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Are people really that dim?

Posted By Patrice Lewis On 11/11/2011 @ 1:29 pm In Commentary | Comments Disabled

Last March, when my husband and I had a little bit of spare cash, we bought a tangible investment: a purebred Jersey heifer.

This past August, we built another tangible investment: a barn.

Our next planned tangible investment will be a new bull for our farm.

This is the tack we’re taking on investments lately. We’re not rich, and because we can’t afford to lose what little money we have to inflation, we prefer to put it into something we can touch. Most of our tangible investments will also multiply, in a literal sense.

Now consider some of the headlines this week on Drudge and The Blaze:

Do these headlines give you a warm fuzzy feeling that your 401k is safe and secure?

There are a lot of people who are desperately clinging to the hope that everything will be just fine with our economy, thank you. Sadly, these are the people who often have the most to lose. They’re the ones most vested in the stock market, or the ones with a hefty retirement account, or the ones with other investments that are precarious at best.

I realize that investing in a bull is not for everyone. (What would the neighbors think?) But I believe it’s high time we remove our heads, ostrich-like, from the sand and re-examine those headlines above. Then reconsider whether your investments are really likely to be safe.

Thankfully, I’m not an economist, because if I were an economist I would probably be obfuscating reality with hype. There’s an advantage to being a broke, ignorant north Idaho housewife living the simple life. It means I can admit to being frightened about the economy and the powers beyond my understanding that affect it. It means we can, without caring what others think, invest in such things as livestock or other tangibles as a hedge against what is almost certain to be a gloomy financial future.

The funny thing is, many people don’t seem too worried about the unrest in Europe or consider how it could affect our dollar. Everyone seems to think China is going to bail out the rest of the world. But China, like so many others, has been cooking its financial books and making inaccurate reports about the state of its economy.

“In the last two years since the financial crisis of 2008,” notes James A. Kostohryz of Seeking Alpha, “the slowdown in the growth of exports has meant that in order to maintain overall GDP growth rates at around 10 percent, the Chinese government has had to promote the stimulation of economic activity that previously was driven by the export sector. The Chinese government has done this in two ways. First, the Chinese government has promoted massive growth of direct government spending at both the national and local levels. Second … [it has enacted] policies that have encouraged a dangerous and almost indiscriminate growth of credit in the private and quasi-private economy.”

In other words, China is faking it. It’s not nearly as financially stable as it would like us to believe.

So what happens if Europe implodes and China can’t ride to the rescue? Simple. The world will do what it has always done: Turn to the United States. Our government will respond by printing more money. And printing more money, as you doubtless know, will cause inflation. Massive inflation. Maybe even hyperinflation.

“[F]or the last 40 years … the global monetary system has been based on nothing more tangible than politicians’ promises not to print too much,” notes Tyler Durden. Mr. Durden points out how “the mountain of debt that has been heaped up since 1971 is fast reaching the point of collapsing like a too-big tailings pile and taking the monetary system down.” And it should be noted that the public figures of the U.S. national debt charts usually do not included the government’s “unfunded liabilities, in particular for the Social Security and Medicare systems. Adding those would more than triple the U.S. government’s acknowledged obligations – to over $60 trillion.”

Do your investments still seem stable and secure to you?

There are still economists who pooh-pooh the purchase of such assets as gold and silver during these shaky times, arguing such purchases aren’t an investment. And possibly they’re right. But at this point, I think people should think more in terms of preserving their money than growing it. It’s not that gold is going up in value; it’s that the dollar is declining. Precipitously.

Are people really that dim, that they can’t see the handwriting on the wall for our economy?

If we had money – and at this point I’m almost thankful we don’t – there is no possible way I would keep it as cash. I would trade it in for something tangible, something that can offer us a long-term benefit. That’s why we’re “investing” our money in such things as canning jars and a barn and a Jersey heifer and hay and a bull. Let’s face it: Cash in the bank may well be worth squat inside a short amount of time. A heifer will breed calves and expand our herd, while giving us milk to make cheese and butter, and meat for the table.

Far be it for me to advise anyone on their own investments. I wouldn’t want to get my butt sued off if things don’t go exactly as expected. Rather, I’m letting you know what we’re doing, or what we will do as finances permit, or what we would do if we had any more money.

“Fortunately for those now paying attention,” concludes Tyler Durden, “the collapse of a monetary system doesn’t happen in a flash. It is a progression, like the spiral of water down a drain. Thus, while no one can predict exactly when the downward spiral will accelerate out of control, there is still time to prepare.”

Couldn’t have said it any better myself.


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