GOLD’S 10 COMMANDMENTS
I thought this post by Izabella Kaminska at the FT was particularly good. In it she expresses some of her frustrations with the reasoning of goldbugs:
“Goldbugs don’t just believe in the fundamentals of gold. They worship at the altar of gold.
The goldbug view represents a market philosophy, a doctrine and a belief-system.
Question it and you incite anger, rage, ridicule.
For ‘non-believers’ this can be frustrating. It’s impossible to have a rational discussion on the subject because goldbugs inevitably intervene with ‘ absolute’ views, none of which are open to adjustment. They stick to those absolutes, even if the facts don’t fit support the narrative.
One might say the following 10 commandments reign at all times:
1) Thou shalt not have any other money than gold.
2) Thou shalt not make paper idol money.
3) Thou shalt not call bullion a relic ever.
4) Remember the day Nixon broke the gold standard.
5) Honour thy gold reserves.
6) Thou shalt not suppress the gold price.
7) Thou shalt not borrow gold from another man.
8 ) Thou shalt not steal another man’s gold.
9) Thou shalt not bear false witness against gold or talk down gold.
10) Thou shalt not covet another man’s gold.”
Reminds me a lot of what Howard Marks said last year:
“My view is simple and starts with the observation that gold is a lot like religion. No one can prove that God exists . . . or that God doesn’t exist. The believer can’t convince the atheist, and the atheist can’t convince the believer. It’s incredibly simple: either you believe in God or you don’t. Well, that’s exactly the way I think it is with gold. Either you ’re a believer or you ’re not.”
Anyhow, at the risk of starting a war of words here I’ll just let the readers decide what they think about gold. I’ll summarize my position as such:
1) Gold will never work as a global currency – single currencies don’t work without government intervention (which defeats the purpose of the gold as currency argument). See Europe.
2) Gold IS money. Anything so broadly accepted as a medium of exchange is money. End of story.
3) Gold should never represent a substantial portion of one’s investment portfolio (over 5%), though this does not mean it has NO place in a portfolio. I fall along the lines of Howard Marks and Buffett to some degree here – any asset that doesn’t generate cash-flows is hard to value and nearly impossible to manage risk around. But an investment portfolio should not only contain growth vehicles. At times, it should contain assets that negatively correlate and help to reduce overall portfolio risk. Gold fits this story given the right environment (e.g., as a negative real interest rate environment has proven).
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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58 Comments
Gold is indeed a form of totemism. It is the dream of a system of value that escapes the vagaries of politics and history, that is, the vagaries of all that falls under what Marx placed under the heading of “labor.” I’m not a Marxist, but Marx was a capitalist, let us not forget. So it is indeed a form of religion, a kind of minor cult that represents a radicalization of classical liberal belief in natural laws as the proper starting point for thinking about historical events and processes–i.e. the mythical “hand” of the market. What is funny and strange about it is that, at the end of the day, it is the claim that value lies not in creating something but in exchanging it. It is a kind of theologizing of the ability to ascribe value to something that defines our own individual, subjective preferences, as if to pretend that there is nothing or noone beyond one’s power to simply assert that something has value.
Okay, I’ll stop armchair philosophizing now. Thanks for posting this.
Gold standard can only be enforced by a central authority, and has always been. In Roman times for example, it wasn’t until the republic got replaced by the empire that a gold standard was enforced.
Also there is the funny fact that domination of commodity money has always risen in times of conflict and war between contending powers (is easy to loot a tangible asset, a paper currency backed by a regime would be worthless though by the looter).
The goldbug mentality is typical of paranoid people who don’t even know at whose interests they are playing for, gold is controllable and manipulable and such can be used to exploit the people just like any other paper currency. Is a power tool, and in fact was used as such by the British against USA before and after its foundation.
Be careful what you wish, two world wars were indirectly created by the gold standard.
Yes, excellent point. I’ve been arguing for years that a gold standard would lead to MORE war and conflict, not less.
