The World According to Gold – Literally

by James West

Previously by James West: Gold and Silver Poised to Surge on Ticking Debt Bombs

Every time I write a “World According to Gold” piece, gold is setting a new record, among a new crop of bubble-callers, and still the world hesitates to pile into gold for fear of getting burned. Many of those who have doubled or tripled their money have since died, retired, or simply kept on making money investing, succumbing to the addictive quality of wealth. The only other consistency with the new old record and another eponymous article, is that there is yet again more fiat capital in the system. But now, the rate at which capital fabrication is increasing is itself increasing. In other words, larger sums are required just to keep the international circle-jerk in motion.

The Republican congressman John Boehner, feverishly, we are led to believe, developing his own alternative plan to the Democrat sponsored plan, suggests raising the debt ceiling in two stages. First, he proposes raising it by $1 trillion, and then by another $1.4 trillion next year. Does that mean we’re going to need an additional $2.4 trillion in debt over the next 18 months?

If I have a loan I can’t repay, the bank doesn’t lend me more money. The bank takes my house and my car and anything else it can find of value and turfs me onto the street. Now I understand that a great nation like the United States can’t be turfed onto the international street, because in many ways, it is the street. But its this inability to stop borrowing, simply through the inertia caused by the great mass of entitlements and military spending, that precludes any serious discussion about balancing a budget.

Gold is going to be making a serious comeback to the global monetary stage in an official capacity. That’s the only possible outcome of the debt death spiral we’re in. The U.S. is indeed going to be thrown into the street, as are all the nations of Europe and Asia, in due course. And that street is the yellow brick road.

If a brick of gold could actually talk, it would say, among other things:

“You know, you human beings are remarkable on so many levels. Such imagination and ingenuity, yet wasted, on deluding yourselves into cutting short your guaranteed brief time on earth. All so that some of you can have a few more toys, homes, cars and sit at the front of the airplane.

But what really gets us, is that even in the face of irrefutable evidence of intrinsic value, your vaunted economists proclaim us to have no intrinsic value. After doubling and tripling in value, returning hundreds of percent on capital investment, the same vapid suited fools decree that we provide no investment income. (So if you bought 10,000 ounces in 2002, and sold 50 ounces every month since that time, you would not be receiving investment income?).

When we anchor your false paper money through a policy enforcement (paper money was originally a certificate proclaiming ownership of a quantity of gold), you enjoy monetary stability. When you abandon the standard and stability of gold, chaos ensues as sure as night follows day. You aver that we are not money, yet we are in fact, the only real money, of which all else is a derivative, or imitation of.

And most remarkable of all, in the face overwhelming evidence, your elite financial and governing class, who collude to bamboozle and impoverish you at maximum velocity – the rest of you just stand by and let them do it.”

Ah yes….if gold could only talk. Probably a good thing it can’t. Imagine how annoying it would be to have somebody around who is always right.

Three weeks ago, Cisco Systems announced that it was going to lay off 10,000 people worldwide, and last week, Borders Books announced its imminent liquidation, which also means the liquidation of another 10,000 jobs. Clearly, the U.S. economy is in full recovery, and we have nothing to worry about. But since the only item to worry about involves the ability of the developed world to continue issuing currency to obscure the fact that bankers and governments are actively defrauding their citizens, the recovery can’t seem to manifest itself in anything except corporate earnings, which would have nothing to do with those billions in stimulus, easing, bailouts, etc that have merely filtered through the banking layer onto the balance sheets of the Fortune 500 beneficiaries.

The only solution to the Greek, Spanish, Italian, Portuguese, Irish, and American and soon to be Chinese, Brazilian, Japanese and Belgium problems, is the issuance of more ‘debt’, which really just means the electronic fabrication of more Euros, Dollars, Yen, and Yuan. The touchy-feely warmth masquerading as a perpetually beneficent sun is in reality a harsh light shone directly into our faces so we can’t see what’s going on in the elite sky beyond. Despite the apparent disdain for gold in any national financial equation, here is another thing gold has to say, if it was allowed a voice:

“Hey, you boobs. The only viable solution that has ever been embraced after a period of monetary hyper-inflation, such as that we are in the midst of now, is a return to the a gold standard.”

Commentators who dismiss the viability of such a standard are either intentionally disingenuous in their proclamations, or merely ignorant. The only thing standing between fiat hyperinflation and the viability (or the inevitability) of a gold standard, is the price of gold. Its not a smart thing to say “there’s not enough gold in the world to support a gold standard”.

According to Gold, “I’m just too cheap. You boobs don’t even know how much I’m worth.” (I’m imagining if Gold could talk at this point, it would be a little condescending…)

Gold is right. Imagine a gold price of over $30,000 an ounce. Or $50,000 an ounce. If we can fabricate $600 trillion worth of bogus, fraudulent securities and commodities derivatives, what is the limit in value we could accord something as tangible and intrinsically valuable, whose returns as an investment have far outperformed any asset class in the last ten years?

So while congressmen on the western side of the Atlantic Ocean, and Finance Ministers on the eastern side of the Atlantic Ocean, squabble over the inevitable increase in debt/money to preserve, at all costs, their standard of living and expense accounts, gold quietly notches higher, silently reproachful of every political twist and turn, patiently abiding its time in exile from its rightful role as The Money.

Gold is now shouting obscenities as us. Rude yellow metal.

Reprinted with permission from the Midas Letter.

James West is an independent capital markets entrepreneur and investor. He is publisher of the Midas Letter.