Likely Outcome of the US Economy and Dollar

Posted on June 5, 2011 by Yousuf

Recently, I came across news that Belarus at the end of last month devalued its Belarus Ruble by 36 percent against the US Dollar and up to 56 percent against other currencies in order to help resolve the country’s balance of payment crisis, but that still didn’t stop the country from now having 20% inflation. This reminded me of what happened to Britain in the 1960s when it had devalued the pound by 14% overnight and had 25% inflation in the 1970s and why I choose to keep my wealth in sunnah/sound money like gold and silver – because central banks can easily wipe away people’s wealth in an instance.

Luckily for Belarus, Russia has decided to step in using the regional bailout fund and give the former Soviet republic a three-year $3 billion loan to stabilize its economy. But when it comes to the United States, with its unemployment at over 15% (22% according to shadowstats), inflation over 2% (11% according to shadowstats) and the US dollar being devalued by over 5% a year, I believe that in the not so distant future, we will have another financial collapse of the US economy and as a result the world economy as 70% of circulated currency in the world is the US Dollar. But unlike Belarus, nobody will be able to bailout the US economy or the world reserve currency, as they are not too big to fail.

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Gold Backed Debit Card and Silver Bank

Posted on May 29, 2011 by Yousuf

Ever since I got into buying precious metals, I’ve always thought it would be a great idea to have a gold or silver backed debit card, so that I could protect my wealth against inflation and have an easy means of spending it through a card which would be accepted worldwide. After coming across GoldMoney, I would have thought they would have been the first to do something like this as they already store precious metal for their clients and allow them to buy it online and during an 2008 interview with the DGC Magazine, GoldMoney founder James Turk said, “Technology today enables gold to circulate as currency in a way that is far more efficient than any national currency, and further, anything you can do today with a national currency you can do with goldgrams. So I would like to continue expanding our scope of products. For example, we are often asked to issue a debit card that people can use to access their goldgrams. I’d like to see that happen in the next year or two, but longer term there are ways to use goldgrams that people aren’t even considering yet.”

Unfortunately, GoldMoney hasn’t taken the leap forward as yet to close the bridge between the online digital gold currency and offline plastic card worlds. I read that the reason was, “that if a precious metal repository begins to conduct transactions outside of it’s facility, it must comply with banking regulations. If this occurs, the ‘allocated gold’ becomes a liability of the vault which brings counter party risk. GoldMoney has been sensitive to this fact and they are very careful to avoid any ‘grey’ areas. For example, I’ve read that another company tried something similar and became ‘creative’ in trying to interface with a credit card company and/or PayPal.  They became entangled in litigation that eventually ruined the company.” The closest thing I was able to find to bridging the two worlds was the ‘Crowne Gold Card’, which was an ATM debit card that gave client’s access to their gold bullion funds. The cost of the card was $95 and had a maximum daily withdrawal of $500 and worked through the STAR and PLUS networks. Unfortunately, the U.S. company closed its business in July 2008.

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Peter Schiff Versus Dave Ramsey

Posted on May 23, 2011 by Yousuf

I had always liked documentaries and even before I began my quest for economic knowledge, I had stumbled across Dave Ramsey who was featured in two 2006 documentaries, ‘In Debt We Trust’ [trailer] and ‘Maxed Out’ [trailer], which both focused on how the credit card industry is bankrupting people, and I liked that he was trying to help people improve their economic education by teaching them economic responsibility. He runs his own radio show and previously ran a TV show on the Fox Business Network until June 2010. I later stumbled upon his videos on youtube for ‘The Total Money Makeover Workout’, as well as a 5-minute extra clip he did after filming in ‘Maxed Out’. I liked his concept of ‘7 baby steps’ to getting out of debt and have recommended a number of my indebted friends to watch his ‘Financial Peace University’ DVDs that came out in 2006. I even watched some of the DVD with some of my friends, as he was very amusing and energetic, but I did detect a number of issues I disagreed with him on, which included term insurance (luckily not life insurance), which I told my friends to ignore.

