**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
So I’m starting to think that Schiff’s recommendations sound plausible. Problem is, I have very little savings, and a decent sum of money in my employer sponsored 403b (basically the same as 401k) at Vanguard. I also have an employer paid pension at Fidelity.
Fidelity has the “Fidelity Select Gold” mutual fund. Our Vanguard plan has no mutual funds available for precious metals although they do have some International Funds.
So my thinking is to move my Vanguard funds into the international funds and my fidelity fund into the Fidelity Select Gold fund.
Is this a viable alternative to investing in gold bullion?
Garret
Hey Garret,
First off I’m not qualified to answer your question. Understand that I’m not giving legal advice or investment advice with this reply. I don’t feel I’m well enough read (on investments) to instruct people on how to invest. That being said I’ll share my opinion…
“Investing primarily in companies engaged in exploration, mining, processing, or dealing in gold, or to a lesser degree, in silver, platinum, diamonds, or other precious metals and minerals. Normally investing at least 80% of assets in securities of companies principally engaged in gold-related activities, and in gold bullion or coins. Potentially investing in other precious metals, instruments whose value is linked to the price of precious metals, and securities of companies that manufacture and distribute precious metal and mineral products (such as jewelry, watches, and metal foil and leaf) and companies that invest in other companies engaged in gold and other precious metal and mineral-related activities. Normally investing primarily in common stocks.”
This is not the same as owning bullion… or as safe. They’re involved in many aspects of the gold ‘market’ without your investment being tied directly to gold. So goes the gold ‘market’… so goes your investments. As you may be aware gold crested earlier this year (in dollars) around $1,000/ounce. Now it’s on a plateau in the low $800’s. Also, the dollar is currently rising in value.. will this continue? Or will Washington print its way into the next depression? I honestly don’t know. But for now the gold mints can’t keep up with the demand for gold coins… that was NPR radio last week. Also, three weeks ago Alan Greenspan spoke before some group of useless bureaucrats and said our economy would get worse. Since he caused the current mess I’d say he probably has a better idea than most on how long it will last. The October 29th Central Bankers meeting was rather gloomy.. they seem to think things may get worse as well.
Members anticipated that economic data over the upcoming intermeeting period would show significant weakness in economic activity, and some suggested that additional policy easing could well be appropriate at future meetings. In any event, the Committee agreed that it would take whatever steps were necessary to support the recovery of the economy.
All this doom is good for gold… at least in the short term (two more years). For now I think gold is stable as a hedge (but as an investment with profit as the goal… the money has already been made). It’s a tough call… and it’s all yours.
I still have no faith in the dollar and I fully expect 2009 to be worse than 2008 for the U.S. economy.
To answer your question… this strategy is a decent one for the circumstances you are in (my opinion). I do not expect our economy to repair itself rapidly… we’ve had too much bad behavior and the spanking is long overdue.
The percentage of your investment portfolio devoted to gold will depend on many factors, with the health of the U.S. Economy at the top of list. At the time of writing this article gold has reached $975/ounce and could possibly double before this bull market ends. As a result of gold’s increase in value the precious metal has proven to be a profitable short term investment as of late. The question is how long will this last? There’s no sure way to know, but based on negative speculation in regards to the U.S. Economy and the declining value of the Dollar – gold could very well continue to be a good investment for the short term. And of course gold remains a great way of protecting your wealth while Wall Street and the Dollar suffer perilous circumstances. This article is written to extend my views on gold as initially expressed in ‘Dave Ramsey, Peter Schiff, and Decline of U.S. Economy.’
**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
Gold and Economics
In general gold is viewed as a lousy investment, often not even keeping up with inflation. Lately gold has made a come back largely produced by inflation and looming economic uncertainty. So having an understanding of economics and the role gold has historically played is essential in determining its market value. The relevance of gold to the global economy and as an investment vehicle is far from over.
