RE: Alan's Question

If somebody had bought gold in Sept 05 when this was first posted...

http://www.fivedoves.com/letters/sep2005/matt914.htm

... they would have already seen their investment grow from $480 per
ounce to $680 per ounce in just 6 months.

The new fed chairman can either have a deflation scenario or an
inflation scenario to solve the currency crisis, as today's Wall Street
Journal describes (page 2). If he picks deflation it will keep the
dollar strong, but will stop the economy as taxes sky-rocket and
unemployment goes through the roof and businessmen refuse to spend. If
he picks inflation (which is more likely) then the dollar may lose 1/2
of its value overnight. That could trigger a "run on the banks" who will
be unable to unwind the "money multiplier" (their fake accounting-entry
money that they lend to us) and the federal reserve will have to take
over the US banking system.

In Argentina where this happened just a few years ago, the banks refused
to give people their money, leading to riots. Paper money will probably
retain its value for a limited period of time as people slowly come to
terms with the fact that it is no longer worth anything. Also,
government emergency price controls will probably prohibit merchants
from rising prices.

I can't say what the best investment would be. Probably having real
assets is the best strategy. They will retain their value no matter what
happens. However, real assets that don't collect rent won't earn any
income. The long term strategy would probably be to hold real assets
that collect rent.  Second best strategies are holding silver and gold
coins or other hard assets that retain their value and can be kept
outside the bank. Don't put into a safe-deposit box that will be
unavailable or looted; you'll need a safe place at home and a couple of
firearms (with ammo) to protect you and your family.

Holding paper denominated assets (Gold options) is a less attractive
strategy because the ability to collect may be limited. Holding EFT's
might be a good strategy because these are denominated in foreign
currency that won't drop as fast. The problem here is that central
bankers in other countries may well take advantage of the dollar drop to
inflate their own currency at the same time, as Steve Forbes indicated
is happening to the Euro in last month's Forbes commentary.

Best strategy of all is to pray, read the word, and trust the Lord no
matter what happens!

- M