GOLDBUG: The allure of gold in a fiat currency world

Russell Napier Explains What’s In Store For Gold If Cash Is Outlawed
Submitted by Tyler Durden on 05/09/2015 19:45 -0400

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However, in such a world, zero-yielding gold would be a high-yielding instrument. If the authorities ever sought to restrict access to banknotes, then gold would suddenly find itself enfranchised as money for the first time in many decades. So, given the scale of these competing forces, it is just too early to say what might happen to the gold price, but the allure of gold will grow the more it becomes clear that central bank fiat has failed and the age of government fiat is dawning.

The time is ever nearer when the price of gold will rise in an era of deflation. In due course, though no time soon, the full force of government fiat will engineer a reflation, albeit one replete with the misallocations of savings and capital so beloved by the bureaucrat. Then the PhD standard, in which the value of money is linked only to the words of the over-educated, will have ended. The gold price will rise even further, ‘And the words that are used for to get the ship confused will not be understood as they’re spoken, for the chains of the sea will have busted in the night’. And that’s ‘The hour when the ship comes in.’

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Interesting change of the interest rate perception.

“Gold doesn’t earn interest.”

That was the common complaint. It just sits there. And, there is a negative opportunity cost.

Now for gold bugs like me, it’s insurance. 

The Gooferment can’t tax it when I die because it doesn’t exist.

The FED, the banking cartel’s, “man in the Gooferment”, can’t inflate it.

And, no one can track it.

With the FED’s zero interest rate policy — screw you senior citizens living on a pension and some savings —, there doesn’t seem to be quite the argument about not paying interest. Compare zero to, as Ric Edelman puts it, zero point nothing, doesn’t seem so bad now does it?

Also, when you think about Cyprus and their “bail in” solution that turns depositors into creditors of the bank, or worse shareholders with non-tradeable shares — think non-traded REITs, another of Ric Edelman’s “favorites” — gold doesn’t compare badly.

I go back to my two favorite … … examples.

  • In Roman times, two ounces of gold got a custom man’s outfit with cloak and sandals; today, those same two ounces translates to about 3,400 FRB “dollars”. Pretty equivalent.
  • And, in my yute, gas at the old Hess station was 30¢ a gallon with trading stamps, a glass, and the attendant pumped it — also cleaned the windshield; today those same three SILVER dimes could be sold for about 6 FRB “dollars”, which would buy more than TWO gallons of “better gas”, but no glass, stamps, or attendant (except in the Pepuls Republik of Nu Jerzee). Pretty equivalent. 


The value of the currency!


I’ll keep my nonexistent gold, silver, and nickels. Thank you very much.

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2 thoughts on “GOLDBUG: The allure of gold in a fiat currency world

  1. There’s an additional question or two here:

    1) Might silver be better at the moment? If you look at the 15 year graphs for gold and silver at I think you’ll find that silver looks better in terms of where it’s at now vs. historical performance. Now it’s possible that it simply became way overpriced at some point, or that industrial uses are influencing it more than investment influences, or somesuch, but simply looking at the graphs it looks better.

    2) There are two main reasons for precious metal investing:

    (A) One expects a moderate deflation/inflation/mini-crash type scenario where the value of the metal doubles or triples in the course of a year or so and one can make a nice profit selling it before it falls back down.


    (B) One anticipates a that there is a significant possibility of a REAL crash… a la Europe of the 1930s… where boatloads of bills aren’t worth more than the heat they give when you burn them.

    In the case of (A) investing through paper — i.e. silver/gold stocks or futures — makes more sense because you don’t pay much in the way of tranfer costs. Physical swaps (I think) usually have more significant costs. Plus with hard metal you then have to worry about taking care of it, burying it in your garden next to Jimmy Hoffa’s corpse or whatever and maybe having it stolen or lost by the local possums tunneling underground looking for roots.

    In the case of (B) i.e. the Zombie Apocalypse, nuclear war (that you somehow survive, etc., the hard metal might be better. BUT… if that’s what you’re planning for then you want your hard metal to be in a form where ordinary people will respect and accept and value it and that you can use for reasonably sized transactions. Well-minted coins of 1 oz or so work pretty nicely in that regard.

    If you go that route for silver, you have three subchoices: (B1) pre-’64 American money — not pretty but would be universally recognized as valid and real; (B2) Newly minted American (or other well-known govt) coins such as the Liberty Dollars that you can get at Kitco or at {SGB btw, gets 100 out of a 100 stars in my book: I was helping a friend make a buy last year, and since I (supposedly) knew more about this stuff from “the internet” I was supposed to engineer the whole thing smoothly. Heh…. NOOOOOoooo…. after tons of back and forth mistakes largely revolving around shipping and currency conversion (SGB is in Canada) things were a total disaster. SGB took pity on us rookies and cut us a real break in overlooking a significant portion of the mistakes we’d made — they could have been hard-assed and still been right to tack on a hundred or two extra to our bill, but they didn’t. So that gets a strong rec in my book!}; or (B3) some of the very creative and artistically beautiful pure privately-minted silver coins offered by both of those dealers and probably others. The fact that they’re privately minted detracts a bit from their recognition as valid out in the wilderness, but they LOOK so nice that I think most folks would accept them.

    If you go that route for gold, your change purse will be easier to carry but you have very little available in terms of real gold coins that have more substance than snowflakes. And a real 1oz gold coin is going to be far too hefty in value to buy a pound of rice with.

    OK… didn’t mean to go on that long… but maybe it’ll be helpful to someone looking around out there!

    Michael J. McFadden
    Peace Studies, 1973

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