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The Last Man Standing

Richard Russell snippet
Dow Theory Letters
posted Feb 15, 2010

February 12, 2010 -- A final thought. One could stay in US dollars and gold. If the dollar goes to hell, rising gold could make up for the loss in purchasing power.

A hundred years ago gold and silver were the only items accepted as money. Paper money was carried around because it was convenient as opposed to gold and silver, which are heavy. Besides, if you had any doubt about your paper, you could turn it in at any national bank for gold, "the dollar was as good as gold." Furthermore, the dollar was backed by one of the strongest and most prosperous nations on earth.

Today the dollar is backed only by "the full faith and credit of the United States," the greatest debtor the world has ever seen. Questions are now arising about the credit-worthiness of sovereign debt. Many analysts believe that the US will never, ever, be able to pay off its debt, which is now not only rising but is compounding.

It's obvious that the Obama administration is putting off the solution of our debt and deficit problems to other future administrations. This is always a dangerous procedure. It's the reason why our children and grandchildren will not inherit the fun and easy life that we live. I've talked about sacrifice before -- our children will be making some of the sacrifices that my own generation made (and I hope one of the sacrifices won't be war).

I think and ponder and wonder. I believe current unsustainable debt is literally "eating up" the world. This should end in both deflation plus monetary inflation through the production of junk, fiat money. Ultimately, the survivor, the "last man standing" will be gold. Ironically, Americans have lost or forgotten the meaning of gold. Which is why only a tiny percentage of Americans now own any gold.

Americans have totally forgotten the meaning of gold and silver. I prove it to myself every day. I buy something in a store and present a gold one ounce coin as payment. Invariably, the clerk looks at the coin and replies, "We can't take that. What is it anyway?" Sad, and rather ominous.

As I write, gold is selling at about 1097 an ounce or still below 1100. A while back I wrote that gold below 1000 was a bargain. Now I'm saying that gold below 1200 is a bargain. Buy it while 95% of Americans have never seen or held a gold coin. In fact, there are large ads in the newspapers every week, ads offering to buy your gold in exchange for fiat paper. And people are doing it. What our Forefathers knew about money has been forgotten. The Founding Fathers would shake their heads in wonderment if they could see the nation they founded as it stands today.

Gold -- The wedge. Down-pointing wedges tend to resolve themselves to the upside.


Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters

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