In ‘Basic Economics – A Citizen’s Guide to the Economy’ author Thomas Sowell mentions gold many times as it relates to national economies. Sowell starts by comparing gold investing to Wall Street “taking inflation into account…..a dollar invested in gold in 1801 would by 1998 be worth just 78 cents. The phrase ‘as good as gold’ can be as misleading as the phrase ‘money in the bank,’ when talking about the long run. There have been many short-run periods when bonds and gold held their value while stock prices plummeted. The relative safety of these different kinds of investments varies greatly with how long a time period you have in mind (199).”
The strongest attribute of gold is its sustained value on global markets. If the U.S. Economy dives into the tank and the stock market suffers – your wealth would be protected with gold because of the its intrinsic value for making jewels and other uses industrially.
Law and Order
Sowell goes on to point out the role that justice plays in economics “the most basic function of government is to provide a frame-work of law and order, within which the people are free to engage in whatever economic and other activities they choose (238).”
When considering where to place your investments, a governments ability to provide law and order in practical terms will influence if investments can be made with confidence. When legal contracts cannot be enforced then investments cannot follow. For example, let’s say we invested in stock with a small oil company in Venezuela in 1998. At the time this may have seemed like a good investment with the company growing in market share and profits soaring. But in recent years we have seen President Hugo Chavez change the government into a Dictatorship and he had the State assume powers over energy companies. Putting the legal system in disarray, investing in the oil company no longer would seem valid since the government may ignore contracts at will. It would seem investors in Venezuela are probably placing their money in gold and foreign investments. Since the goverments enforcement of contracts is unpredictable, investing within the borders of Venezuela no longer makes sense.
In ‘Crash Proof – How to Profit from the Coming Economic Collapse’ author Peter Schiff speaks confidently of gold investments in Australia’s Perth Mint. The Perth Mint has been owned by the government of Australia for over a century. According to Peter
Unlike the U.S. government, which under the Gold Reserve Act of 1934 made it illegal for U.S. citizens to own gold, Australia has no such history (226).
Confidence in the continued reliability of Western Australia’s government to protect this asset and honor legal contracts as they are written will continue to make the Perth Mint a great place to harbor wealth outside the United States. However, never put all your eggs in one basket.
War
Economic uncertainty causes investors to look to gold. The War in Iraq is partly to blame for the rise in gold prices. War causes governments to print and borrow large amounts of money, which obviously leads to a spike in inflation.
This is why a major political or military crisis can send the price of gold shooting up, as people dump their holdings of the currencies that might be affected and begin bidding against each other to buy gold, as a more reliable way to hold their existing wealth, even if it does not earn and interest or dividends (Sowell, 227)
If tomorrow America were to embark upon the road to another Civil War – the price of gold would skyrocket as Americans moved what dollars they could out of U.S. stocks and into foreign markets and gold.
Gold and Banking
In the first half of America’s history gold and gold backed currency was used as money. Using gold and gold backed currencies protects wealth and prevents the government from taking spending on a roller coaster ride. Because of our gold backed currency the United States became the world’s industrial giant. Sowell describes this process
Both Americans and foreigners could exchange their dollars for a given amount of gold. Therefore any foreign investor putting his money into the American economy knew in advance what he could count on getting back if his investment worked out. No doubt that had much to do with the vast amount of capital that poured into the United States from Europe and helped develop it into the leading industrial nation of the world (295).
Even before the U.S. government destroyed our own currency by removing us from the gold standard and printing too much of it – gold was used by non-government backed banks.
Some banks used to issue their own currency, which had no legal standing, but which was nevertheless widely accepted in payment when the particular bank was regarded as sufficiently reliable and willing to redeem their currency in gold (Sowell, 226).
In 2007 a ten year old company in the U.S. called Liberty Dollar had a successful business issuing gold backed currency that competed with Federal Reserve Notes. However, the FBI raided their vault taking all the gold, silver, and platinum they had in stock. Company informationsays
Von NotHaus developed the Liberty Dollar in 1998 as an “inflation-proof” alternative currency to Federal Reserve Notes. The U.S. government, however, historically has taken a dim view of anything monetary that could be perceived as substituting for Federal Reserve Notes. Authorities have attacked such alternatives as counterfeiting, while supporters of such bartering tool attack the Federal Reserve Notes as fakes.
