Gold & A Time Of Universal Deceit

Tyler Durden's picture

Submitted by Tim Price via Sovereign Man blog,

“We are currently on a journey to the outer reaches of the monetary universe,” write Ronni Stoeferle and Mark Valek in their latest, magisterial ‘In Gold we Trust’. Their outstanding work is doubly valuable because, as George Orwell once wrote,

“In a time of universal deceit, telling the truth is a revolutionary act.”

The reality bears restating: as the good folk of Incrementum rightly point out,

“..the monetary experiments currently underway will have numerous unintended consequences, the extent of which is difficult to gauge today. Gold, as the antagonist of unbacked paper currencies, remains an excellent hedge against rising price inflation and worst case scenarios.”

For several years we have advocated gold as a (necessarily only partial) solution to an unprecedented, global experiment with money that can only end badly for money.

The problem with money is that comparatively few people understand it, including, somewhat ironically, many who work in financial services.

Rather than debate the merits of gold (we think we have done these to death, and we acknowledge the patience of those clients who have stayed the course with us) we merely allude to the perennial difficulty of investing, namely the psychology of the investor.

In addition to being the godfather of value investing, Ben Graham was arguably one of the first behavioural economists. He wisely suggested that investors should

“Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

Graham also observed,

“In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.”

Judgment has clearly been tested for anyone who has elected to hold gold during its recent savage sell-off.

The beauty of gold, much as with a classic Ben Graham value stock, is that as it gets cheaper, it gets even more attractive. This should be self-evident, in that an ounce of gold remains an ounce of gold irrespective of its price.

This puts gold (and value stocks) markedly at odds with momentum investing (which currently holds sway over most markets), where once a price uptrend in a given security breaks to the downside, it’s time to head for the hills.

There are only three ways of trying to handle a mountain of unsustainable debt. The options are:

1) Maintain economic growth at a sufficient rate to service the debt. We believe this is grossly unlikely.

 

2) Repudiate the debt. Since we also operate within a debt-based monetary system (in which money is lent into being by banks), default broadly equates to Armageddon.

 

3) Inflate the debt away.

At the risk of pointing out the obvious, which path do we consider the most likely? Which path does it suit grotesquely over-indebted governments and their client central banks to pursue?

But it does not suit central banks to be caught with their fingers in the inflationary cookie jar, so they now have to pretend that deflation is Public Enemy Number One.

Well, deflation is certainly a problem if you have to service unserviceable debts. So it should come as no surprise if this predicament is ultimately resolved through an uncontrollable and perhaps inevitable inflationary or stagflationary mess.

So we have the courage of our knowledge and experience. In fact, of other people’s experience, too.

As the title of Robert Schuettinger and Eamonn Butler’s book puts it, we have ‘Forty Centuries of Wage and Price Controls’ and their inevitable failure to draw upon. We know how this game ends, we just don’t know precisely when.

We have formed a conclusion based on facts and we know our judgment is sound. For the last two years, the crowd has disagreed with us on gold.

We think we are right because we think our data and reasoning are right. Not that we don’t see value in other things, too: bonds of unimpeachable quality offering a positive real return; uncorrelated assets; value and ‘deep value’ stocks. And we ask a final question: if not gold, then what?

Are we deceiving ourselves – or are our central bankers in the process of deceiving everyone?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Soul Glow's picture

Gold is money.  'Nuff said.

DoChenRollingBearing's picture

Gold, buy it, hold it.  Stay the course.

***

Everyone should have at least 5% of their net wealth in physical gold.  There are so few who do have amount (well under 1% of the USA's population) that having 5% in gold puts you into a "1%'.

And, if you have 10% - 20% in gold, ahh...!

On the other gold thread today, I saw some special cases (retirees, etc.) that have a lot more than 20% in gold.  OK, in some cases, sure, over 20% is fine.  But, make sure you have enough cash (etc.) to "defend the precious..."

Soul Glow's picture

What else should one have saved and as an invetment other than PM?  Cash?  A house and land?  All else is easily taxable.  

Gold is money in the bank, but your own bank and no one elses.

DoChenRollingBearing's picture

"Diversification" is my middle name (although it is not obvious).  We own a condo, a bearing import business in Peru and some small income-generating investments.  For many people, too much gold might have a bad effect, if gold goes down, and they need to cash-out (for any of a thousand reasons), they would wind up hurt if they do not have the other assets (CA$H) to "defend the precious".

nink's picture

Gold is not money. It is a measure of intrinsic value that is limited in supply and can only be obtained through wealth, Money on the other hand can be conjured up at will.

SoberOne's picture

Self directed IRA LLC seems a legit way to go if you have FRNs locked in an IRA. 

Anusocracy's picture

We also have a 100 century war between the forager culture and the sedentary culture.

markmotive's picture

Oneday the deceipt will be revealed in the form of financial crisis. When that day comes, you might turn around and see gold up $1000.

