Sunday, April 5, 2009

Now is the time to buy gold

My dad just gave me a quick economics lesson.
Now is the time to get a hedge against inflation such as gold or real estate.
The reasons for this can be found in this quick economics lesson:

When the government wants to get more taxes but doesn't want you to know you're being taxed, what do they do?
Well one thing they do is they tax someone other than the nice people that voted for them, like lets say... the energy companies! So they say, "We won't tax you, instead we'll tax those evil energy companies in order to cut down on emissions because it's the green thing to do". But what do the energy companies do? They still need to make their percentage, so they just raise energy prices and pass the buck onto the consumer... that means you! So now through this third party you are being taxed by the government.
But some people can figure out this shell game, so what's another way they can tax you without you knowing? Well they can print money and basically borrow from themselves which is called monetizing the debt, the definition in short is "printing more money, which causes inflation". But this also means that if there is more money but the same amount of goods and services then you just do the math and the same goods and services will now cost more in dollars. But it won't hit the entire economy right away which is good because you have time to buy hedges against inflation before the effects actually hit. People say "But how will we pay off all of this debt?" Oh they don't pay it off, they just print more of what passes for money these days(lets say t-bills), so the debt will always be there.
The fact is that most people are just too stupid to know when they're being taxed. And they think that the government is stupid but, they aren't and they know exactly what they're doing and what's going on.
They had to have known about the housing bubble. Here's why. When the house lending industry was deregulated(actually meaning regulations mandating that unqualified buyers be accepted for loans. Yes this is backwards but correct). This made it so that there were now more people bidding on the same house, when there used to be only 2 qualified buyers there are now 2 qualified buyers and 8 unqualified buyers, all bidding on the same house which because of supply and demand means that the house prices went up. And when the bubble burst this was called a housing "market correction". Where all of the unqualified buyers are now not buying houses the demand went way down and so did the prices.
But houses are always a good investment even if the dollar becomes worthless because even then your renters will just pay in whatever currency is around then. And as they say, "They aren't making land anymore".
But in short whenever they say "We're monetizing the debt" you should run out and buy gold or real estate, because those are hedges against inflation. But with real estate you have leverage so that should be the main thing to buy now especially right after a market correction like this in Florida.
But the one thing I'm not sure of is that if one bar of gold now will buy the same number of loaves of bread per ounce as in the future then you're not actually making money, unless maybe you have the power of leveraging, like with houses. At least you want to retain any money you have already by converting your cash into hedges.

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