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Have we as a human race gone crazy?  After all of the past mistakes and the results, have we not learned anything at all?  People are gnashing their teeth waiting for the Fed’s latest statement.  THEY are a good part of what got us into the current mess, why would anyone believe that they can get us out of it.  OK, OK, maybe 5 years ago one could have “hoped” that the Fed could save the day but 5 years later isn’t it clear that their actions haven’t worked?  Why in the world would they now “magically” start working?

Another “why” that I wonder about is why does anyone listen to or even pay any attention to economic reports?  It was said today that retail sales (seasonally adjusted) were down .1 percent for Sept. (up .4 if auto sales are taken away)…but the not “seasonally adjusted” retail sales were down 9% month over month from Aug., does this show a healthy economy?   Or how about inflation?  Does anyone believe that inflation is 1% or less?  Do you realize that over the last week there have been calls for (and even from Fed members) higher inflation because it will be “good” for the economy?  Really?  We need more inflation…why, because people are not squeezed enough yet or because without it the financial house of cards will fall down on itself.

Another area where I just have to shake my head and ask “why” is the politicians?  Why would anyone listen to anything virtually any politician had to say?  If their lips are moving…they are lying.  Yesterday we were told that President Obama had no idea whatsoever that the NSA was spying on foreign leaders which caused quite uproar.  Let me put this in perspective if I could.  People are ticked because we are spying on foreigners?  …but not upset that Americans themselves are being spied on?  Aren’t we supposed to gather foreign intelligence?  Don’t we have a Constitution that explicitly forbids the government from eavesdropping?  So, we were told that the NSA would stop spying on foreigners (which is legal), nothing said about continuing to spy on Americans (illegal), no one knew that this was happening but somehow, now, the activity that was not even known about will no longer happen?  …You’ll get to keep your health coverage too!  History will look back at us now and “comedy” will be the description of the tragedy that has slowly evolved and gobbled us up.

Before wrapping up I’d like to comment on a question sent to Jim Sinclair and his response.  The question was whether or not someone should pay their mortgage off by selling gold to do it.  Jim’s response was basically “yes,” selling gold to pay off the debt and that the thought processes after a hyperinflation you’ll be able to pay off your debt with 1 Maple Leaf will never happen.  Historically, debt has been re “set” by the amount of devaluation of the currency.  To this I say “yes AND no.”  Yes, after the fact debt will be re denominated in the new currency and somewhat adjusted for the devaluation.  Please note that I said “somewhat” adjusted and I also said “after the fact.”

When currencies and debt get “reset” they will not go back to a comparison to gold at today’s price or one in the past such as $300 or $500 per ounce.  In my opinion the debt will be adjusted back to levels just prior to the reset.  Should gold trade to $2,500 or $5,000 or even $50,000 prior to any reset that would in my opinion be the level where a debt adjustment would be made?  This adjustment cannot be exact because that would negate the purpose of any reset in the first place.  Gold must be revalued higher to fill central bank coffers with value or “equity.”  The debt issued also must be made “easier” to pay off particularly for governments.  If you hold government debt I believe the reset will strip value from you while easing the burden on the issuer.  The mortgage market is different …because it is the money that the people owe.  This debt is more likely to be reset closer to a 1 to 1 level.  My guess is that a 95% default rate would ensue with the banks ending up holding properties that they can then sell and thus lend another mortgage on.  This way the government is happy, the banks are happy and the people are screwed.  I think that by holding an amount of gold equal to your mortgage will AT LEAST pay your mortgage off after a reset and probably with less, possibly far less ounces required to make settlement.

The Weimar experience showed that once they went to gold backed currency, real estate immediately went down by 30% …and then started going down.  You might choose to pay your mortgage off or just purchase another house with less gold.  The problem is that after a reset there is “no money on the streets” and a deflation sets in.  Let me explain another way.  Leading up to the change in currency, a German could have simply sold an ounce of gold for a couple of trillion Reichmarks and paid off their loan.  The loan had already been indexed to inflation so the “amount” was more to payoff but gold had already moved up ahead of the inflation indexing.  After the reset it took more ounces to pay off the newly reset loan but less than 5 years prior when the system was “normal.”  Another difference today is that the dollar is the global reserve currency whereas the Reichmark was the currency of just one nation.

My point is this, holding gold into and through a reset will allow you to arrive with wealth “at least” intact.  Maybe there will be a window where it is the “perfect time” to sell your gold and pay your debt down but timing it will require much skill and include luck.  This all assumes that the system holds together for maybe a couple more years.  If this is not the case and we collapse now, you won’t be hurt by holding your gold into the other side.  You will still have wealth to pay your mortgage off if you choose but real estate will probably be deflating in value at this point as the system will need to produce for at least a few years to allow money to flow onto the streets.

This is a difficult question and there are many variables involved.  I think that the bottom line is that reset, no reset, it happens now and quickly or later and slower…holding gold will at a minimum get you into the next monetary system with wealth to help you survive.  You cannot say that about many assets or investments as we face potential bail-ins of bank deposits, maybe brokerage accounts, retirement plans and they can even tax your house out from under you.  Gold, held outside of the system will allow you back into the system with poker chips to continue to play the game with.