It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so.
Quote by Will Rogers (1879-1935)

There are plenty of things in this world people believe in that simply are not true.

Sixty years ago, it was believed that cigarette smoking was actually good for your health, and a whole generation of people bought that proposition hook, line and sinker. Later, as the truth was uncovered in the late 1960s about tobacco, many who believed in this falsehood had to suffer the horrible consequences that develop from years of smoking.

Amazingly, even with the truth that cigarette smoking is bad for one’s health, we still see many who choose to smoke today. This clearly points out the fact that people make poor choices for themselves in spite of the widespread availability of knowledge to the contrary. More on the topic of free agency a bit later.

Other examples that may seem more comical to us from past history include the belief that the world was flat, or that bloodletting was necessary to overcome disease or sickness. While we may laugh at these examples from the distant past, our current generation is no different. There are many examples today of things people believe in that simply are not true.

A few that come to mind are:

• Getting 72 virgins in heaven for committing heinous crimes of terror
• The thought that politicians are good people who have your best interests at heart
• The Colorado Rockies will win the 2007 World Series

But let’s look at an example that involves every individual and one that will have far greater consequences not only for a majority of Americans, but for the world at large.

The example I am talking about is the common belief that the paper currency called the U.S. dollar is a true store of value. Since the early 1970s, the value of a dollar has varied up and down against a basket of currencies as measured by the U.S. dollar index, which was created in 1973. Since the inception of that index the dollar at its strongest point had a value as high as 160, and at its weakest point a value of 79.

Before that index was created, gold and silver were the world’s international reserve currency, used by virtually everyone based on an agreement made in Bretton Woods, New Hampshire, shortly after World War II. Gold and silver were also the primary instruments in which governments and millions of individuals kept their savings.

That agreement continued until the U.S. government was able to successfully pull off the greatest financial hoax of all time by convincing the world to accept the U.S. dollar as a substitute for gold and silver . Since that event, central banks and large institutions around the world have been hoarding paper dollars as they once hoarded physical gold and silver. Because the U.S. was able to maintain economic strength, military supremacy, and the benchmark currency status, the world has allowed the U.S. government to create dollars seemingly without limits or consequences. That is, until now!

For the past five or six years, the international exchange rate of the dollar has been in steady decline. The current rating of the U.S. dollar is now at 80, just a tick above its all-time low.

See the chart below.

Slowly but surely over the past five years, smart money investors have started to see the writing on the wall for the dollar and have begun to exit their dollar positions. The problem is that governments and institutions that have foolishly accumulated hundreds of billions of U.S. dollars are afraid to dump them. The reason for this is simple: sudden selling could trigger a global panic away from dollars. The value of the dollar would drop so quickly that most dollars would be devalued before those trying to sell them could get all the way out.

To avoid this sort of stampede, the large holders of U.S. dollars, such as China and Saudi Arabia, are now dumping dollars off the radar screen of the international financial markets through vehicles known as Sovereign Wealth Funds (SWFs).

Through the use of SWFs, governments can offload dollars by purchasing non-dollar assets in the U.S. or around the world without any reporting. The problem with this sort of arrangement, however, is that the more SWFs are used to dump dollars, the less chance they have of staying off the radar screen.

This kind of activity is suddenly beginning to get the attention of other large dollar holders who are also looking for an exit. Nobody wants to start the stampede, yet everyone is getting very antsy knowing that only the first people out will be paid anything close to the current dollar’s value.

To keep the whole shaky edifice together (the idea that the dollar is a store of value as good as gold and silver), the U.S. has to continually convince others to hold their paper and dump gold. This is the reason why we have heard so many times in the past ten years that central banks around the world have been selling gold. In other words, since paper is as good as gold, you no longer need to hold any physical metals as a store of value. The bottom line, however, is that nothing could be further from the truth.

To complicate matters more, the Fed now finds itself in a real pickle. The ailing U.S. economy needs lower interest rates to avoid major problems in the real-estate and stock markets, but to protect the dollar from free-fall collapse a higher rate of return on U.S. paper promises is desperately needed. In other words, the U.S. government is damned if it does and damned if it doesn’t. If the Fed raises rates to protect the dollar, then the real-estate market comes unglued and the U.S. stock market will tank. If the Fed lowers rates to protect the economy, it will have to let the dollar fall into oblivion.

In the past, when the dollars-as-good-as-gold scheme was still working, a move to inflate was always supported by more buying on the part of foreigners, because confidence was still high. But if foreigners have now lost that confidence and are no longer willing to accept dollars from one another, let alone from the U.S., this leaves the future direction of the dollar no longer in question. It will head much lower, and soon.

So it now appears that the time has finally come when the rest of the world is no longer willing to buy up the paper promises of the U.S. at the current rates of return, or maybe even much higher rates of return. Many have been warning for decades that we would reap consequences for creating money without limits, and it looks like that moment is now upon us.

IF OTHER GOVERNMENTS AND SMART MONEY INSTITUTIONS ARE LEAVING THE DOLLAR, THEN SO SHOULD YOU!

Flee the U.S. dollar before you’re fleeced by the government con artists who continue to sell you falsehoods of every kind in order to keep you invested in their ruse. What are some of these falsehoods as they relate to protecting your hard-earned savings?

Falsehood #1

The rate of inflation in the United States for the past twelve months as calculated by the U.S. government’s Consumer Price Index, and reported by the mainstream press, is 2.7%.

