I still receive many comments and emails from gold bugs who believe that hyperinflation is coming/ has begun and that ultimately the solution is that we must return to some sort of gold as/ behind money construct.
For the record, I currently see price deflation in things that most consider to be “Assets,” while at the same time I recognize price inflation in things that people need. Overall I believe that “asset” deflation is far larger and that it is caused at the root by an overall deflation in the total quantity of money – today that is base money, debt (other “deposits), AND derivatives. I believe that all currencies constructed to date have/ will fail due to their flawed construct. They all die for the same exact reason – that is a loss of confidence (which usually leads to massive increases in money quantity).
Yes, our dollar is dying in the same manner as all other currencies throughout history, regardless of what backs them. I believe the sequence of events will include another round of very significant asset deflation, and that the reaction to it may be the trigger for a loss of confidence event/s. Timing of those events is not clear, but as I say, I do not believe this is a problem that will be passed onto our grandkids, nor our children, it is this generation that will be forced to live through the transition to whatever is next.
This morning I received an email from someone who at first glance was just another gold bug… but at second glance, he is really a free money advocate believing that gold should be free to perform a savings (store of wealth) function, alongside of a fiat trading medium that is not generally considered a store of wealth. This concept is labeled the “Free Gold” concept, and many detailed articles can be found at the FOFOA blog.
I HIGHLY recommend reading this blog and have marked it in my blog roll for you. So, in the past two days I have posted an article about complexity, another about a man who also sees deflation then hyperinflation, and today I am linking you to that blog with many articles by someone who sees hyperinflation as the destination and is very good at spelling out the reasons why he sees that. What I appreciate about the FOFOA blog is that he is NOT proposing that gold be our next money system, but instead believes that it is a store of wealth alongside of our next money system. In fact, that is exactly what I recommended in Freedom’s Vision when I say that gold must be FREE to trade without manipulation.
However, because I’m still bombarded by hardcore gold bugs, here is my response to those who profess their undying admiration of gold’s utility as money itself. No, I’m not much fun at a gold bug’s or a debt pusher’s party, those two paradigms are not the only answer, they both belong to a false and failed framework of a box that is as failed as the Republican/Democrat box in which we live. Things are not either this or that… real answers to things that have failed EXCLUDE the very “this” and “that” of the past!
While my perspective is “out there” relative to traditional (BS) theory, here’s my overall perspective and response to gold bugs for what it’s worth:
While I appreciate the gold bug’s sentiment, gold is simply the other side of the same old coin. There is only ONE REAL WEALTH, and that is people, not gold. All gold standards have failed throughout history in the very same manner as have “fiat” currencies – history is through the eye of the beholder’s bias, I encourage everyone to view both sides of monetary history for what it is – all monies have failed, do we simply repeat a multiple human failure? Isn’t that the definition of insanity?
Recall the specter of the roaring twenties… Who owned the gold? How did credit dollars get so out of control that the Great Depression followed? Were we not on a gold standard then? How many times during periods of gold standards do politicians (in bed with bankers) recast the ratio of gold to paper and why? Has the gold bug myth of mining more gold from the earth as prices rise really worked to control inflation and deflation? Who has it worked for?
Economies are built upon people, not gold… empathy and communications lead to the rule of law, which includes a shared means of exchange. That exchange allows the coming together of monetary, natural, and human capital that then build the infrastructure that support people, not gold. It is people who BUILD wealth, wealth does not just simply exist on its own. What is far more important than WHAT backs money (ultimately only people can) is WHO controls its production and its quantity! This is the realization that civilization is working towards… if we must go through another gold standard on the way to that destination of understanding, then it will bring nothing but pain to all but those who control it – and that is NOT you, nor is it I.
There is only ONE currency that will survive the test of time, and that is a currency based upon MATH and the rule of law that the people uphold via transparency and checks and balances. The math MUST target ZERO PRICE inflation/deflation, and then, and only then, will a stable system be made that can last.
The real store of wealth is the intellect of the human mind, not an arbitrary rare earth element. ENERGY is far more important than minerals and is the ONLY INTRINSIC thing in nature. In fact, modern science (not the crap you and I learned in school and is still be perpetuated) is rapidly finding that all minerals, all matter, literally springs forth from energy. The universe is comprised of ENERGY, everything, all matter including gold, oil, water, and people are energy… we are all simply waves upon the fabric of the universe and we are all connected by it. Gold is simply one state of energy, as is soil, rock, the sun, you, me and everything else. This is the truth that people are on collision course with, all roads lead to the truth.
Again, if humanity must suffer through yet another gold standard, we will have been miserable failures to yet another generation that will have to learn that WHO controls the money is FAR, FAR more important than what backs it. Gold and debt are both controlled by the very same people… control is the key word, they use BOTH gold and debt to control the masses. Ultimately the only real money is backed by the masses, their energy, their creativity, and their imaginations. That is the long-term path that humanity is on.
You, me, and everyone else, should be free to trade gold unrestricted from the manipulations that are occurring now and have occurred throughout history. Gold is THE most manipulated substance on the planet, and has been for as long as it has been used as “a store of wealth.”
All that said, I realize that current perceptions are everything in the short term, and thus I own small quantities of precious metals and recommend that others do too. However, it should be noted that I began recommending that ownership at $300 an ounce, not $1,300… not that it can’t and won’t go higher, it can and probably will as the speculative 3rd phase of its parabolic rise probably has yet to occur.
As the velocity of debt has come to a screeching halt (debt saturation), the PRIVATE central bankers dependent upon never ending growth have been throwing greater quantities of money to make up for the lack of velocity. That has failed, and will fail as long as debt saturation remains. Meanwhile we walk down a dark hallway of events that are leading us to our currency’s final destination. Failure to recognize current problems and history for what they are will doom another generation to a repeat of the same mistakes. We must continue on our evolutionary path, and to do that we must regain control of our rule of law and our monetary system.
Once the people have done that, then humankind will advance our knowledge of the universe, and in turn secure the survival of our species.
Again, let me connect the dots for you… communication → empathy → rule-of-law → monetary system → capital formation → natural resources → human resources → wealth → scientific understanding → long term SURVIVAL of the species!
Note that each is built upon the last – we cannot accomplish the upper level functions as quickly or as efficiently without a solid foundation. It is our non-nature-conforming rule-of-law and monetary systems that are our present drag to understanding the true nature of the universe.
Yes, I know this sounds fanciful, but matter can be created from energy! Our experience is limited to the opposite! That is we can and do readily convert matter into energy, but we are still infants in our ability to do the opposite. As we wise up to the way the universe really works (forget the “Big Bang” and all other such world is flat nonsense) we will discover the processes through which water (how did it get on our planet?), oil, gold, and other matter came into being. We will learn that we are quite literally swimming in energy, and we will learn to use it to our advantage. But first we must make sure that we progress forward and not step backwards in terms of our rule of law and in terms of our monetary system.