In Jim Cook's Archive


Over the past one hundred years, America has become a full-fledged welfare state. With Social Security, unemployment benefits and many other programs, the government aims to eliminate financial hardship and make life easier. The great wealth our country has generated pays for this social spending. At the beginning of the twentieth century, our nation was too poor for such indulgences. Back then gold was money. The increases in money were limited to how much gold was mined in a year. Imagine how unworkable that would be today with our huge deficits. Politicians hated the gold standard and they got rid of it. That enabled the monetary authorities to increase the number of dollars to pay the bills of the evolving welfare state.

Now we are in a predicament where the government must pay to keep the economy going and the people solvent. This is the welfare state on steroids. The amounts are staggering and the Federal Reserve is in the process of printing trillions to try and finance this budding Armageddon. Can they do it without ruining the dollar? Who knows? Could this be the comeuppance of the welfare state? We don’t know that either. Can we cure all this by running a high level of inflation? The answers will be forthcoming, but for now they certainly give us grounds for worry.

What assets protect us best in this environment? The stock market can be a hedge against currency debasement. The Fed seems to be paying extraordinary attention to how it fares as it injects liquidity into various markets. In the past, the stock market has not fared well during inflationary recessions. As for me, I’m happy to have silver coins and bars and gold coins stored at the bank. I don’t know the future, but I do know that gold and silver have a historical record of providing safe harbor in a crisis.

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