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China, Gold, and the Dollar, Part 6: What Should the Individual Do?
Part 5 of the interview series ended with Craig R. Smith suggesting that our own federal government has proven that it is unable to do what is necessary to save the system. Part 6, the last of this interview series, is below.
Also, be sure to watch this week’s video of The Good, the Bad, and the Gorrie about the so-called housing market bottom and why we're not really there yet, here:
James: Ronald Reagan was absolutely correct about the government’s inability to do the right thing. As it is, there is a lot of bad news today, and a lot of bad things look like they’re going to happen in one form or another to the dollar, but we don’t know.
Do you think that this election will change anything? I’m not a Ron Paul supporter, although like you, I do agree with some of the things he says, but the problems we face go much deeper than the executive branch.
That is why I am not optimistic that the Fed is going to allow itself to be emasculated before Congress. I just don’t think that will happen.
Craig:I think you’re right, James. Look at the Ryan Budget. In my opinion, the Ryan Budget doesn’t go far enough; but you watch. The demagoguery on that, pushing granny off the hill, and all that stuff, will work; it will die. We’ll get some watered down version of something that is ineffective.
This government has to finally draw a line in the sand and say, “We can’t continue on this path or we are going to hit the wall and have a financial crisis that’s going to make 1929 look like child’s play in comparison.”
James: I think you’re right. Remember the Fed is a fiat money institution. It is not a gold backed institution. “Statists,” as Greenspan wrote way back in 1966, “abhor gold because gold limits the state.”
A fiat currency enables the state to expand as much as it wants to and as fast as it can. The idea that gold is going to rescue the system, or be allowed to rescue us, I think, is somewhat of a Pollyanna outlook. I just don’t see the Fed rolling over and saying, “Gosh, you’re right. We’ve been wrong all this time.”
Even Ben Bernanke wrote a paper in 1988 for the Fed pointing out that, regardless if you bail out banks, it’s still not going to really help the economy at large because banks then will get their revenues from interest on excess reserves, and buy treasury bills for no risk, instead of lending to generate income.
We’re seeing that happen now. I think the bailout is really a bank bailout, whether it’s in the US or abroad. It’s all about the banking system. It’s not about the economies at large. I’m afraid that’s the case. That’s my take on it anyway.
Craig: I think you’re right. I think you’re spot on. In referring to Alan Greenspan in ’66 and the subsequent paper wrote in ’67 called “Golden Economic Freedom,” he made the point that gold and your economic freedom are inseparable because the only way the state can continue to grow as you said is if they were off the gold.
That’s why we came off the gold standard. These calls to go back on the gold standard right now, well, it would be impossible unless we priced gold at $10,000 or $15,000 an ounce, which just would not be practical right now.
That’s why what I write in the final chapter of my book is that the only chance that the individual has right now is to put themselves on their own gold-backed system. We’re not telling people to take responsibility for their own welfare. But we’re not telling them to go out and buy dehydrated banana chips, machine guns, and Krugerrands and wait for the end of the world to happen for Pete’s sake.
We believe, rather, that you should have no less than five percent, and no more than 25% of your money in gold; the rest should be diversified into inflation sensitive stocks, such as utility stocks.
Think about it. People will keep paying their power bill, gas bill, electric bills, so on and so forth, and maybe if you have to have some position from a government side, buy treasury inflation protected securities called TIPS, so you have a well-diversified portfolio.
Keep in mind, countries never go bankrupt. It’s the individuals of a country that go bankrupt, because we the people, every single American born today, comes into this world with $50,000 worth of government debt. If tomorrow, the government hit the wall, we the people are on the hook for that money.
I don’t think the average person understands that. There was a piece in USA Today recently where the actual number is $42,056 that we each owe. The average income in America is $49,000.
We basically have to take one year of our labor to pay off the government’s debt. It’s just so far beyond management right now, James, that the only viable solution politically – because it all boils down to politics, is to inflate our way out of it.
That’s why we wrote Crashing the Dollar and then the subsequent book, The Inflation Deception, and now our new book, After the Dollar, because after the rampant inflation we will soon have upon us, you will see the dollar go the way of the dinosaur.
I’m not saying exactly when this will happen, but I’m just telling you it’s going to happen in our lifetime.
James: I don’t disagree with you whatsoever. I would say Craig R. Smith, founder and chairman of Swiss America Trading Corporation and columnist for WorldNetDaily.com, that you are right on not only in your insights as to what our problems are today, but also in how we, as individuals, can help ourselves and not rely on the government to take care of us. I do appreciate your time and your insight and the great points you’ve made.
When your new book, After the Dollar comes out, can we talk again?
Craig: You bet, James, thanks for having me. It was a lot of fun.
James: My pleasure.
This ends my Friday interview series with Craig R. Smith. Check back next Friday for our next series to begin. JRG.