Author’s Preface

In 2002, under the influence of a libertarian themed investment newsletter, I converted about half of my net worth into US Gold Eagle coins. At the time, this was a little more than I had paid for the house I was living in. Any responsible financial adviser would have strongly cautioned me against putting so many eggs into one basket, especially into that particular basket. Gold was widely derided as a “barbarous relic”. As recently as May of 2012, Berkshire Hathaway Vice Chairman Charlie Munger publicly spurned the precious metal, claiming that “Civilized people don’t buy gold.” His boss, uber-investor Warren Buffett agreed, explaining that “If you buy an ounce of gold today and you hold it a hundred years, … you’ll have one ounce of gold and it won’t have done anything for you… You buy one hundred acres of farm land and it will produce for you every year. You can buy more farmland, and all kinds of things, and you still have one hundred acres of farmland at the end of the hundred years.”

I don’t disagree with Mr. Buffett’s argument. In fact, I wholeheartedly agree that the creation of wealth comes largely from the accumulation of productive capital like farmland or machinery. But I don’t at all regret my decision to buy such a large quantity of the barbarous relic. My reason for buying gold had nothing to do with investing in productive capital. What Mr. Buffett didn’t mention is that in the span of one hundred years, a farmer can expect numerous droughts, floods, hailstorms, locust plagues, perhaps even catastrophic global climate shifts. Similarly, any capitalist can expect sudden shifts in consumer preference, labor shortages, economic sanctions, adverse government regulations, unreliable suppliers, quantum leaps in technology, wars and rumors of war … The list is endless and any item on the list may leave the farmer with less than even his initial one hundred acres, or the capitalist bankrupt. Mr. Buffett also failed to mention that in order to purchase those hundred acres, and then more farmland, and then all kinds of things, one must offer something in exchange. One might try to barter a defunct restaurant for farmland, as a neighbor of mine has been trying to do for a couple of years now. For most of us, however, the preferred medium of exchange is money.

Ready money is a bulwark against disaster as well as the means of answering opportunity’s knock.

There are many different varieties of things called “money”, most of them usurpers to the title. In July of 2011, Congressman Ron Paul, chairman of the Subcommittee on Domestic Monetary Policy and Technology, in a Congressional hearing, asked Federal Reserve Board chairman Ben Bernanke, “Is gold money?” Mr. Bernanke hesitated momentarily, as his face took on a puzzled expression. Then he answered, simply, “No”. Congressman Paul followed up, asking, then “why do central banks hold gold as reserves?”

“Tradition”, answered Bernanke, admitting that the most traditional, conservative money is gold.

None would dispute that money has value. In fact, in most people’s minds, money and value are almost synonymous. As there are many different things that serve as money, fluctuations in the relative value of, or more properly, the relative demand for these things occur, and are traded, second by second, on world markets. Once in a blue moon, the relative demand for these different monies deviates so far from the historical norm, that the case for exchanging the money which is in favor for the one which is out of favor becomes glaringly obvious. This was the situation vis a vis the US Dollar and gold in 2002. Thus my purchase of gold was not intended as a productive investment, but as a speculation, one that has paid off handsomely.

Like Warren Buffett, I believe that investment plays the leading role on the economic stage. I also believe that speculation plays an important supporting role, and only occasionally the role of villain. About a year and a half ago, I became aware of a new speculative opportunity in a currency trade. Like my earlier trade, it involved selling USD. However, rather than traditional, conservative gold, it involved buying a currency which is entirely innovative and revolutionary. Consequently, the risk involved was exponentially higher. I had no way of reliably estimating either the upside or the downside from history. If I were to have sunk the price of my house into this trade, I would have had no grounds for complaint if my heirs had me involuntarily committed. Instead, I put $100 into this speculation, just dipping my toe into the water. As of this writing (3:13 EDT April 2, 2013), I am up 1272%, or 776% annualized. I am firmly convinced that this rate of growth will continue, and will probably accelerate explosively into the foreseeable future.

This blog is about traditional money (gold and silver), how the central banks of the world have tried to obscure the monetary role of gold in favor of their fiat currencies, and how, in May of 2009, a radically non-traditional money emerged which I believe will, in time, render the entire question of gold versus fiat currencies moot.

My intent in writing is to relate the purpose, history, and future of money. Since earliest childhood, we have been taught the folk wisdom that money is the root of all evil. This is a lie. Money is neither good nor evil. Nor is it the root cause of either good or evil. Money is simply a great (possibly the greatest) enabler of every human endeavor, regardless of the underlying motive. Thus, from a moralistic viewpoint, it is incumbent on good people to use money to foster good and combat evil. It is my hope that this blog may contribute to that effort in some way.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: