Death by a Thousand Cuts


"To stick with paper currency is akin to a death by a thousand cuts."

The Political Landscape
The Greeks need even more boatloads of cash to stay afloat and its richer European partners are scrambling to put a package together. The German government is desperately trying to enlist more contributors, and the UK is an obvious target. So, the question is: will David Cameron rollover or stand firm? For now, he is standing firm.

One of the reasons for keeping the British pound was to avoid such nonsense. This bailout is good money after bad—all in aid of keeping the Eurocrats in highly paid jobs rather than helping the Greeks solve their debt problems. Taking on more debt is not a cure for debts; it's akin to giving smokers another cigarette as they try to kick the habit.

The Greeks would be far better off walking away from the euro and starting again with their own currency and a clean slate. The thought of living through a 20-year austerity program and enduring a fire sale of state-owned assets is too high a price to pay, as the riots in Athens clearly demonstrate.

Business taxation in Greece amounts to roughly 52%—about four times more than it is in neighboring states, such as in Romania. In Turkey, there is a five-year tax holiday to entice new businesses; so, the outlook for inward investment looks bleak. That being the case, the possibility of Greece paying its debts via internal growth is zilch.

Yes, a default would mean that the banks would be in for a haircut. But, as we see it, it's one they truly deserve.

However, we still will be subjected to the pain of the political system as those who attend the 'G' meetings, with the best of intentions, do not employ one brain between them and have been wrong footed a number of times by economic reality, as frequently highlighted by Nigel Farage in this clip entitled: Your euro predictions have been 100% wrong, Mr. Barroso.

Gold, Investing, Bob Kirtley

Unfortunately, those who run Europe are no brighter than those who have taken the United States to the very edge of the abyss, where there will be more quantitative easing (albeit in a disguised form) as it continues its 'extend and pretend' policies.

Going back to the UK, we can see that gold has been making new highs in the GB Pound as shown on the chart below:

Gold, Investing, Bob Kirtley

To buy 1 oz. gold now costs in the region of 950, thought of as a ridiculous possibility only a few short years ago. We could bring in other countries, such as Spain, as their time in the bailout spotlight is drawing ever closer, however, we think you have got the drift.

As Advocates of Honest Money, What Does This Mean to Us?

We need to realize that our political masters are devoid of ideas other than the printing of even more money. The debasement of currencies will gather pace as each of the sovereign states smile sweetly, while devaluing their own currency in the now-frantic race to the bottom. As an asset class, the folding stuff generates very little in interest payments and buys less each year as prices for commodities, goods and services, power, etc., become more expensive.

To stick with paper currency is akin to a death by a thousand cuts.

What to Do Now
Start by calculating your net worth, and ascertain just how much of it is in cash and how much is in hard assets. Allocate a certain amount of cash to act as a cushion, and cover your living costs for a period of time that will put you at ease. The 'investment-cash' portion can then be allocated to an asset class that you consider has value. The agricultural sector is popular, so is the oil sector and energy in general. Time is usually a constraint to gaining an understanding of all the possible sectors that are vying for your cash. Focus on what suits your investment goals and criteria, and then learn everything that you can about it—before making an actual purchase.

In our case, it's the precious metals sector where we have invested and traded for many years and have gained a 'feel' for how it performs. Our strategy has been to acquire both physical gold and silver along with a select few of the associated stocks. And when the opportunity arises, we also utilize the options facility to add some leverage to a particular trade.

Protecting your wealth and self-preservation is the name of the game. Whether you like it or not, you have a position. And no matter how small it is, you must get your head and ask yourself: Is this the best that I can do? If not, put some effort into it. After all, it's your financial future on the line here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. (Winners of the GoldDrivers Stock Picking Competition 2007.) For those readers who are also interested in the silver bull market, which is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

Bob Kirtley

DISCLAIMER: Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

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