By Craig R. Smith, CEO Swiss America
The events of this week mark a defining moment in American history.
The world has witnessed an unprecidented attempt to take down the United States market economy, government, defense and morale by the enemies of freedom. Americans responded with resolve, patriotism, calm and prayer.
The U.S. financial markets will soon reopen brimming with hope to offset the temporary helplessness we've all felt. Central bankers willing to underwrite and undergird market confidence will largely fund this new hope.
Liquidity will return to stock and mutual fund owners on Monday, September 17, who have financially been adrift for the last six days.
Meanwhile, Americans who own gold and U.S rare coins were able to maintain instant liquidity throughout this horrendous crisis. Indeed, gold shines brightest during the dark passages of life by offering its holder a liquid asset that transcends race, religion and geography.
Gold has been challenged by the modern economic theory of debt and credit. Most pragmatists have declared gold is no longer a viable medium of exchange.
Quite to the contrary, gold alone has maintained 100% liquidity while the communication lines of our modern debt and credit system were scrambled by the World Trade Center bombing. Gold alone stands the test of terror, tragedy and time.
Cash may be king, but gold alone rules today's fragile, vulnerable economic which has been brought to its knees this week... in less than one hour!
NOBODY KNOWS, but perhaps we can get a clue only from the recent headlines...
-"Bush designates Friday as national day of prayer" - CNS News
-"Struggle to stay out of recession grows tougher." - Houston Chronicle
-"Fed Gives $50B to Support Europe Banks" - CNNfn
-"Consumer sentiment plunges to 8 1/2 yr. lows before attacks" - Bloomberg News
-"Horror struck investors seek havens of gold and bonds." -Financial Times
-"Fed could make half-point cut to stave off credit crunch" -USAToday
-"WTC Attack to Cost Insurers Billions" - Fox News
How much will the total bill come to and who will pay it?
+$50B for European banks...
+$10 - 20B for projected insurance claims... (unless this is attack is declared an official "act of war" ...
+$20B by the Federal government for relief and investigation...
+10B plus for an counter offensive...
+*50-75B that the Fed will surely provide to Wall Street to shore up the markets.
That adds up to $100-150 billion of fresh liquidity that must be infused into the U.S. economy just to glue the civilized world back together. If the U.S. officially declares war, sky is the limit.
I would submit that given the prospect of a deepening recession/depression, the Fed's only alternative is to inflate the money system. Period.
It feels sort of like we are in the eye of a hurricane. In the end it is the American consumer that the Fed and the world is relying on.
Is it any wonder the American investor's psyche is suffering. The weight of the world economy is resting on your shoulders. So we are being admonished to 'suck it up' and do our duty.
Investors are being told not to panic by our political and economic leaders. I agree. As The Street.com's Jim Cramer told his radio audience yesterday "I've never made one red cent panicking." In fact, we are being barraged by media polls designed to calm the population.
80% of 4,600 polled by CNN said they wouldn't hoard cash... 99% say they won't sell off stocks whenever the market reopens. Why it is almost un-American to consider your personal economic future over the national interest, right?
This week has been a wake up call alright - not only regarding the U.S. preparedness level for terrorism - but also for the amazing vulnerability of the financial markets. Things are going to be very different all seem to agree.
Yet most things will remain the same. Americans want to give because most Americans have been given much. I foresee neighborhood block watches expanding as Americans are driven to reach out. Vigilance will grow and bring family, friends and communities together as only a crisis does.
My family and I will hearken to President Bushes call for a national day of prayer on Friday to seek our role in His divine purpose for our lives, our community and our nation.
Yes, I'm proud of gold. It has served this nation for over 200 hundred years. No, I'm not ashamed of my Gracious God... or my gold... because in a pinch they will never fail.
Please, remember my #1 investment commandment: Thou Shalt Diversify Assets! - not to get rich, but to protect all of our futures from the violent storms of life that must surely come.