The most often given reason for buying gold and silver by new investors is concern about the dollar. And, rightfully so. The dollar is in a precipitous decline in the foreign exchange markets, brought on by decades of deficit spending by our federal government.
The fedgov’s deficit spending really got started after President Nixon “closed the gold window” August 15, 1971, which meant that foreign governments could no longer turn in paper dollars and receive gold. Nixon effectively put the world on a monetary system based on paper.
Actually, Nixon “dropped the second shoe.” President Franklin Roosevelt put us on the road to a paper currency when he made it illegal for Americans to own gold coins and gold bullion. Regardless of how we got to this point, we are there, and we must deal with it: a worldwide monetary system based on paper, a useful but an inexpensive commodity.
The sad history of paper money is that when it is unlinked from gold or silver politicians print it until it is worthless. As the late Franz Pick, noted currency expert, said when Nixon closed the gold window, “The dollar is a dead currency. It is only a matter of time.” Now, it appears that the news is spreading about the dollar’s ill health.
Earlier today, CNN.com posted an Associated Press article about debt in America. It is a scary read. A ticking time bomb, the author says. The article reinforces why gold and silver are “the investments” for the times. Actually, they are hedges against a declining dollar, brought on by decades of deficit spending.
For those readers who want a really good piece on money and the dollar, read The End of Dollar Hegemony, a statement by GOP presidential candidate Ron Paul before the House of Representatives. Paul’s piece is one of the best I’ve read, showing that we have at least one presidential hopeful who understands money and the predicament our country is in.