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Sunday, October 19, 2008

Solutions to the Coming Great Depression- Sound Money

I have been attempting to provide solutions to the upcoming Great Depression. Again, I don't have all the answers but, thanks to some great advice, I would like to provide solutions.

We talked about food last time (and we will return to that subject in a short time) but today I wanted to talk about money.

Most economists that follow Austrian economics agree that, based on the actions of the government and the Central Bank, we are headed toward some type of massive hyperinflationary event. More than likely, it will be a hyperinflationary depression- job losses with spiralling prices. This is much worse than the deflationary depression of the 1930's. At least in the 30s, you had purchasing power. Plus, most people were not as dysfunctional as today- i.e. families were whole, morals were intact.

Now, I do not relish the thought of this. I'm not out celebrating this fact. However, I also believe that if you think something has a likelihood of happening, it is wise to prepare in the best way that you can (within a certain level of reason).

Why do I believe that hyperinflation is coming? In simple terms, when the Federal Reserve prints money, it creates a rise in prices. In many ways, it is supply and demand. Printing more paper money means more supply and creates more demand and rarity in the commodity sought.

While we have seen US dollar strength recently, I believe the dollar will be in a falling pattern once again. I think they will have a tough time holding it up this time. I suspect a drastic crash in the dollar.

Trust me, there is more Central planning to come. Congress is talking about giving all of us $1,500 to spend. Bernanke is encouraging more economic stimulus. Again, all of this is inflationary.

Now is a good time to look into gold as an investment vehicle. Of course, you cannot get interest on gold like you can at a bank. But, with the uncertainty of the banking system, it is not a bad idea to balance your paper money with some gold (and silver). Plus, gold and silver have historically been a great hedge against inflation.

Deuteronomy says that you must have accurate weights and measures. Our founding fathers failed at fiat currency and went with a gold standard. However, we abandoned that in the last century which has allowed the Central Bank and our political leaders to operate immorally by the mis-use of money (printing money to make up the shortfall, rather than balancing budgets and reigning in spending).

I'll write more extensively on precious metals but I think it is important to 'sound the alarm' now. is a good and reputable dealer.

Also, it is important to note that the US confiscated gold in the first depression so you might want to hide some gold overseas. holds your gold in a vault abroad (England and Switzerland).

Keep informed with these great financial websites:

Article of interest:

The next big leg down for the U.S. dollar

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