I sincerely regret to inform you that about 8:00 this morning a dozen FBI and Secret Service agents raided the Liberty Dollar office in Evansville.
For approximately six hours they took all the gold, all the silver, all the platinum and almost two tons of Ron Paul Dollars that where just delivered last Friday. They also took all the files, all the computers and froze our bank accounts.
We have no money. We have no products. We have no records to even know what was ordered or what you are owed. We have nothing but the will to push forward and overcome this massive assault on our liberty and our right to have real money as defined by the US Constitution. We should not to be defrauded by the fake government money.
The U.S. government no longer desires a gold backed currency although many citizens do. A gold standard restricts the creation of credit as Sowell accurately states “The big problem with money created by the government is that those who run the government always face the temptation to create more money and spend it…….For this reason, many countries have preferred using gold, silver, or some other material that is inherently limited in supply, as money. It is a way of depriving governments of the power to expand the money supply to inflationary levels (225).”
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. here is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to covert all its bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
The real question is can a discretionary paper currency managed by Central Bankers perform as well a gold standard? So far it seems successful. However, a gold standard prevents the booms and busts seen in our present economy as a result of Central Bankers attempting to control the economy by expanding credit to provide a steady increase in growth. The problem is that this policy encourages borrowing and consumption instead of savings and production.
The future of the discretionary system has yet to be put to the test. Sowell describes the changes that electronic transfers of money have brought about. Governments inflating their money supply too rapidly could lead to large percentages of wealth being transferred out of the country instantly. ”The discipline this imposes is different from that once imposed by a gold standard, but whether it is equally effective will only be known when future economic pressures put the international monetary system to a real test (Sowell, 296).”
In ‘Crash Proof” Peter Schiff believes that a gold standard will return – either through governments or private citizens in an open market. Schiff states that the upcoming collapse of the U.S. economy and dollar will open the eyes of citizens to the failings of a currency based on pieces of paper backed by nothing.
How to Invest in Gold
If you are planning on investing in gold contact the staff at Euro Pacific Capital, this is Peter Schiff’s investment firm.
Gold Coins
Physically owning gold is one way to invest. Purchasing a Krugerrand (South Africa), Canadian Gold Maple Leaf, or American Gold Eagle Bullion Coins is one way to physically own gold. At a current price of $1,000 the actual value of the gold metal in these coins by weight can quickly become worth more than the price of the coin itself – if the price of gold continues to rise. The American Gold Eagle Bullion Coin contains one ounce of gold.
Gold Bullion
Bullion can be purchased from The Perth Mint. From The Perth Mint website “Investors who do not want the inconvenience and risk of storing their precious metals can take advantage of the investment products that The Perth Mint has developed. These products allow investors to buy gold, silver and platinum via its Certificate and Depository programs or to buy gold via the Australian Stock Exchange. Alternatively, The Perth Mint manufactures a wide range of bullion coins and bullion bars for those who prefer to store physical precious metal themselves.” There are other places to purchase bullion so do some research and find the method that suits your concerns.
Gold Mining Companies
You can buy stock in Gold Mining Companies. This is a good idea since gold mining has been very slow until recently. With the price of gold going up the demand for mining will increase accordingly.
Dave Ramsey and Peter Schiff are two men that I respect because they exist within a group of little known “truth tellers,” speaking out on the perils of personal debt and a troubled U.S. Economy. But there are two distinct differences in their perspectives concerning our U.S. Economy and monetary policy that I find puzzling. Scroll down to watch Schiff’s top interviews.
