Why is Debt good?

Kia Ora,

People are always saying get out of debt, but you should only get out of bad debt & increase your good debt (that which buys you a cash flow positive investment).

Why? Because the monetary system to keep going require expansion & the only way to do that is by creating new debt. So you have the instituitions creating new types of trading such as the ETS or carbon credits to create money out of nothing.

Issue right now is the lending instituitions are not lending. The only growth or so called green shoots have come from government stimulus. Now the governments are saying they are going to cut back on that. You only have to see the reaction to China raising its interest rates to slow inflation, to see how good the economy really is.

Through out history these bubbles have burst at some stage. Just the same as the gold bubble will at some time burst. The only difference with the gold bubble is it will get to such a ridiculous price that the next day it will be just an ounce of gold, but the currency it is based against will be worthless just as Zimbabwe's has just done, so they have taken up a currency that is doing the same as theirs. The US dollar.

Where as the currency will be worthless & something will replace it, gold will be able to still buy items.

Notice I haven't included silver in this. The reason is silver is becoming very rare or so the information has us believe. The reason why is silver has so many uses besides just being a precious metal & has being manipulated to stay at historically low prices. Historically silver should be today US$94 an ounce, not US$18.5. Silver is used in medicine as well as all electronics since it is the most conductive metal around.

Now some gold is also used in electronics but its price has being such of late that people are extracting it from computers that are recycled. Silver being so low no one is bothering yet. Basically there is only about four months silver left at current usage rates. Only 25% of it is mined for silver itself. The rest comes as a by product of mining other metals, gold in particular, but gold production is falling. Silver is thought to have only 15 years worth of the metal left, making it the most precious metal on the planet.

So there is a belief that silver could pass gold in price.

Why the emphasis on gold & silver? Because history shows when you educate yourself, that when governments or society creates too much currency one of two things happen. It all crashes & we end up with a deflationary depression as per the so called great depression or gold & silver revalue themselves to an amount equivalent  to the amount of currency created. Either way society moves to the only true money, gold & silver.

The situation is not so bad when associated with a gold standard, where you can only have so much currency in the system if you have a certain amount of gold. Why we move off gold standards is usually to pay for wars & this creates a fiat currency. A fiat currency lasts, going on history 40 years. Since Bretton Woods agreement in 1944 ties all the worlds currencies to the US$ & the US (or President Nixon) took the US off the gold standard in 1971 causing the whole world to be on fiat currencies means that about 2011 the US$ will be worth nothing. Its estimated worth today on when it started as a fiat currency is 3 cents.

Not to say gold & silver will be the only good investments, but you need to educate yourselves & prepare.