The Phaserl


If You Understand History and Economics, You Understand Gold

by Egon Von Greyerz, Gold Switzerland:

How can ordinary people ever understand the importance of gold when they are continuously fed with false and distorted facts. The latest publication to publish false and ignorant propaganda on gold is the British weekly magazine the Economist. The article begins with a graph of gold starting in September 2011. Anyone who knows anything about gold recognises that this is the time when gold reached a peak of $1,930. Between 1999 and 2011 gold had gone from $250 to $1,930 which is an increase of almost 700%. During the same period, the Dow was virtually unchanged and the UK index, the FTSE 100 was down 3%. So whilst gold was up 8x during those 11 years, stock markets were static but the journalist did not mention this. Instead, he starts the graph at the very top of gold after an 8 year rally.

False propaganda and incompetence

In my article last week I talked about “Lies, Damned Lies and News” and this is the perfect example of the most blatant lies and misinformation that we find in the media today. It has now gone so far that I and many others don’t trust anything we read in the papers or hear on television or radio. And how can you, when journalists either deliberately publish biased and false news or by sheer incompetence cannot bother to find out the true facts. But that is not enough, the article goes on as follows:

“Although gold is seen as a hedge against inflation, it cannot be relied on to fulfil this function over the medium term; between 1980 and 2001, its price fell by more than 80% in real terms.”

Yet again, the author picks a point in time that is totally misrepresentative. For anyone who knows anything about gold, 1980 was a peak after a run from $35 per ounce in 1971 to $850 in 1980. The fact that gold had gone up 25x between 1971 and 1980 was of course not mentioned by this ignorant writer. Instead he starts from the peak in order to spread his false propaganda. I am not sure if it is a coincidence that the Rothschild family is a major shareholder in the Economist.

The author then comes up with a conclusion which is total proof of his ignorance of the role of gold:

“So buying bullion is really a bet that things will go spectacularly wrong: that events escalate in the Middle East and North Korea or that central banks lose control of monetary policy. It could happen, of course, but it helps explain why gold bugs tend to be folks with a rather gloomy attitude towards life.”

If you understand history and economics, you understand gold

What the author cannot grasp is that for the very small minority of people who understand the significance of gold, it is not a question of being gloomy. No, if you understand history and economics, you also understand that gold is the only money that has survived in history. Since fiat money begun, whether it was metal coins or paper money, governments have consistently destroyed its value by either diluting for example the silver in the coin from 100% to 0% as with the Roman Denarius in 180 to 280 AD. Or they have extended credit and printed money without any economic accomplishment in return. If you make a loan or print money without a compensating delivery of a service or goods, that money is by definition worthless. And this is exactly what governments are doing whenever they are under pressure. In the last few decades, over a couple of quadrillions of dollars of debt, unfunded liabilities and derivatives have been created out of thin air. Before this bubble period is over, those quadrillions of debts and liabilities will return to just air. And so will all the assets that were backed by this debt.

War drums are turning louder

The world is now entering the most dangerous period since the end of WWII. The sound of war drums is now becoming too loud to feel comfortable about the future. Trump’s declared policy until last week, was not to interfere in other countries politics. Since then the US has bombed Syria and Afghanistan and is continuing to bomb Iraq. All of these bombs are killing many more civilians than Syria allegedly killed a week ago. The bomb in Afghanistan is the biggest non-nuclear bomb ever dropped. North Korea is continuing with its nuclear bomb testing and the US is sending warships to the area and also threatening to strike. The conflict between China and the US regarding the islands in the South China Sea can easily escalate. Russia has not attacked any country outside its own territory for a very long time. But Russia is now feeling threatened from many directions. With US nuclear missiles directed towards Russia from both Eastern Europe and Turkey, the Russian bear is now feeling threatened. In Syria, Russia has been invited to assist in the fight against ISIS. Russia is unlikely to withdraw and if the US continues to bomb Syria, the outcome could be fatal. In addition, the whole of the Middle East is a time bomb. Saudi Arabia, for example, could be destabilised at any time.

Looking at military spending, the US is as big as the rest of the world. But we have seen in Vietnam, Afghanistan, Iraq and Libya that with all its fire power, the US could not win any of those conflicts against powers with a fraction of its military resources. Nuclear bombs would of course be decisive, but Russia also has enough nuclear missiles to destroy most of the world, just like the US.

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