Will FT-900 Bring about the “next 9/11” in April, 2014? What is Jeff Opdyke talking about?

Checking out the teaser pitch for Opdyke's Sovereign Investor newsletter, similar to Porter Stansberry's "July 1, 2014" dire predictions.

By Travis Johnson, Stock Gumshoe, February 12, 2014

Jeff Opdyke has a pretty inflammatory ad going around these days for The Sovereign Investor, it’s all about how the consistent export of gold from the US — as reported in form FT-900 — will lead to America experiencing it’s “next 9/11” moment in April of this year.

The basic argument is that the US Treasury Department has been secretly selling off the gold from Fort Knox for years, consistently exporting more than can be explained by the mining production and internal consumption of gold in the US, and that the global public is becoming aware of this but will be shocked into action in April.

The April date comes from the fact that he says China has tended to release information about their gold reserves only every five years or so, and they last reported their gold holdings in April, 2009. Next release, whenever (if) it comes, will call attention to the huge hoard China has been building (though it may be largely from mining, as I believe all Chinese-mined gold is required to stay in China)

Here’s what Opdyke says about the gold export anomaly:

“Here’s what I found out: Since 1991, the U.S. has been consistently exporting large quantities of gold on a net basis.

“And the amount of gold the U.S. has exported is well above and beyond what the US should be capable of exporting.

“Let me show you what I mean…

“Using data from the Gold Fields Mineral Services, the US Census Bureau, the US Mint and Bloomberg, I was able to determine the U.S. total demand and supply of gold during those 20 years.

“During that time, the U.S. had a total amount of 7,532 tons of gold available for consumption… but the U.S. consumed 7,605 tons.

“So, we consumed more than we had available to us. That implies we should have been a net importer of gold.

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“But oddly enough, we were not. In fact, we exported a massive 5,504 tons.”

I don’t know how reliably these import/export figures describe the real situation in the world, since gold is fungible and recyclable moves around the world in both paper from and in bullion form pretty easily (it doesn’t just get exported from one place, imported to another, and consumed — it could just as easily be exported again to another customer), but there are certainly plenty of folks who believe that the Treasury is hiding empty vaults at Fort Knox. They buttress this both by saying that the Federal Reserve has been dragging its feet at Germany’s request to repatriate its gold (though that’s not at Fort Knox), and by noting that many politicians over the years have asked for audits of both Fort Knox and the Federal Reserve, to no avail.

Just as an FYI, Fort Knox is the US bullion depository — it’s the gold that the government owns, managed by the Treasury Department. The Federal Reserve doesn’t have anything to do with Fort Knox, but has a separate gold bullion depository in Manhattan that is filled with gold owned by the central banks of other countries in the world … it’s the Fed-held gold that Germany has asked to have back, not Fort Knox’s gold. I don’t know if that makes any difference in the grand scheme of things, but they are separate — the US government owns only a tiny portion of the gold that’s being held by the Fed. And yes, it seems sketchy that it is going to take the Fed seven years to give Germany its physical gold back, and that they’ll be returning less than Germany holds with the Fed in New York and less than they initially wanted back within German borders — but “seems sketchy” applies to a lot of global finance, banking, and government posturing, I don’t know if that means there’s really any problem with the availability of that gold in the Fed’s vault or not.

So the basic argument from Opdyke ends up being pretty similar to Porter Stansberry’s argument that we’re on the cusp of the global economy losing faith in the US dollar as the world’s reserve currency, and that the loss of this faith will and would mean that the dollar falls versus other currencies and against commodities, meaning imports would be more expensive for Americans and our wealth and standing in the world would be eroded. Porter also intimates that we’ll see social unrest.

There is a clean and attractive logic to all of that, and it makes some sense given the history of currencies and central banks that points to shakeups every 30, 40, 50 or 100 years, depending on who you ask — the waves of currency dominance have mostly tracked the rise and fall of global empires as the Dutch currency and Spanish currency each had a century or so of global importance before the British Pound took over in the 18th or 19th century, then the British Pound collapsed around WWI and the US dollar began to rise, followed by the gold standard being coopted in the 1930s and then abandoned in the 1970s as “fiat” currencies took over both in the US and worldwide, followed by … well, whatever happens next.

