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Another Reason Why Gold & Silver

Hotep (Peace & Blessings) G&G Readers,

Quotes of the Week:

From Jim Puzzanghera, in a news story posted on the Los Angeles Times website on August 27th:

''The Commerce Department on Friday downgraded the nation's economic growth in the second quarter, providing the most important evidence yet that the recovery has stalled.

The anemic annualized growth rate of 1.6% was down from last month's estimate of 2.4%. The drop was slightly less than many economists had predicted, but the report still put an exclamation point on a week of bad economic news that has raised fears the nation could plunge into another recession.

Responding to those concerns, Federal Reserve Chairman Ben S. Bernanke said Friday that the central bank was prepared to step in if necessary to help provide additional stimulus to the economy and avoid the type of debilitating deflation that struck Japan in the 1990s.''

''He outlined three possible options, including expanding its purchases of long-term securities to pump more money into the economy and signaling that the central bank will keep its short-term interest rate near zero for longer than the vague 'extended period' it has promised.''

. . . and from Richard Russell, editor of Dow Theory Letters, in remarks posted on his website on August 23rd:

''American's are deserting their multi-decade love for common stocks. They have already lost their love of tech stocks. They have already lost their fantasies about making a fortune in housing. They have given up their dreams about their kids living a better life than they have. Americans have given up on hope that the government would solve all our problems and save the nation from chronic unemployment and eventual insolvency.

So what's left? What do Americans have faith in today? I'd say it was cash -- US dollars. My thinking is that the demise of the dollar will leave American's with nothing substantial to believe in. Wait, there is one item, and that item is gold. Americans (the Tea Party) will rediscover the US Constitution and ultimately turn to the safety of Constitutional money -- gold.

As for the future, I have no idea where gold will go in terms of dollars. And very frankly, I don't care. I don't worry about gold because it is not debt like the dollar and it is not created by man or by an organization run by man. Gold is wealth on its own, and if the Dow declines to 3000 and gold sells for 800 US dollars an ounce I don't care. I'll still be ahead of the game.''

. . . and from Congressman Ron Paul, in his ''Texas Straight Talk'' column on his House of Representatives website, posted on August 23rd:

''Recently there have been some encouraging signs that Congress is finally willing to admit what should have been evident two years ago. Even after a $150 billion bailout, Fannie Mae and Freddie Mac are still bankrupt and should be abolished. Indeed Rep. Barney Frank, a longtime champion of Fannie and Freddie has made a few statements alluding to this and I have signed on to a letter asking him to clarify his remarks and hold hearings on this topic. There seems to be a growing consensus in favor of abolishing Fannie and Freddie. This is the good news.

The bad news is that instead of simply returning to the free market, Fannie and Freddie will probably be replaced with something equally damaging, and at this point we can only guess what that will be. One possibility is that instead of these two giant Government Sponsored Enterprises (GSEs) the government will deputize thousands of smaller banks to do the same thing -- that is to securitize mortgages with taxpayer guarantees to encourage lending that otherwise would not happen. In other words, there will be a myriad of smaller Fannies and Freddies, and government involvement will reach even deeper into the financial sector.

Fannie and Freddie, and thus the taxpayer, has an alarming $5 trillion exposure to the mortgage market. To some, spreading out this risk might seem tempting, and a smart thing to do. But the fact remains that if a bank expects to lose money on a loan, so will the taxpayers. Playing around with structures and definitions will still not deal with the root problem -- government meddling in the housing market, playing fast and loose with our tax dollars, and central planning by the Federal Reserve.''

. . . and from Michael ''Mish'' Shedlock, in a posting on the Seeking Alpha website on August 27th:

''The real challenge for the Fed and President Obama is to admit neither the Fed's policies nor Congressional policies are working, that there are no short-term cures or fixes, and that it is time to share the pain more equitably including huge concessions from public unions, a haircut by Fannie and Freddie bondholders, and a reduction in unsustainable spending, especially military spending.

Unfortunately, neither Bernanke, nor Obama is capable of saying what needs to be said, or doing what needs to be done. Unless and until they are, all the yapping by Obama and Bernanke will be as productive as giving a bullhorn to a bullfrog.''

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Asante Sana (Thanks)

Gary Gray
Tax & Financial Consultant, RFC
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.