THINGS YOU CAN KNOW ABOUT GOLD

The future is unknowable.  Unless you're God.

Therefor the idea that something that may happen in the future is discounted by the market is impossible.

But there are things you can know about the present that will continue to be true in the future unless the nature of reality changes.

And there are things you can know about Gold.

The first thing you can know about Gold is that it is a CURRENCY.

How do you know?

Because every central bank on earth uses it as a reserve currency.  And every central bank, or governement banking institution has used it as such for the last 5000 years.

Second thing you can know about gold.

Like everything else, gold is traded against another currency.  So if other currencies stregthen because of inherent power in the issuing authority that currency will probably rise in value against gold.

Which currencies are currently strengthening?

None.

Every currency on earth right now is beset by massive debt, rising inflation, and deglobalization.

So it's a safe bet that over time Gold will rise against every currency.

At the moment the only currency that challenges gold's supremacy is the US dollar.

The problem with the US dollar - apart from the domestic problems of debt, inflation, and political instability is that every country that sees the US as a competitor - or even an enemy - such as China, Russia, Iran, Saudi Arabia, and their satalites (which includes much of Africa, India, much of the middle east and some of South America) are currently actively de-dollarizing.

This is not an opinion.  This is an economic fact.

That which is trending now is likely to trend into the future.  

The thing we can never judge is the speed at which the trend develops.

Trends always seem to develop slowly,  Then Suddenly the trend matures and everything looks different.

It's like Hemingway said about how people go broke: Gradually, then suddenly.

That's why  the trend is never in the market.  Because nobody knows when gradually turns into suddenly.

So if you think you have time to protect yourself from gradual global currency upheaval, by buying  gold:

You may be in for a shock,

WHEN THE FED PIVOTS...

 

When the Fed pivots, it will be gold's day.  Raising rates into the massive mountain of domestic and global debt that exists today is the world's biggest game of chicken.  It's like racing cars towards the edge of a cliff to see who will blink and hit the brakes.

If the Fed blinks and stops raising before inflation has been brought fully under control, they lose all credibility and with the loss of confidence the world's central banks will all sell dollars to buy gold.

If the Fed doesn't blink and keeps raising rates even thought inflation is now largely a supply side problem, they drive the car right over the cliff and cause an explosion in the credit markets that will cause the world's central banks to sell dollars and buy gold.

Right now it's a waiting game.  

We're all waiting to see if there's a miracle "Soft landing," where inflation drops back to zero and the global economy accelerates  and profits surge, a real Hollywood ending.

Some people think that's possible.

Not Felix Zulauf, or Simon Hunt, or Jim Rogers, or Jim Rickards, or Marc Faber, or Kyle Bass or Mike Green, or Jim Grant, or Bill Fleckenstein, or Lacy Hunt, or Grant Williams, but...

Probably somebody you've seen on some cable market show.

Put me in the no soft landing camp.

Put me in the forced pivot camp.

And when it comes, that's when gold and hard assets will be the only safe havens in a world of burning paper, and electronic malfunction.

Perhaps not at first.  At first all assets will explode upwards with a real pivot.

Then inflation comes back with a vengeance.

Then....

We're in uncharted territory.  What happens when an historically debt laden economy faces out of control inflation with trend sub one percent growth and a shriking labor force?

Nobody knows.

Only one thing's for sure:

You'd better have hard assets if you want to survive.

THIS IS NOT CAPITALISM

 

The Fed eases and markets soar.  The Fed tightens the markets drop.

This is not capitalism.

Printed Money being given away free by the Fed/Treasury to big banks who lend it for next to nothing to Hedge Funds who buy up everything and make prices rise to appaling levels while savers get nothing for the money they lend the bank. 

This is not capitalism.

Capitalism is where the Financial Elite on Wall Street help the most productive companies to have access to capital so they can expand and employ workers at fair wages.

That is Capitalism.

Capitalsim is where the Federal Reserve Bank stays completely out of the economy except during extreme crisis where they become Lender of Last Resort to make sure that fundementally sound banks don't implode because everyone wants their money back at the same time.

That is Capitalism.

When greedy mother f****s borrow more than they can ever hope to repay in order to take huge gambles in the risk markets and then lose, the Federal Reserve Bank stepping in to take over the debts is an abomination.

That is not Capitalism.

There is nothing wrong with Capitalism.

Unfortunately our economy has moved so far from capitalism that we have created a system where a Central Bank run by unelected beaurocrats with zero real world financial experience tries to direct the most complex man made system on earth with academic models that bear no relationship to the system they're supposed to be mapping.

That is not capitalism.  It is insanity.

And it has nothing to do with Politics.  You can look to blame the left or the right or this politician or that one.  But you'd be missing the whole point.

The point is that the system with an interventionist Central Bank is the definition of Socialism.  And it ends up bailing out a Financial Elite that no longer exists to direct money efficiently, but exists to suck money out of the system into its own pockets, because they know when massive bets fail, the Fed will bail them out.

That is not capitlism.  That is insanity.

INTRINSIC VALUE

 

Does gold have intrinsic value?

Aristote argued that it does because it is used in jewlery - and the very qualities that make it perfect for jewerlry also make it perfect for coinage - it is constant, malleable, divisible and it doesn't tarnish.

These are rare qualitities.  And many also find it to be quite beautiful.

Beauty is subjective, however.

I had a freind who was a very bright and accomplished musician who told ,me once that Bach was like white noise to him.  I thought this to be very sad.  To me Bach is the voice of God.  .

But can you say the music of Bach has intrinsic value when not everyone can hear it?

Of course you can.  Because over many centuries it has been so valued by many people.

That is really the test.  Intrinsic Value is proven as it is appreciated by many over long periods of time.

These things can range from Elements or precious stones or medicinal herbs that have characterisitics that many find useful and/or beautifull, to art and artifacts and compositions that many find useful, compelling, beautiful over long periods of time.

Over many centuries if something is valued by many people for charracteristics that are immutable, it has intrinsic value even if some people don't apprecitate it.

Gold has been used as a currency for ovr 5000 years now, just as it has been used in jewelry for at least that long.  You can admire gold Egytian bracelets and gold Greek coins in museums all over the world, just as you can hear concerts of Bach and Beathoven at Symphonies all over the world, just as you can admire the painting of Da Vinci and Vermeer and Titian at museums all over the world.

Of course, New Things constantly arise and are admired for short periods of time: Ganga Style, the Macarena, pogs, Investment Tulips, Beanie Babies, Crypto Currencies... Do they have intrinsic value?  

We'll know in a few hundred years.  Sometimes you find out after only a few months

Meanwhile no other currency but gold has ever lasted for more than a few decades (except silver which gernerally exists in a bimetallic system with gold.  

Trust the test of time.  Don't fall for fads.