And yes, it is absolutely true that we owe much of what we take for granted — cheap imported goods, cheap energy — to the fact that pretty much everyone in the world has agreed on the dollar as their medium of exchange… and, perhaps more importantly, that we’ve been able to build up a massive debt by borrowing money in a currency whose supply we control. With it not being missed by many that we used a chunk of that borrowed money to build the most powerful military in history.

The hegemony of the dollar is clearly eroding to some degree, partly because dollars should be losing value as we print more of them in order to pay off our debts, though the dollar has held up much better than many folks expected in the last few years … arguably because most other currencies of any size seemed more dangerous, what with Greece and their ilk threatening the Euro, and China’s currency remaining under strict control, and the Japanese Yen being aggressively devalued to save that economy… etc.

I’ll leave the big picture thinking to you — I have some sympathy with the view that the US dollar should be losing value more quickly than it has, and that eventual significant devaluation is the only reasonable way to deal with our un-payable federal debt … though I also think that in the current hair-trigger world of global trading and financial engineering it’s quite possible that all of these changes happen slowly enough that the dollar doesn’t appear to crash. The logic of the dollar’s demise is almost impeccable, but logic doesn’t drive the global economy — and, as we’ve seen in the past, crises send people fleeing to the dollar even if logic tells them that the dollar is doomed. At least, so far.

And I do buy a bit of gold or silver bullion now and then to diversify my savings, I’m mindful of real assets owned by companies, and I sometimes hold foreign currencies (though I don’t have any at the moment)… but it’s worth noting that a productive company that produces or owns something important to people should be relatively agnostic, over the long term, regarding the currency in which their daily business is transacted… failing currencies wouldn’t be good for any business operating in that currency, obviously, but strong businesses have survived worse.

Porter Stansberry’s trigger point for his similarly-described collapse of the dollar is the enactment of the Foreign Account Tax Compliance Act (FATCA) this Summer — that’s the new tax and reporting regime that the US government is pushing through to improve reporting for banks and to catch more tax cheats, and that looks like it will be a big regulatory burden for banks…. and possibly a better solution to tax evasion, though I’m no expert on the details. Porter thinks that will lead banks to exit the US market and avoid the dollar. That sounds fairly extreme to me, though it will certainly impact banks if and when it’s enacted (it’s already been delayed at least once, to July 1, and many folks think the banks will keep chipping away at it and delaying it or altering it to cut out the teeth).

Otherwise, Porter is essentially spinning the same tale that he marketed extremely aggressively in his “End of America” pitch a few years ago — that you need to get into assets that you don’t have to report to the government (like American Eagle bullion coins), and get some money overseas (get a foreign bank account while you can, buy real estate in other countries), and buy farmland to protect your family, etc. etc. You can see Porter’s latest version of this spiel here if you’re so inclined.

Opdyke has a fairly similar pitch (you can see it here if you’re curious), though his trigger point is different, coming in April instead of July. The basic idea is the same: the dollar’s going to collapse, the world as you know it will change dramatically, buy something that will hold its value if the dollar falls (ie, don’t stuff your greenbacks under the mattress or in a savings account — turn them into something else).

Like Stansberry, he cites four things to do … and they’re very similar to Stansberry’s stipulations: buy precious metals, sell bonds that mature in more than five years, generate income with trading (selling options, it appears), get some of your money out of reach of the US government, and buy real estate in some select foreign countries. Frankly, it sounds kind of like Opdyke took his lead from Porter’s “End of America” spiel of a few years back and just twisted it a bit … though, to be fair, the folks who have been suggesting the decline of the American Empire have shared similar kinds of ideas for decades (and built a few newsletter-publishing empires in the process).

[And if you’re curious, Porter’s “World’s Most Valuable Asset in a Time of Crisis” is, yes, still farmland. I’m afraid I’m going to be sticking with my farm share subscription for a while and not tilling to earth myself, but still, it’s hard to argue that owning a farm is a bad thing if you’ve got money burning a hole in your pocket.]

