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Tuesday, April 10, 2012

What's In Your "Personal Bank"?

It seems like the more information you get, the more muddled things become.  I believe, Information Overload, is the term.  I think, perhaps, I'm getting too far, "into the weeds" and losing perspective.  Perhaps.

Precious metals.  I love 'em.  The quick explanation of my beliefs is, until the federal government stops purposefully causing inflation, stops creating money out of thin air (also causing inflation), and starts living by a balanced budget (so I don't have taxes increased, thus reducing my purchasing power), I'll have PM's.  As much as I can afford.

Lately, I've questioned my beliefs.  Is the money I've got tied up in PMs going to vaporize - be nothing more than shiny metal?  The stock market keeps chugging along - have I missed that boat?

Lots of folks are hesitant to buy PMs for a number of reasons.  The two biggest are future confiscations and the current (perceived) high prices. 

I'm not worried one little bit about either of these things.  I don't think confiscations will ever happen.  This video pretty well explains my views.

There are just too many other "easy pickin's" out there for the government to hit before they'd come after your gold or silver. Most importantly, if you buy your gold from private parties, or face-to-face IN CASH from bullion dealers, no record of your purchase will ever exist.

If a call similar to that which occurred in 1934 is made by the government, just twiddle your fingers and whistle Dixie.

The high price argument is a bit more sticky. When customers come into our shop, we tell them we have no way of predicting or influencing the price of PMs. None whatsoever.  Buy today, and your PMs may crash in value tomorrow.

Buying PMs is a matter of faith. Having faith that the government will continue its current path. If you honestly believe that they will stop creating money out of nothing, and will establish AND stick to a balanced budget without imposing obscene taxes, then you absolutely, positively should not buy PMs.

A key mental perspective you MUST have is that PMs are a long-term hold asset. If you have got to look at the spot prices each day -stress out on dips and are elated with spikes- you're going to end up in the loony bin.

When you make a PM purchase, it needs to be thought of as your "last resort" money. Like a 10-year CD in a bank. Just like that CD, you should only buy when all of your other needs have been taken care of - food, water, medical, guns, ammo, land.

Also keep in mind that all governments have a vested interest in keeping the price of PMs down.  High gold prices mean a weak(er) dollar, for instance.  That should be an item you mull over before you plunk everything you've got into PMs.  Governments will do all they can to keep or force prices down.

I'm a big believer in the concept of "dollar cost averaging".  Commit to buying a certain portion of your target amount each month.  If you're going to buy $1,000 or $10,000 or $100,000 in gold, spread that purchase out over 3 months, 6 months or a year.  Whatever time horizon makes you comfortable.

Many think that having other tangible forms of wealth - food, wood, guns, ammo and land - is the way to go.

I agree, up to a point.

You can only realistically store so much wheat and ammo.  Unless you have a warehouse facility on your property, you're somewhat limited.  You need to represent your accumulated wealth in other ways.

Land is an awesome option.  Especially land from which you can provide for yourself.  Fruits, vegetables, animals.  This, right now, is at the top of my To Do list.

But you're immobile and vulnerable.

History has shown us that governments will do pretty much whatever they want to you and your possessions.  Ask the Jews in Nazi Germany or the Japanese in America how being a large land owner turned out for them.

If you and your family must "bug out" you can only take so much food and ammo with you.

If the land is taken via eminent domain or for a failure to pay taxes which have been jacked up to pay for the nanny state, you're screwed.  All of your eggs are in one basket, and it just got taken from you at the point of a gun.

Yep, you can point a gun back in their direction, but it will be your last act on this earth.  And honestly, I think it's an option more and more folks will take.

Or you can live, and fight another day.

Here is my biggest concern:  Cash becoming illegal.  It's not as far-fetched (or distant) as you may think.
There are two major trends taking place that are shaping up as a recipe for disaster. On the one hand, we have massively indebted governments around the world desperate for tax revenues and, on the other, steadily growing multi-trillion underground economies whose main goal is to avoid paying them.

The concept is that everything must be bought and sold via electronic means.  Credit card, debit card, checks, Paypal, Bitcoin, etc.  There are very few (if any?) legal things that must be paid for with cash.

