Hard Money

What Is It? Do We Need It? And Why?

I think that before we get too deeply into this discussion, we need to define the word money. Money is a medium of exchange. It came about thousands of years ago when mankind began to exchange goods and services with his neighbor. Exchanging goods occasionally was made difficult because the people involved in the exchange did not share similar wants or desires. Maybe I want to trade a sheep for a cow, but you already have all of the sheep that you need. I have nothing else of value to trade so I have to find someone else that needs a sheep and has something to trade that you would like to have.

At some point we began to trade precious metals or jewels. They had value because they were fairly rare. There was always a market for gold, silver and precious stones. Gold and silver eventually became the standard because it was easy to carry, it was easy to form into coins, it was easy to measure, and cutting or changing it's shape did not radically affect its value as is the case with precious stones.

Hard money then is something that is generally accepted as having intrinsic value. Gold and silver are the two obvious choices, but we are certainly not limited to these two. Copper has also been used for centuries. It too has intrinsic value, so too do a number of other metals.

When you hear of people expressing the desire to return to hard money or hard currency, it is usually someone wanting to return to the days of gold and silver.

Do we need to return to hard currency or gold and silver? I believe we do. You see once a government decides to replace hard money with paper or counterfeit money, it becomes very easy to increase the supply of money to pay for whatever those in power want.

The government convinced us a long time ago that we needed them to have control of our money. They created the Federal Reserve to manage (read manipulate) the printing of paper money. Then in 1971 we just decided to end any relationship our paper money had with the gold stored in Fort Knox.

What has been the result? We have run budget deficits every year since. Our government initiates new programs with no regard for where the money will come from to pay the bills. We are engaged in the greatest case of empire building the world has ever seen, but we do not have the funds to pay the bills.

Our current Fed Chairman, Mr. Bernanke, states that we (the government) have printing presses and we can run them 24/7 and print an almost limitless supply of money for next to nothing.

The only problem with this solution is that it eventually has to end and there has never been a time in history when it ended well. In fact it has always ended badly for the country that went down the road of massive currency inflation. You know the saying, "Those who do not know history are destined to repeat it." Our government needs to spend a little time learning history before it is too late.

Hard currency prevents this from happening. Scientists have not been able to create gold. There is no way to artificially inflate the supply of gold in circulation. So there is no way for the government to spend beyond their means unless they convince the people or private investors to loan them money.

Imagine using money that doesn't lose its value every year. You would be more inclined to save than to spend. You would increase your wealth by saving part of your earnings every year. Dealing with money that loses its value (a tad over 95% at last count) year after year encourages spending. And excessive spending encourages debt. And debt can be a killer and we are all going to find that out in the near future. Not only as a country, but individually as well.

Get out of debt now, while the getting is good.

I ran across this chart this week and I thought I would share it with you. What it shows is that since May the world markets have been in decline. And it seems that the US markets are trying to follow suit.

We don't read much about this in the papers outside of the occasional comments about Japan's market or maybe a couple of the European stock markets and that is a little worrisome.

It is as if "they" do not want us to know about problems starting to pop up around the world. Knowing that other countries are starting to see weakness in their markets would only cause caution or worse fear. Unfortunately what "they" do not realize is that there is a tremendous amount of interconnectedness in the global markets and what goes around comes around.

Just to cut through some of the news hype that we are exposed to every day you should know that none of the stock indexes in the U.S. are higher than they were in December of 2005. They are all lower. If your investment or retirement funds are all invested in U.S. markets, they are not doing well. That is why diversification is so important and not just diversification between different funds or stocks, but in different asset classes.


We are putting the final touches on a new kind of investment system. We have been testing the strategies that I have talked about here for over five years. Our main desire right now is to make it as simple and easy to understand as possible. This system is not some day trading strategy that requires your constant attention. It is primarily designed for people who are too busy to baby-sit their investments, but at the same time want to protect their assets.

The basic system requires maybe 30 minutes once a year. I believe that even the busiest folks can set aside 30 minutes a year if it means protecting their investment and retirement accounts and accumulating enough assets to retire comfortably.

If you would like to be notified when the Risk Adjusted Asset Management System (RAAMS) is ready, just send a blank email to: alertinvestor@freefollowup.com and we will let you know the minute it is finished.

