Wednesday, September 19, 2012

Creative Schemes and Theft

What is the best way to get rid of onerous debt? If you are a banker that is?

First you dream up some wondrous scheme and give it a fancy-pants name. Names like, Quantitative Easing, Operation Twist, MBS buy-backs, blah blah.

You also have the option of pretending that the assets on your balance sheet have meaningful values. All you do is simply leave those values at what you bought them for or what you think they may be worth. Market value? Not on your life, that would look something like the truth. Pretend you have collateral.

But then again, I may be missing something. Theses deep minds in control of our hard earned wealth must have our best interests in hand? Yeah, right.

Of course the one aspect of all this money printing they don't tell you is who gets to use the money first. You see, having first use of new money, created out of thin air, is the best world you can live in. Before the money units get out there and cause higher prices, and they always do, you get to buy up assets at low and even distressed prices. Put it this way, you get to steal other people's wealth and they don't even know you are doing it.

This is why owning precious metals and other commodities, puts you as close to the 'new money' that you could possibly be. Not to steal wealth, but to maintain your own.

Then there's financial repression. Another brilliant phrase to redefine the word 'theft'. This is where your savings get pummeled with low deposit interest rates and the costs of goods and services increase by a greater amount than those deposit interest rates.  Of course this is why the Fed, the ECB and China, are buying their own government bonds. To keep interest rates low.

So have a think about this when next time someone (who should know better) tells you that holding physical gold and silver is high risk. Think, "increasing precious metals prices as money is printed and no counter-party risk" and rest assured.

Gold in New Zealand dollars: $2141.82 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $42.07 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)
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