According to Jim Rickards: Catastrophic outcomes come faster than expected

http://www.planbeconomics.com/2014/06/catastrophic-outcomes-may-come-fas...

jeff montanye's picture

all the foregoing are reasonable thoughts.  i even like the one gold is not money which i think zher's damned prematurely.  the idea is it is better than money.

however i don't think george orwell wrote that bit about truth being a revolutionary act.  it is a good one sentence summation of his life though.

http://www.barrypopik.com/index.php/new_york_city/entry/in_a_time_of_uni...

August's picture

Just terminate all pre-tax retirement plans. 

Roths might (or might not) work out a bit better, but if you're investing pre-tax dollars in a qualified plan, Uncle Sugar has a non-extinguishable claim on whatever share of your investment he cares to take.

Soul Glow's picture

Uhm, no.  That is wrong.  Gold is money.  

jeff montanye's picture

gold is what money should be, but, in the last century, rarely has been.

Squid-puppets a-go-go's picture

indeed. Er, nink, I respect your right to another definition, but just know as demonstrated over 6000 years that any other definition if swallowed by enough people will lead to economic instability sooner or later

fattail's picture

"Gold is a great short, we should have done more."  Or something like that.  Is what I was told by the three college educated late twenty somethings.  All they could talk about was their of ass kicking stocks, and how the US needs high levels of debt so the Fed can control interest rates.  "If the US had no debt, how would the Fed control interest rates, who would control interest rates, and if no govt backed debt what would all the banks and insurance company's buy?"....  I actually had this discussion.  One of them actually tried to blame the housing crash on the market mispricing interest rates.  Granted he was not probably interested in monetary policy back then, but I had to remind him the Fed kept rates at 1 percent for a year and a half, which was historically low at the time.  They had no problem with the Fed's actions.

I felt like a jew at at hitler youth rally.  

I also felt the time was drawing nigh, when this whole clusterfuck blows...   I sometimes get the feeling that everyone is buying gold for the same reason I do.  So it was nice to feel like maybe  the general public is still asleep.

VAD's picture

Gold is money.  Currency can be conjured up at will.

sessinpo's picture

 VAD   Gold is money.  Currency can be conjured up at will.

---

By your definition, what else is money? How about oil or coal? Maybe agriculture?

Money is any medium of exchange. Until gold is taken as that exchange, it remains a commodity that is priced in dollars.

lordylord's picture

"By your definition, what else is money? How about oil or coal? Maybe agriculture?"

Money must have certain qualities.  Gold satisfies all of them.  Therefore, gold is money.  Any further argument on your part only shows your ignorance and I have absolutely no desire to enlighten someone so crass as you.  I suggest you do your own research on the matter before polluting the board further.

EINSILVERGUY's picture

Agreed

Mike maloney has a good series on money and why gold and silver historically satisfy all 6 requirements

Anyone who has spent any time learning knows why salt, coal, bitcoin and fiat are not money.  Some are commodities and some may be currency, but none can be deemed money

 

 

 

SoberOne's picture

Agreed, diversification is key. Even a few dollars for liquidity.

Soul Glow's picture

Agreed, diversification is key. Even a few toilet papers for liquidity.

Fixed it for you.

agstacks's picture

In a collapse physical dollars will be very scarce.  

CHX's picture

There will be no need to "defend the precious". As the masses switches on the lights they'll do that for phyzz holders with their fiat (directly or indirectly through the owners of their fiat). IMHO, we're close to critical mass. A little increase in physical demand and the shorts will have their a$$e$ on fire and hell to pay. Not that I look forward to the mayham that will cause.

JohninMK's picture

Timing will be everything. Hold it to long and it will be gone as if the collapse does come and PMs become important then Governments will have to act.

First, they will nationalise their citizens' gold, probably as per last time in the US, buy it at a low price then revalue it. They will start with the central vaults where many of the largest holders have their PM 'safely' stored. Then, using dealers records, they will go for the other big holders using SWAT teams with their latest weapon, the metal detector. You are probably OK if you just have a few coins or jewelry but you might think about storing them in a innocent Faraday Cage like HI-Fi equipent (you knew you kept that CD player for a reason!) or a PC (good for anti-burgler as well).

Then they will nationalise PM companies in the territory and/or shares held in PM companies.

After this, unless you are in the 0.01% or a gangster, it will be difficult to trade PMs, certainly not openly, as it will be difficult to find a buyer.

Those who are into PMs now will have to use them to ride the rise in value then trade out, before the going gets tough.

Took Red Pill's picture

I don't think confiscation of gold will happen. Our few paltry ounces won't mean much when they've let tons & tons go east. Even when Roosevelt issued the order, no one went door to door collecting it. And no one went to jail for not turning it in.

ILLILLILLI's picture

Same document on Scribd:

 

http://www.scribd.com/doc/9442970/Collateral-Damage-U-S-Covert-Operation...