I don’t understand why people get irritated with people who like and buy gold. Seems very irrational to me for people to argue like this. The entire scenario has nothing to do with rationality, only the stupidity of the human condition.
Anonymous
I don’t understand why people get irritated with people who question why others love gold. Seems irrational to me for people to argue like this. The entire scenario has nothing to do with rationality, only the stupidity of the human condition to defend gold no matter what.
I say more below in a post- But we don’t have an opinion- WE take action. We owned Gold- WE sold Gold- We did not own it until the price started to move as it is today.- We own GDX as of now!
My opinions don’t matter…it’s what I do and whether I make money based on my process. Let the crazies discuss and distract you. Make money if you have to sell bomb shelters to them. If you love Buffett..buy BRK-B.
Heck I’m 15% long today and 5% has been with BRK-B damn stock is my anchor. Love the way it moves on a day like today. just ..but the price action of Gold does not agree with Buffett. It agrees with Einhorn. St.Joes and Sears does not agree with Berkowitz(FAIRX..we had to sell this) it agrees with Einhorn.
WE are 5%(I want to be 10) long GDX taking my longs up to 20%-25%-
I don’t know how many times I must stress this. DON”T DIG IN LIKE BJM!
Be flexible- your job is to make money. That’s it. If your opinions have helped you make money then keep doing it.
It’s hard for me to have anything but admiration for gold, which has been a great store of value for the last 11 years.
Jimmy C
“It’s hard for me to have anything but admiration for the SPX. It has been a great store of value the last 18 years”….Anon 1999
“It’s hard for me to have anything but disdain for Gold VII. From 1981-2001 I lost over 70% of my money”
Pleas don’t use the past couple of years of a bull market in an asset to ratify and justify why you now own it. Do I have to point out that you are falling in love with something that has no feelings. It has no admiration for YOU. It is an asset to be bought and sold.
There are books written about what you just said. How do you not see what you just said is the exact thing you read about that decides the ultimate fate of the owner of an asset who puts human feelings to it.
Gold doesn’t give a shit about you! Nor does the guy I just spoke with at Monex. Nor does David Einhorn, or whomever. Buy it sell it..but the moment you put human emotions to it..your DOA. I own it today. I can’t tell you how long I will own it. Do you remember the 60minute piece on Dell Shareholders having a BBQ in love with how smart they were. They weer in love with Dell. Maybe not today.
I have a statement of a client with that I’ve kept. It is dated 12/31/2003. He had 16,291 shares of CBCF(Citizens BKG Corp Mich). He LOVED this stock. He had Admiration for this stock. It was valued at $32.71 Long $533,041.52 .It sent him $18,571 in dividends every year. I would sit with him every 1/4 at first and try and get him to diversify or move away from this account. Politely Mr.G would tell me I didn’t know what I was talking about. Not going to do it VII.
ON DECEMBER 31 2009 CRBC(new symbol) is worth .69 cents. It is now worth $11,240.79. Mr. G is now dead. Mrs. G and I don’t talk much. We manage one account and have this stand alone brokerage account with a worthless stock in it.
Don’t tell me you love Gold, DEll, Citizens Bank, Yahoo, apple, CSCO, or whatever. I don’t mean to sound like a dick. But I dont’ want to coddle you. Tough love before you learn it the hard way. Don’t dig in like BJM. Be flexible. Don’t become a statistic in a look back investment history book on Gold. Have an EXIT. What would make you sell? What price is your price? What characteristics would cause you to reduce Gold? WHERE IS YOUR LINE IN THE SAND?
If you need help on Gold…go to B Ferros site…www.onlypricematters.com
Listen to someone who is objective. Don’t listen to ZH or Monex or Buffett. Let the price tell you when to get off. But don’t fall in love with anything tha doesn’t care about you.
I’m going to paste this comment on my bathroom mirror. Classic… $500k down to $11k. Wish I wasn’t in love with my old dot-com company, my old condo…. my ex… all 3 were better than many of their comparables (my old dot-com is still in business, but my options still worthless). I should have dumped all 3 before they dumped me.
