If Printing Were The Answer, Zimbabwae Would Be The Most Financially Successful Country In The World

I was sitting with my dad at 75 Main last week when we started to discuss the economy. The economy is probably my favorite thing to talk about. It’s one of those things that affects everybody, and the beauty of it is that nobody can question you when you are right about it. One of the things that I find frustrating about working in an “artistic” field such as writing is that it can be subjective. Even if you are a great writer (like I am, hehe) somebody can say that you aren’t to his or her personal tastes or that they don’t like you personally. This can be extremely annoying, especially with people who get jealous of your work, and it’s sort of something that all artists have to deal with.

But with the economy and investing, there is no question. Either you are right and you make money, or you are wrong and you lose money. There is something very pure about it.

Recently the price of gold has come down a bit, and as a personal investor, my dad was happy to ask me about that and I was happy to answer. Gold is going through a small correction right now for two reasons. One is because of the crisis in Europe dominating the media landscape. The U.S. dollar has the exact same problems as Europe, the only difference is that the focus is on Europe right now. This will probably remain true throughout 2012 until the Presidential election. The second reason is because of the political races that are taking place. Everybody wants to give the economy a juice right now because they want to take credit for the high that we all get off of money printing and going deeper into debt. As such, the dollar gets a little stronger compared to the Euro and other currencies, such as gold.

But make no mistake about it, all of the fundamentals that cause the price of gold to go up are there and monetizing our debt is going to continue in the U.S. whether anybody wants to admit it or not. “Well so what? So we print more money, what’s the big deal?”

The big deal is very simple, as you print more money, the value of that money goes down. So many politicians and economists do not understand this, and it is frightening. But look at it this way, if money printing was the key to economic success than Zimbabwe would be the world’s most financially successful country.

The bottom line is that if you are going to protect your wealth, you have to be wise with where your money is going. It’s just that simple, and it’s not a bad idea to have some gold. I’ve looked at any large dips in gold as buying opportunities, and if you want to be really clever, you can buy and sell it during these ups and downs, or you can hold it for the long haul and visualize what will happen to the U.S. after the election. Even more so if Mitt Romney were to win, although I’d hate to say it, Obama really isn’t any better when it comes to this.

I really see this pretty clearly, so I can’t help myself from writing about it, and I’d really appreciate anybody else reading this to write in and tell me your thoughts.

My dad asked me about stocks. Yes, I believe in stocks, but the reason is because of the reasons I’m in favor of gold, I’m betting that the printing press is going to keep printing, which means that the companies that many Americans rely on to live, will continue to have money pumping into them. I’m cautious on technology stocks and any other security that doesn’t involve hard goods that people need. Stocks can be a store of value, gold can be a store of value, commodities can be a store of value. The point is that the fiat currencies are in a crisis but nobody really knows or wants to admit what that means. I personally feel safer with my own money in high dividend yielding stocks or gold, even when there is volatility.

In terms of lifestyle, look, this country is a great place. But governments are broke, and unless something drastic changes, like insane increases in taxes or insane cuts to services, we are going to continue down this road, both in the U.S. and in Europe and if the printing press continues, it’s going to have unwelcome effects on our currency which will have an unwelcome effect on our way of life. There are plenty of examples where governments go broke and have to revalue their currency, and it’s for this reason that if you have money, you have to at least acknowledge that this can happen and invest accordingly.

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