In a recent radio show (early January 2008) Dave Ramsey was asked about the state of the American Economy. He joked and said that the media had predicted “36 out of the last 2 recessions”, implying the media was anxiously reporting any negative news in regards to the state of our Economy. Ramsey then went on to mention that GDP and Net Worth figures were steadily rising – and pointed to these facts as proof that talk of recession is nothing more than ‘fear mongering’.
Peter wastes no time attacking the Net Worth argument (smacks it down in the preface) stating that booming optimism “relies heavily on the familiar but erroneous argument that declining savings rates are belied by high household net worth figures, which we know reflect inflated housing and paper asset values.”
In other words, Americans have record low amounts of Savings (lowest since 1933) – but that’s supposed to be alright because they bought a house three years ago, which has doubled in ‘market value’, so the acquired equity represents Net Worth. As we are currently witnessing, Net Worth based on home equity is dropping sharply. Likewise, paper asset values such as stocks and investments will also drop, because they are based on a maintained global market ‘faith based’ value of the U.S. Dollar. The Dollar is on the way down, along with any markets based on its value. Since most American’s ‘paper assets’ are based on investments backed in U.S. dollars, the Net Worth attached to these paper assets are likely to crash and burn.
How does Dave Ramsey not comprehend this?
The Gross Domestic Product argument
Moving on to the ‘GDP is growing – so the Economy is great’ argument. Peter invalidates this fantasy on page 2 of Chapter 1. The problem “is that most Americans, including most economists and investment advisers, have confused conspicuous consumption with legitimate wealth creation. Our impressive gross domestic product (GDP) growth, dominated as it is by consumption, is not a measure of how much wealth we have created but of how much we have destroyed.”
Our inspiring GDP is based on borrowing and consumption (bad), not savings and production (good). It sounds wonderful to be able to say that life is good because people are spending money. But when you analyze just beneath the surface there is a horrifying catalyst: The Savings of American Citizens are gone, personal and national debt is at an all time high, and the money was used to purchase garbage.
If this is how you measure success – count me out.
Gold investments and the Gold Standard
In regards to monetary policy Dave Ramsey is not a promoter of Gold. Although Dave doesn’t mention hard money or a Gold Standard, he does degrade the precious metal as a poor investment. In Dave’s latest book ‘The Total Money Makeover’ he had this to say about Gold: “The truth is that gold is a lousy investment with a long track record of mediocrity. The average rates of return tracked as far back as Napoleon are around 2 percent gain per year. In recent history, gold has a fifty-year track record of around 4.4 percent, about the same as inflation and just above savings accounts………..It is important to remember that gold is not used when economies fail. History shows that when an economy completely collapses, the first thing that appears is a black-market barter system…” (pg. 55).
Although I don’t doubt that Ramsey’s facts are accurate, his assessment of Gold is backed by his above mentioned confidence in the U.S. Economy. If the value of our U.S. Dollar were to crash – Gold would remain a viable investment (protecting an individual’s wealth by maintaining value on the global market).
This is where Peter and Dave’s philosophies differ.
If Peter Schiff turns out to be correct about a Dollar meltdown – Dave’s investment strategies would fail (they’re based largely on Wall Street Economics). Peter’s attraction with Gold is reinforced by his admiration of the American Economy and Government when our currency was on a Gold Standard. The Gold Standard restricts the creation of credit and helps to keep Government Spending under control. Peter understands this and believes that the next dominating ‘reserve currency’ will be backed by the luscious Gold.
Dave Ramsey is on the right track regarding most of what he says. He encourages all Americans to get 100% out of debt immediately. Ramsey accurately explains that obligations to debt prevent wealth building.
However, after retreating from the debt trap I highly recommend adopting Peter Schiff’s investment strategies (based on foreign markets and precious metals). I know it’s difficult but let’s try and look beyond Wall Street, or as Peter would say “Nations are not served by citizens who refuse to face the truth. Blind optimism, shrouded typically in patriotism, abounds and is going to lead us to disaster.”
