You all remember them, don’t you? The clear plastic box full of dirt, with ants running around in it, building tunnels, reproducing, eating, and having a great time. The fellow who invented the ant farm, used to pay people a penny per ant, if they would go out into the California desert to find creatures to place in his boxes. Ah the delight of watching ants live normal lives but all in a plastic box. They thought all was well, but we knew they were confined, and doomed to live out their lives in a clear plastic box.
On the way back from Texas Saturday, I listened to a show called, “Your Money,” or some such title as that. People would call in and ask this ’expert’ what to do with their bucks. He would rattle off a bunch of various bonds, stocks, mutual funds, and various ways to invest dollars, with the usual income of under 5% all taxable of course. One guy called in, and said he had lost a bundle in the last crash, and had recently placed $75,000 with a broker who said he knew what he was doing. He had lost $50,000 of it so far. Balderdash, was my comment on the whole show. Not a word about gold or silver, which are shining like they really are, and will continue to do so.
At my Kiwanis Club, a stock-broker from Wells Fargo elucidated about which stocks to buy and what to do. I asked him about gold and silver, which had been real money for 5,000 years, and which had gone up far faster and further than any stock he mentioned. His reply was that gold had the habit of going up and down, and was unpredictable. I reminded him that gold’s price had been stable for almost 200 years, until the government decided to remove it as a backing of paper money, and that when it went up in 1979 and early 1980, it was because of one rich man’s attempt to corner the world’s silver supply, plus the administration of Jimmy Carter, when interest rates were so high, that gold deserved to be where it was. No answer. Just a glum expression.
The New Forbes Magazine, has a huge feature on investing. Of all the recommendations, guess what? Gold is mentioned at the end, and paper gold is the thing they say one should own, not physical. There are literally dozens of suggestions with loads, no loads, stocks, bonds, and the same basically as on the radio. Just like little ants running about in an ant farm. As Henry James said of Thomas Carlyle, “The same old sausage, fizzing and sputtering in its own grease.”
America, and indeed the entire world, is so hung up on paper, and all that can be printed on it, that it is just like the little ant farm. Workers get paid in paper, and the paper never leaves their sight as to investing. Papers with this or that printed on them, and papers with paper guarantees and promises. Colored papers, heavy and light papers. Engraved papers, notarized papers, and papers with impressive signatures and seals on them. Paper, paper, paper. Just like the ant farm, everyone runs about like the ants, and dwells on paper, paper, paper. No one ever gives a thought to the simple fact that paper is only as good as who issued it. And not only WHO issued it, but who they are, what is back of them, and I don’t mean more paper. Look at the dollar, as an example. It has nothing in back of it.
At an flea market outside Dallas, I bought a 60’s frame with a silver certificate, silver dollar, silver dime, war nickel, and silver granules in it, for a few bucks. The flea market owner hadn’t a clue about silver certificates, which were dollars that were redeemable in silver. Ah, the good old days, when a dime was made of 90% silver. Dollars today, are redeemable in more dollars. They can be USED to buy silver and gold, (and should!) but they are not redeemable in them.
The Forbes magazine, is dated December 8th, a few days hence, and it says that gold hasn’t hit $400 yet. Of course it did, long before December 8th. Why do they print a magazine dated over a week after its issue? I haven’t a clue. Forbes says that gold should be $350. Of sure, with a trillion new dollars being printed this year, bankruptcies at all time highs, and the stock market floating on gas. Gas, because the P/E ratios are at an average of 30, which happened to be three times more than they should be for a logical purchase. It must be gas that is holding up Ford at about $12, since it has corporate and retirement debts of tens of billions, and no way to pay them down.
Like the ants living in an ant farm, the world is depending on, printing, exchanging, and saving in pieces of paper with various inscriptions on them. The world is running around in paper circles. Good trees are being cut to make more paper. While the dollar sinks, the euro gains, but they both are paper. The yen, dollar, peso, franc, and others go up and down in relation to each other, but all go DOWN collectively. All have lower purchasing power as each year passes. Some lose it faster than others, and that’s why currency traders do their arbitrage. Those that aren’t in jail, anyway.
Some papers, such as the Putnam Fund, Invesco, and the insurance company the French got involved in, have been raked over the coals by everyone, because those nasty people traded in and out of its funds at the little guy’s expense. Been a lot of securities frauds lately, haven’t there? Lots of guys taken away in handcuffs, fined huge sums, and generally a bad thing for those handlers of all those papers. Physical gold and silver are funny that way. Funny, because they aren’t dependent on fund managers, firm managers, government efficiency, paper printers, paper engravers, stock markets, futures markets, or all the hullabaloo mentioned in Forbes or on the radio.
Ginnie Maes and Fanny Maes are all the rage, in spite of funny bookkeeping. These, to quote Forbes, “ are the safest of mortgage backed securities, their credit-worthiness explicitly backed by the federal government.” Wow! That’s quite a recommendation, isn’t it? That old “Full faith and credit of the US government” line. The US government hasn’t a clue as to what it is doing, and if it didn’t print the trillion dollars this coming year, it would be as solvent as a brick. Not only can’t any of its departments balance their checkbooks, but trillions goes to no one knows where. To quote CBS news of January 29, 2002, “Its own auditors admit the military cannot account for 25% of what it spends.” Donald Rumsfeld is quoted in the same CBS news as saying, “According to some estimates, we cannot track $2.3 trillion in transactions.” That’s $8,000 for every man, woman and child in the US. More quotes from the CBS News: “Twenty years ago, Department of Defense Analyst Franklin Spinney made headlines exposing what he calls the “accounting games.” These numbers are pie in the sky. The books are cooked routinely year after year,” he said.
The problem is, that pieces of paper with ink on them, be they real or counterfeit dollars, stocks, bonds, notes, or what have you, are so totally dependent on a thousand different things, that to place faith in them or their backers, manipulators, CEO’s, staff, regulators, auditors, or any of millions of employees, is foolish. If you trust the dollar to save you from ruin, I pity you. If you trust the SEC to protect you, you are placing your faith in a bunch of bureaucrats, who can’t usually tell up from down, except they love to enlarge their territory, and hire more bureaucrats, so they can be over them. The SEC has announced today, that it is investigating a firm that did suspicious trades in 1999 four years ago! Shutting the barn door after the horse has left. Picture them as in an ant farm, shuffling papers, issuing rules and edicts. Ants in a farm. Imagine all the trillions of pieces of paper in the world, and everyone trading with them, and not a tangible thing in sight. Tangibles being traded, bought and sold, for pieces of paper with no tangible value. Millions of hours of labor each day, being traded for pieces of paper not redeemable, except for more pieces of paper. The paper buys stuff, but less all the time. It didn’t used to be that way. Get out of the ant farm. Stop doing what everyone else does. The majority are always wrong, it seems. As usual, I urge you to protect yourself.