A Strange Thing Happened at the Office Tuesday

The two ladies at our front reception were all in frenzy yesterday.A customer came in to buy one of our higher-priced newsletters. But instead of paying by check or credit card, the customer plunked down a shiny $50.00 U.S. gold Liberty coin on the desk. He was paying for his goods with gold.
Frankly, in 26 years, this has never happened. We’ve never had a customer come in and pay for a product with gold. And no one in the office, believe it or, had ever seen a gold coin. (Of course, it is off to the jewelers in the next day or two to see if the coin is real.)This got me thinking. Is this the way of the future?I’ve written in this column (until I was blue in the face) on how America is on the wrong economic path. This great country went from being a creditor nation to a debtor nation.

Our manufacturing base is all but gone. Government has gotten too big. We bailed out companies during the recession that we should have not. The wars we are fighting cost big money, homeland security has been a new added expense since 2001, our healthcare program is very expensive…and the list goes on. This year, the U.S. will issue more new debt than the remainder of the world government combined.

Nixon took away a system where the American dollar was at least partially backed by gold bullion. Today, we live in society where a whole generation has been brought up with debt: mortgages, loans, credit cards, gas cards.

Sure, when interest rates are low, the temptation is to borrow, not to save. But that is changing now. After a 30-year cycle of interest rates falling, I see interest rates starting a 25- to 30-year cycle back up. This will make “debt” a bad word again and “savings” a good word.

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Unfortunately, the amount of government debt (some call it “national debt”) and personal debt that has been piled on over the past few years will eventually make the value of paper money (the proper term is “fiat money”) questionable.

What good is paper money if inflation kicks in? What value is there in paper money if we just keep printing more of it when we need more? I think you get the picture.

It is no coincidence that gold has risen from $300.00 per ounce at the beginning of 2003 to $1,250 an ounce in 2010? Of course not. The smart money sees the declining value of the U.S. dollar and is moving its money into the old store of wealth that has proven itself for over 5,000 years: gold.

Back in 2002, I started urging my readers to get into gold-related investments. And it’s not too late. Sure, gold has rallied lately, but the gold market (like all investments) will eventually correct lower from its recent rally…and that will be time to buy more gold-related investments.

Michael’s Personal Notes:

I read a report the other day that said one out of eight Americans is now receiving food stamps. This compares to one out of 35 Americans who was receiving food stamps during the Great Depression of the 1930s.

I’m not sure if these statistics are correct, but if they are even close, the standard of living for Americans is deteriorating rapidly in the face of rising record government debt; a lethal combination that will not play out well in the end.

Where the Market Stands:

The Dow Jones Industrial Average starts this morning down 4.7% for 2010.

What He Said:

The year “2000 was a turning point of consumer confidence in high-tech stocks. 2006 will be remembered as the turning point of consumer confidence in the housing market. That means more for-sale signs going up, longer time periods to sell homes, bloated for-sale inventory and eventually lower prices for homes. But this time, the turnaround in consumer confidence will have a bigger impact on the economy. Hold onto your seats, this is going to be a nail-biter.” Michael Lombardi in PROFIT CONFIDENTIAL, August 24, 2006. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.