By PINCHAS LANDAU
Vending machines at German railway stations are selling small blocks of gold, in lieu of chocolate bars. Harrods, which caters to a higher-class customer than mere commuters, is now selling blocks of gold more or less off the shelf. These and other recently reported items are part of a steadily growing body of evidence suggesting that gold is at the center of a speculative frenzy that, in many respects, displays the characteristics of a mania.
To suggest this, especially in public, is to incur the wrath of a rapidly swelling legion of gold bugs. These are people who invest in gold out of belief, rather than base material motives such as making a profit.
Ten years ago, when the price of gold had sunk to around $250 an ounce - compared to the then all-time high of $980, hit in March 1980 - there were very few gold bugs left. But over the last decade, and especially over the last year or two as the global financial system has staggered through crashes, crises and collapses, the number of believers in the faith centered on the yellow metal has grown by leaps and bounds.
What exactly do they believe in? It's easier to define what they don't believe in, or regard as abominations. First and foremost is "fiat money," meaning a currency issued by governments that is backed only by the mere promise of the said government to stand behind the pieces of paper it issues, not by any real asset. All fiat money is essentially fraudulent, in the eyes of gold bugs.
Gold, on the other hand, is a real asset because it has been recognized and accepted as a store of value for many thousands of years - thanks to its scarcity and indestructibility. Until the 1930s, most currencies were backed by either gold or silver, with a legal obligation on the governments to produce on demand a specified amount of gold against each banknote it issued.
Of course, this obligation was largely fictional even then. But when the Depression created dire need, the US, the UK and other countries reneged on their promises by "leaving the gold standard." To the true believers, that was the watershed for the global economy, and it's basically been downhill ever since.
Central banks - the agencies that control national currencies and issue the stuff - are the demons of goldbug theology, responsible for systematic debasement of currencies and, ultimately, of the debauchment of the societies that use them. It is easy to see why the events of the last two years, and the revelations of the total incompetence and deep-seated corruption of the main pillars of the fiat currency-based financial system, has led so many people to convert to the ideological purity of a gold-based religion.
In particular, the huge and totally unprecedented expansion of central-government debt, taken on to support failed financial institutions and also to stimulate economies overwhelmed by debt, has convinced many people that key sovereign states - not just Ireland, but the UK, Japan and even the US - are all racing toward national bankruptcy.
This can only be avoided by "monetizing" the debt burden, which means printing the money to pay for it. But this "solution" will generate high and rising inflation, and ultimately hyperinflation, and the only tried and tested safeguard to protect personal wealth against inflation is - you guessed it - gold.
That seems to explain why the price of gold has made a long series of new record highs during this year - after an initial set of records last year, followed by a plunge from almost $1,000 to below $700 an ounce. The obvious, but heretical question is: If the world is teetering on the brink of bankruptcy, why hasn't gold already fulfilled its devotees' expectations and soared to a price level of multiple thousands? Why is it still struggling in the very low quadruple digits?
The answer usually given is that "they" are manipulating the price. Who is "they"? Well, it's TPTB, as the lunatics and weirdos who populate this section of the blogosphere call them - The Powers That Be. "They" are trying to defend the status quo, because its demise is their doom. But the rotten system that "they" created, and expanded for as long as they could, has finally crumbled under the weight of its own garbage currencies and junk bonds (by which they mean US government Treasuries, since the US government is insolvent in their view).
In the end, "they" and their machinations will be swept away, and the ensuing rush for true value, i.e. gold, will sweep the price to two, three, five or more thousand dollars. When that apocalypse arrives, only the faithful, who put their trust in gold, will find salvation in "real value," while the mass of fools who trusted fiat currency and the governments who issue it will be reduced to penury.
But it's not too late to see the light and save yourself. Buy now, at prices that will seem laughably low when the general public realizes the truth... but which are also 50 percent above those of one year ago, when the end of the world really was nigh, but when no one wanted to touch the stuff.
landaup@netvision.net.il
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