I have a better one-
My second stint was after Morgan Stanley was working at UBS(my last stop before finding religion and going independent)
My good friends family owned a business. His Uncle managed all the money for them. He wanted me to take over- We had a meeting and they forwarded to me all of their Statement. A briefcase full.
Their business made in 2000 about 750,000 a month. Having known him for 5 years I was expecting this to be an exciting new relationship profit wise for myself.
I sat in my office with my partner and our mouths dropped. They had an account that went from 2,500,000 to 8,300,000 by 12/31/2000. I wondred why he was giving me this old data. This account at Schwabb was now 285,000- 315,000 broken up into 7 different corporate accounts. With huge losses I had no idea what to do with. I met with the family and the Uncles would not part with what they knew how to do.
Fast forward they did it again with BAC in 2009. Fast Forward they did it again with GOOG when it popped. They now use Wells Fargo Private Client. We still joke about this. It is the worst statement I’ve ever seen in 15 years of doing this.
Columbo-Peter Falk was once a client of mine- He had 50m or so with his cousin back east in B share Mutual Funds. It’s hilarious how much people give credit to high net worth individuals. They know less than anyone on this site about what to do with money.
Had I stuck every dollar I ever saved in a mattress I’d have well over $1M more than I do now. Everyone cries about inflation eating the value of your dollars… f-that… the little guy gets crushed on virtually every investment they make. Imagine your friends with that $750k/mo business stuffing their profits into a mattress every month… what would they be worth now? $50+ million? Inflation adjusted that would be… oh wait, $50 mill.
VII
I don’t understand why people get irritated with people who question why others love gold. Seems irrational to me for people to argue like this. The entire scenario has nothing to do with rationality, only the stupidity of the human condition to defend gold no matter what or equities no matter what.
Defending equities is equally as stupid………….that is the problem with the human condition. Humans rationalize everything where no rationality exists………..
I find it comical that the media is obsessed with the goldbugs — if the goldbugs are such a fringe inconsequential group with ridiculous ideas about how this world should work, why the obsession and the constant criticism of the group? This only draws attention to them. Why not just leave them alone and ignore them? It is likely that the Scientologists or the wicca outnumber the goldbugs in this world.
What cares if someone wants to waste their money buying gold? I don’t see people get all upset with petcock fetishists.
The Establishment betrays that tinge of desperation and compulsion trying to change people’s mind about gold. What for? Concern for the financial well being of the ignorant masses?
media writes articles that will attract attention…. want to make readership skyrocket… just attack an idea that zealots hold… for example, find an MLM company in high-growth mode… write an article about how the product is crappy, or MLM’s are doomed to fail… but first make sure your server can handle the crush. Obession with gold in the media is only because there are obsessed people who flock to those articles to defend them… viola, you’ve got page views to sell ads against.
The recent price action has to be humbling for goldbugs – especially given the current debt euro crisis which should have gold rally.
That said, the great unspoken irony is how world’s central banks are the greatest holders of gold currently. And how they are also the largest buyers of gold year over year. I wonder if central banks believe in “gold” and not as a global currency but as some kind “security blanket” to comfort themselves, the public and investors who may question fiat.
This should have been 2 posts, the first quoting a bunch of garbage from somebody who doesn’t understand why anybody could be in favor of gold, and chooses to label those she disagrees with as fanatic cult members. Yes, one might say there’s 10 commandments, and one might also say pigs can fly. They are both of about equal validity. She couldn’t successfully defend her position, so she decided to attack her opponents, the weakest form of pseudo-debate.
Then there could have been the second post discussing the pros and cons of gold… or even better you could have just thrown out everything you wrote/quoted from the FT post and just focused the second part, which would have provided some useful information for your readers
1) Gold will never work as a global currency…
Agreed. Gold has never really been a good currency, a good currency needs to have a relatively low value so it is useable for small transactions, and be flexible enough to grow with population and the economy. But what will work is gold as money and numerous fiat currencies that are floating with relation to gold, and each other. But one should not save in currency, it should be earned, and spent for things of value or utility.
