His brilliant ideas include: spending your way out of recession; borrowing your way out of debt; and printing unprecedented amounts of currency out of thin air without consequence.
Krugman is smiling right now because he thinks that he's been proven right. Gold's massive sell-off over the last few months has shaved over $600 from the metal's nominal price... a steep move any way you look at it.
And as Krugman has been saying, 'gold is not a safe investment.' But that's because he fails to understand the fundamental premise of gold.
Gold is, in fact, a terrible investment. It's an even worse speculation. But let's look at what those statements actually mean.
When you 'invest', you risk a portion of your savings, typically for several years, hoping for a nominal gain when denominated in paper currency. You buy for $1,000 and you sell for $2,000.
'Speculating' involves taking much higher risk, often for shorter periods of time with a smaller percentage of your portfolio, hoping for outsized nominal gains when denominated in paper currency. You buy for $100 and you sell for $2,000. But you could easily lose everything.
Well, gold makes for a really bad speculation. Like almost any real asset, it can't really go to zero. It's physical. It's real. It's always going to be worth something. And for physical gold, there's very little leverage available.
Gold makes for a bad investment too... because in either case, the price of gold tends to rise and fall over the long-term with inflation and inflation expectations. If it's leading (or keeping pace with) inflation, then you can't expect much of an inflation-adjusted return.
But these reasons for buying gold miss the point.
Gold is a proxy against the financial system. It's a way to withdraw savings from a corrupt fiat currency and hold something that cannot be conjured or made out of thin air by a tiny banking elite. We don't buy gold hoping to sell it down the road for even more paper currency.
If you look at the fundamentals briefly, gold had a major sell-off in part because the Chinese have been reporting poor economic data.
Even with: poor economic data still abounding from the US to China; massive, debilitating, debt still accumulating; Europe still completely bust; and Japan promising unprecedented money printing in an era already marked by unprecedented money printing, what will the general trend be? Will central bankers around the world continue printing money?
It certainly seems likely. If they stop printing, interest rates will surge and nearly every government in the developed word will go bankrupt. That's a big incentive to bankers to keep printing money.
With this in mind, the gold correction probably has quite some time to play out however the long-term trend is obvious; gold prices will continue to rise!
For those wanting protection of their purchasing power in gold, there are several ways that may be appropriate to obtain this protection. These include direct ownership in minted coins, use of gold exchange traded funds, gold mutual funds, and junior gold stocks. Many are investigating having part of their IRAs in gold, silver, precious metals, and non-dollar denominated currencies.
In addition, for those that truly believe default of sovereign debt is the greatest risk we all face, it is wise to learn how to implement a multiple flag strategy to diversify this risk or provide protection against higher taxes, capital controls, hyperinflation, civil unrest, erosion of personal liberty, and the rise of a police state. With a multiple flag system, you consider taking preparations like, but not limited to, establishing a foreign bank account, purchasing some real estate overseas, seeking alternate sources of income, dual citizenship, and carrying multiple passports.
I will continue to provide examples of things we need to learn, the secrets of the insiders, as part of being savvy with our money, and introduce alternative wealth creating strategies, in future articles and updates at my blog over the next few weeks.
If you are like-minded, be sure and join me here as a way to get back in the game … Great Professionals ... Rebuilding Careers .
Finally, I want to thank Simon Black, of Sovereign Man, as he was the source of some of the material mentioned in this post.
In closing, be sure to Meet Me at my website, WhoIsMikeFarrell; Learn How to Get Self-Employed, at my HomeBizSocial website; Read about my Internet Marketing Business at myaspenIbiz site; Obtain Some Tips About Being No 1 on Google, at aspenIbiz My Go-To-Market Partners website; and Learn How to Live Longer, at aspenIbiz My Life’s Advantage Today site.
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