Opdyke’s trigger point, that awakening to the fact that China has more gold than the US or than the Federal Reserve, will, he says, come not with a gradual change over decades but with a “bang” … he quotes an oft-cited study on this point:

“Economists Carmen Reinhart and Ken Rogoff explained this phenomenon in their best-selling book ‘This Time is Different’, in which they examined hundreds of confidence crises. They call it the ‘bang’ moment. Here’s how they explain it:

‘Perhaps more than anything else, failure to recognize the precariousness and fickleness of confidence is the key factor that gives rise to the ‘this-time-is-different’ syndrome. Highly indebted governments can seem to be merrily rolling along for an extended period, when bang – confidence collapses, lenders disappear, and a crisis hits.'”

So … will a future announcement about Chinese gold reserves shock the world, or will the enforcement of FATCA drive the rest of the world away from the dollar? Will the dollar collapse with a bang or continue to deflate in value with a whimper as it has for most of the past 50 years? Or even surprise everyone and go the other direction?

I dunno. And I bet geopolitical surprises will play as much of a role as central banks and interest rates. But let’s look into what investment Opdyke is teasing as a way to protect your wealth in this eventuality.

The first thing he points to is physical bullion ownership — which Porter Stansberry and several other folks also say is important, they think it’s critical that you avoid owning just “paper gold” through ETFs or through the futures market, but own actual physical gold you can touch … or, secondarily, own real, audited, allocated gold held in some (preferably foreign) vault that you can have delivered to you if and when needed. Lots of other heavily-hyped newsletters and precious metals pundits have talked up the importance of “physical” gold and silver — I think the last time we wrote about it was for a Palm Beach Letter teaser about the “paper silver” crisis.

And there are a couple more esoteric ideas in the bunch, too, that I can’t really opine on without sounding uninformed — like the foreign real estate pitch, which has him touting a few opportunities to cut taxes by relocating overseas (including a thinly-veiled hint about “Galt’s Gulch”, which is the name often given to Doug Casey’s Cafayete, Argentina expatriate haven). It all ends up sounding like solutions for the wealthy and government-averse or profoundly tax-averse, or for the young and idealistic — who else would go to the hassle of buying foreign real estate and moving halfway around the world? It just sounds exhausting. I moved my family 600 miles in search of higher taxes and worse schools, and if I never move again I’ll be awfully pleased.

Yes, I know that Porter and others say that the “normalcy bias” leads those of us in the comfortable American middle class to think that the government won’t really get that bad or confiscatory, that “they” won’t come for our gold or our retirement accounts, and that this is a throwback to the fact that so many hundreds of thousands of Jews stayed in Nazi Germany until it was too late to escape, failing to see the clear writing on the wall … but I choose to hear that as more offensive than it is prescient.

But anyway, we do eventually get to something that’s more like an “investment” thought.

One of the ideas Opdyke pitches is related to precious metals — here’s how he teases it:

“… there’s an even better way to profit from the rise of a new monetary system. It’s a gold investment few people know exist.

“A small group of investors have figured out a unique way to profit from gold. They’re striking special deals with certain companies involved in the gold industry.

“Nolan Watson, for example, started using this strategy back in 2008. So far, he’s already increased his investment by 809%. That’s enough to turn a small investment of $25,000 into almost a quarter million dollars.

“Gold expert John Doody has increased his portfolio by more than 1,200% with this strategy. And many consider him one of the best gold investors of our time.

“Here’s what he said recently:

‘I love [this investment]. You just make these deals and move on to the next one.’

“I call this strategy ‘Golden Streams.’ And it has performed much better than the metal in recent years….

“While gold is up 61% since 2008, the ‘Golden Streams’ investment is up 352%. The good news is you can also participate in these deals right from any brokerage account.

“And what’s really amazing is this special class of gold investment has nothing to do with ETFs, bars, coins, options, mutual funds or investing directly in gold miners. And yet, it has managed to beat all those types of gold investments.

