Tuesday, January 11, 2011

Richard Russell - Gold is the Ultimate Survival Mechanism


With gold still consolidating gains, the Godfather of newsletter writers Richard Russell in his latest commentary stated, “The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October's report." David Blitzer, managing director at S&P Case-Shiller. I've said before that as I see it, our task in the years ahead will not be building potential profits, rather it will be how to avoid losing purchasing power.”
Russell continues:

“Question -- Would you be satisfied to retain your current standard of living during the coming decade? I've thought a lot about that. After all, what are we working and struggling for? The answer is that we're working so that we can enjoy "a decent life." Isn't that what all the buying and borrowing has been about? Americans want the good life, and they've been borrowing their heads off to have it.

The question I ask myself is, "What do I have to do so that I can continue to enjoy the great American 'good life'?" What comes to mind immediately is gold and the dollar and debt. The national debt of the United States is roughly $13.9 trillion. We've carried that huge debt in an atmosphere of historically low, low interest rates. But what happens as rates rise (as they are now doing)? How will our government deal with our unmanageable mountain of debt? I'm afraid that our debts are on the way to eating us up alive.

Which is another reason to own gold. When all else is lost, or maybe I should say lost in depreciated dollars, gold will be there as it has been for over 5,000 years. Gold is the ultimate survival mechanism.

We can't pay off our national debt with higher taxes. To do that would throw the nation into a second Great Depression. The only way we can deal with the debt is through a severely devalued dollar. I can't think of any other way -- but wait, there is one. That other way is to ignore the debt, kick the can down the road. Let other presidents and other Congresses wrestle with it. Of course, I doubt if we could get away with kicking the debt down the road.. I'm not even going to talk about defaulting on our debt. That would be unthinkable, and would put the US firmly in the banana republic class. In that case, the new best-seller would be a book titled, "The US, Death of a Nation."

So far, the US has been borrowing to finance our good life and our debts. We borrow from other nations, we borrow from Social Security, we borrow from whom ever will lend us money. To make our obsessive borrowing more attractive, we will have to raise rates. And that's when the trouble begins.”

I hope King World News readers and listeners understand how important it is what Russell was saying at the end there about rising rates. The United States has such a massive debt load that we simply could not service the debt were there to be significantly higher interest rates. Make sure to protect yourself by owning physical gold.

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Eric King


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