One thing that could destroy the temporary high could be the destruction of the financial system due to loss of the reserve currency status and the replacement of the petrodollar system. If and when that happens things will not be looking good for America for a very long time. China is taking actions that could result in just that type of outcome. Their new silk road initiative and oil trading system utilizing Yuan to gold will eventually have serious consequences for Americas standard of living.
Total debts and derivatives in the world amount to 30-50 times of world GDP. The bulk of this is derivatives and when they fail they will become worthless. The 250 trillion or so in global debt will default when asset prices implode and interest rates explode. When the debt bubble explodes stocks could decline by as much as 95%. Interest rates could exceed the 20% rates we saw in the 1970’s.
In the last 100 years the value of major currencies have declined by 97-99 % relative to purchasing power in gold. The last 1-3% will follow very soon. When the financial system collapses due to losses from derivatives and stocks it will erase all of the savings, and retirement funds people were expecting to get at some future date. This will instantly impoverish the bulk of the population.
As the system collapses the banks will likely try to re-inflate assets by massive money printing which will only cause hyperinflation at some point. As hyperinflation kicks in the price of many assets like stocks, bonds, investment properties and art will likely collapse in real terms. Items like gold, silver and productive farmland will likely fare better.
Eventually deflation will carry all asset prices down as the world falls into a global depression, possibly for decades. All of these things will likely result in social unrest and wars as people become hungry and angry at a system they took for granted for so many years. The trust will be broken and people will look for something else to believe in.
One thing is for certain. People today believe anything but reality and that will catch up to them all very soon in a very painful way. Things work until they don’t. Our economy has been rolling along for decades on the stored wealth of previous generations but that is about to run out of steam very soon. When it does it will be a shock to all but a few. You can ignore reality but you cannot ignore the consequences of ignoring reality.
The bulk of the money and credit we use today is created by bankers and politicians. Fiat money is a way for those in control to siphon wealth away from the working class in ways that most people cannot understand. Through taxes, inflation and predatory lending practices the population is systematically impoverished.
It has become difficult if not impossible for the average person to survive without access to money on a daily basis. Everything we do costs money and your access to it is your lifeline. Few people today pay with cash. This makes it easier for those controlling the technology we use to control the amount of access we have to our money. Electronic money also makes it easier to create money and credit out of thin air. The governments monetary policy can make life easy or hard depending on their actions.
Venezuela is a good example today. Most of the population is going hungry because their money is near worthless and they have little of it to buy necessities. Capital controls enacted by the government to keep prices down have done what they always do, created shortages. This is only true for the average person though. The wealthy and well connected can still get anything they want on a daily basis. Those with the money or control do not have to contend with the problems of the masses that rely solely on fiat money.
Those that control the money supply can devalue the currency, reduce access to it or destroy it completely at will. This is the ever present threat that a controlled money supply has on the population. It is for this reason that society needs to realize how much peril they are in and take proactive measures to protect themselves from the actions that will surely come in the future as the economic system collapses from abuse of the monetary system as it is.
Gold and silver have been used as money for 5,000 years and are not controlled by any one person or country. They are the true world currencies that are stable by their very nature and people should once again embrace as the method to free themselves from the control of others. Most people today do not understand gold and silver because they have been slowly removed from the monetary system for the simple reason that people who hold this kind of wealth cannot be completely controlled by those in power.
This kind of wealth cannot be tracked, created out of thin air, or otherwise subverted by individuals because of its universal acceptance and ease of storage and portability. It can be traded between individuals privately, hidden for years just about anywhere and cannot be devalued by overproduction.
There was a man where I grew up that owned a store on the river. He acquired a small pile of gold coins over the years through normal business dealings. When the government called in all the gold in 1933 he kept his gold coins and hid them. In the 1970’s he sold these coins at a greatly inflated price. He was able to do this because the government did not know what he had. That is the beauty of gold and silver and why governments hate them so.
If you can feed yourself, protect yourself and carry wealth in a form that is free of government interference then you are largely beyond the control of the government in many ways and this is what they fear most.
To control the population the government only has to control the money and people will be forced to bow to their will. If people cannot get the things they need they will become desperate and desperate people are ripe for manipulation. This is the danger society faces if they have no alternative currency system in times of unrest. Holding gold and silver give individuals the power to resist government intrusion and manipulation and maintain their freedom.
