Money 9-11

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An Undeclared
War is being waged against your money, wealth, stock, bonds, and
physical assets. The war is being fought with disinformation, easy
credit, deficit spending, questionable accounting and the primary
weapon: fiat currency. The deficits that have occurred since 9/11,
about 2 trillion USD, represent roughly 25% percent of all dollar
denominated Federal debt since the country began accounting for
debt. This deficit financing is the proximate cause of the inflation
that wreaks such financial havoc on individual investors over the
long run.

Let's look
at a chart
of the Dow Jones Industrial Average (DJIA) of the last 5 years:

This chart
is pretty flat, some dips, some raises, some more dips, not a lot
of change on average. It is reputed to be a very accurate indicator
of the state of the economy. The DJIA is a dollar denominated statistic,
thus it is not inflation adjusted.

The price of
gold is immune to inflation since it is a commodity whose scarcity
does not change significantly over small periods of time like 5
years. Very little of the gold produced is actually consumed so
it has a tendency to accumulate over time (we are not running out
of it).

This data plot,
which was found on the Internet from the gold vendor Kitco,
is dollar-denominated and as one can tell the price has steadily
risen over the last 5 years, which in conjunction with the increased
gold production worldwide and lack of industrial consumption indicates
that the "value" of the dollar as a money equivalent is
dropping precipitously.

Let's look
at a graph of gold over the last 5 years and comparing US Dollars
versus Euros.

The graphs
started at almost exactly the same value 5 years ago. While gold
has been rising relative to the Euro it has not been rising as fast.
That is, the Euro is not losing its value as quickly as the dollar
when compared to gold. Thus European socialists are devaluing their
currency slower than "conservative Republicans."

Historically
gold has been the money reserve of last resort and universal exchange.
The US Dollar is not in fact money. Nowhere on any dollar bill will
you find the word money. This is not an accident. The architects
of the Federal Reserve System understood the nature of money and
have legally separated the US Dollar from what economists consider
as money (see Von Mises link later on). It is a currency and it
says that is legal tender for all debts public and private.

Finance is
what an individual does with their money, currency and capital.
Economics is what the government does with everyone's wealth. Some
personal finance, I am sure at best I am an average American, so
my house has "risen" in value about 30% over the last
5 years, my 401K is flat (a loser when indexed against inflation)
and neither are anywhere near as good an investment as gold since
9/11.

This brings
me to a discussion I had with some coworkers shortly after 9/11.
I made the argument that the war on terror would be expensive, financed
with debt, and would lead to a long term devaluation of the currency,
thus buying and holding gold or silver would be a good investment
strategy.

Consider the
tax preferential treatment of 401K/403B as a form of registration,
and highly regulated and inflexible investment vehicle. I am unaware
of any of these "investments" that speculates in gold
or silver bullion, internationally the real forms of money
that have been accepted across cultures
for over 2 millenniums.

I am a software
developer, and an applied mathematician by trade and training, not
an economist. However, as a devotee of Austrian Economics and Ludwig
Von Mises
for over 30 years, this prediction was as difficult
as falling out of a boat and hitting water. My coworkers thought
I was cracked, they probably still do.

The "War
on Terror" has now lasted longer than World War II. It will
soon have lasted longer than American involvement in both World
Wars as active combatants. If we look at it from another perspective
it is just another big government program that is actually a war
on the taxpayer. The inevitable casualties will be your wealth,
your lifetime savings and with those possibly your future.

Gold charts
provided by www.kitco.com and
are for free distribution with attribution.

June
15, 2006

George
Giles [send him mail] is
an independent thinker and writer in Nashville, Tennessee. He took
graduate course work in Atmospheric Physics under the Alabama State
Climatologist.

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