Doubtless many gold and silver investors are starting to feel decidedly uneasy. Perhaps there is even a little panic as headline prices of the metals are pounded, especially in U.S. Dollar terms. So maybe we should remind ourselves of the fundamental rationale for holding these metals – insurance against monetary debasement.
Some might concluded that the ‘seismic monetary events’ of 2008 released sufficient financial stresses to eliminate the need for further ‘monetary insurance’ via precious metals. Yet we see parallels with New Zealand’s September 2010 Christchurch earthquake. It was surely a one-off event which, whilst formidable in its power, caused few casualties and could be repaired with relative ease. What followed on February 22nd 2011 will never be forgotten by those who experienced it as a secondary quake, now assessed as the third most expensive natural disaster in history, devastated the city.
Huge seismic tensions arise over vast periods of time often un-noticed by those in close proximity to the hidden stresses and strains building below. It is only at the point of dramatic tectonic shift that realization of the sheer magnitude of what is happening below becomes apparent. Yet by then it is too late to react.
In our view vast seismic monetary forces have been building since the foundation of the United States Federal Reserve in 1913 and the Great War of 1914-1918. Slowly but surely the negative ‘monetary energy’ caused by the disastrous – and ubiquitous – twentieth century embrace of socialism by the west has caused unprecedented strain. We would suggest it is necessary to visit the latter stages of the Roman empire for anything approaching a satisfactory parallel.
Those who bought gold, and especially silver, at the ‘top’ may be kicking themselves, especially if they were hoping to on-sell and make a fast buck. Those who borrowed money to buy gold, and especially silver, may be feeling rather nauseous as day after day prices are pounded. Yet, at Caerleon Publishing Limited, we have always advanced the case for the metals as monetary insurance. Ironically, we see the rationale for holding that insurance increasing – not diminishing. The great economist of the Austrian School, Ludwig von Mises, reminded us that there are only two ways a credit induced prosperity can end: “voluntary abandonment or the total destruction of the money system involved”. As electoral events in France and Greece have recently reminded us, there is no appetite for ‘voluntary abandonment’. On the contrary, expect demands for more ‘bread and circus’ to grow louder. Ultimately, expect: “total destruction of the money system involved”.
The whole essence of insurance is that you never need it until you need it. Seeking cover, just one minute after the disaster, invites history’s timeless admonishment – too late. Study the underlying financial topography, not the establishment’s ‘noise’. In doing so you will recognize, that as metals prices have weakened, the case for monetary insurance has actually become more compelling. If you want to learn more about gold and silver – without the hype that so often accompanies these metals – the second edition of Golden Bull will be launched very shortly.