Right now, if you sell your gold, you get cash and for the most part, the transaction is invisible unless YOU decide to make it public.  If cash is made illegal, when you sell your gold coins, the money would be put on a debit card or you'd get a check to deposit into your bank.

You've now established an electronic audit trail that could raise the eyebrows of the .gov.   Hmmmm.  How much did you pay for that gold?  Still have the receipt?  No?  Well, you then need to pay taxes on the profit you made, and since you don't have a purchase receipt, the entire amount is considered a profit.  Have a nice day, comrade.

Right now, in Italy, it is illegal to buy anything over 1000 euros in cash.  That's planned to be dropped to 300 euros.  France is at 3000 euros and Spain is supposed to be following suit.

My belief is that if this happens, people will still use PMs in the black market.  Think about the old Soviet Union (or the current Argentina).  While domestic cash was not illegal, foreign currencies were.  Yet, the mighty dollar (strong relative to other currencies) was king.

People risked prison to acquire and use dollars.  I think the same will be true of PMs.

Accept The Challenge

What ya gonna do?

Personally, I want a diverse representation of what I've worked hard to acquire.  A little bit of this, a little bit of that.  I'll re-allocate into different piles as I see fit and things change.

If the fundamentals of our economy really change, I'll sell some of my PMs.  Not all, but some.

And I'm not talking about government-produced propaganda, either.  I'm talking real job growth, not unemployment numbers that drop because people fall off the rolls after a couple of years.

I'm talking about federal budgets that propose being balanced sometime in my lifetime, PLUS seeing actual changes NOW that indicate it might actually happen.  None of this, "We'll increase spending and borrowing now, and pinky-swear we'll make cuts in the future," crap.

I'm talking about real change.  The dismantling of this nanny state and a return to being a constitutional republic.

Seeing as little if any of this will happen over the next 30 years, PMs will be a part of my personal "bank" for a long, long time...

Copyright 2012 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


Unknown said...

I think you have got to look long term. You have got to be willing to accept significant paper losses and gains as part of the game. Remember that you are buying X amount of silver or gold. It doesn't matter if silver goes down, an ounce of silver is still an ounce of silver. I bought a bunch (for me) of silver then it dropped from $40 to $26, lame but oh well.

JWR recommends that you have a core holding of emergency/ barter metals. Get such and such amount of silver (and maybe gold) and do not sell it unless there is a dire emergency.

He says you could then maybe dabble in investing in PM's. These you might buy low and sell high or whatever as the market dictates. However don't mess around with your core stuff.

Oblio13 said...

Chief, I think you are right.

Chief Instructor said...

TOR, I tell all of my customers that they should think of PMs as a CD, IRA or 401k. It's not money you intend on using for a very long time. I have a target amount of PMs I want to have when I retire, with the intent of being able to "cash out" a set amount each month. I believe that the purchasing power of PMs will be maintained, regardless of the redemption rate. It may be $5000 an ounce of gold, or $50. I believe it will buy what $1700 +/- buys today.

Oblio, yeah, it sucks. We have to make plans to lessen the destructive impact of the government that supposedly works for us.

Pearls said...

I agree... We buy silver, have some gold, but I see gold as a "wealth holder" and well.... we arent "wealthy", but we do have plenty of assets. We have also used most of our disposable income to improve our land. Land is great, but if you cant do anything with it, well, its not worth much to you. And to improve raw land is expensive! Having several different ways to get chores done is vital. I also would recommend not OWING anything on land, improvements, house - anything with an adjustable interest rate has to go immediately. If the government is going to take what we have, its going to have to outright do it - not subtly making us lose the land for tax issues, debt, or the like.

Chief Instructor said...

Pearls, I worry a LOT about how to make land productive. I've been a suburban guy my entire life. There is just so much to consider.

Water sources, topography, proximity to neighbors, access, etc. State and local government regulations. I worry I'm getting Analysis Paralysis!

Our purchase is probably at least a year in the future, so I just keep reading and trying to learn.

One of the reasons we'll be leaving California is for property tax reasons. We've got this thing called Prop 13 which currently caps tax rates. I'm certain it will be dismantled so the cretins in Sacramento can keep their bellies full.