I've been hearing different views on purchasing gold. It seems to me if you have gold, what good is it if you can't eat it? It's a very speculative market to be in. Is there any safe place to put your money besides burying it?

-- Barb-Douglas (bardou@yahoo.com), June 26, 1998

Answers

There is strong support for the purchase of gold & silver. First, the fedgovt can not possibly print up enough cash to support any bank run. they are already running at capacity and attempting to stockpile cash reserves now (according to several articles in North's newsletters). i seem to recall that in a recent iscussion, they advised that most of our transactions are electronic, with only about 10% covered in actual cash. if you believe that the electronic side of banking (which translates into all banking) is going to fail, then cash will become very short in supply, very quickly. this could mean that we see a new currency which replaces the old (easier to print, faster, different values, etc). if that happens, there could be a recall of current notes. maybe, maybe not.

no matter what, in the absence of access to cash, some thing of value must be used for commerce and the store wealth. it is easy to say barter, but it is much easier to hand over a few silver coins to purchase something than try to find someone who sees the value you need for the trade in that pig you have to trade or the case of beef stew in cans you might have. its hit and miss.

whatever the end of the day brings with y2k, a major meltdown or "just" a severe impact on the economy and markets (i can not believe it will be much less than that), it certainly is likely to result in a loss of confidence in the present monetary system of fiat currency which is backed by nothing. as people look to what could possible replace cash as a medium of exchange or simply a safety net against whatever changes may be coming down the road, they would logically turn to hard assets that have historically provided a medium for exchange or storage of wealth. history would tend to indicate that gold and silver are the only real alternatives in such a sitaution, as litle else is liquid enough (someone is always willing to purchase) and easily stored and secured. gold and silver bullion coins are minted by the governments of the world for that reason.

so, if you think the wordld is about to turn ugly, or at least, our finanical system might be in for a beating, taking a reasonable portion of your cash and putting it into gold (which is at historically low levels right now and seems to present little "downside risk") or silver might be the prudent thing to do. i would not suggest however, putting everything you have into gold. cash, supplies and other assets are similarly important. food, water and shelter are certainly first on the list.

it simply a method to diversify if you have extra assets - a recommended approach when one is unsure of the future. whatever happens, you can then be best prepared to deal with the consequences.

hope that helps. god bless.

-- steve (str8talk@aol.com), June 26, 1998.

The way I am seeing it, people are trying to remember back historically to the great depression. This 2YK situation is under different circumstances. However, I do hear Wall Street analysts saying that the stock market is over priced, but the economy is good. I really don't know who to believe, because I think we are all being spoon fed and brainwashed at the same time. I don't think I can go wrong with food, fuel, and cash. Only the rich will be able to afford the gold, but the middle class who are into debt will only be able to afford the basic essentials if they have cash to do it with. If they don't, then I will take that diamond ring, or that gold watch in exchange for something I have that they want, like that case of beef stew. It doesn't matter to them how they buy it, as long as they get it! So, if I stock up on beef stew, and nothing happens, then I am stuck with beef stew. If I stock up on gold and nothing happens, then I am stuck with gold that I bought high and now have to sell low! It's all a gamble. But one thing I know for sure, people will have to eat, and they can't eat gold.

-- Barb-Douglas (bardou@yahoo.com), June 27, 1998.

The de-linking of gold as a primary monetary metal has been going on for quite a while now. There are more reasons for it having evolved as 'money' through the past several thousand years, and more reasons for modern economic systems to push for its evolution into a mere market commodity than I have time or room to get into here. Read some economic or monetary history (try Bill Grieder's _Secrets of the Temple_ for example). Then see if you still ask that question.

Gold is simply a highly efficient store of value. There is only so much of it, it's hard to come by, most people think it's pretty, it is extraordinarily malleable and resistant to corrosion. So it's been considered valuable for quite a long time. Any number of economic advisors include gold as a portion of a wisely diversified portfolio to this day. I don't mean just the gold bugs either. Again, take a look at some of the books- I personally like Dr. Mark Skousen, but you can pick your own, and if you check a variety of opinions you'll see that gold is still a mainstream hedge investment.

Gold is no good if you're dying of thirst and it's all you have. Likewise if you're starving, you can't eat it. But if there's anyone around anywhere who has more of something you need than they need, you are almost certain to be able to trade gold for it. Military services of all modern countries often include gold coins in escape kits for pilots and others going in harm's way (see Andy McNab's _Bravo Two Zero_ for example).

Granted, if you don't have more than a certain amount of money gold is not a major concern. You are definitely better off taking care of essentials like water, heat and food first. But if you don't want to spend $100,000 on canned beef stew, what do you do with the money?

At minimum you should have a couple of month's expenses in cash, in small bills, on hand after you get the pantry stocked and a source of water, heat and other essentials assured. At minimum every family who can afford it should have a $1000 face value bag of what's called "junk silver" also- that's pre-1964 US silver coins, preferably dimes or quarters. Right now that should cost about $3500- 3700, and will contain 715- 725 ounces of silver. I recommend Dillon-Gage in Dallas, TX (800-375-4653) as a source if you're interested. This is NOT an investment- it is strictly "monetary insurance." If you don't know WHY you need insurance on your money, I'm most likely wasting electrons here. There's no need to read further.

Beyond that, if you still need a safe place to store value, gold is an option. It is at historically low prices right now, just as the market is at historically (hysterically?) high prices. Basic investment advice is, "Buy low, sell high." Get it?

Gold is recognized as a store of value all over the world. When the currency crisis hit South Korea a couple of months ago, the government asked its citizens to voluntarily turn in their gold at its market price in won (the SK currency). The gold was sold for dollars which were used in turn to buy more won to redeem more gold. In a couple of weeks the people of South Korea turned in 160 TONS of gold under this emergency program, and the currency crisis was over. Do you recall SK asking for an IMF bailout??? Do you recall hearing about the Fed intervening on world currency markets on behalf of the won, as they did for the Japanese yen last week (spending untold millions of your tax dollars to bail the japanese currency out in the process)??? I can't cite the SK story for you off the top of my head but I read it on the news wires and I am positive I remember that figure correctly.

Gold still has a role in economic affairs. The business cycle has not been repealed, no matter what all the twentysomething market wonks say. Y2K or no Y2K the current boom will unwind sooner or later. You can believe the "new paradigm" or you can believe several thousand years of monetary history. You pays your money and you takes your choice.

Best wishes,

LPL

-- Lee P. Lapin (lplapin@hotmail.com), June 27, 1998.