GOLD – In Your Self-Interest

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(February 2013)

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IT IS IN YOUR SELF-INTEREST TO OWN GOLD AND SILVER! This may not have been true from 1982 – 2000, but it definitely is true today and will be true as long as central banks are aggressively monetizing debt (“printing money”) and devaluing their currencies.

Gold has been money for thousands of years. Why? It serves the needs and self-interests of merchant and consumer, king and subject, saver and spender.

Similarly, gold serves the needs of a well-run and responsible government by encouraging commerce, savings, and capital formation with stable, reliable money. Commerce creates economic and political power, so more profitable commerce helps create stronger economies and more powerful countries.

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Gold retains its value and consequently savers and consumers can trust that their savings, if invested in gold, will preserve wealth and purchasing power.

Gold has performed well as a medium of exchange, store of value, and recognizable currency unit for thousands of years. This begs the question, why did all the countries of the world abandon gold backing for their currencies?

Answer: Self-Interest!

Whose self-interest?

Answer: Those who profit by driving gold out of the economy and replacing it with unbacked paper money that can be created in nearly infinite quantities. Banks, the financial industry, and politicians are the primary beneficiaries. Banks can create unbacked paper money from “thin air,” loan it to governments, businesses and individuals, and generate substantial profits. The financial industry shuffles paper, sells stocks, creates debt-based investments, packages and resells debt, and makes huge profits from the manipulation of paper money, but not from buying and selling gold. A percentage of those profits are recycled to politicians to purchase favorable legislation. The system works well for those at the top.

This highly simplified explanation should make it clear. Banks and politicians benefit from an unbacked paper money system that encourages the use of paper money to create and direct profits back to the banking and financial industry. The self-interest of bankers, the financial industry, and politicians are well served. Most individuals not connected with those groups are served considerably less well.

So what is the problem? The bankers create and manage the money, politicians are enabled to borrow and spend to excess, average Americans borrow and spend, and business continues. We all think we get what we want, meet our self-interested goals, and continue with our lives.

Really? So why does gasoline currently cost nearly $4 per gallon when it was priced under $.20 in the 1960s? Why does a pack of cigarettes cost about $6 when it used to sell for about $.25? Practically speaking, it is the same gallon of gasoline and the same pack of cigarettes. What about gold? It cost a bit over $40 per ounce in the 1960s and now it costs about $1,600 per ounce. It is still the same ounce of gold.

What changed? What changed was the value of money. Unbacked paper money is usually created much faster than the economy grows so that excess money and debt creation can serve the interests of the bankers and politicians. A larger quantity of dollars chasing goods and services pushes consumer prices higher. Hence $4 gasoline is now normal.

The dollar has NOT been a stable unit of value for about 100 years – since the Federal Reserve was created in 1913. The purchasing power of the dollar has been shrunk to a fraction of its former value. During this time, the financial industry grew much larger, government expanded to many times its former size, and the national debt exploded. The monetary system meets our needs and self-interest but only at the cost of ever-increasing debt and inflation. Is it time to partially remove ourselves from the system due to the high costs of unpayable debt and inevitable inflation?

Gold is no longer used as money, because it serves the self-interest of bankers, the financial industry, and politicians to use unbacked paper money that can be easily manipulated in value.

But gold does serve the self-interest of most other people who desire preservation of wealth and purchasing power.

All paper currencies eventually devalue to zero – over 500 paper currencies in the history of the world are now worthless. I doubt it serves your self-interest to store wealth in a devaluing unbacked paper currency, especially now that most G-20 countries are engaging in a competitive currency devaluation (devalue the national currency to make exports more affordable in other currencies) that will reduce the purchasing power of those currencies against the price of goods and services that we need for everyday living. Read Ten Steps to Safety.

In my opinion, it serves the self-interest of most people to remove a portion of their assets from the devaluing paper currency game and transfer that wealth into real assets – gold, silver, oil, diamonds, real estate – whatever is real and will retain value during the coming inflationary storm created by central bank money “printing” and competitive currency devaluation.

Many in the media will tell you that gold is in a bubble, gold is a barbaric asset, gold is useless, gold is a bad investment, gold pays no interest, and gold is not safe. Many in the media will suggest that you are better off holding your savings in paper dollars guaranteed to lose purchasing power at 5 – 10% per year and perhaps even more rapidly in the next few years. Is it in your self-interest to listen to such media nonsense and to hold your retirement and saving in a devaluing currency? Perhaps you should move a portion of your savings and retirement funds into gold and silver as has been done for several thousand years. Think SAFETY with NO counter-party risk!

You probably believe that your self-interest should be more important than feeding the profitable self-interest of the banking and financial industry. If so, consider gold and silver. Read Why Buy Gold? and Why Buy Silver?

GE Christenson
aka Deviant Investor

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