Emboldened by the lack of consequences for subverting the U.S. constitution and breaking international law duringthe Iran-Contra scandal, the Bush administration group known as “the Vulcans” planned a bigger drive to crush thesoul of Communism once and for all.  This group had graced themselves with this moniker, naming themselves afterthe Roman god of War – Vulcan. They waged war against the Soviet Union and Iraq under George H.W. Bush, andagainst Iraq and Afghanistan under George W. Bush.Belonging to this group 31 were   Dick Cheney   Don Rumsfeld   Colin Powell   Paul Wolfowitz   Richard Armitage   Condoleezza RiceThe Vulcan’s drive to bring and end to the Cold War was fueled by a covert war chest invisible to congressionaloversight. 32 This war chest would be known by several names: Black Eagle Trust, the Marcos gold, Yamashita’sGold, the Golden Lily Treasure, the Durham Trust or Project Hammer. 33 These same Vulcans would be broughtback to power in 2000 under the administration of President George W. Bush, son of  President George H. W. Bush.

 

jeff montanye's picture

vulcan was the roman god of fire.  mars was the roman god of war.

http://en.wikipedia.org/wiki/Mars_(mythology)

silvertri's picture

Read it long time ago , should be mandatory reading talk about putting all the pieces together at once...the ultimateconspiracy theory, anybody know anything about the author?

 

silvertri's picture

Read it long time ago , should be mandatory reading talk about putting all the pieces together at once...the ultimateconspiracy theory, anybody know anything about the author?

 

TeethVillage88s's picture

Interesting Link, Never been there before.

samcontrol's picture

a fucking LOT of SILVER options of all sorts !

and just in time. .. The world is PERFECT. Love all in RETARD.

PS .
the butchers from France will face Germany this weekend in the world's most important stadium . We have been waiting since " Seville(82) " for revenge. My flying butchers will send someone to the hospital for a third match in a row and finally get our revenge. and if you don't know what i am talking about go back to staking , dreaming or eating cheeseburgers but you are losing out..
Go Platinoush , you are a genuis.

Silky Johnson's picture

My money was formed in a supernova, not in the ink cartridge of a NY yid.

CHX's picture

That is correct, must likely in several supernovae, actually. AND - in smaller amounts - during radioactive decay of heavier elements.

IronShield's picture

If you can't hold it, you don't own it.  A portion of any portfolio should include physical metal in hand.  Just in case.  ;-)

boattrash's picture

Agreed IronShield. Would also suggest small/medium food production to those that are able. Food will also be money before this shitstorm ends.

IronShield's picture

Concur with that.  A 3-month supply, along with the means to defend it.

CHX's picture

Disagree. Food will be useful for BARTER, but food is NOT money (since it's perishable, bulky, and often non-divisble [eg.gs]). From barter arose the need for money in the first place! Nuff said.

Da Yooper's picture

Okkkkkkkk

now what moron could give you a negitive vote on this

ohhhhhhh

I get it

 

a scum sucking liberal progressive  banker

oy

Da Yooper's picture

The problem with money is that comparatively few people understand it, including, somewhat ironically, many who work in financial services.

 

LMAO

 

reallllllllllyyyyyyy

 

The problem is a select few know far too much.

 

much that is hidden from the public through the gibbersh they speak which is used to keep the public in the dark avout what & how they screw the GDP

 

soooo much so

 

they can manipulate & rigg the markets to enrich themselves at everyone else's

 

expense

 

they should be held to account for their theft from the public.

ACasey's picture

Deceit.  Deceit is the centerpoint of this entire paper currency fiasco.  In such a short time, one government after another has integrated into the banking scheme that effectivley stole the wealth produced by labor of so many and delivered that wealth to a very select few.  Taking from others and giving to themselves based on deceit.

Dan Smoot wrote the "Invisible Government" in the 60's and aired the radio show "Dan Smoot Report".  Looking back, everything he warned against; violations of the US Constitution, private bankers seizing control of a country's money supply, and the coming consequences are all here in our face.

The entire world crossed a precipice as the looting by very few select bankers drives an entire planet's economies into their private hands.  Those orchestrating this are psychopaths but worse are the legions of men and women that swear allegiance to these private bankers; looting from others and giving to themselves.

Deceit and deception by so few threw an entire planet into havoc, carnage, refugees, rubble, war, and death.  The planet crossed the precipice and there is no going back.  That precipice, the limits of excess, are breached and what is certainly coming next spells the end of everyone including those taking the path of deceit.

intric8's picture

Come on, lets cut to the chase. Who is largely in control of monetary policy? Who comprises the most influencial banking institutions on earth? Who are our leading and most influential economists? Who uses "an appeal to figures", ie, "blame it on numbers, not us" as a clever way of absolving themselves of all blame as the winds of rectitude dismantle this house of cards we call modern monetary theory?

If we're truly interested in fingering the culprits who are spreading and perpetuating lies and deceit, its good to know WHO we're talkin about here.

Caviar Emptor's picture

But whatever we do, let's please coddle the banks. These fines from DOJ... They are distracting superior people from the hard work we are all too stupid and pretty to handle ourselves. We need to smile, indulge and forgive. No jail time? Why we should rejoice that we are not vindictive. After all, greed was so good for so long that we can fully understand any misdeeds performed in the name of capitalism. In banx we trust!

August's picture

Fiat "money" is, perhaps, the Great Filter. 

All across the depths of the cosmos, within the habitable zones of uncounted galaxies, billions of earth-like planets give rise to complex life forms, which develop tool use to a high degree, and then go on to discover both nuclear weapons and central banking.

Few, if any, survive.