Friday, July 10, 2009
First, Corrupt the Language
if you want to destroy a society, Lenin reportedly once said. So, Gold is not money, Gold is for jewelry and other trinkets, etc.
Gold is reviled and ridiculed by the mainstream financial community and the lies told about it are obscenely inaccurate. The classic line is the one about buying Gold at the absolute peak in 1980 for $850/ounce and then getting 20-30 years of lousy returns. Sort of like buying the Nikkei Japanese stock market at the very peak in 1990 and having 20 years of even worse returns, but let's not mention that.
Look, Gold is not money because I want it to be. Gold has been money for THOUSANDS OF YEARS because free men and women decided it was the best form of money out there. Paper money with nothing behind it but the foul promises of those who live off the generosity of others (i.e. apparatchiks) has been tried hundreds of times around the world over thousands of years and has failed every single time. People currently holding the reigns of power have been immersed in a fiat system all of their working lives - it's all they know so most of them are ignorant about why Gold is important and what its role is.
I know that you can't eat Gold. I'm not really sure what this has to do with saving or investing, but otherwise intelligent commentators on financial markets have said retarded shit like this about investing in Gold. You can't eat it! As if you could eat fiat paper dollars, government bonds, or stocks!
I know that you can't use Gold to buy stuff at the grocery store. Just like you can't use bank certificates of deposit (CDs), government bonds, or stocks to buy stuff at the grocery store, so what the fuck is the point of saying stuff like this?
I know that if the shit really hits the fan that you're better off owning guns and food than Gold. Yes, and you're also better off not owning stocks, worthless paper fiat dollars or government bonds if this happens. Again, stupid argument and yet routinely mentioned whenever Gold is the topic.
I know that Gold is a better deflation hedge than inflation hedge, but many things are only fair inflation hedges. In the 1970s, stocks were a lousy inflation hedge and Gold was a great inflation hedge. In the 1980s and 1990s, Gold was a lousy inflation hedge and stocks were a great inflation hedge. In the 2000s, stocks were a lousy inflation hedge and Gold crushed stocks and was a great inflation hedge. Every Wall Street shill talks about the 1980s and 1990s and ignores the 1970s and the 2000s and people still fall for it! Asset classes go in and out of favor and stocks for the long haul is a stupid sales pitch for the lazy, trusting and/or ignorant.
Is something rare and natural that cannot be created out of thin air or easily destroyed a better store of value than paper tickets printed with no effort by people with no moral character? Duh, ya think?!
Gold has outlasted all the apparatchiks who seek to destroy it and demonize it. Our current fiat system has gone to excesses that will be looked back on in disgust. The bust that we are now going through is a direct result of a fiat paper money system completely out of control. The problem is that most people have no idea that the cause of the current economic depression was an easy money and credit system fostered by an anchorless global monetary system and fascist central banks that get to help decide how much money/debt is created and the cost of money (i.e. interest rates).
Gold is not a great investment, it is money. It is savings. It is a stable store of value in a world gone mad with fiat disease. It is an anchor.
And the funny thing is that once this deflationary crash really hammers stocks and other asset classes towards the end of this year and probably into next year, the sentiment will turn. Gold will be the savior that allows the apparatchiks to return to inflation.
Remember that inflation is a form of theft. Governments steal their citizens money by debasing its value year in and year out. They force their citizens to run on the hamster wheel faster and faster to feed the out of control government beast that now seeks to control health care, the auto industry, charity/welfare, farming, the drilling of oil, the real estate market, the financial markets, retirement accounts, and the climate! This costs a lot of money, especially when these industries are run in the incompetent and inefficient manner that characterizes all government-run entities. The government desperately wants to create inflation again!
Here's a little secret: Gold is a way to re-create inflation and governments and the central banks they are in cahoots with own more Gold than anyone. Want an end-game scenario? Here's an easy one: re-peg the currency to Gold at a level that makes the current Gold price seem like the deal of the century using a new currency with a fancy new name (sovereign/national, regional or international will do). Rather than directly and openly debase the current currency, simply set an exchange rate between the new currency used for international trade and the US Dollar. This exchange rate, it just so happens, will be the equivalent of a 30-90% overnight Dollar devaluation.
No gloom and doom, no end of the world, just the oldest re-cycled government trick in the book. It's coming, of that there can be no doubt. The question is only one of timing. Deflation first, then inflation by any means necessary. Gold will retain its value and will still buy the same amount of food, real estate, stocks, etc., but the almighty US Dollar will suddenly buy a lot less of those things.
Gold is money, so to measure its value requires that you think of Gold in terms of the things it can buy that you want. An ounce of Gold, as the saying goes, is generally equivalent to the cost of a decent man's suit. This has been generally true for at least the last hundred years. What is the fiat currency price of a man's suit over the last 100 years?
Gold won't make you rich unless you trade it professionally and do it well, but it will maintain your purchasing power in a world of collapsing asset prices. Fiat currency can perform the same role over brief periods of time but its longer term value is always suspect.
Once the Dow to Gold ratio gets to 2 or less, it will be time to switch asset classes once again, as the deflationary crash will have nearly completed and stocks and other asset classes like real estate will again be a good deal. And if you've got the Gold in your pocket, you can eat it if you want (although I admit it's harder to chew than paper fiat currency) or you can use the Gold to buy up the stocks and real estate that your neighbors can no longer afford.