything, they believe, will be devalued, which means ultimate deflation.  The one item that cannot be devalued is gold.  Therefore, these people count their safety and wealth in ounces of gold.

These people are not worried about the price of gold.  If the price goes down, it means that it’s taking fewer dollars to buy an ounce of gold.  That’s deflationary, and it means that living costs are declining.  If the price of gold is rising, it means that it’s taking more dollars to buy an ounce of gold.  That’s inflationary, and it means that it will take more dollars to sustain your standard of living

After all, why celebrate if gold rises to $3,000 an ounce and a loaf of bread costs six dollars?”


*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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