Credit Crunch, Hyperinflation and BullionVault

Posted on December 21, 2007
Filed Under Society |

BullionVault are an online gold and silver ‘dealer’. I received an e-mail today from them as a member of their mailing list; some of the content was interesting enough to share. We all know now that a ‘credit crunch’ is here - even though the arrival of this has been clear for years (I sold my house 3 years ago to free up the cash, and attempt to avoid the problems that are just around the corner), now the media is in full swing with these stories, it can be said without appearing like a fringe lunatic - that we are almost certainly heading for hyperinflation.

Anyway onto that e-mail:

We learned yesterday that the British government’s guarantee to bail out the creditors of Northern Rock Bank is worth a staggering £100 billion. That’s £5,000 [$10,000] per British household.
This week the European Central Bank made $500 billion available through money market operations. And only last week $110bn of new money was created by central bank loans with artificially low rates and reduced-quality security. This is money creation on an epic scale.

Why is this happening now? Here’s my theory: 31 December is a major day on the financial calendar. If you take a sample of bonds you’ll find that a disproportionate number of them are due for interest and/or redemption on 31st December. Redeeming bonds is very cash intensive, and cash is not freely available in the banking system right now.

So it seems likely that some frantic finance directors will be working long hours to find the cash that will enable them to avoid a default next week.

If that’s right the festive season could see the announcement of some nasty shocks. June 30th won’t be much fun either, for the same reasons. The credit crunch is deepening, and will go on doing so until at least next summer.

That’s pretty stark information - giving a bleak outlook. Of course you have to consider that it is in BullionVault’s interest to make a sales pitch in order to off-load their gold. But the truth of the matter is that cash may well soon be of very low value. I haven’t used BullionVault’s services, as I prefer to have a more ‘hands on’ approach with my own gold and silver. That said Bullionvault’s statement cannot easily be denied.

The value of gold and silver historically has never depreciated, 2000 years ago a single gold coin would buy a Roman toga, today a single gold coin will still buy the equivalent - a quality suit. Whilst it is certainly becoming harder to buy small stocks of gold and silver (people have wised-up and are holding onto what they have), it is still far from impossible.

2 years ago, 10 ounces of silver cost $75, today that same amount of silver will cost you over $140, that’s a 100% value increase. Owning precious metals is one of the surest things I have done - and with what we are heading towards I can only suggest that everyone gives it some serious consideration…

Comments

One Response to “Credit Crunch, Hyperinflation and BullionVault”

Eric on February 1st, 2008 8:04 pm

I completely agree!…great information. Gold is one of the best/safest investments you can make in an uncertain economy….like ours!

Interesting email, as well…
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