Changing course is often hard - even when it is clearly for the better. And that is true especially when trying to change the course of our thinking habits.
When it comes to understanding the new dynamics of gold in world affairs, it is not only hard for ordinary people, but even for long time gold experts.
However, there is a new dynamic in the world of gold, and this new dynamic determines how the gold market will function and grow over the next several decades. The name of this new dynamic is:
Euro vs Dollar.
This is not a poorly concealed ploy for promoting the Euro vs Dollar Currency War Monitor. To the contrary, the newsletter was named after this dynamic because it pointedly describes, in three words, what is going on in the world today - and thats not just the world of gold.
If you are new to this series of articles on this topic, please refer to these two earlier essays for some quick backgound reading: Gold will Rise and Stay There!, and Gold will Win the Euro vs Dollar War
It appears that even long time gold advocates, people who have correctly and frankly advised tens of thousands over decades concerning the advantages of gold over paper assets, people who have followed, sniffed-out, and meticulously documented the mechanics of past gold manipulation, and even people who have been closely following this series of essays on the very subject, are still thinking in terms of the "old" dynamic.
Here are the definitions of "old" and "new" thinking:
The Old Thinking:
Gold, though inthe long term safer than other investments, is an investment like any other. It's price moves in cycles, just like the business cycle and like paper-asset booms and busts: Sometimes it's up, sometimes it's down. To profit from gold, you must try to determine (hopefully in advance) when it's going up, and when it will come back down, and adjust your trading and investment cycles accordingly.
The New (Euro vs Dollar) Thinking:
Gold is going up. Period. On the way up, there will naturally be wild, short-term, swings in price. There will be short-term volatility, but all in all, it will move "up". (This is, of course, the wrong way to put it, as the following essay What is Value? has attempted to show. What's "moving" up or down isn't gold -- but the value of paper money relative to gold.)
The long and short of it is: there will be no further long-term declines.
In one sentence: because the world has re-aligned itself with the function of gold as the world's unrivalled store of value.
That is what makes gold so "valuable" to people the world over. It keeps its value - no matter what!
Find one other thing or substance in the world that can fill out gold's shoes in that respect.
Silver? Maybe, but it has too many industrial uses relative to gold. That probably makes it a fantastic condidate for an enormous price-explosion someday soon, but it has a number of drawbacks that just will not allow it to fit the bill as "the" store of value of human history.
Platinum? Too rare. There's too little of it around, and it also is primarily an industrial metal. It is usually "consumed" more than saved.
Other metals? Too plentiful, too easily corroded - and also too many industrial uses.
Hard goods like machinery, tools, art, etc.? Machinery quickly becomes obsolete. Tools are okay and always valued because useful, but how many hammers do you want to store in your vault, and how many vaults will you need to store them?
Other commodities, like fungibles? Too fungible. Too bulky. Too easily "created" (grown).
Allright, we all know that. So what's wrong with the "old" view of gold? Doesn't it still apply, anyway? Isn't it correct to buy whenthe price is going up, and sell when the price goes down?
Sure it is - if you have a very narrow short-term, paper-profits oriented view of gold. If all you are using gold for is to make you more of that green stuff, well yeah. Of course. In that case, the old view is just perfect. The only problem: all you will have in your hands at the end of the day is - that same old paper stuff, except that now it buys a whole lot less than it did when you "invested" it.
This is precisely the crux of the whole matter. If your world-view is "paper-centric", that's how you will see gold.
The big problem:
The rest of the world (outside the United States) is inexorably moving back toward a gold-centric view of world finance. The world is moving toward a system that regards gold as the standard of all economic value. This new standard is not the old classical gold standard. The days of legislatively fixed fiat-to-gold ratio are over for good. What will take their place is a system that completely frees gold from any adversarial action by governments and centrla banks the world over. Continuing to fight this new system will leave the United States far behind in terms of future economic security, industrial prowess, and moral leadership.
What? Moral leadership?? What the heck does morality have to do with gold?
Nothing, really. Except that whoever aligns himself with gold, ultimately aligns himself with reality (at least economic reality). Conversely, whoever opposes gold, ultimately opposes economic reality.
In other words, gold represents economic truth, and those who oppose gold oppose economic truth - which by definition turns them into economic liars.
Gold is bed-rock value. Gold is the ultimate form of payment for debts. Gold cannot be "created" or faked in any way. Gold must be slowly, often painfully, and always expensively, extracted from the ground where God put it. It must be processed, melted, poured or otherwise shaped into convenient forms, stored, and paid for with real labor. It is accepted by virtually anyone in payment for virtually anything. And now it can even be transferred online.
Those who oppose the functional truth of gold must by definition rely on deception to achieve their goals.
They must create in you the false belief that gold has now been "overcome", that gold is a "barbarous relic," that it has no relevance in an advanced society ("advanced" in what direction, one should ask?).
To accomplish this with respect to you, an individual, these forces must create the illusion in you that other people no longer value gold - and they must repeat that same process with every other market participant in order for the illusion to be effective.
