In Jim Cook's Archive


Rich people imitate one another.  Most wealthy men and women turn their finances over to professional money managers.  Lately they’ve been turning to hedge funds.  These managers also tend to run in packs.  They pretty much follow the investment logic of Warren Buffet who pointed out that twice in his career his stock portfolio fell by half.  He only had to have patience and in time it recovered and grew from there.  All these folks buy into the theory that everything will be fine and recoveries are inevitable.  None of them understand that we face an unfolding crisis that that can vaporize much of their wealth.  They don’t get it and when they hear economic warnings they ignore them.

Stock fluctuations don’t frighten these managers and investors. Crisis isn’t on their radar.  Most buy into the Keynesian argument that all we need is more money.  Print and be happy.  Ultimately, however, a price must be paid for this folly.  A great banker and economist John Exter (1910-2006) put it this way “The marketplace is a crime and punishment world, and this Federal Reserve credit expansion is the greatest monetary crime of all time.  Accordingly the punishment will be far and away the greatest punishment of all time.”

In the face of this coming turmoil conventional investments aren’t going to cut it.  The real danger to the nation and to the rich comes from a falling dollar.  At some point the currency markets and the world will turn their back on the dollar because there are too many of them.  When you can’t bail out the economy with more newly created dollars, because their value has fallen so far, you have the advent of depression. The late economist Hans Sennholz (1922-2007) wrote about what’s coming after inflation destroys the dollars purchasing power. “In the dusk of the paper system that springs from political power and economic redistribution, the dreaded depression that was so long delayed in coming will finally make its entrance with irresistible force.”  In this environment bonds have been obliterated and stocks are toast.  The rich are getting less so.

Members of the affluent upper class think they can offset the ravages of inflation and depression with their holdings of tangible assets.  However, rental property, second homes, art, antiques and even gold can suffer major losses in a precipitous economic decline.  Somebody in the world has to buy them and without stable money these buyers will be few and far between.  Eventually, tangibles are going down hard.

You might argue that farmland will be impervious to a crash.  Not so.  The price of farmland has gone into the stratosphere.  From these heights it can easily replay the 1930’s.  Two things are left that world must have under any condition; oil and silver.  It’s impractical to take oil into your possession.  Silver, however, is portable, divisible and can be stored in small areas.

urthermore, unlike gold it’s numerous industrial uses and limited supply insure that its price will likely not collapse as could most everything else.  Investor demand from Asia and elsewhere also keeps rising so from today’s price levels nothing you can own appears to offer more upside and protection than silver.  The fact that the affluent upper class and their money managers neglect silver means it’s the ultimate contrary opinion investment.  It also means the rich are probably going to get poorer in the coming financial holocaust, because they don’t own the right things.

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