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Gold as a Hedge Against Government Spending Gone Wild

Written By Brian Hicks

Posted May 27, 2010

If you want to get a glimpse into the future of things to come in the United States, you need look no further than recent events in Greece.

The protests and riots that have been underway because of the unpopular cuts in pensions, wages, and benefits (along with increased taxes) are a precursor of things to come for the world at large.

The reason this is happening is that Greece’s government spent and borrowed themselves into oblivion, and must now submit to harsh terms in order to receive a bailout. They have no choice in the matter.

They either rein in their spending and raise taxes or suffer the horrible consequences of not getting a bailout, which essentially would mean the death of Greece as a country.

The difficult and harsh realities now faced by the people of Greece should be a wake-up call for all citizens of the world.

Running deficits and spending yourself beyond your means does matter and eventually catches up with you. When that moment comes, it will not be pleasant for the people of that state or country.

And the Greeks, like most governments around the world, have been overspending for decades. The ridiculous, failed government-owned businesses, benefit programs, and subsidies of every kind have made Greece a laughing stock and the classic example of “out of control” government.

But until the unsustainable situation caused a dire problem, most people (voters) went along with the status quo. So long as they were getting theirs, who cares?

This is the essence of what ails America and every other country that thinks it can create money out of thin air — whenever it wants or needs to, to get whatever it so desires.

This line of thinking — that government has a limitless checkbook and can take care of its citizens from cradle to grave — is complete and utter stupidity. It always has consequences and now those consequences are going to be felt around the world. The painful process of fiat currency unraveling and bubble popping is picking up momentum.

The rioting, protests, strikes, and violence we are seeing in Greece right now will also happen in the United States and around the world as one fiat currency domino after another topples.

Mark my words: Civil unrest is coming to many countries (including the United States), and it is coming sooner than most people understand.

The 1,000-point drop in the Dow earlier this month was blamed at first on the mess in Greece as the complexity of a financial solution became more apparent.

In reality, the reason for the drop in the Dow is multi-faceted; in my opinion, it was the result of its being grossly overvalued.

When I heard the mainstream media eventually try to tell us that the massive drop in the Dow was caused by a computer mistake, I actually burst out laughing… The powers that be certainly don’t want mainstream Americans to understand the truth of just how weak the whole system is, and that the Dow can sell off 1,000 points in less than a few hours…

For now, however, the next trillion dollar bailout is underway as I promised you would happen again as we tried to bailout the first wave (TARP). We will continue to hear about bailouts of all kinds.

The latest one is a three-year plan with a $1 trillion price tag, combining efforts from the European Commission, Eurozone countries, and the International Monetary Fund to support the euro and poorer EU countries at risk for default like Greece, Spain, Ireland, and Portugal.

These bailouts are a joke and give those in power even greater authority to steal from the masses and bring the world to the economic precipice.

The de-coupling that I have been talking about for almost a year and a half is now underway. The first major signal occurred as the Dow dropped 1,000 points and gold jumped higher on the news.

In other words, when we see that gold is going higher as world markets continue to sell off, that is the signal that safe haven buying is about to become a main stream event.

I would imagine that gold is getting ready to run to the next new high, which I anticipate will take us to the $1,350 level or possibly higher. The story in silver, however, is getting even more interesting…

To summarize, now that the de-coupling is underway, I believe we are going to see major moves in the precious metals and mining stocks as the masses run for the exits on their failing government currencies and grossly overvalued general stock and bond market portfolios.

As this movement grows in maturity, the stampede into the precious metals is going to be one for the record books.

Hold on tight to your precious metals investments as the currency and general stock markets whipsaw back and forth before their ultimate collapse.

Gold and silver is the place you ought to be!

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Good Investing,

Greg McCoach

Editor, Wealth Daily
Investment Director, Insider Alert and The Mining Speculator