Gold is one of nature’s finest creations.
On the other hand, central banks create trillions of fiat currency
units – dollars, euros, yen, quataloos, whatever – from nothing and use
those currency units for purchases … Apple stock, salaries for a
thousand Ph.D. economists, office buildings, lobbyists, politicians,
gold bullion etc.
It is unfair that the Fed creates trillions of dollars from nothing
and values those dollars equally with other dollars created from the
efforts of millions of businesses and individuals.
UNFAIR? Of course it’s unfair. That’s the point!
With their “unfair” ability to create fiat currency that spends the same
as existing currency, central bankers increase their power and wealth
at the expense of citizens. They own or control governments,
congressmen, CEO’s, commercial bankers and more.
Don’t expect this to change. Those in power like things as they are.
Gold or fiat currency? Honest money or “funny” money?
From (the brilliant) Alasdair Macleod: “Understanding Money and Prices”
“Gold matters, because, excepting
silver, it is the only form of money that has survived since individuals
discovered the convenience of money over barter. It is beyond the
control of governments, as they cannot issue it without acquiring it
first. It is subject to the constraints of its quality, so that as a
medium of credit it cannot be debauched, only defaulted upon. Its
relative inflexibility and its soundness are the primary reason
governments do not like monetary gold, and force their preferred
alternative on their citizenry. The vested interest of government is
therefore to discourage, or even ban the use of gold as competing
money.”
Fine Gold or F.I.N.E. Central Banks?
A F.I.N.E. central bank can be defined as a Freaked out, Incompetent, Neurotic, Excessive central bank.
Freaked out: Central banks have devalued currencies,
“stimulated” economies by massive “printing” of currency units, forced
near zero and “negative interest” rates upon economies, and a hundred
other deceptive, destructive and devaluing practices. They are freaked
out because ordinary people realize central banker economic models and
policies only benefit the wealthy.
Central banks are enormously helpful to the financial and political
elite. The “game” is not over but their edifice constructed on fiat
currency, lies, and bad policy is wobbly.
Incompetent: The Fed has devalued the U.S. dollar by
about 98% since 1913. Central banks lowered interest rates to near
(U.S.) or below zero (Europe) since the financial crisis of 2008, and
yet the economies of Europe and the U.S. remain weak or have contracted.
If central banks are expected to support their economies, they appear
incompetent. However, if their purpose is to extract wealth from the
citizens and transfer it to the elite, then central banks are competent
and successful.
Neurotic: QE1, QE2, operation twist, “whatever it takes,” serial bubble blowers, try something to see if it works, and flip-flop often.
Excessive: The Fed added $4 trillion to their
balance sheet since 2008. Total central bank “creations” approach $15
trillion. Excessive indeed!
Fine Gold or F.I.N.E. Central banks?
And the consequences of central banker actions will be … what they
always are: Devaluation of currencies, transfer of wealth to the few,
increased debt etc. It has been reported that global debt is now $217
trillion. Choices:
- Debt will increase forever. (Doubtful!)
- Default. Sorry, we aren’t repaying that debt.
- Default. Sorry, we are devaluing the currency units by “printing”
trillions more, which will create consumer price inflation,
hyper-inflation and collapse, but hopefully after the next election.
Extend and pretend, “keep this sucker running for a few more years,” not
in my lifetime, etc.
History shows that fiat currencies always collapse. Will today’s euro, pound, dollar and yen be different?
The end-game according to Alasdair Macleod:
“The outcome is inevitably cyclical.
Prices will start rising at a greater rate, and interest rates must rise
to keep pace. Unaffordable nominal rates in the near to medium term are
a racing certainty. We can assume that a new financial and economic
crisis will follow, in which case over-indebted businesses will go bust,
asset values crash, and banks will move from insolvency toward
bankruptcy, just as the deflationists fear. The response from central
banks will unquestionably be to flood the financial system with yet more
money [the fiat stuff] to keep the banks alive, and insolvent
businesses afloat. Quantitative easing to support asset prices and to
fund government spending will have to be reintroduced at a greater level
than seen heretofore.”
A preview of what is coming:
Illinois: “From Horrific to Catastrophic”
Chicago Police Pension Fund
Italian banks collapsing
Deutsche Bank Silver Manipulation
Pension Apocalypse Is Coming
The Broken States of the Union
Gold for preservation of assets and purchasing power is necessary.
Otherwise why would China and Russia substantially increase their gold
hoards every year?
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GE Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 - 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites.
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The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
