This is an exact reprint of a column I wrote 9/10/2018
“The inflation rate in Venezuela is 67,934% a year, currently anyway. This means that if you wanted to buy an ounce of gold, it would cost over $81 million Bolivars, which is what they use for money, at least for now. By the time you read this, they may have switched to the “Petro,” which is just another bit-coin, or sham. Here is a paragraph from a recent “Forbes” magazine. “The rate of inflation, quickly makes paper money worthless. Money must have three attributes if it is to serve its role. A store of value, a unit of account, and a medium of exchange. When one of these disappears, whatever you used to call ‘money,’ isn’t that any more. In this case, the Venezuelan Bolivar no longer serves as a store of value. The number one problem, according to Brown Brothers Harriman, is that the government has persistently failed to deal with its massive overspending and deficits.” Well now, isn’t that ‘Elementary my Dear Watson,’ to quote Sherlock Holmes?
Zimbabwe went through the same ridiculous procedure a few years ago, when the government went wild with spending, making their ‘Zimbabwe Dollar’ currency, go to virtual zero. I’ve still got my $20 trillion Zimbabwe dollar note, as issued by the Reserve Bank of Zimbabwe. They have since switched to the U.S. dollar as official currency, and doubtless Venezuela will do the same. Not that the U.S. dollar is a firm store of value, but it beats the rest of the World’s un-backed monies, of which the U.S. is one. I must disagree with the Forbes piece a bit. Even if the debt is high and spending is out of control, the dollar or any other currency, must have buyers for the debt that government creates. When governments create debt, they always try to sell it by promising high interest rates for those buying it, or loaning It to government. How ridiculous, to me anyway, is loaning fake money to government, which created the fake money you are loaning!
The U.S. Treasury bond is bought around the World, because it is thought to be safe, due to being issued by the U.S. Treasury, and backed by the Federal Reserve, which actually is no part of the U.S. Treasury or Government. The “T Bill,” is regularly quoted as to its interest bearing, and the most quoted, is the “Ten-Year Bond,” which runs generally at about 2.9% interest yearly. When other currencies fail, as a last gasp, it is because no one wants to buy that government’s debt. So far, the “T BILL,” sells with no problems around the World.
Socialism, by dictionary definition, is: ”Any of various theories or systems of ownership and operation of the means of production and distributorship, by society or the community rather than by private individuals, with all members of society or the community sharing in the work and in the products.” The commune is socialism, ands it has never worked. Or a second dictionary definition is, “The stage in society, in Marxist doctrine, coming between the capitalistic stage and the communist stage, in which private ownership of the means of production and distributorship has been eliminated.” To me, the socialistic, huge bureaucracy, which began with FDR, was at its peak under Obama, and is now trying to be drastically reduced by Trump; is socialism, or the mid-range before we become Russian or Chinese communist. When Congress passes thousand-page bills, which no one has read, and passes enforcement to bureaucrats, which have not been elected, but appointed, you have basic socialism. If anyone out there, or anywhere, has seen any government, at ay time, or at any size, ever perform better than individuals, businesses, companies, or even corporations, please let me know.
Suppose you were a Venezuelan citizen, and knew that your country had the largest underground oil reserve in the World, it was operated by efficient, U.S. corporations, Caracas was a wonderful, prosperous city, and all seemed to be great. Then, in 1998, Chavez was elected, who managed to overcome several attempts to overthrow him, and when oil prices went down, he nationalized everything in his grasp, seizing U.S. refineries, production techniques, and equipment. Would that have been a good time to begin buying gold and silver? Yes! Did the bolivar crash instantly? No, any more than other un-backed currencies crash instantly, with the exception of the German reichsmark after WW I. That one went quickly, thanks to the Treaty of Versailles in 1919, but even that took a couple of years.
Many things happen like a lightening flash, with no warning, and that’s why we have insurance. Auto crashes, falls, floods, earthquakes, and fires, can happen instantly, and not to have homeowners insurance is insane. Well then, how about inflation insurance? “Inflation insurance? I never heard of it,” you probably would say. We have it by the ounce, and it it’s called gold and silver. Will the dollar collapse? It’s already collapsed 85%. Some think soon. Some think never, and both can be wrong overnight, if a few things occur. Devastating hurricanes, floods, political overthrows, world wide economic catastrophe can happen to anyone and everyone, and then its too late to buy insurance. Not to have gold and silver, as the ultimate economic or unbacked paper money insurance, is foolish, to me anyway. I am insured. Are You?