This process therefore requires an enormous amount of energy, planning, marshalling of precious resources, and it requires the application of sheer political and economic force. Can you imagine the amount of productive capacity that is laid to waste each and every year - just to keep up this illusion that paper dollars are "as good as gold"?
Why does that illusion need to be kept up? Because the paper dollar, functioning as the sole reserve currency of the world, conveys upon its producers (the US governing elites) an enormous, theretofore unkown power: the power to simply print an entire country's payment requirements for imports of real goods from abroad. Goods from other countries, who had to produce them by the sweat of their people's brows.
This is not to say that individual Americans don't work and "just live off the backs of others." Just the opposite. Americans themselves have been just as victimized by this charade as the other people of the world have. But there is a difference, and that difference may ultimately explain why so many in the world end up thinking that they hate "Americans." (They are really just pissed at the US governing elites.)
The difference is that individual Americans were, to some extent, allowed to economically share in the benefits of this massive, world-wide, surrepticious, essentially un-American, expropriation and wealth transfer.
But Americans had to pay a dear price for that questionable privilege. They had to pay for this privilege with the gradual, almost complete (and soon to be totally complete) loss of their constitutionally guaranteed freedom. Other people of the world have never possessed such freedom, and therefore did not have to pay in that currency, at least. But Americans did.
When truth is lost, freedom is lost, because, when you do not have true information to base your decisions on, you essentially lose the freedom to make your own, effective, decisions. Money is supposed to convey information about the economic value of a product or service. When that information-carrying function of money is distorted, all decisions basedon it are distorted as well, and therefore in reality ineffective. Your freedom is gone. Lost in a coordinated illusion - a financial "Matrix" of sorts.
Therefore, in addition to representing economic truth, gold also represents economic freedom. Not by accident did the founders of the Constitution decree that only gold and silver shall be made a payment for debt. When FDR confiscated Americans' gold in 1933, he consequently also confiscated their economic freedom.
When the IMF and the dollar-reserve system were formed at Bretton Woods in 1945, there was at least still a gold exchange standard in force internationally - until the London gold pool crashed and burned in 1968 and Nixon defaulted on the US' gold payment obligations in 1971. When the US governing elites (what I call "Amerika") figured out that the world actually stuck with the dollar even though the US had just totally debased it, a lightbulb went off in their heads (it must have been a very dim one, though).
"Amerika" realized that they could now simply print the money to pay for whatever they needed, without regard to any restraints formerly imposed on them by gold's discipline. Their own subjects and the entire world were literally taking it lying down. Time for some more "action."
Thus occurred the raping of the true America - and of the world.
But the world has changed course on "Amerika."
While "Amerika" is busy trying to deprive its subjects of the last vestiges of financial and other privacy under the new, terrorism-inspired "USA Patriot" Act, the world is opening up to gold - and thereby financial freedom and, ultimately, truth.
China's communist leaders are about to allow Chinese individual subjects to own and trade gold again, while the US government is implementing laws that allow its agents to enter its subjects' homes without telling them, photograph "evidence," snoop around in their personal papers and effects, and then leave again without ever letting them know, until, at some later date, they send their subject a letter: "Oh, yeah, uhmm, by the way, we searched and ransacked your house last month but never told you about it. It's all for your own safety and for the greater good of your country, of course." It's a sad state of affairs when communists are "out-freemarketing" the supposed free-marketers of the world.
So, the foundation for economic truth and freedom is spreading fast in the (supposedly "socialistic") rest of the world, while in our own (supposedly "free" and "capitalistic") country we lose guaranteed freedoms by the truckload.
Hmm. Wonder where all that will end.
Anyway, the question arises: when the entire rest of the world embraces gold, can the US alone ever hope to push down the price of gold again, as it has in the past?
And that's why gold will rise and stay there.
Can the US afford to resist this sweeping sea change any longer? It cannot. The longer it tries, the more it plays into its enemies' hands. There will come a point when John Snow or any of his nameless successors can no longer say: "Oh, no problem, a falling dollar is just fine with us, and by the way, it is in no way incompatible with our strong dollar policy." Eventually, the dollar will fall so low that "Amerika" will be forced to sell our remaining gold reserves to defend its baseless currency.
So, when the entire rest of the world is changing course, and even our own governing elites can no longer afford not to (though they may try), can we, the gold advocates, the purveyors of free-market economics, afford not to change course? Can we afford not to adopt a truly gold-centric world view?
As long as we se things the "old" way, we will continue to play into the hands of the still governing gold manipulators. By chasing our hoped and dreamed-for paper profits, we will continue to help them use the very derivatives we invest in (futures, options, cash) to push the dollar price of gold down (or better put: the gold-price of the dollar up).
Gold is no longer a "buy and sell". It is no longer an "investment." Gold has become a definite long-term SAVE. It will soon resume its role as the standard for all economic value. And all paper that is traded in ignorance of this "new" old dynamic will simply burn. Only paper that is traded in recognition of this new 'euro vs dollar' dynamic (i.e., paper that is not used to suppress gold) will even have a chance to exist in the future.
And that future is not very far away.