2) Gold IS money. Anything so broadly accepted as a medium of exchange is money. End of story.
Agreed.
3) Gold should never represent a substantial portion of one’s investment portfolio (over 5%), though though this does not mean it has NO place in a portfolio. I fall along the lines of Howard Marks and Buffett to some degree here – any asset that doesn’t generate cash-flows is hard to value and nearly impossible to manage risk around. But an investment portfolio should not only contain growth vehicles. At times, it should contain assets that negatively correlate and help to reduce overall portfolio risk. Can fits this story given the right environment (e.g., as a negative real interest rate environment has proven).
I disagree and agree with this one. I personally believe gold should make up NO LESS than 5% of one’s portfolio, but most people would be poorly served by having more than 20% of their portfolio in gold. The only people who should have more than that are those that don’t want to actively manage their investments, and are looking for a long term buy and hold, on the timeframe of decades.
oops, didn’t mean to make that a reply to whatsgoingon, it was a comment on the original article.
A few points.
I don’t think there is enough gold mined in the world for everyone to have 5-20% of their assets in gold. Perhaps someday when we start mining asteroids, but not now.
The USA used gold as currency during the eras when the USA produced a lot of gold. The USA is pretty well mined out.
I don’t think gold is a long term buy and hold at current prices. Someday real interest rates will go positive again. It may be decades from now, but it will happen.
Gold coins could be a nice way for hiding assets from governments, or passing wealth from one generation to another without the tax man knowing about it. This should be particularly important in European countries that face complete economic collapse – where complete confiscation is a very real possibility. If you are a Spaniard or a Greek, it is probably a better idea to bury gold coins under your basement floor than Euro notes. However, it is probably easier to smuggle Euro notes across borders since gold will set off metal detectors and show up nicely on x-ray backscatter imagers.
Valid points points, but…
I believe that’s true at current gold valuations, but many gold bugs believe gold’s price will rise significantly, and if people did start adopting gold in a broad manner the price would most definitely rise. And of course even if I’m right and it is a good idea, many people will still ignore such advice, so in reality it would never be the case the everybody would have gold as that much of a percentage.
There’s definitely advantages to being a producer, but not the only thing, for over 100 years spain was pretty much the only producer of silver and yet the entire world used it’s coins.
I personally don’t propose we start using gold and/or silver coins as exchange, mainly as a store of wealth.
Gold’s price was going up for years before real interest rates turned negative.
Thanks CR.
Gold is also a reasonably mobile store of wealth, but maybe diamonds are better.
Gold does have a special status. Why do you think all the CBs still hold it?
Agree that 3) is the main reason to hold it.
Diamonds don’t set off metal detectors, so you may have a point. However, both will show up on various backscatter image scanners. Paper currency will show up also, but is probably easier to conceal from the scanners.
Why do CBs buy gold? Perhaps some anticipate having the need to back their currency with gold in the future. And by snapping up large portions of the world’s gold, they make it harder for rival central banks to form a gold based currency. Also, some may anticipate that OPEC will one day demand gold for oil, and they need insurance for their country.
I’ve been playing with gemstones for 30+ years (I hate to call it investing). If you want to concentrate wealth in a very small package, there is no better option, IMO.
Diamonds are an extremely manipulated market, so it’s difficult to buy low/sell high unless you’re on the inside. But they are fairly liquid.
Non-diamond gemstones tend to fare better versus inflation (rubies, emeralds, sapphires, etc), but also worse during deflation. But this also offers decent speculating opportunities. They are less liquid, though.
And no need to worry about x-ray or back scatter machines. Just mount them in some cheap looking jewelry and wear them wherever you want to go!
That’s really interesting, thanks. (Now that’s pragmatic info!)
How do you actually get info about prices in the diamond/precious gems market space? Is there public info or only private info for those participants that have seats on private exchanges? Has the diamond monopoly (deBeers) actually gotten stronger or weaker? You should write a guest post … one hears a lot about gold,art,wine, etc. but not as much about this space.