“While ‘Golden Streams’ have performed extremely well in recent years, I expect them to go parabolic once investors lose faith in the dollar.

“Even if gold moves to just $3,000 an ounce, I expect this investment will move more than 700%. That’s enough to turn each $20,000 into a little more than $165,000.”

Sound familiar? Yes, indeedy — Opdyke is teasing the old streaming/royalty concept in precious metals. Which, frankly, is my favorite way to invest in mining as well — but it’s been awful over the last year, getting much the same downside as the actual large mining stocks and falling worse than the price of gold. In general industry parlance, Streaming refers to usually larger investments made in “almost ready to produce or expand” mining operations that give the buyer the right to buy a substantial portion (typically 8-30% or so) of the gold (or silver) mined at a set price, typically fixed at roughly a third of what the then-current commodity price is.

This strategy was developed and commercialized by Silver Wheaton (SLW), which made streaming deals for silver with big non-silver mines (silver being a valuable byproduct that the miners could monetize by pre-selling it to SLW). Nolan Watson was the CFO at Silver Wheaton when they perfected this model, and later went on to found Sandstorm Gold (SAND, SSL in Canada), which is presumably one of the stocks being teased here, and Sandstorm Metals and Energy (SND in Canada, STTYF on the pink sheets), which focuses on base metals (and is still a bit of a train wreck after some bad deals). Sandstorm Gold continues to be my largest mining investment and largest and preferred gold equity investment, but it’s sure been a rough ride as gold has fallen.

Royalties are often the result of investments made into a mining project at a much earlier stage, or of early work by a prospector or settlement to a land owner, and if bought they cost the investor less than streaming deals, and they yield a flat percentage-of-the-gold (or other metal) produced that’s typically far smaller (1-5% or so). The two largest passive gold mining investment companies are mostly royalty owners, Franco-Nevada (FNV) and Royal Gold (RGLD), though they also do both own some streaming deals and some non-gold assets.

So it’s hard to picture a world in which those aren’t the three “Golden Streams” investments Opdyke teases, if only because they’re by far the largest and most accomplished and viable of the existing royalty/streaming companies that are gold-focused — unless you throw in Silver Wheaton in place of one of those to get your silver exposure instead of gold (SLW has a little gold exposure too, but it’s very small)… SLW has been by far the most volatile of the four over the years, but is also by far the largest (the volatility comes largely from the fact that silver has almost always been much more volatile than gold). All four of those streaming/royalty firms are up since 2010 or so … but all are also down considerably (dramatically, even) from their highs of late 2012, when all the world seemed to think that gold and silver were simply not allowed to fall in price. Leverage is fun when prices are moving up and a $100 move in the price of gold causes your stock to go up to 20 or 30% in a month or two, but when gold falls 25% that same leverage means your stock can fall by 50%, sometimes more.

The John Doody quote, by the way, is from a conference call the Phase 1 Investor folks had with Nolan Watson, SAND’s CEO, when they recommended that stock a couple years ago — we covered their teaser pitch for it at the time, but Sandstorm Gold has since put the transcript up online here.

And yes, Opdyke and I aren’t the only ones who like the idea of these “passive” precious metals investments — the benefit of royalties and streaming deals is that you don’t have to worry too much about cost inflation in mining, or about delays in mine development causing a cash crisis or dilution … on the flip side, the downside of these kinds of deals is that same passivity — you end up pretty stuck if the operator is desperate for cash or losing money and can’t finish building the mine, or simply decides to shut the mine down for a while if prices are low. Diversification should help with that, as will counting on Sandstorm or Royal Gold or Franco-Nevada to choose projects wisely, projects that are sustainable and profitable and low-cost, with potential upside from future exploration or expansion … but it does sometimes backfire on the royalty or streaming deal owner if a few partners go bad at once. That’s how Sandstorm Metals & Energy got into trouble a while back, and it’s hitting Sandstorm Gold a little bit right now — the larger RGLD, SLW and FNV are reliant on a few tentpole projects but otherwise are far more diversified than the smaller SAND.