Opposing Truth to Falsehood #1

The truth is most prices that affect consumers are not calculated in the government CPI number. By any reasonable calculation of what consumers are actually paying for a complete basket of goods and services, the true rate of inflation for the past twelve-month period would have to be at least 8%. In reality that is being conservative. If you went into a thorough study of the matter, you could easily make a very good argument that the number is actually much higher than that. But you get the point.

People who continue to use government data as the benchmark of truth will never understand what the government is doing to them, and thus most likely will stand to lose the most.

Falsehood #2

A U.S dollar-denominated bank account, CD, T-bill or mutual fund is a good place to keep your money until things settle down. Allowing your money to reside in these conservative investment vehicles will protect you as it always has.

Opposing Truth to Falsehood #2

While this may be a shocking statement to the uninformed, keeping your money in a U.S. dollar-denominated account of any kind is now a high risk investment. In the next twelve months, there is a very good chance of losing a large portion of those savings to staggering devaluations in the U.S. dollar. The days of the U.S. dollar as the world reserve currency are numbered. The rest of the world is beginning to understand this. Most here in America do not. The flight from the U.S. dollar is already underway and quickly gaining momentum. The major point to keep in mind is that when the currency itself is no longer trustworthy, then all other financial investments (T-bills, CDs, etc.) denominated in that currency are suspect as well.

Falsehood #3

The almighty Fed will soon bring the U.S. economy in for a soft landing and short layover before taking off again to greater prosperity for all.

Opposing Truth to Falsehood #3

Recent assurances from the Fed and Treasury that all is well, that sub-prime and prime lending woes are well contained, the economy is strong, etc., at this point are good for nothing but fodder for a nice fairytale.

The truth is that the recent real-estate and mortgage contractions are causing the Fed to inflate even more, which will only further weaken the dollar. To keep the economy going back in 2002, the U.S. government opened up the liquidity spigots, pumping up the real-estate sector. It worked wonderfully for a while, but the Fed, knowing it had only bought some time, also knew there would be consequences. Most of this liquidity went into adjustable rate mortgages (both prime and sub-prime) that now need to be re-set at much higher rates. We are already seeing the effects of these higher payments on many homeowners, namely a record and increasing number of foreclosures. Unfortunately this reset activity is about to hit a very high level beginning in October of 2007 and continuing through much of 2008.

In addition to these problems, the U.S. is in a war that appears to have no end in sight which puts even more inflationary pressures on the system at large.

In my opinion, what we are witnessing is the collapse of the U.S. empire. How long it takes to fully unwind is anybody’s guess, but the long-talked-about consequences of irresponsible U.S. monetary policies are now knocking at the door.

Falsehood #4

Gold is a barbaric relic of the past and is no longer needed in modern society other than for jewelry.

Opposing Truth to Falsehood #4

The central banksters and mainstream media morons love to promote this falsehood!

The truth of the matter is that gold is one of the few choices you have for protecting your overall wealth from the coming collapse of the U.S. dollar. Thus the constant disinformation propaganda we see on the part of the government media complex to keep you from understanding that fact.

At some point, the rapid fall of the dollar will cause a massive move into gold. When you understand how small the gold market really is, then you will have no problem understanding just how high the price of gold will go when the worldwide ocean of fiat currency suddenly chases after it. This is particularly the case when you understand that almost two thirds of all the world’s central bank reserves are kept in U.S. dollars. That’s a very large ocean of fiat money that will be looking for cover.

As to how high gold could go, Pierre Lassonde of Newmont Mining recently said this:

“I believe gold could have three zeros after the first number. I just don’t know what the first number will be.”

Governments cannot create gold out of thin air as they can with paper. Because the U.S. government needs to keep creating greater and greater amounts of paper in an attempt to maintain its unsustainable debt and spending, it needs to keep convincing the public that all is well and there is no need for gold.

I mention this because for the last seven years I have been beating the drum for people to take advantage of the opportunities presented in the precious metals and junior mining stock markets. While I have been able to help many people over the years make tremendous returns on the monies they were willing to invest in this sector, I have been completely dumbfounded at times by the relatively small number of people who have paid any attention to what I consider the most critical time in our financial lives.

And while the profits of the past seven years have been wonderful, they pale in comparison to what is coming in the very near future. It is still not too late to get involved.

There has been a relatively small group of investors over the past six years that has made amazing profits in precious metals and mining stocks. This group of people, who have been learning, studying and wisely investing over that time period, has come to know that certain things are true whether the masses believe them or not.

For the most part they are prepared as best as can be, given that most of what is coming is out of our control. What we can concentrate on is protecting our savings from further erosion and actually using this time of crisis to make large sums of money. If you are prepared with the right knowledge at the right time, even small amounts of money can turn into very large sums within a short period of time.

These investors understand the need to own physical precious metals and why they should have exposure to the precious metals mining stocks.

Conversely, I believe those who have large sums of money and continue to believe in something that simply is not true stand to lose most of their wealth in the coming years.

Getting back to free agency, as I mentioned briefly above, we all choose for ourselves how to direct our lives and invest our monies. Whether we make a right choice or a wrong one, we are exercising our free agency to choose.

But we can only exercise our free agency successfully if we make the right choices. I fear many unsuspecting investors are making the wrong choice by simply doing nothing or going along with the status quo. Consequences come sooner or later to those that consistently make wrong choices. That certainly looks to be the case for the U.S. government, which has abused its system of credit for decades.

You, the investor, still have time to make the correct choices, but you need to act soon.

Exercise your free agency and flee the U.S. dollar before it loses the better part of its value. This is a time when proper preparation will meet with enormous, unprecedented financial opportunity.

BUY THE PRECIOUS METALS!