Those silly goldbugs! What kind of an idiot would prefer lumps of a rare, shiny metal over strips of paper with pictures of dead presidents that can be printed in unlimited quantities by politicians whenever they feel the need?
Gold is driven by negative real interest rates in the US end of story, that is why when bad US economic data comes up, gold goes up, because the prospects for prolonged negative real interest rates increase.
Gold reacts like every other commodity when there are talks of QE; QE is vastly misunderstood.
Gold benefits from strong demand from emerging economies: China and India.
Gold benefits from fear driven demand/loss of confidence in paper currencies by goldbugs.
In the context of economic uncertainty such as in Europe where the exit of a country may result in much higher inflation in the exiting country, gold is something to keep in mind.
People who are obsessed with gold are mostly those who believe it should be the global reserve currency. Basically, they don’t understand how their views are flawed. It’s not just a religion. It’s a political belief system based on an anti government position.
There are two kind of believers: 1) goldbugs 2) people debating every two days or so about how crazy believers are goldbugs. The second broad category is well represented in this blog. What about performances ? The Harry Browne permanent portfolio is 1/4 gold, 1/4 equity 1/4 short bond and 1/4 long bond. It’s one of the best performing portfolio with (in 35 years !!!) average return of 9,5% and extremely low volatility. It doesn’t require a portfolio manager nor special algos. So if you are one of the few (really really few) who did better, you’re a great portfolio manager otherwise you’re just loosing time. But most traders are essentially like sportsmen, they like to partecipate, winning is not what they are really interested in.
Ha, true observation. The anti-gold bug obsessed believers.
I am not a gold bug, but I see the case for gold:
– inflation hedge / neg real IR
– potential banking crisis / fiat currency crisis hedge
– it has been money for 5000 years or so (it can be split in small amounts etc.)
Still I am glad Cullen has a more nuanced view. 5% is probably too low, 25% maybe too high.
Finally I have argued many times that only because something does not produce CF, it does not mean it has no value. As you may know stocks fluctuate many times over the volatility of their dividends – it all has to do with variation of the multiple (or risk preference)
I once had an argument with a goldbug, where he dropped this classic thing: “If you had a time machine you could travel back anywhere in time and pay with gold”
I thought to myself, if I had a time machine I wouldn’t even need gold.
The most likely creators of a time machine (or at least a time communicator) are the military research establishments of major powers like the USA, Russia, Europe, or China. And if a time communicator is created, you will never hear about it. The power that has it will use it covertly for national power.
Haven’t read the whole article, but IK is not making the argument against ‘gold – the asset class’ is making the argument as ‘gold – always long’ and ‘gold – how the monetary system should wok’; that gold bugs go ballistic at the first sight speaks volumes and only reinforces the perception that they are paranoid lunatics.
Truth is that gold bugs are plain wrong on these two things: a) if you have bought gold for the past year you’ve been losing money; gold has been a loser for decades ffs, so gold as an asset class can be good or can be bad, buying always gold and ‘converting’ your dollars to gold is not always the winning option, this is a fact; b) there is no reason why a gold-standard is superior to other monetary systems, gold has sometimes has its own problems, sometimes similar sometimes different to fiat systems, and in any case can only be enforced by states (there is nothing ‘free’ about gold standard and is a false flag for free market).
Now you can go and buy or sell gold, I’ve been long in gold sometimes and short other times, but not based on some articles of faith.
P.D: On a more interesting note, about the negative rates theory. Where is the break point where model collides with reality?
Rates are bordering the real real (not a typo) negative field (see Swiss bonds) and gold is in a down trend and close to breaking levels which would make gold probably go towards the 1000 USD.
There is a point where all asset classes are non-performing and this point is called disinflation and then, deflation. In this environment it does not matter if rates are negative (you receive less money in the future than what you are investing for real now) because there is a broad disinflation in all asset prices. In this environment currency gains purchasing power NOW even if it loses purchasing power at the future, is a ‘liquidity premium’ (there is more demand for dollars that there are disposable at the market).