So … all that gives you something to chew on when it comes to the “big picture” stuff … and at least a few royalty and streaming stocks to consider that are likely Jeff Opdyke’s three “Golden Streams.” Got an opinion on any of it? Well, what are you waiting for? That friendly little comment box below isn’t going to fill itself …


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Kirk
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Kirk

Travis: you do such a great job in shedding light on the questionable practices of these newsletter investment peddlers like Stansbury. I had his newsletter for a couple of years, and really got tired of his schtick, and that of others like him. Thank you.
Kirk

Carbon Bigfoot
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Carbon Bigfoot

Let me say I have a history with the Bonner crowd. I was into Casey back in the late 80’s when I sold Diamond Fields prematurely—what a dope!! If anyone recalls Casey made his fame and money in Nikkei puts. He led me astray with the loser book ” Investing for the Rest of the 90’s”. After that I lock up with several of the Oxford Club gurus including Louie B. and Alex Green. Unfortunately I didn’t have the $$$ to buy their recommendations. That wasn’t until I bought into the $5000 program with Karim R. and Greenie. Their 35%… Read More »

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takeprofits
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👍416

Hindsight is always 20/20, but at least you got your money back and were also $5000. to the good, live and learn.

dcohn
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👍208

Unluckily I realize this may be a bunch of bull like most of what we read online but Karen Hudes stated on Shift Frequency the following. This is a snippet only of course HER WORDS NOT MINE. Hope she is right and we beat them down and come out like US Citizens. I quote part of the article >>>>Former World Bank Senior Counsel and whistleblower Karen Hudes has an amazing revelation about secret U.S. gold. Hudes says, “We’ve been offered, the United States, 170,500 metric tons of gold on deposit in the bank of Hawaii to underpin our currency which… Read More »

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sdmaley
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@ 170,500 metric tons of gold
Are the units correct? Most recent version of the promo has a chart showing uS gold reserves peaked at 20,500 metric tons in 1950s. Text following that figure says it was then half of all the gold ever mined. Difficult to tell whether Hudes is credible. The following is interesting: http://www.veteranstoday.com/2013/03/27/the-world-bank-rejecting-the-rule-of-law/

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sdmaley
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While estimates of all the gold ever mined vary, it appears the promo was way off. See, eg: “How Much Gold is there in the World?”, 31Mar2013: http://www.bbc.com/news/magazine-21969100

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Peter Strickler
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Peter Strickler

If you do believe any of this may happen, it would be pretty silly to invest in any asset that is dollar denominated. If you are a little worried, just simply buy an insurance policy, which is what I consider Gold stocks, such as Silver Lake resource or Kings-gate in Australia and buy them in Aussie dollars and you’ll be just fine.

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frank nolan
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frank nolan

Would the dollar devaluation have the same effect as a default? I’m thinking a default would put every bank account personal and corporate , trusts, real estate asset, mortgage, insurance company and every pension plan into a re-valuation as zero assets. Would the same be true of a serious devaluation?

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takeprofits
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Frank (25) Ultimately a devaluation of the dollar is inevitable because “WEALTH” can not be printed as it consists of the earth’s resources (freely given by a benevolent Creator) and owned by all of humanity) and our share is determined by our contribution of human labour! Man has not yet learned to be truly thankful for what he has been given or disposed to enact laws that ensure a fair distribution of wealth according to each persons contribution. The society that man has created in contrast is one of greed focussed on acquiring assets they did not work for. Yes… Read More »

Leslie Dweck
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Leslie Dweck

China has most to loose by a devaluation of the U.S. dollar and have most to gain by the dollar strengthening. China is not allowing its currency to float precisely so that it does not appreciate to where a free market will take it, They have long ago realised it simply was not in its overall interest to allow its currency to rise and to allow the dollar to devalue. Making their exports far more expensive and USA manufacturing far more attractive does not help them bring their economy out of the dark ages up to Western Standards of living.… Read More »

