0%? Really? Zero?

I recently got into a disagreement with a colleague of mine. He believes that the proper allocation to gold (or other precious metals) is zero, and as you might know, I feel gold and or silver are an essential part of every portfolio. I'm sure this conversation is not unique and I wanted to address the articles and information found on the web that attempts to support the claim that you should not own any precious metals. I will address this piece by David Marotta specifically since it encompassed several points I found in other sources.

The primary focus of this article is that gold does not show nearly the returns that stocks do. You will get no argument from me on that point, I believe diversified high quality equities should be the majority, and the core, of every portfolio, but I am not contending that gold should be the lion’s share of a portfolio. Only that an allocation of zero is way off base, especially when you consider the environment we currently live.

Never Let a Good Crisis Go to Waste

“Never let a good Crisis go to waste when it’s an opportunity to do things you had never considered or you didn't think were possible.” – Rahm Emanuel, Chicago Mayor, former Congressman and the Obama Administration Chief of Staff

If Rahm is willing to admit such things in public, how much of a stretch is it that he would not try to prevent a looming crisis, or even willfully cause one, if it allowed the opportunity to implement policies he has always believed in, but thought were impossible. Mr. Emanuel is not unique in his thoughts surrounding crisis, he was just the one who allowed the truth to slip out. The above quote was actually a clarification for a previous comment, “You never want a serious crisis to go to waste”, which he is often credited with. His clarification brings no comfort.

E-Dollar vs. Negative Rates

If you are unfamiliar with the E dollar concept, please read this post before reading on.

In my last piece I went over how negative rates exacerbate bubbles. In this post I wanted to cover the likely outcomes resulting from implementing the E-dollar vs. negative rates. They are both solutions that have been raised in the financial mainstream to the monetary problem we are now facing. Specifically, an unsustainable debt resulting from a feature of our debt based monetary system to grow debt generally faster than the underlying economy.

In a negative rate environment there would not be a mechanism to significantly reduce the current debt

Ban on Cash, Negative Rates, and Super Bubbles

Recently there has been has been a rising chorus to do away with cash, here, here, and here. You will hear several reasons why this is necessary but there really is only one. The banking interests want to be able to implement significant negative interest rates and participants in the economy being able to opt out of negative rates by removing cash from the banking system makes this very difficult.

So how did we get here? Over the past 70 plus years we have been living in a credit created bubble that has supported the economy, but as Von Mises said:

The Reason Economists Can Feel Safe Discussing Bans on Cash

Why do economists currently feel as if it is acceptable to discuss banning the use of cash? There is the obvious answer that since their go to solution to periodic faltering of the debt based monetary system of lowering interest rates has hit an end point at the zero lower bound, they feel it is necessary to implement negative rates. Yes they certainly see a necessity, which is interesting, considering they would never admit that changing the monetary rules is an indication of failure of their theories. Yet there was a time when going cashless would have been seen for what it is, a major limitation of freedom, and it wasn't that long ago.

What is a Conspiracy Theory?

In our society the term Conspiracy Theory brings out strong negative reaction in most. Visions of nutcases dance across most people's mind, and several years ago I had the same reaction. That was until, feeling that there was something off in the economy, I started to do my own research. What I found was there were countless undisputed examples throughout American history that if brought up before and even for years after the fact would have been considered what we now call conspiracy theories. Here are a few examples that stuck out to me:

Prior to the United States entering World War One Great Briton's supply line from the US were being devastated by German submarines, U-boats. The Germans attempted to only attack ships that were carrying munitions. There was a passenger liner, the Lusitania, which was supposed to set sail for the UK from New York. The German embassy fearing the passenger liner would steam into danger attempted to warn the American public away from traveling on the Lusitania by putting a notice in news papers. Many papers would not run the warning, though many did.

Alan Greenspan, Angel or Demon

Alan Greenspan is a man derided as the nemesis of Austrian economics and free market capitalismfor good reason. The long standing chairman of the Federal Reserve implemented policies that exacerbated the boom and bust cycle of recent decades. For those paying attention this could end in nothing but failure of the financial system as we know it. To the casual observer he and his apparent strategy was the enemy of sound money, but looking at all of the information available, there are major inconsistencies in this thought process. This post is the second in my challenge series. I will challenge the commonly held belief in the alternative financial media that Alan Greenspan’s motive and end game is to maintain Keynesian economic dominance which his actions seem to support.