Thursday, February 7, 2013
Gold and Human nature
Paper is a promise. When the banks and the insurance companies went down in 2008 trillions of dollars of paper promises would have been defaulted upon - had the Government not stepped in to bail out the banks and insurance companies with trillions of dollars of tax payer money. Everything from Credit Default swaps to Life insurance policies to AAA corporate bonds to Pension Plans.
In effect they're now being paid off to the people who paid into them - with their own money. Tax money, and the commensurately debased dollars in their bank accounts.
Most Social Security payments will likely be defaulted upon at some point. Most Pension Plans will be defaulted upon at some point. And everybody's paper dollars are being constantly debased.
These all represent promises that are constantly being reneged upon.
Gold is the only form of currency - in fact, the only financial instrument - that does not involve a promise.
That is the virtue of gold.
Some people call it a barbarous relic. Most financial analysts consider it to be outdated, useless in today's complex sophisticated financial world. That's because these are the folks making promises. And they hate the idea that there should be any limit or accountability to their promises.
Here's how you will know when gold has become outdated and useless:
Human Nature has changed. And everybody tells the truth all the time. And everybody honors all their promises all the time.
When that happens gold will have become a barbarous relic.