The Phaserl


How to Profit as the New Gold Standard Takes Hold

by Justin Spittler, Casey Research:

Has Doug Casey convinced the government to bring back the gold standard?

Over the past two weeks, Doug has been working on a special project. He’s spent a lot of time with high-ranking government officials, trying to persuade them to back the currency with gold. Believe it or not, the government is taking Doug’s ideas seriously…

Unfortunately, we’re not talking about the U.S. government. As you may know, America gave up on the gold standard in 1971. Prior to that, folks could exchange their U.S. dollars for a fixed amount of gold. This kept the government honest and prevented it from printing too much money.

Today, U.S. dollars are merely paper, backed by nothing. Or, as Doug says, the dollar is an “I.O.U. nothing.”

• Not a single country uses the gold standard today. But that could soon change…

Last week, Doug went to the African country of Zimbabwe with Nick Giambruno, editor of Crisis Investing. They met with high-ranking government officials and local business leaders to discuss a return to the gold standard.

Less than a decade ago, Zimbabwe had one of the worst currency crises in history. The crisis began like most financial crises do. The government borrowed too much money. Government officials thought they could pay off the debt by printing money. This made the situation much worse.

Inflation reached 624% in 2004, according to some estimates. By 2007, the country had “hyperinflation”, meaning prices rose more than 50% each month.

By November 2008, inflation peaked at 79,600,000,000% a month, according to the Cato Institute. Prices doubled every 24.7 hours. The only time inflation has been higher was in Hungary in 1946.

The government printed 100 trillion dollar notes…the price for a loaf of bread reached 35 million dollars…and “starving billionaires” protested in the streets.

• Zimbabwe’s financial system collapsed…

Stocks stopped trading on the country’s stock exchange. In 2009, the country eliminated the Zimbabwe dollar. It now uses other foreign currencies like the U.S. dollar and South African rand.

Zimbabwe is still in shambles. The economy is barely growing. Unemployment is staggeringly high. Food and water shortages are common.

• Doug says a “gold reserve bank” could help restore confidence in Zimbabwe’s banking system…

The Herald, the country’s main newspaper, reported last week.

Mr. Casey, who is also an investor and international business consultant, said setting up or converting the Reserve Bank of Zimbabwe into a gold bank could be necessary to raise capital.

“If you set up a gold bank in this country, all the people (Zimbabweans) become shareholders and it will be possible to raise maybe as little as a $100 million on the world market and that will capitalize the bank,” said Mr. Casey.

The Herald continues.

“People could deposit their euros and dollars into the gold bank and the bank will buy gold and convert the currency into gold. This is how the gold bank is built. As more and more people deposit their savings into the bank it is transferred and converted into gold and when it grows it can be converted into notes or coins and it will be growing,” he said.

Doug and Nick (pictured on the right) made front page news in Zimbabwe’s The Herald:

• Nick says the idea was “very well received”…

He thinks there’s a good chance the government will implement a gold bank. This would make Zimbabwe the only country in the world with a gold-backed currency.

Unfortunately, that’s all we can say right now. Talks between Doug and Zimbabwe’s government are ongoing. But Doug and Nick will reveal more about their trip in the next issue of Crisis Investing later this month.

Nick will also tell readers how to easily invest in Zimbabwe. He’s found a Zimbabwean precious metals miner with “explosive upside potential.”

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