Peter Schiff VS The Empire (Compilation)
Peter Schiff on CNBC 11-20-2008
Peter Schiff on ‘The Gold Market’
Peter Schiff June 26 2008 Fox Business News – Cavuto
Peter Schiff on the Glenn Beck Show – THE BAILOUT
Wiki Facts
David L. Ramsey III (b. September 3, 1960) is an American financial writer, radio and television host.
His syndicated radio program, The Dave Ramsey Show, is promoted with a tagline that it is about “Life and Money,” and is heard on over 300 radio stations throughout the United States and Canada, and also on XM and Sirius satellite radio. He has written over 14 books, three of which have been on the New York Times Best Seller list. His books and broadcasts often feature a Christian perspective that reflects Ramsey’s own religious beliefs.
Ramsey’s current company, The Lampo Group, is headquartered in Brentwood, Tennessee, and oversees three divisions geared toward financial counseling.
He has been featured on many media outlets including The Oprah Winfrey Show, 60 Minutes, and The Early Show on CBS. He has also recorded a pilot and six episodes of a reality show named The Dave Ramsey Project. He is the host of The Dave Ramsey Show at 8pm ET and repeated at 12am weekdays on the new Fox Business Network.
Peter Schiff is the president of Euro Pacific Capital Inc., a brokerage firm based in Darien, Connecticut. Schiff frequently appears as a guest on CNBC, Fox News, and Bloomberg Television and is often quoted in major financial publications. He is known for his extremely bearish views on the United States stock market, bond market, the US dollar, and the United States economy in general for which he has earned the nickname “Dr. Doom.” His father is tax protester Irwin Schiff.
Schiff wrote a book called “Crash Proof” (2007) and also hosts a live internet radio show called “Wall Street Unspun.”
Peter Schiff on subprime homes and lending standards
Irwin Schiff is the father of Peter and Andrew Schiff. Born in 1928, Irwin is a prominent member of the United States group which refers to itself as the tax honesty movement, and which has been referred to by the Internal Revenue Service and other government agencies as the tax protester movement. Schiff is known for writing and promoting literature that claims the United States income tax is applied incorrectly. He has lost several civil cases against the federal government and has a record of multiple convictions for various federal tax crimes.
Schiff is serving a 13-plus year sentence for tax crimes at the Federal Correction Institution at Terre Haute, Indiana. His projected release date is 7 October 2016. Irwin Schiff is also the father of stockbroker Peter Schiff, who is credited as a co-author of Irwin Schiff’s 1985 book, “The Great Income Tax Hoax: Why You Can Immediately Stop Paying This Illegally Enforced Tax“.
The following video is an interview with Irwin Schiff on Hannity and Colmes. It’s amazing how even Hannity, Mr. Liberty and limited government himself, berates Irwin for not paying his fair share. It never ceases to amaze me how even the most honorable of talk show hosts will manipulatively shake down a great man in order to foster America’s path to ruination and marxism to protect their own career. These talk show hosts are not the GREAT AMERICANS they claim to be. Great Americans are the ones who stand up for truth, even when it puts their lives and wealth in harms way.
The same Sean Hannity who takes up for Big Government (in the above video) is the same Sean Hannity who recently released his Top 10 Items for GOP Victory in November. Hannity had this to say:
3) The Candidate Pledges to support Tax CUTS, and fiscal responsibility:
a) The American people are NOT under taxed, Government Spends too much
b) The Candidate who Pledges to ELIMINATE and VOTE AGAINST ALL Earmarks
c) The Candidate pledges to BALANCE the budget
That Government’s do not have the ability to solve all of our problems, and to take away all of our fears and concerns. We need their pledge that we will be the candidate that promotes Individual liberty, Capitalism, a strong national defense and will support policies that encourage such…
It is our fundamental belief that limited Government, and Greater individual responsibility will insure the continued prosperity and success for future generations.
We the people who believe in the words of Ronald Reagan, that we are “the best last hope for man on this earth,” “a shining city on a hill,” and that our best days are before us if our Government will simply trust the American people.
Well, there are those in life who do, and then there are those who talk…..
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