Bill Buckler, editor of
the incisive The Privateer market letter, closed it down the other day after
29 years, sounding not just worn out from the work and needing a break but
also a bit depressed by the world's increasing illiteracy in economics and
maybe by the recent attack on gold as well.
From the start Buckler
had documented much of the war waged against gold by Western central banks --
-- and maybe that's why
in recent years he declined to mention efforts to document more of that war
and agitate against it. He considered it a given.
... Dispatch continues
In fact, of course, obvious as the war against gold was to Buckler and a few
others who have thought deeply about gold's function as money, the war still
cannot be acknowledged and discussed by 99 percent of monetary metals mining
companies and the financial news media. And so the war continues to be waged
largely surreptitiously at the expense of not only the monetary metals
markets but also markets everywhere that are no longer free.
But as Buckler retires,
free gold marketeers and advocates of transparency
in government can claim him as their own and salute him, as by quoting from
his final letter, excerpted below.
By Bill Buckler
The Privateer, Edition 727
... Here is a third quote from our website. It is
the conclusion of our page stating "The Case For Gold." It was
first uploaded to the Internet in 1995. Its message will remain true unless
and until gold returns to the global financial system as a circulating
form of medium of exchange or money.
"Money is not wealth; it is a medium by
which wealth can be exchanged between consenting adults. If an adult does not
consent, then money cannot produce an exchange. Nothing can produce an
exchange if the potential parties to it do not consent. But an expropriation
can be produced, by a government with sufficient power. To obtain that power,
money must be controlled by government. Today it
"And because the money you use is totally
controlled by your government, dear reader, so are you. That is
the case for gold as money."
And here is someone else making the case for gold --
long before your Captain was born:
"It is impossible to grasp the meaning of the
idea of sound money if one does not realize that it was devised as an
instrument for the protection of civil liberties against despotic inroads on
the part of governments. Ideologically it belongs in the same class with
political constitutions and bills of rights."
-- Ludwig von Mises,
"The Theory Of Money And Credit," 1912.
We certainly do not scorn the (indirect) gain in the
purchasing power of gold that has taken place over the past 12 years. Nor do
we scorn the loss of that same purchasing power that has taken place since
August and September 2011. But gold's "price" in terms of what
masquerades as "money" today is and must be a secondary
The fundamental importance of gold -- as money
-- is eloquently summed up by von Mises in the
quote above. A free nation cannot be achieved or preserved without a sound money. Gold -- above all other possible media of
exchange, including silver -- has historically proven itself to be that sound
money. Any analysis of any aspect of our current global financial system that
ignores this fact is fundamentally flawed.
That is particularly true when dealing with markets.
Money is the bedrock of all financial markets. As
such, it is also the bedrock of all economies.
It is impossible to overstate the importance of
Gold is the soundest money ever discovered.
The 'Controversy' Over Government Manipulation Of
To state that the more despotic a government becomes
or aspires to become, the greater grows its antipathy to gold as money, is a
To argue over whether government is constantly on the
lookout for more ways to interfere with gold's ever regaining its role as
money is a trivial pursuit.
To maintain that governments don't try to influence
the "price" of gold in terms of the fiat currencies on which their
continued domination depends is just plain silly.
In 2000, The Privateer analysed the huge
upward bounce made by the Nasdaq in the immediate aftermath of its initial
crash of March of that year. We used that particular event to make a wider
"Manipulation? Could Be: Why would such an
action surprise anyone? Why is this particular instance of government
intervention taken by so many as 'proof' of the absence of 'free markets' in
the United States?
"The world knows that the Fed has the sole
discretion to raise or lower U.S. interest rates by any amount at any time of
its choosing. Governments have been intervening in currency markets for more
than half a century. Government intervention in the economy, and in the
markets, is an accepted tenet of both economic theory and practice and has
been for most of the past century."
Only two things have changed today.
First, the Fed no longer "raises" U.S.
Second, the level of intervention in the economy and
the markets has hugely increased.
How could anyone argue that gold is
"exempt" from all this? After all, there can be no doubt that gold
is government enemy No. 1.
The Function Of Gold
Anything bought or sold on a financial
"market" is supposed to be an investment. Financial investments are
supposed to have two attributes. First, regardless of their price at any
given time, they provide a "yield" in the form of a dividend and/or
an interest payment. Second, being traded on a market and therefore being
subject to price fluctuations, they provide the opportunity for capital gains
-- or losses.
All dividends, interest payments and capital gains
are denominated in the currency of the nation in which a given market is
The aim is to enjoy both an income stream and
the possibility that the market value of the investment will go up. Both of
these are ultimately paid in terms of "money" -- in all cases a
In the "advanced" nations -- those most
steeped in modern economic and monetary "theory" -- the precious
metals and gold in particular are not seen as investments.
We have long since become very tired of the mantra
of Western investment analysts: "Gold is not an investment
because it pays neither dividends nor interest."
This is perfectly true. No form of money pays
dividends or interest -- money is dividends and interest -- and every
other form of payment that exists in all markets. Money is used to buy -- and
sell -- investments. It does not constitute the investment itself.
A gram, troy ounce, or tonne of gold is merely a
mass of inert metal. When used as money, it is not a promise to pay;
it is a medium of exchange and therefore a form of final payment. It cannot
be created by law (fiat), so its quantity cannot be increased by law (fiat).
It is not a promissory note (like a Federal Reserve Note); it is a means of
transferring property between participants on a market.
Gold is final payment. Its
utility as a medium of exchange does not depend on the future confiscation of
wealth. It is the medium by which the ownership of wealth is voluntarily
transferred between the owners of that wealth.
Gold is not an investment and should not be
looked upon as an investment. It is the best means discovered to underpin a
market economy -- and, by doing that, a free and therefore civilized society.
The 'Market' For Gold
The reason there is a "market" for gold
today is because gold has been legally barred from its historic role as
money. Since gold in the form of money is no longer the common denominator in
all prices, it has a price in terms of the currencies that have usurped this
There are two markets for gold. In one, money is
used to price paper claims to gold. In the other, money is used to price
physical gold itself.
The headline "price" of gold is determined
in the paper markets -- most notably in the futures markets of the United
States and other “developed” nations. Physical Gold plays next to no role in
these markets. Almost all "contracts" are bought, sold, and settled
in terms of paper. The holder of a futures contract can "request"
settlement in the physical metal on the expiry of that contract, but he or
she cannot demand it. All contracts can be and almost always are settled in
All Privateer subscribers will be well aware of the
price gyrations that have recently hit the futures markets for the precious
metals. For an excellent overview of the current situation, we recommend
"Waiting For The Dam To Break," which was recently uploaded to
The most notable feature of the recent dive in the
"price" of gold on the global futures markets is that the lower the
"paper price" went, the higher the demand grew for the physical
Even more notable is the fact that this physical
demand was not confined to those parts of the world where gold is seen as
insurance against central bank monetary creation. The demand was global. The
cleaning out of physical inventories took place everywhere. And the
"premium" on physical metal -- the markup of the "spot"
(physical) price over the futures (paper) price -- blew out all over the
world to an unprecedented degree.
This is the most dangerous event to have hit the
overseers of the financial system since the credit freeze of 2008. And there
is no "cure" for this one because physical gold cannot be created
out of thin air.
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