Where could I pay with gold? More importantly when currencies fail( along with governments) who would be willing to trade something that is needed food, water, clothing, oil gas, shelter etc. for gold. That is what we are talking about right hedging against currency failure. I have always hated gold. Maybe because I could not understand it.
‘Where could I pay with gold?’
You hear that argument a lot, but consider this: ‘Where could you pay with your stock certificates? Where can you pay with you T-bonds?’ After all, you can’t go to the store and buy your groceries by showing them your 401k statement.
If gold goes to $5 or $10,0000 an ounce in a currency crisis you sell your gold and buy lots of groceries.
Right
And if everyone does that or enough of them …….. gold isnt worth 10,000$ an ounce anymore. If too many people are on one side of a trade………………………….
Just google ‘BIS to make gold tier 1 capital for banks’, then consider it is already tier 1 capital for central banks, then consider all of the trillions lurking in paper, that can see the debt deflation happening.
Just a matter of time before gold is freed from the paper suppression to its price and valued purely in its physical form.
99% in gold, all paper is a short on gold.
Neutral here: the markets will ultimately tell us who is right.
One thing I’d say is that if you believe in the gold narrative, you should put *more* than 10 pct of your money there. If you believe that markets and the dollar are going to crash, why would you want 90 pct exposed to that risk.
What on this earth is there to understand about gold……………?
There is some real crap being written here………………
This conversation is a distraction. We don’t own gold and I’ve said before that the price action will determine what we do next. GDX- is Ripping today. WHY?
Is it fortelling more Silly Easing(which is the Baby Bulls crying to suck on Bernankes Teet) or is it a safe haven?
I don’t know. But the Price Action of Gold is what matters- Gold is ripping today that is all we need to know. Don’t get caught defending this asset or dismissing it. Just watch it.
Don’t allocate 5-10% to it just because some text book tells you to diversify.
You want average returns–diversify. Into, Gold, Mid Caps, Small Caps, EM,Internatial etc. Hold on to stuff that bleeds just to tell someone your well diversified.
Buy Gold when it tells you too. Let the loonies sell the end of the world and let the buffets miss out on money to be made. Your job is to make money not have an opinion.
Beware of false breakthroughs though, we had one not long ago… just a couple months. But memory is very short.
there’s some bullish elements for gold to ramp here…
http://onlypricesmatter.wordpress.com/2012/06/01/being-analytically-honest-presenting-the-other-more-bullish-case-for-gold-miners/
Yes, there are… we are in an important inflexion point… I closed shorts a couple weeks ago, then opened again last week and today have been stopped out.
Now I’m on the sidelines, will watch for a couple sessions how things work out to take large positions again besides daytrading (although tempted to make a binary bet to the downside, but not beyond risking 2% of equity).
So stocks are down 2%+ today and gold +3% and you want to short the latter not the former?
I prefer to get good entry points in my shorts, so that’s why I said ‘wait and see for gold’, it could be a good shorting position just like it was couple months ago when someone could have said the same thing. If you are correct I WON’T short gold, that would be foolish, I would get long (I’m open about it, no preferred position at this point), as it will be a long ride up. Do I take from your comment you always short/long in the middle of a trend?
Following your logic, you probably would have said me a couple months ago: “don’t short oil at 102-103″ or “don’t short gold after such a breakthrough”. Well, I’m glad I didn’t do that and just watched for good shorting opportunities which took some risk but paid off. For me the key is to limit loses in case I’m wrong and that’s just what I always try to do.
If you were referring about that small binary bet, in gold after such strong breakthrough to the upside is stupidly cheap to make such a bet even with enough time to let it work, I only need a small retracement of the move and can sell @25-50% profit of the position thought options. But I respect these moves and that’s why I probably wait a couple of sessions to see what happens.
