The Case for Gold and AFG

Gull..I suspect you're not stupid, (Though of course I can't be certain..:¬))

If you read the 'Fleet Street newsletter' or the 'Daily Reckoning' both have made many references to it, though I can't exactly recall when they last did so.

E stands for Energy..(in the form of OIL)

The scientists at least a few of them anyway, have predicted that the world will start to experience maximum output in oil in 2006. (The point when turning on the taps more doesn't produce more oil)

In 2 years the UK will become a NET importer of oil, by 2010 we will import Gas too, by 2020 who knows what the price of oil will be...

The Chinese, Russians, Brazilians, Indians...all 3billion of them in total will have the demand and the money to outbid the west, and that can only spell disaster for Western Economies.

Oil, Gas, Zinc, Copper, Tin, Iron/Steel, Wheat, Barley, Maize, Silver and mostly GOLD will be the products to own.


A GOLDBUG'S LIFE
by Bill Bonner

Mr James Surowiecki wrote a wise and moronic piece on
gold in the New Yorker. His wisdom is centred on the
insight that neither gold, nor paper money are true
wealth, but only relative measures, subject to
adjustment.

"Gold or not, we're always just running on air," he
wrote. "You can't be rich unless everyone agrees you're
rich."

In other words, there is no law that guarantees gold at
$450 an ounce. It might just as well be priced at $266
an ounce, as it was when George W. Bush took office for
the first time. That was just four years ago. Since
then, a man who counted his wealth in Kruggerands has
become 60% richer in dollar terms...and 25% wealthier
in Britain.

But gold wasn't born yesterday...or four years ago. Mr
Surowiecki noticed that the metal has a past, just as
it has a present. He turned his head around and looked
back a quarter of a century. The yellow metal was not a
great way to preserve wealth during that period, he
notes. As a result, he sees no difference between a
paper dollar and a gold doubloon, or between a bull
market in gold and a bubble in technology shares.

"In the end, our trust in gold is no different from our
trust in a piece of paper with 'one dollar' written on
it," he believes. And when you buy gold, "you're buying
into a collective hallucination - exactly what those
dot-com investors did in the late nineties."

Pity he did not bother to look back a little further.
This is, of course, the moronic part. While Mr
Surowiecki has looked at a bit of gold's past, he has
not seen enough of it. Both gold and paper dollars have
history, but gold has far more of it. Both gold and
dollars have a future too. But, and this is the
important part, gold is likely to have more of that
too.

The expression, "as rich as Croesus", is of ancient
origin. The king of historic Lydia is remembered, even
today, for his great wealth. Croesus was not rich
because he had stacks of dollar bills. Instead, he
measured his richness in gold. No one says "as poor as
Croesus", do they? We have also heard the expression,
"not worth a continental", referring to America's
Revolutionary-era paper money. We have never heard the
expression, "not worth a Kruggerand".

Likewise, when Jesus said, "Render unto Caesar that
which is Caesar's," he referred to a Denarius, a coin
of gold or silver, not a paper currency. The coin had
Caesar's image on it, just as today's American money
has pictures of Lincoln, Washington or Jackson on them.
Dead presidents were golden back then. Even today, a
gold Denarius is still about at least as valuable as it
was then. America's dead presidents, whose images are
printed in green ink on special paper, lose 2% to 5% of
their purchasing power every year. What do you think
they will be worth 2,000 years from now?

A few years before Jesus, Crassus, who had made his
fortune on real estate speculation in Rome, decided to
put together an army to hustle the east. Alas, such
projects almost always meet with disaster; Crassus's
was no exception. He was captured by the Parthians and
was put to death in an unusually cruel and costly way.
But he did not end his days with paper money stuffed
down his throat...and certainly not dollar bills. No,
they poured molten gold down his gullet - or so the
story has it.

Gold has a long history. And during its history, many
was the time that humans were tempted to replace it
with other forms of money - which they believed would
be more convenient, more modern, and most importantly,
more accommodating. After all, gold is hard to find and
hard to bring up out of the earth. As a result, its
quantity is always limited - by nature herself. Paper
money, by contrast, offered irresistible possibilities.
The list of bright paper rivals is long and colourful.
You will find hundreds of examples, from Assignats to
Zlotys. But the story of paper money is short and
always sad. Since the invention of the printing press,
a new paper dollar or pound or franc can be brought out
at negligible cost. Nor does it cost much to increase
the money supply by a factor of 10 or 100 - simply add
zeros. It may seem obvious, but adding zeros does not
add value.

Still, the attraction of being able to get something
for nothing has been too great to resist. That is what
makes goldbugs so irritating: They are always pointing
it out. Even worse, they seem to enjoy saying that
"there ain't no such thing as a free lunch," which
comes as a big disappointment to most people.

Once people were able to create "money" at virtually no
expense, no one ever resisted doing it to excess. No
paper currency has ever held its value for very long.
Most are ruined within a few years. Some take longer.
Even the world's two most successful paper currencies -
the American dollar and the British pound - have each
lost more than 95% of their value in the last century,
which is especially remarkable since both were linked
by law and custom to gold for most of those years.

For the pound, the final link was severed way back in
1931. The dollar - and with it, the world - was not cut
lose until August 15, 1971. That was when everyone
found out what the greenback was really worth - nothing
much.

Whatever promises the Feds made with regard to the
dollar, they could unmake whenever they wanted.

Some paper currencies are destroyed almost absent-
mindedly. Others are ruined intentionally.

But all go away eventually. By contrast, every gold
coin (and silver too, for that matter) that was ever struck
is still valuable today - and the coins almost always
have more value than when they first came out of the
mint.


Regards,

Bill Bonner
The Daily Reckoning


W.S.