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How to Protect Your Life Savings from Hyperinflation & Depression

Once upon a time…

I was a frequent speaker at apartment association conventions and meetings. I still remember the last one at a major city association. Before my speech, the executive director took me aside and sternly ordered me not to say anything about laundry concessionaires. I had written in my newsletter Real Estate Investor’s Monthly and in my book How to Manage Residential Property for Maximum Cash Flow and Resale Value that you have to watch laundry concessionaires carefully.

A laundry concessionaire is a company that puts coin-operated washers and dryers in your apartment complex and pays you a cut. I have seen problems with the collections not being reported accurately, with one-way leases that give the concessionaire easy rights to renew or get out but make it hard for the landlord to get rid of the concessionaire, kickbacks paid by the concessionaire salesmen to property managers so they can overcharge the landlord in the lease the property manager puts the landlord in, and concessionaires taking a far bigger cut than their investment in the equipment and maintenance would warrant.

I have had concessionaires at times and owned the machines myself on other occasions. Owning them myself was more profitable for me and I recommended my readers follow my example. In other words, get rid of the concessionaires.

In that last apartment association speech, I told the executive director that I had no plans to talk about laundry concessionaires in my remarks. The subject was rents or some such. But I told her that if I got a question about laundry concessionaires, I would answer it. She was not pleased.

I never got another apartment association speech invitation. Did the local concession salespeople at that city subscribe to my newsletter or buy my management book? Almost certainly not. So why did a concession company talk to the executive director that way? Apparently the national headquarters of the company put out the word that they would not support associations that had me speak. The night of my last speech, the sponsor of that monthly meeting was one of the few national laundry concessionaires. There was a big sign at the door saying, “Tonite’s meeting sponsor is ——————— Laundry Concession. Please support our sponsors. They make our meetings possible,” or words to that effect.

Brave to bad-mouth gold?

So what does this have to do with gold? I recently spoke at the Freedom Fest in Las Vegas. I did two talks. In one, I was on a panel. The other three panelists represented gold-selling companies. They were in favor of your buying gold. I was against it and recited my reasons which are all factual, not opinion. See the “Gold and other commodities chapter” of my book How to Protect Your Life Savings from Hyperinflation & Depression and the gold articles listed at my home page for that book.

I also did a solo speech at Freedom Fest about my hyperinflation/depression book where I also recited my reasons against buying gold as an inflation hedge.

I did not get any complaints from the organizers, but at least one attendee told me I was very brave for making statements against gold there. The mere mention of gold generally got applause at Freedom Fest speeches. One questioner at my solo speech was angry about my saying that the average adjusted for inflation gold price for the next forty years was probably going to be the same as it was for the past forty years: $615 2010 dollars. He pointed to current and projected government deficit spending as proof gold would go up. As any reader of my writings on that will attest, I talked at great length about the disaster that will hit the country sooner or later because of massive deficit spending. But I also pointed out to the questioner that his prediction coming true does not necessarily refute mine. Saying gold will rise about its current price of $1,200 2010 dolars and that it will aveage $615 2010 dollars over the next 40 years are not mutually exclusive predictions.

He was saying that gold will go higher. I said that I did not deny that it may go higher. But I said I was talking about a 40-year average in the future. The fact that gold goes higher than $1,200 an ounce in, say, 2010 or 2011, does not preclude its average price in 2010 dollars still being $615 over the next forty years. The typical pattern in past hyperinflations in places like Germany, Israel, Argentina, and so on is the hyperinflation goes nuts, the public refuses to accept the currency for any purpose, and the government is forced to issue a new currency that is backed by something real, not just government fiat. For example, the most famous hyperinflation, in Weimar Republic Germany in 1922 and 1923 was ended by issuance of the Rentenmark to replace the Deutschmark. The Rentenmark was backed by German homes, farms, and business real estate and inventories. It ended the hyperinflation overnight.

4 to 1 before, and after

Before the 1922-1923 hyperinflation, the exchange rate was approximately four German marks for one dollar. During the hyperinflation, it took billions of German marks to buy one U.S. dollar. But when I visited Germany in 1967, the exchange rate was again four marks to the dollar. So a German version of me could have said in 1922 that the average exchange rate for the German mark to the U.S. dollar averaged 4 in the past and would average 4 in the future, and he would have been right. Average and peak are two different, but not mutually exclusive, numbers.

My statement that gold has averaged $615 2010 dollars in the past and would probably do so in the future was nothing but an application of the well known mathematical phenomenon of regression towards the mean to gold prices. “Mean” is a statisticians’ word for average. All it means is that stuff tends to go back to its average over time and be at or around the average most of the time, notwithstanding occasionally extreme values, like the swings of a pendulum.

