Twenty months ago the Dow Jones Industrial Average and S&P 500 both hit historic highs—14,198.10 for the Dow and 1,576.09 for S&P.
Then the bubble burst and stocks on the two indices lost more than half their value. The slide seemed to end on March 6, 2009, and since then stocks are up some. Some investment experts say we’ve hit bottom and the recovery may be beginning. Others say of the recent little run-up, it’s but a bear market bounce.
Regardless, America’s economy remains troubled. And with the Federal Reserve throwing new money out the door to fund bailouts, stimulus programs and expanded government services, inflation is bound to follow. And once it starts it’s going to get ugly.
If you need proof, look to the Weimar Republic in Germany. In 1918 the government of Germany began printing money at a dizzying rate, setting off hyperinflation. Prices were rising so fast that workers receiving their pay would immediately run to the store to buy foodstuffs before prices climbed again. Business and industry were paying their employees with wheelbarrow-loads of cash.
In trying to keep up with the falling currency rate, Reichsbank printed a 1,000-billion Mark note that was so worthless that when it was spent few bothered to collect the change. By 1923, with one U.S. dollar equal to one trillion Marks and inflation at 30,000 percent, the collapse of German currency was complete.
Germany is not alone in experiencing hyperinflation. Economic collapse under similar circumstances also occurred in this century in Zimbabwe (last year), Turkey, Romania, Argentina and Russia.
In the U.S., our government tried to spend its way out of a recession in the 1970s. The inflation rate increased by 500 percent—from a 70-year average of 2.5 percent per year to a high of 13.5 percent in 1979.
But government spending in the 1970s is practically zero when compared to what the U.S. government is spending today. Don’t be surprised if you’re soon wishing the inflation rate was only 13.5 percent.
Are you looking for a hedge against inflation? You should look at buying gold and silver. By the way; gold in early October 2007 was selling for $750 an ounce. As the stock market dropped gold took a little ride and is now selling for $936 an ounce.
But you may be like most people who have never considered buying precious metals and don’t know how. It’s not as difficult as you might think.
The simplest and most obvious way to buy gold is in its physical or bullion form. Bullion refers to the metal cast in bars or minted into coins with the weights marked on them.
Actual coins we recommend are the American Gold Eagle, Canadian Maple Leaf, African Krugerrand or the Australian Kangaroo. We prefer these because they are stamped in English, have their gold content stamped on them, come in convenient, well-known sizes (1 oz., ½ oz., ¼ oz. and 1/10 oz.) and sell at small premiums over the value of their gold content.
If you can’t make up your mind which to buy you should probably give more consideration to the American Gold Eagle, which the U.S. mint still lists as legal tender.
For silver we recommend buying pre-1965 U.S silver coins. They were minted using 90 percent silver. They are still legal tender and are worth more than their face value (proving the devaluation of the dollar) because of their silver content.
One of the best ways to buy these is in bags with a thousand dollars face value of dimes, quarters, half-dollars and silver dollars. A bag contains 715 oz. of coins and currently costs between $10,000 and $11,000. You can also buy American Silver Eagles.
There are many places you can go to buy gold and silver coins, both locally and over the internet. Local dealers give you the confidence that you are shopping with a legitimate business—particularly if they have been around a while—and the ability to actually see and hold what you are about to buy. You can make your purchases with cash, if you choose, which will help you remain under the Government radar. Finding a local dealer is as simple as looking in your telephone directory’s yellow pages.
You can also buy gold from Comex, the commodity division of the New York Mercantile Exchange on which gold, silver, copper and aluminum are traded. This is where futures contracts of gold and silver are traded, and it is here where you can buy gold and/or silver futures or actual gold and/or silver bars.
If you want to own larger quantities of gold bullion but have storage issues, look to the Perth Mint, a 100-year-old mint owned by the government of western Australia. In the Perth Mint Certificate Program bullion can be purchased at the mint’s spot market ask price with no markup. There is a service fee and administrative fee, but storage is free. Safety is assured because the metals remain on site and cannot be lent out.
Another option is GoldMoney, available at www.goldmoney.com. Through GoldMoney you can open a free account and buy as much gold or silver as you want, as often as you want. You own the actual metal and it is stored in vaults in London and Zurich. The wealth in your account is readily accessible by electronic transfer.
However you chose to buy it you should use any dips in the price of gold and silver to grab more. Gold bugs predict gold will at least double in price. And silver is predicted to do even better.
Remember, he—or she—who hesitates is lost.