A Little Game of Old Maid, Part IX
Date: March 16th, 2009
Category: Ideology of Freedom
By Robert Ringer
(The content of this series of articles has been taken from my 1982 book “Civilization.” Today, we continue with our examination of real money. Following is what I had to say about that subject in 1982.)
In theory, paper money is fine, provided it is given only to people who produce products and services that other people voluntarily want to buy. So long as a majority of people believe that this is what paper money is used for, they have faith in it. Faith is the key to the whole paper money scheme; it is the key to the stability of any kind of money.
People have faith in gold because of the properties we discussed earlier and because centuries of experience have reinforced that faith. But paper money has none of the desirable qualities of gold, and centuries of experience have belied people’s faith in it.
Therefore, the value of a paper currency at any given time exists only in the minds of the people who are forced to use it. Once those people lose faith in the currency, the currency ceases to exist ─ no matter what laws the government passes.
By the same token, so long as people have faith in gold, governments cannot eradicate that faith simply by insisting that gold is not money. Vern Myers suggests how silly such governmental attempts are in the following analogy: “A comparable case would be if the U.S. government passed a law which said that parents no longer love their children; the bureaucrats would assure you that children were now only a commodity. After all, isn’t it the law? Therefore sell your children.”
Certainly all hard money newsletter writers, and most of their readers, are well acquainted with everything I have discussed up to this point. Yet, as I said before, they still seem intent on overlooking the crux of the gold issue. This is evidenced in many ways.
For one thing, their talk always centers on the price of gold, and what that price means in terms of profits or losses. For another, they recommend selling gold because they fear the possibility of a deflation.
Also, they say that gold has risen “too high,” and that it is therefore too late to buy. Finally, they warn that one of the big drawbacks to buying gold is that it doesn’t pay dividends or interest.
In each of these instances, however, they have drawn their readers’ attention away from the main point of the gold issue. Gold was never intended to be an “investment.” Gold is a protective shield ─ the finest ever known to man ─ against the destruction of paper currencies.
Gold is a survival tool. It guarantees you that the fruits of your labor will not be stolen. Think of gold as markers that keep track of the amount of goods and services you are entitled to as a result of your labor.
Governments can print infinite amounts of paper markers, but gold markers cannot be manufactured. You buy gold as a near foolproof insurance policy against government’s paper money theft scheme; you don’t “invest” in gold in the hopes of making a profit.
Once a person understands the crux of the gold issue, he has little interest in the paper money “price” of gold, whether it be $200 an ounce, $2,000 an ounce, or $20,000 an ounce. When the destruction of paper money is nearing its end, gold may very well be “priced” at $1 million an ounce, but so what?
If $1 million in paper money buys only a basket of groceries, does the price really matter? You may just as well measure gold in terms of air. If you understand the long term ─ which is the focus of this section of the book ─ you will condition your mind to ignore the “price” of gold in terms of depreciating paper dollars.
Likewise, you will not be tempted to sell gold just because its paper money price happens to be dropping at any given time. This is where many “deflationists” totally miss the boat.
A detailed historical study of gold’s effectiveness as a store of value, by Professor Roy Jastram of the University of California (Berkeley), confirms that gold tends to retain its value in relation to other commodities, long term, even through periods of deflation.
What does it matter if the paper money price of gold is $100 an ounce if one ounce of gold at that price buys the same amount of other commodities as it did at $500 an ounce? Gold transcends paper-money prices; in fact, it really measures the value of paper money, rather than the other way around.
As to the argument that it’s “too late” to buy gold because you didn’t get in at $35 an ounce, or $100 an ounce, or whatever, you should by this time see the faulty logic in such thinking. Gold is for long term planning. Just because you didn’t get in at the beginning, when the government first removed its artificial price barrier, doesn’t mean that it’s any less a protective tool now than it was then.
Sure, it’s nice to be able to buy gold at a lower paper money price, for the obvious reason that you can get more of it with fewer pieces of paper. But how many times in your life have you gotten in on anything on the ground floor? Get in now. Buy today. Buy at $1,000 an ounce. Buy at $5,000 an ounce. Let someone else get stuck with the Old Maid.
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Today’s Reflections:
Again, everything I said here is still true today – and, almost certainly, will continue to be true into the foreseeable future. As I pointed out, there would be nothing wrong with paper money per se if it were given only to people who produced products that other people voluntarily wanted to buy.
Paper money is all about faith. So long as a majority of people believe that it can be used to buy the goods and services they want, they will have faith in it. If the seller of a product believes that the IOU someone wants to pay him with can be used to buy something of equal value, no problem.
But once the general public catches on – once most people realize that government is simply printing up pieces of paper and handing them out to people who don’t produce anything in return – they begin to flee into hard assets. And with Washington’s dramatically accelerated march toward Marxism, the odds that we will see this happen in the not-too-distant future are very high.
March 18th, 2009 at 11:27 am
“There’s a sucker born every minute” …..Michael Cassius McDonald, 1860’s
That old aphorism should now be updated: There’s a sucker born every second. This truism is the primary reason why our economy has crashed and socialism is now growing exponentially, it is because there are so many millions of suckers that have been and are being born. Perhaps that sounds a bit harsh, calling my fellow Americans “suckers.” Sorry, if that bit of frankness offends anybody; but, I could use some other, and perhaps, more offensive terms and still speak the truth about my assessment of a large and growing segment of the population. In fact, the term sucker, in my opinion, is a very mild way of putting it.
The good news is that the condition of living in suckerdom, like serfdom, is entirely reversible. If you have been infected with suckeritis or you know someone who has contracted it, it need not be fatal. This condition is entirely treatable and 100% curable. The first step in the treatment process is finding an articulate individual who is telling the truth about politics, the economy, human nature, and life in general. This can be more difficult than you might imagine.
One such articulate and truthful individual is Mr. Peter Schiff: Recently, I had the privilege of listening to him speak at The Ludwig von Mises Institute. http://www.mises.org/ is where you can view one of his best oral presentations.
The legendary Jim Rodgers is another individual that possesses both common and uncommon sense.
For many years a man by the name of Marc Faber was warning people not to be suckered into losing everything when the boom turned into doom.
All three of the above individuals rely on gold both as an investment, and a store of value. If you have gold, or you are thinking about buying it, than it would be a very wise move to consider what these men have to say. Google any of the above individuals if you want to supplement Mr. Ringers advice on gold.
Warning: If you’re happy being a sucker wearing a pair of rose colored glasses and wish to be an eternal optimist, than I suggest that you not waste your time and listen to any of these men. All of these men have a very grim outlook on the economy. In fact, I respect the opinions of these men so much that, frankly, I’m a bit worried for the future of America and the people I love.
Personally, I think gold carries some heavy-duty risks. Learn what they are if you don’t want to walk on the road to suckerdom. If you think that only gold will carry you safely threw the next great depression, then you might want to rethink your position and think again.
In conclusion, my great-grandparents raised my grandparents and they lived very well during the last Great Depression. My family lived like kings during that time period when in comparison to the general population. They did it without gold. My grandparents also raised my parents threw some harsh economic times. In the future, I will post just how they accomplished this. Personally, I own both gold and silver. And I’m ready to sell and get out of gold as fast as a bat out of hell if the federal government looks like it will employ price controls and/or confiscation of commodities as a means of supporting the almighty dollar. There are a lot of good places to hide and store your wealth, remember that gold is just one of them.
Thank you Mr. Ringer for bringing up this important subject and revisiting your excellent and thought provoking book, I still have a copy which is worth more than its weight in gold.