More recently I came across a video on youtube, which was an audio excerpt from Dave Ramsey’s show from January 2008, where a woman called in saying that her father read Peter Schiff’s book ‘Crash Proof’ and was pulling his money out of his 401k (retirement plan) and stock market as it was going to crash and she wanted to hear his thoughts. He basically decided to discredit Peter because Peter’s father, Irwin Schiff, is in jail for his beliefs that the income tax is unconstitutionally and simply calls the two of them kooks. He then went on to say that stock market crash books come out each year and its unlikely the stock market will crash, and he couldn’t see a world where some major companies (Home Depot, Microsoft, Ford, GM, Alcoa, General Electric, Whirlpool) could go out of business. Then he states that gold is stupid and he only keeps his money in the FDIC deposit insured bank, mutual funds, and fully paid for real estate.

Peter brought up the issue on his radio show on April 25 [13:35-17:10] after he came across a video on youtube by filmmaker Jimmy Morrison for his upcoming documentary called ‘The Panic of 2008’ in which Peter would be featured. The video includes Peter’s response to Dave’s conversation with the woman, their predictions for 2008, the stock market crash of the major companies he mentioned, gold, money printing, and real estate wealth.

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The Myth About The Importance Of A University/College Degree

Posted on May 23, 2011 by Yousuf

Unfortunately, the world we currently live in puts so much importance on higher education, as it was such an important thing when our parents and possibly grandparents grew up. But the fact that everybody these days has a university or college undergraduate (bachelors) degree, makes many pursue a graduate (Masters or PhD) degree in order to stand out from the crowd. But the biggest problem in this day and age is the cost of such degrees, with students taking on huge student loans in order to get the degree, which they then have to pay off over many years. And if that wasn’t bad enough, the costs seem to be increasing every year, so when the National Inflation Association [NIA] (aka Inflation US) came out with their latest documentary about it, I decided its about time to do a write up about my thoughts, so enjoy.

After watching the documentary, I remembered the student riots in the UK at the end of last year because they decided to triple university tuition (top up fees) from 3 thousand to 9 thousand pounds, as well as the credit card documentaries (In Debt We Trust, Maxed Out) I’ve watched over the years showing how much credit card debt university students were on the hook for after graduating, and the interview Peter Schiff did with Kelli Space, a 23-year old woman with a $200,000 student loan debt for a bachelors degree in sociology. So for me, when I hear people say “everybody needs to go to university”, I say “no”, because having that piece of paper doesn’t necessarily mean your going to get a better job. You could easily take courses and get a certificate in order to get a number of jobs, which wouldn’t require you to go to university. You could take an internship in a company that you would like to work for and learn hands on what type of work you wanted to get into. And if that piece of paper is going to have you in debt for years or is being shouldered by your parents who had to either save up for years or have taken on a loan for it, I’d have to ask you to think hard whether the cost outweighs the benefits.

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Silver’s May 2011 Decline

Posted on May 15, 2011 by Yousuf

Anyone who is following the silver market lately would have seen the 30% drop that began since the beginning of the month, where silver dropped from around US$ 48 to 35 in 4 days (May 1 – 5). The fall happened not so long after it traded above the January 1980 all-time high of $49.45 per troy ounce (London silver fixed price) both on April 25th (49.76) and 28th (49.50). For those who are new to the market, falls like this will shake ones confidence, but you should always stay calm and not jump to conclusions. So lets first put everything into perspective.

The 10-Year Bull Run
Gold and silver have been on a bull run since 2001 and in all bull runs, their will be up days and down days, but naturally their will be more up days. :) All you have to do is look at a chart since 2001 and you will see that the highest run in commodities for the last 10 years has been in silver, with it being up over 900%.

10 Year Commodity Returns [2001-2011] - Silver, Copper, Gold, Coffee, Cotton, Crude Oil, Nickel, Corn, Soybeans, Cocoa, Wheat, Sugar, Orange Juice, Aluminium, Gasoline, Cattle, Hogs, Natural Gas

Now lets look at a chart for the last year, where silver nearly doubled in price by the beginning of this year and nearly tripled before the recent decline. Looking only at its price this year, silver increased by 65% before its recent decline, while gold only got to 13%. Silver is more volatile than gold, so you will have larger declines in silver than in gold, but you will also have larger gains in silver over gold. Silver presently is reasserting itself as a monetary metal, in comparison to only being an industrial metal, which is why presently there is as many dollars going into buying gold bullion as silver bullion. This can clearly be seen in the gold to silver ratio, which was over 1 to 80 in 2009, 1 to 65 in 2010, 1 to 48 at the beginning of 2011, 1 to 32 before the decline.

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