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arch1
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Leslie I agree with some & disagree with other of what you say. $ will not lose all “value” it is backed by “Full faith & credit of U.S. govt. ; Translated that means backed by govt. ability to extract money through taxes from U.S. resident. As you know we can use anything we choose for money, in early USA used deer skins,term still lingers in word ‘buck’,, penny was, ‘pennyweight’ of barleycorn. Oak tree nut could be used as ‘a’ corn etc. Problem is most such rot or rust; gold very durable,,also ‘shiny’ & people like shiny thing. Price… Read More »

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Leslie Dweck
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Leslie Dweck

Dare I say that spending our way out of debt was precisely what we did after WWII so succesfully thanks to the USA inspired Marshall Plan. Look at Germany France and the UK then and thereafter, as well as the boom that benefited all, especially the USA, as a result. Thank God the USA had the foresight in the current recession to adopt a diluted Keynsian solution that avoided a depression that would have been worse than all previous depressions and put us all back on a path to healthy growth that in itself enables us to meet our debts.… Read More »

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scor
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scor

The massive amounts of debt can’t be unwind unless a huge depreciation of the currencies,also the euro ,Yen and even the Chinese currency,because also China is dealing with about 1 trillion of bad loans,indeed a very low number in comparison with US debt but you never know the real numbers. I guess China is loading up gold because they want to have enough collateral against their holdings of a huge pile of US bonds and also Euro bonds in wich they fear to be trapped, but to enforce their currency to become the new reserve,they need at least 10000 tons… Read More »

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takeprofits
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👍416

Leslie: Would be interested in knowing what you define as “healthy growth” as the only thing that could be defined as experiencing “healthy growth” currently is “DEBT” if you are applying the word healthy as meaning substantial, certainly applied to debt it is not desirable. Since our currency on a world scale is “borrowed into existence as debt” how can we ever experience “healthy growth” in our economies when an ever greater portion of the average wage earners income goes to interest and taxes to cover government debt? Before you attempt an answer read my comment to Steinfeld who posted… Read More »

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arch1
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ADD IF not clear I meant gold more stable than dollar. Could have diamond backed money or Pearl backed money but diamonds burn & pearls dissolve in wine. With nod to P.J. O’rourke After we “eat the rich” where next do we turn?

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ernesto
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ernesto

I was afraid when I saw the gold (metal)price push dawn without any of the usual excuses and the dollar did not move ,I though there is some gov. making dollars but not excavating gold and felt the equation unbalanced in favor of gov. spending, I am still afraid US. sadfully would be closing the gap with P.I.G.S. economy if the dollar were backup by gold ,no printing, no spending, no way to pay debt ,as for now printing dollars with the honest workers purchasing power ink, is devaluation the same. dooms day could come a day that chinesse offer… Read More »

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Leslie Dweck
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Leslie Dweck

Owning housing or land in a depression is a great way to loose money.
as mentioned above in my reply to Frank Archambeau suffering a temporary devaluation is far better than suffering a full blown lengthy depression. Gold backed currencies were abandoned precisely because they bring about depressions and stiffle world trade. Both of which empoverish us far more.

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scor
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scor

Deflation is good for common people ,but bad for the ridge because they can’t create wealth out of thin air ,a house is to live in and protection against inflation if you bought it on the cheap,since real estate is hugly overpriced in many countries and especially in the UK and also in many countries overtaxed it’s something to ignore these days. If you think that we are in a temporary devaluation,think twice ,the current cheating of extend and pretend is soon coming to a screeching halt and that will create a full blown depression,they can’t keep creating smoke and… Read More »

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takeprofits
Member
👍416

Really Leslie, “Gold backed currencies were abandoned precisely because they bring about depressions and stifle world trade.” Reality, politicians who want to spend, spend and spend some more, do not like the discipline that gold imposes, simply creating dollars via the printing press is so much easier and costs only the price of paper and ink. If they had to go into the mines to work hard to dig up tons of precious metals to earn a living they would soon learn putting ink to paper is not the way to create real. wealth. Would you agree with me that… Read More »

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