If every household in America held three ounces of gold and a few dollars in silver currency, the nation would have sufficient real money to function in the absence of fiat monies. This idea may take some time to wrap your brain around but it is really that easy. The difficulty many have is trying to imagine todays prices in fiat money compared to the fiat price of gold and silver.
Many people today, especially government workers, make 50, 100 even 150 thousand dollars a year and the price of goods in the economy reflect those wages. One hundred years ago an average person only made about 600 dollars a year but that money was gold and silver money and the price of goods in the economy reflected those wages. This is what the average person needs to understand.
The people can be controlled by the government by manipulation of the fiat currency and this control will continue and increase in the future. The only way to break free of this manipulation is to hold real money that government cannot control or track. In the future the ability to engage in free market commerce will depend on your ability to hold and use real money that is not controlled by government but by free market principles. Your ability to survive a situation like the one in Venezuela may depend on your ability to pay for goods in gold and silver. That is something that is entirely under your control.
The basic minimum wage in Venezuela today is $7 dollars a month. Not a day or a week but a month. Those that hold local currency see it devalue on a daily basis making things increasingly worse as time goes on. Had any of these people stored some of their wealth in gold they would have the ability to live a little easier as the economy collapses. One ounce of gold in the hands of a Venezuelan today would last them for years. This is a lesson we all need to heed.
Simply storing some of your wealth in gold and silver is no cure all but it is part of a bigger strategy to insure you do not have to suffer as many will in the coming years due to their blind faith in their belief the government will care for them. Keep in mind that the government is actually controlled by the same people that will destroy your standard of living so why would they care about your suffering.
Understanding what will likely happen and insuring you have a plan to deal with it is the only hope you will have of coming through the coming bad years in tact. Those who trust in government or only live for today will reap what they sow and it will be unpleasant at best if they survive at all. A simple strategy to insure you do not suffer does not have to be expensive or complicated. The best plans are simple and allow you to adapt to the changing times. If you invest in a simple, inexpensive plan and the world somehow goes on as normal, you will not be any worse for the investment but if things takes an unexpected turn and your plan becomes necessary, it will allow you to survive the crisis much better than the bulk of the population.
The strategy I outlined in The American Dream Lost is a basic plan that will work for just about anyone but is mainly designed for those that have only a few thousand dollars to draw on in an emergency. That is to say it is designed for the majority of Americans that have little money. It is important to understand that a plan of this type is an insurance policy against bad times that can do great harm to you and your family and needs to be understood in that light.
One of the worst problems people have is that when something bad begins to happen they attempt to continue living as they always have and ignore the future consequences until it is too late to do anything meaningful about it. If a person loses their job they continue to live as they always have using up their small savings in the hope that things will change for the better before they run out of money. Sometimes they win and sometimes they lose, it depends on how lucky they are. This type of mentality often leads people to the point where they run out of money and only then do they try to come up with a plan. The problem is, by then they have no resources left to enact a plan with. This is what you need to avoid.
When your economic situation suddenly changes for the worse you need to immediately sit down and determine what the future is likely to look like. It is good to be optimistic but if the chances of finding a new job are not very good you need to decide how best to use what resources you have to maintain a decent living standard. You may have to make some very difficult choices but the option of doing nothing could be very harmful in the long run. For those that decide radical steps may be needed to continue caring for their family the following list is a good place to start.
Buy a years supply of basic foods and supplies that store easily
Buy some durable clothing for future use
Buy an older vehicle for cash that can pull a trailer
Buy a good used camper trailer for cash that can house your family
Buy a weapon and ammo for protection and hunting purposes
Buy a few rolls of silver coins to preserve wealth and act as an emergency fund
What this gives you is the ability to continue caring for your family even in the worst of situations if everything is lost to creditors. They will have food, shelter, clothing, transportation, security and the ability to buy critical items that are needed at some future time. Convincing your family they have to move to a camper for a while would not be easy but the alternative of being homeless would make it an easy choice. The fact that thousands of people all across America are at this very moment living in tents near large population centers is proof enough it can happen.