I really don’t understand why folks, like Cullen, treat the statement “Gold is money” as a matter of fact. Gold is not broadly accepted as a medium of exchange, yet you hear the phrase repeated over and over. Nothing more than simple observation is needed to verify the fact that gold is not a broad medium of exchange. I could walk around Seattle today and observe hundreds, if not thousands, of exchanges involving money and I can all but guarantee you that not one of those will involve gold.
Furthermore, I cannot buy gold and then sell it for the same price at which I bought it, making it a really poor “medium of exchange.”
Gold has been money and could be money, but right now it is not money. It is a vehicle of speculation, not a medium of exchange.
The article has almost a null value.
Substitute stocks or bonds for gold, and you just have the opposite ideology.
Way better is to actually do real research if some group or item makes zero sense or if one is frustrated, looking for a fuller picture of reality and “truth”.
A cycle of hard vs. paper assets has existed for centuries,
Bob, you’re spot on with your comment that gold is not money.
When gold has been money, governments abuse it, suppress its price, and prevent it from serving its best and only purpose.
Where you are not spot on is in saying that gold is vehicle of speculation.
In its physical form it has never been that, rather through the ages it has been a way to store one’s wealth, a wealth reserve if you will. Do you think central banks own 30,000+ tonnes of the real thing for speculative purposes? Nope.
We are headed back to the total demonetisation of gold, and to it being priced in its physical form only.
If you are interested in more detail, head over to Fofoa’s blog, but prepare to read and think deeply about monetary developments over the last hundred years.
While I often disagree with and argue with goldbugs and often find tghem ill informed and credulous, these are a bunch strawman attacks…
1) Thou shalt not have any other money than gold.
False. Most gold proponents prefer gold themselves, but don’t care what other people save, transact, and contract in, as long as they aren’t compelled by legal tender laws, prohibitions on gold ownership, capital gains taxes on saving/transacting in gold, or other restrictions on their own freedom. Alan Greenspan as well as Sen. Buffet (Warren’s father) both made persuasive arguments linking personal and political liberty with hard currency.
2) Thou shalt not make paper idol money.
False. The gold proponent does not wish to dictate what others can use for money or accept in payment, only that others don’t force him by law to accept paper money, or prevent him by law from saving, transacting and contracting in gold. Private as well as public paper currencies would be expected to stand or fall on their own merits, in the absence of legal restrictions on choice in what money to accept in payment, contract or choose for savings.
3) Thou shalt not call bullion a relic ever.
You can call it a delicacy for all anyone cares.
4) Remember the day Nixon broke the gold standard.
It was a default on the honor and promises of our government, and preceded a decade of massive destructive inflation, and wasteful welfare and warfare spending enabled by said default.
It was not the outcome of a democratic process or deliberative debate, and was carried out by the subterfuge of claiming it as a ‘temporary measure.’
By taking this backdoor route and not out in the open, the ground was laid for our present day mismanaged, misunderstood hybrid system, cobbled together ad hoc, and composed of institutions set up for a gold standard regime, as well as policymakers that do not understand the monetary system they exist in.
5) Honour thy gold reserves.
Only a small minority of gold proponents actually advocate a return to a centrally managed redeemable gold currency. Of course, any institution promising to redeem its obligations in gold should honor its contracts.
6) Thou shalt not suppress the gold price.
If the government is directly or by proxy, via the derivative market or some other means, putting downward pressure on gold prices, is that a legitimate function of their power and role and steward of the financial system?
I don’t know that this is happening, but if the claims are at all credible, then all responsible parties should demand transparency and disclosure of such policies. However, even hardcore 100% gold standard types like Mish generally dismiss such worries as unfounded, since they would only benefit holders of gold in the long run, while causing potential losses/blowups by the parties involved, and subsequent bailouts.
7) Thou shalt not borrow gold from another man.
Never seen this one. Is it just made up?
8 ) Thou shalt not steal another man’s gold.
k I see there just weren’t ten things so this is filler. If you can’t come up with ten clever items, just use a different analogy. Press a full album, don’t give us filler.
9) Thou shalt not bear false witness against gold or talk down gold.
