Why You Buy Gold
Here's a short exceprt from King World News' interview with Peter Schiff of Europacific Capital. He very quickly and clearly outlines why everyone will soon be buying gold.

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With gold consolidating recent gains, today King World News interviewed Peter Schiff, CEO of Europacific Capital, to get his take on where things stand. When asked about the run in gold Schiff responded, “Well it’s going to continue, gold is going to go higher because people want refuge. In fact the other safe havens in the currency world, like the Swiss Franc or the Yen, the central banks there are trying to undermine their currencies.

I mean the Swiss are actually thinking about pegging their currency to the euro. One of the reasons people were buying the Swiss Franc was to get out of the euro. Now they are threatening to turn the Swiss Franc into the euro. So what’s the one asset that central banks can’t print? That’s gold and so gold is the last man standing and everybody is going to be piling into it.”

When asked about the relentless rise in gold Schiff replied, “Look at what’s going on, governments have interest rates at zero, the Fed just said they are going to keep interest rates there for at least two years. That’s basically QE3 because they are going to have to buy a lot of bonds to keep interest rates that low. So what else is gold going to do?

If there is no yield on currencies, if they are printing them like they are going out of style, if governments are trying to keep economies inflated and they have all of this debt, how are they going to get rid of the debt? They are going to inflate it away. If they are not going to default and they are not going to cut government spending, what’s left? Inflation, print money.

So it’s becoming obvious to more and more people and when the government repudiates its debt through inflation, when you hear they (governments) are inflating their way out of debt, well, yes they are inflating their way out of debt, but they are also inflating their creditors out of their assets.

When the government gets rid of its debt through inflation, it wipes out people’s assets that are based in that currency, people’s savings. So if you don’t want to get your assets inflated away, you buy gold, that’s the refuge....

“Gold will be overbought for years, I mean it will have pullbacks, but most of the time it will just be going higher and you are going to have to buy it. That’s the wall of worry. I talk to people all of the time who say, ‘I can’t buy gold because it’s high.’ Who says it’s high? Maybe it’s lower than it was based on how many dollars and euros and RMB are out in circulation now.

Gold is a measurement of the value of money. So the higher the price of gold, all it’s telling you is that money as wealth has lost value. If money keeps losing value, then gold has to keep going higher. Gold only has one way to go and that is higher because the only way that you are going to stop the price of gold from rising would be to do what Paul Volker did in 1980. We need to get a huge increase in interest rates, where interest rates are way ahead of the real rate of inflation.

But the problem is you can’t do that without completely destroying the phony US economy, so you’ve got to be willing to do that. To break the run in gold, you have to be willing to collapse the economy, to bankrupt the US government, to crash the housing market, to bankrupt the banks. You have to be willing to take a recession or depression, one that’s much worse than the one in 2008/2009 time frame. I just don’t see any political will to do that. As I said, they are going to keep on printing so it’s just a one way trip for gold.”