Gold, A Perfect Imperfection

An ancient gnarled tree:

Too fibrous for a logger’s saw,

Too twisted to fit a carpenter’s square,

Outlasts the whole forest.  TAOISM

The late John Maynard Keynes, a revered economist and said to be the father of today’s western economic philosophy (Keynesianism) once called gold coins a “barbaric relic.”

Is gold like the ancient gnarled tree:

Too heavy to carry around as money,

Too laborious to find and too energy intensive to mint into coins?

Gold’s obscurity as wealth is still debated even today, yet it has been the desire of many powerful leaders in history. It has compelled men to risk their lives for it and many wars have been fought over it. Yet for some strange reason gold is commonly frowned upon by the average financial expert. They say it’s useless as an investment because it produces “no interest or dividends.”

Could this obscurity be why gold has outlasted all paper currencies, banks, governments and stock markets throughout all history, like the gnarled tree outlasting the whole forest? Is gold so important as money that it’s considered useless by many financial experts? Is this gold’s secret to success?

Even the great Warren Buffet is not in favor of investing in gold. Meanwhile his father and former governor of Nebraska, Howard Buffet was a strong supporter of the gold standard and oddly enough, Warren himself started his investing career in the jewelry business.

However, the founder of one of Wall Street’s biggest institutions, J.P. Morgan once said, “Gold is money, and nothing else.” Let’s explore this statement for a moment. So what is “money?” As defined by the 1980 edition of Webster Encyclopedic Dictionary; Money:  Coin; gold, silver, or other metal, stamped by public authority and used as the medium of exchange; in a wider sense, any equivalent for commodities, and for which individuals readily exchange their goods or services; a circulating medium; wealth; affluence. So, is money the paper currency we carry in our pockets or the deposits we have at the bank? Well, here’s what Webster defines as paper currency: bank notes, or other documents serving as a substitute for money or a representative of it.

You mean CASH is not MONEY!?

Bank notes or currency as they are commonly referred to, are issued by a country’s central bank and represent the DEBT of that nation, NOT money! For example; a Federal Reserve Note is issued by America’s central bank called the “Federal Reserve.” Currency with no gold or silver backing is called a “fiat currency.” This means the currency only has value based on the good faith and credit of the nation. It’s just like a promissory note between two individuals; one is the lender, the other the borrower. Similarly deposits at a bank are credit. You, the depositor are the lender and the bank is the creditor on your account. This is very important to understand in light of the recent “bail-in” policy passed by many governments, even the Canadian government in 2013. They are planning to confiscate your savings to keep the system afloat! Interesting however, practically every central bank in the world is a private institution that answers to no branch of government, not even the president of a nation. Sure, central bankers meet with government officials to discuss monetarypolicy, but they act independently and look out for the best interest of their stakeholders, NOT the citizens of a nation. Central Banks are owned by wealthy, powerful and elite individuals who have no allegiance to any one country, they consider themselves global citizens. Did you know that EVERY paper currency that ever existed, ended up being worthless like the Zimbabwe dollar and the German Mark during the hyperinflation of the Weimar Republic. Hyperinflation is the result of a central bank creating too much money and credit to keep an economy going artificially. This is exactly what the FED is doing with the USD and it will end up in hyperinflation as it always has. This means a cup of coffee could cost $1,000 and a gallon of gas $50,000! Your retirement portfolio will not even last two months. Coincidentally, almost all central banks keep gold bullion in reserve. Why not you?

The great Henry Ford once said, “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” The fact is; central banks dictate interest rates on their own and create money to buy the debt (treasury bonds) of a government. Think of a central bank like a credit card company; they issue credit (currency) to a government in exchange for bonds and the interest on the bonds is paid by the taxpayer.Who do you think is on the hook for the massive “bail-out” from 2008 and the easy credit policy of the FED over the past decade? Yes, YOU the taxpayer! So, as a result of all this injection of money and credit into the system, we get inflation. Inflation is not an economic phenomena, it is planned by central bankers to keep a nation in debt and under control. Think about it for a second; why does a loaf of bread today cost ten times more than fifty years ago? It’s the same loaf of bread, just the currency it’s priced in has lost VALUE! An ounce of gold fifty years ago was $35, today that same ounce of gold is well over $1,000! Why did the price of real estate skyrocket over the past decade? Not because more value was added to the homes, but because too many lax mortgages were issued by the banks. Like the loaf of bread going up in price a house went up in price with no added “value.” Real estate prices were inflated artificially by the creation of easy credit and we’ve experienced the crisis of 2008 because of it. The fact is; the USD has lost over 90% of its value since the creation of the FED in 1913.

So what does all this have to do with the price of gold? Just ask one of the greatest gold traders of our time, Jim Sinclair of JSMineset.com, who has been accurately predicting the price of gold for decades. He says based on the expansion of money and credit by the FED and the TRILLIONS in derivatives that have no market to settle in, gold will be at least… 

$3,500 per ounce!

Truth be told; gold is simply honest money because it is:

·       Rare and precious
·       Globally recognized
·       Transportable
·       A durable store of value
·       Evenly divisible
·       Everlasting

Gold maintains value because a thousand men can go searching for gold in a mountain for six months and only one of those thousand men will discover gold. So gold’s value is not only the labour of one man going hungry and thirsty for six months, but also the labour of the other 999 men who found nothing. Once gold is refined into a tradable form like a coin or a bar, it harnesses the productive powers of labour as “intrinsic value” and it’s locked into that gold coin forever! Gold is the only form of wealth or money that cannot be destroyed! This is why gold was used as money throughout most of history. Since gold cannot be created easily and lasts forever, it limits the creation of currency and credit by a central bank or a government. As a result, inflation and debt is contained because the money supply and credit issued by a government has to be backed by the gold in reserve. So, is a gold standard the best monetary policy for a government? I’m not sure, but according to a paper written by the late Howard Buffet, a gold standard is essential for the economic freedom and liberty of man. Personally, I believe having restrictions like a gold standard for the creation of currency and credit is definitely better than allowing central banks to create it freely on their own.

So is gold a “Perfect Imperfection?” Is it a “Barbaric Relic?” Does it produce “Interest or Dividends?”

Yes, all of the above. Gold bullion has all the requirements to perform as perfect money and for about 5,000 years it has done so, very successfully. So, thank you Mr. Keynes for calling gold coins a “barbaric relic.” I believe this is why central bankers keep gold in reserve. They know the truemeaning of gold and want to distract the public into other forms of wealth like currencies or stocks, making gold “imperfect” as an investment. It’s no secret that mainstream financial institutions discount gold investing because they want you to invest in “their” customized financial products. You don’t have to be a “gold bug” to buy gold coins, just do what central bankers do and keep gold in reserve to protect your true wealth. At least it’s real money and not a liability of any government. As for paying interest and dividends, just ask the major bullion banks like J.P. Morgan and Scotia Bank if they charge interest on the gold they lease to central banks and you’ll find your answer to that fallacy.

In conclusion, if we want to save anything for the future that maintains true value, then we need to change our culture and pay more attention to history and become our own “central bank” with gold in reserve!

Sincerely,

Bosko Kacarevic

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