I would amend this one to say don’t attack strawmen, debate the issue honestly.
10) Thou shalt not covet another man’s gold.
More filler.
I am not a gold bug, don’t own any gold, think a gold standard is impracticable, and think gold may well be overvalued. But to attack proponents of gold is to reveal one’s own faith before the greatest idol, the State.
Proponents of gold are pretty much just those with a realistic attitude towards the State in general and in particular our present government. Attacking them with hate or derision is just declaring your own loyalty oath and faith in the omnipotence of the State, and and so makes you both ridiculous and despicable to all decent people.
Very well said!
Well said.
And you don’t need to be a goldbug to own gold, just a sensible saver.
Executive Order 6102
Still loads of crap being written……………….here
VII,
It wasn’t only GDX that was ripping, all the mining stocks to do with gold (and silver) went up while everything else was going down. Got to tell you something……..
Nixon didn’t break the gold standard in 1971. He (“Oh, those evil speculators”) dumped the promise that every USD could be exchanged/redeemed for gold at $35 per ounce (a.k.a. Bretton Woods). Already in the 1960s the amount of USD increased more than the US was holding gold. Because the US was “”hell bent”" on fighting a war in Vietnam. So, the gold standard was effectively already killed by the Kennedy/Johnson administration in the (early/mid) 1960s.
Izabella’s article is ridiculous (unless it was proffered in jest, in which case it’s quite funny). It’s nothing but an ad hominem spew, akin to calling anyone who questions government a conspiracy theorist. Cullen, your views are much more reasonable.
I am certainly not a gold bug, but there are two things you can’t deny:
1) Gold has a long (if imperfect) history of being used as money. There are many good reasons why we have used gold as collateral for money, which I won’t go into here.
2) Central banks still hold gold. I’ve said it before and I’ll say it again: If the fiat money masters of the world still hold gold, you should hold some too. Think of it as the money of last resort; the only form of final payment that everyone ultimately trusts.
I do not believe in holding gold as an investment or as an inflation hedge. It’s insurance. Then, if we ever go back to some kind of official gold standard, bonus.
One benefit of gold is that it is not particular to any given country or system. That makes it the ideal diversifier if you hold the rest of your savings in holdings particular to your home country (eg stocks, cash, home, bonds). I don’t think the Harry Brown idea of keeping savings as a 25%:25%:25%:25% mix of cash:30year-treasuries:stocks:gold is foolish. For the past half century such a mix would have seen very little in the way of drops in USA, Germany, UK, Japan, Canada etc etc. What other way of holding savings could offer that?
It strikes me as Bullish for Gold if the FT gets so senstive about it…. although they may realise people understand their history in the matter although this could be a head fake so as big decline is coming……….waaaaaaaaaaaaaaa
Who knows ………..I see it as a store of value rather then a medium of exchange anyhow.
Nothing against Fiat mind you , but if goverments use the power of fiat to tax you for bank credit mistakes (see Europe) you really have no choice in the matter – which my suspicious mind tells me the ECB wants anyhow.
I mean in 2008 a Irish person had no choice but to buy some of the stuff given what the goverment was doing to peserve the bank bond market deposits……it was clear they were externalising the losses on the plebs.
Anyway Cullen the oringinal fiat had nothing to do with the concept of interest….it was just sticks and stuff , at least the Gold merchants were more honest about matters back then as Gold and interest went together – hand in gloove (pounds of flesh and all that)
But Fiat has been corrupted to the point that the gold boys run the shop so…….. paradoxically you have got to hold a few Philharmonics baby to protect you from now bank controlled fiat.
p.s Rememeber the ESM is the beginning of a more total dictatorship withen Europe – did you read the documents ?
No POLITICAL CONTROL OF FIAT IN EUROPE – the ESM is a banking creature -even worse then the IMF…..which is bankers controlling the fiat of treasuries.
ITS A WORLD OF SHIT……that MMT gets wrong.
Its belief in the CB / Treasury hybrid is disturbing to me.
Its a Medusa.