The Inevitable Return of the Gold Standard
Richard J. Greene
June 30, 2006
Rising prices from years of inflating the money supply are finally seeping into the highly doctored core consumer price index. To hear some of the leading economists debate the inflation issue on TV, with remarks such as asset price inflation being good inflation versus product inflation being bad inflation, should tip us off as to just how far from a solution we are. If this is what we have come to expect from those trained in the field of economics, just imagine how hopeless it would be to try to explain the dangers inherent in today's economic model to your average investor or consumer. We have currencies worldwide that do not hold value for any length of time in the hands of stewards that merely wish to project the illusion that they are concerned with maintaining purchasing power. Meanwhile, they put on a big show of slowly ratcheting up short-term interest rates to demonstrate monetary credibility while at the same time flooding a reckless amount of money creation into the system to offset the higher rates which are still below actual inflation. Surprisingly, this sleight of hand has well in excess of 95% of the masses so easily fooled, demonstrating their economic illiteracy.
The financial leadership of the US is most concerned with keeping up appearances. They fully believe in their power to manipulate their way out of any reality. Their moronic attempts to knock down the price of gold and silver, usually in the middle of the night, are so short-sighted as to be laughable. It amounts to trying to put out a seven alarm fire by smashing the fire alarm on the side of the building. By artificially depressing the price of gold and silver they merely make demand higher than it otherwise would be and supply lower than it would otherwise be. Now that even the more financially illiterate are seeing that the heavily manipulated statistics can no longer hide inflation, a slow motion panic will begin and build. But don't expect Americans to lead the charge into gold; the Plunge Protection Team is working hard to sell the bond market as the place to seek refuge from financial storms. This should be at least mildly successful for awhile more because the average American has not yet come to grips with one important fact... the government lies to us constantly and often. The CEO of Newmont Mining recently projected flat to declining gold production industry-wide over the next five to ten years. It follows that supply will be declining for years due to long lead times just as the mentally crippled begin to understand what has happened and how to protect themselves. Gold demand will be soaring just as years of neglect result in anemic production; you can guess the result: spectacularly higher prices for gold and silver.
The actions that the Fed takes at this point will not matter except in the short-term since interest rates are still below real inflation, (rather than the made up inflation figures that the government manufactures which the masses gladly and foolishly accept). Recently released GDP figures above 5.0% are a howl, the real number is very likely negative. The difference is largely the huge understatement of inflation. While some gold investors fear rising rates with memories of Volker's relentless hikes decades ago, the huge debt levels of today precludes that possibility. Interest rates are going up because inflation is much higher than most believe not because the economy is too strong as the Fed would have you believe. They wish! The bull market in gold began while the Fed was easing rates and flooding the markets with money and accelerated when the Fed began raising rates and you guessed it, flooding the markets with money. Since the Fed, a private bank, was unconstitutionally handed the monetary reins of the United States in 1913 it has instituted a totally fiat currency in phases that has increasingly served special interest groups at the expense of the American people and now the people of the entire planet. With inflation, its main means of theft, increasing greed and debauchery of the dollar has resulted in capital misallocation and a hollowing out of the US economy. The condition of Ford and GM are good examples of this yet the talking heads on financial TV would have you believe that GM is off to another "fresh start". You can chalk up GM's survival to date to its Fascist-type links to the US Government.
There is still time to protect yourself financially by protecting your interests by owning gold. It amazes me that Americans are so comfortable with the current situation that we must borrow over $2 billion a day from foreigners to maintain our standard of living. That is not a secure future. Perhaps it is because they haven't noticed, just as they haven't noticed the so called "Patriot Act" merely takes from citizens their constitutional rights, or that the "Impunity Act" which exempts special interests from SEC disclosure which is another giant leap toward Fascism.
The next time an election is held and your President blurts out ha ha ha ha, I got straight C's in school and now I'm your president, make sure you didn't vote for him. Hold elected officials to higher standards and educate yourself on the consequences of the actions of the financial authorities. Remember the words of Thomas Jefferson, "If a nation expects to be ignorant and free, it expects what never was and what never will be." At this point, to have no exposure to precious metals is inexcusable. Financial advisors should take note and assess if they could be held liable or at the very least brain dead. There are well-documented research papers by Ibbotson and Sinquefield showing how precious metals exposure increases returns while lowering risk. That should be especially true under current circumstances.
