Dear Slavey…

Love your column, I think you are a valuable addition to the TDV newsletter.  Do keep it up.

I just read your July 31st column and agree, like most of what you write about. 

However, at this point, seeing that the USSA is full steam ahead going towards hyperinflation, 
wouldn't it make sense to leverage yourself right up in debt???  Indebt yourself up to the gills by buying physical gold & silver.

Then, hyperinflation hits and pay back your debt with a small portion of your metals OR just walk away... stick it up to them... not only get back at them but also get ahead...

Kind regards mon ami, 

David

Dear David…

Now THAT’s an extremely creative idea… and not a bad plan at all as long as you can service the debt for a while.  We can’t predict exactly when the fiat will hit the fan but if you charge up all your credit cards, pull all the equity out of your home, then default quickly before the price of gold shoots up to the moon (which it surely will), the Police State will lock you up and throw away the key.

But hey, it’s not any more risky than buying stocks (ok, it’s way LESS risky considering the stock market is just a Las Vegas gambling pit at this point).  Go for it and write back after the collapse and let me know how well you did!!

Here’s another idea for my slavey friends stuck in the U.S….  lower your taxes by getting an IRA based on gold.  Here’s a great blog with information on how to do it… http://goldirablog.org/

Don't let the bastards get you down,

Slavey

A Parting Shot:

Heh. I tried that leverage thing a few years ago...

It was the early part of the new century. Thanks to my new Internet powers I had learned a bit about gold, silver, central banking and fiat currency. At the time silver was a little under $5 per ounce.

I regularly read a couple Web sites on gold and joined a discussion board focused on silver  where arguments raged about how high silver would go. Believe it or not, there were quite a few posters who swore that silver would never get into the double digits again...that it would probably settle at $2 or $3 for years!

The arguments calling for much higher prices made a lot more sense to me. As did the arguments for an eventual dollar collapse. So not only did I keep buying silver with money I had on hand...but I also kept buying on margin! I maxed out my credit cards -- i.e. borrowed dollars at nearly 20% interest rates -- in order to increase my silver stash. I was far from rich in those days, but eventually my silver cache grew to weigh more than I did.

Then the silver price barely moved for a few years. Meanwhile I was paying around 20% per year on the money I’d borrowed to get much of that silver. I figured eventually the silver price would start growing at a higher rate than the interest on my borrowed money. But for a long time it didn’t.

I got tired of carrying so much debt. I had had all sorts of plans to sell silver into a rising bull market...to sell 25% of my stash as the price got to $25/ounce, then another 25% up into $50, another 25% at $100 and then the last 25% into what I figured would be the ultimate price of around $200/ounce. But years went by and silver didn’t even get to $15. Dejected I started selling off my stash. The price spiked up around $20 in 2008 and then fell. Except for a few one-ounce rounds I sold off the rest of my stores around $12 per ounce.

Then the bull market really began. In 2011 silver would peak nearly 10 times higher than where I’d bought the bulk of my investment ten years prior. I bought much of my silver at under $6 per ounce. In 2011 the price went to just under $50 per ounce. That return would have handily beaten the roughly 20% or so I was paying on the money I’d borrowed to get the silver.

If I’d kept my silver that long, would I have known to sell after $40, but not wait till $50 (which the silver price just missed)? I like to think so. It doesn’t matter, however.

I’m sharing this to remind you: even when you know real money  --gold and silver-- is on the way up and fiat is on the way out, it’s still possible to miss out when you’re playing with borrowed money. It doesn’t feel good to be in all that debt, paying all that interest while you wait for the inevitable. Inevitable doesn’t mean imminent, after all.

You could really give the system the finger by borrowing as much as you can, buying a boatload of silver and gold and then fleeing the US, never to be seen on its shores again. Yeah, that’s technically fraud...but you’re defrauding fractional reserve bankers. That’s like defrauding a counterfeiting ring.

As tempting as it is, it’s not something I recommend. For the same reason I don’t recommend tax evasion and armed resistance against police and military. As morally justified as these may be, they’re liable to get you kidnapped or killed.

I tell you of my own experience of trying to leverage borrowed dollars into silver profits to show how tricky a game of timing that can be. If I’d started borrowing to buy a couple years later, I would have seen rewards much sooner and more than likely stuck with the plan. But would I have had the peace of mind to see the plan through after the collapse of 2008 shook out the weak hands...especially considering that my leveraged hands were especially weak?

Gold and silver will cost a lot more in terms of dollars. Eventually. But a lot can happen between here and there. Imagine if right now you buy gold at $1600 and then it sits there for a few months before dropping to $900. Pretty bad. But imagine if you’d bought that gold with borrowed money that you’re paying 25% per year on! It would feel even worse.

Like Slavey says, go on and try it. And let us know how it goes. I can tell you from firsthand experience that a sure thing doesn’t always come to pass on the schedule you have in mind. Hyperinflation may come and eventually make you look like a genius. But you may have to move into your mom’s basement long before that. Market irrationality has more stamina than your ability to stay solvent, especially in the midst of economic collapse.

Regards,

Gary Gibson

Editor, The Dollar Vigilante