What Is Economics?

If you were to ask 100 people that question, you would probably get some very interesting answers. Some might say that economics is the study of the economy. Some might say that economics is the control of the economy. Others might say it has something to do with supply and demand. Most would tell you that they don't really know and more importantly they don't care.

Unfortunately, even the folks that gave you the one half right answer, supply and demand, would probably tell you that they don't really care.

So, what is the right answer? Well, it may surprise you to know that economics is the study of human action. Wow, that's not like anything you have ever heard before eh? We make choices every day that affect our personal economics. We make those choices and take those actions based on personal gain. Every time we enter into a transaction of any kind, the primary question circling in our brain is, "what's in it for me?"

Every day we make decisions. What to eat, what to drive, where to work, and how productive we are at work. And all of those decisions are driven by our desire to better ourselves.

If you are in any type of marketing, and I would suggest that we all are to some extent, you may have heard that answering your potential customer's question, what's in it for me, will get you closer to the sale than any other customer question you could answer.

That is because we humans are naturally selfish by nature. We are looking out for ourselves and most of the time we will make decisions that we feel will better our lives in some way.

Now if you are a merchant and you sell a product or service to your customers and you have several competitors that sell the same product or service, you may be wondering, how will a customer choose your product over the identical one provided by your competition. That brings us to the next important piece in the study of economics. Incentive. All else being equal, the best incentive will win the deal. And of course incentives improve the deal. Incentives make us feel like we're getting something for nothing.

In fact, if you look at the world around you and find the most ridiculous situation, if you give it some thought, you will find that the situation is brought about because of incentives.

For example, why would our medical profession promote a diet that has been proven to cause the very diseases we are working so hard at curing? I'm talking about heart disease, diabetes, and high blood pressure. Looking at the problem logically, it just doesn't make sense, but if you look at the problem economically, you find that the medical industry has a huge incentive for keeping things the way they are…money and lots of it. It is far more profitable to treat disease than to prevent them.

That doesn't sound ethical does it? And maybe it's not, but it shows how people make decisions that better themselves first.

Economics give us another prospective on the world around us and sometimes it is the only way to understand certain situations. That's why economics is an important field of study, after all, the world is made up of people and economics is the study of human action.

Do You Deserve Liberty?

"Those that would give up essential liberty in pursuit of a little temporary security deserve neither liberty nor security."

Benjamin Franklin


Ben Franklin was a true American success story. He was a self-made man of means. His wealth allowed him to concentrate on what he felt were important issues. The founding of a new country was at the top of his list.

His quote says something about how the founding fathers felt about liberty. We fought a war against a superior military force and managed somehow to defeat them for the right to enjoy personal freedom.

Today, Franklin must be rolling over in his grave. We have systematically surrendered our freedom in the name of security. A security that our government cannot provide.

If they cannot provide security, then why have we made such a big deal about it? Why is it that the government is so determined to convince us that we need protecting? The answer is really quite simple, but startling at the same time. You see the government wants to maintain power, power over the economy, the currency, and all aspects of our lives.

And they will do anything to stay in power.

Our leaders are not stupid people. Everything they do is for a reason. It's just that the reason is not clear to us and they wish to keep it that way.

But the signs are everywhere if we just wake up and look around. As a country, we are overextended. Our military is stretched dangerously thin. Our debt is out of control. Our empire, and that is just what it is, is fraying at the edges. We are beginning to look a lot like Rome. Fraying at the edges and rotten to the core. And all in the name of maintaining power. We are hated around the world, just as Rome was before the collapse.

Did anyone offer help to the poor Romans as their empire collapsed around them? No and the U.S. should expect no help either.

Now, the latest in our last ditch effort to maintain our power and control. Our government has been in high-level talks with officials of both Canada and Mexico about a merger of sorts, something similar to the European Union complete with a new currency, the Amero.

Since our currency has lost over 90% of its purchasing power since the Federal Reserve took over in 1913, we are probably due for a new currency. I see this as a last ditch effort to keep the party going a little longer, but as Mises wrote, manipulating the currency only works for so long, and then it ends…and usually quite badly.

According to Ben, we deserve neither security or liberty and I fear that is just what we will get.