You see it in other investment prices like stocks which average price-earnings ratios of around 15 over a century or more, but occasionally hit extreme lows like 7 (Great Depression) or extreme highs like 40 (late 1990s dot-com boom).

If I had said gold will never go above $615, my questioner would have had a case. But I did not speak of the extremes that gold buyers are capable of, only the average. The average price of gold in 2010 dollars will probably be $615 over the next forty years even if we have a bout of hyperinflation. Once the government issues a new currency backed by some hard asset to end the hyperinflation, the price of gold will collapse. That’s how a peak of $2,000 or more and an average of $615 can both be accurate predictions of the next forty years.

34 years experience with the media

I have been an author for 34 years. During that time, I have often offered to appear on radio and TV programs. I never had much trouble getting such offers accepted. I have been on Good Morning America, Larry King Live, 60 Minutes and many local radio and TV programs. I have also been quoted in almost every national periodical and many foreign ones.

Since hyperinflation and depression, also known as deflation, seem to be extremely hot topics now, I figured it would be easier than ever to make some appearances about my new book.

In the past, I used to send out 100 or so snail-mailed news releases as often as once a month. I think there was only one that was not published somewhere. This time, I sent out 10,000 nationwide via PR Newswire. Although about 200 local radio, TV, and newspapers instantly put the news release on their Web sites apparently by some automatic process, I am not aware of any media outlet that did a story about me or the book. You can see the PR Newswire release I sent out at their website. In their search box, search for my name, John T. Reed, and check “new releases.” Also make sure your search goes back to at least June 21, 2010. As you will see, the news release did, indeed, say that precious metals were ineffective at protecting you against inflation.

The same thing is true with new books or new editions where I send review copies to newspapers and magazines. I generally get a number of reviews or mentions. Not this time, even though I sent out more than the normal number of books.


Then, as I was listening to a local radio program that frequently talks about hyperinflation, deflation, and deficit spending, I heard a gold commercial. They have lots of gold commercials. So do the TV shows that talk incessantly about deficit spending and such.

Hmmmm. Do you suppose that gold companies have done to me now what laundry concessions did in the past: told the shows and periodicals they sponsor that they do not want anyone interviewing me about gold?

I cannot say for sure. And I am not paranoid. But I have been writing books and sending out news releases and review copies of the books for 32 years. In past years, I was in Who’s Who in America. This year, I am in Who’s Who in the World (both books are published by the same publisher: Marquis), so I have not become less well known. There are far more media outlets today than back when I had no difficulty getting on TV and radio. Indeed, most of the appearances I made were unsolicited by me and I even began to turn some down including the Today Show.

Of course, not all media outlets today carry gold commercials. But maybe most that are about finance and investment do.

It is an interesting and suspicious phenomenon. Fox’s Glenn Beck was atacked for having Goldline as a sponsor. The accusation was that they overcharge for gold. I would not know about that, but the reaction of Beck and Fox was that Goldline has a good Better Business Bureau rating—end of discussion. Since the BBB generally works almost totally off consumer complaints, and gold buyers would typically not know if they overpaid, a good BBB rating does not necessarily refute the accusation.

Are the gold sellers more effective at suppressing anti-gold stories than the liberals are at suppressing anti-Obama stories?

Much is in the news lately about liberal journalists preventing anti-Obama messages and stories from being published. But obviously there are some media outlets that are quite willing to publish or run anti-Obama stories. Would someone please name a media outlet that has lately run an anti-gold story—whether they cited me or any other non-fan of gold. (I have seen a few such stories in the San Francisco Chronicle, which typically has two-page precious metals ads nowadays and the Wall Street Journal. The Economist for 7/10/10 gives both sides ad includes a quate from the chief economist for Citigroup who said, he would not invest more than a sliverof his wealth “into something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs.”)

If there are none, that is a more pervasive bias than the liberal one. It may be that gold dealers have accomplished, through their advertising dollars, what the liberals only dreamed of: completely keeping the other side out of the media.

I generally have not solictied TV and radio appearances since the mid 80s. Everything gets old, even flying around the country and staying in nice hotels at network expense to be interviewed by Morley Safer and David Hartman.

Also, I kind of like the idea of having a near monopoly on the unvarnished truth about both the advantages and disadvantages of using gold as an inflation hedge.

If anyone has any evidence of media reluctance to quote gold opponents, I would like to hear about it. My phone number and email address are at the bottom of most of my web pages.

John T. Reed