SovereignLife Freedom Blog

“Fiat” money is money by decree – worthless paper made money by legal enforcement and financial sleight of hand. And what most of us don’t realise is that all such paper monies have failed, in the end. That’s the reason why gold and silver are going up – because in reality paper money is going down.

Here’s a fascinating “rogues gallery” of previous failed paper monies, just to get the context right and to remind us that no paper money is immune from ultimate failure – including the ones considered “too big to fail” – like the USD.

A Thousand Pictures is Worth One Word

Ambrose Evans-Pritchard, back from a sabbatical, has this to say:

As the twin pillars of international monetary system threaten to come tumbling down in unison, gold has reclaimed its ancient status as the anchor of stability. The spot price surged to an all-time high of $1,594 an ounce in London, lifting silver to $39 in its train.

Return of the Gold Standard as the World Order Unravels

Now you can buy your gold from a vending ATM machine in the UK:

Don’t Try Snacking on These Bars: The Vending Machine That Sells Gold Not Chocolate

No sooner had I started talking about Bitcoin than one of its exchangers – Mt Gox – was hacked, and clients of that service had their bitcoins stolen.

I received quite a lot of email saying something to the effect of: “Well, so much for your recommendation of Bitcoin!”. But that is jumping to conclusions on a number of fronts.

First “Bitcoin” was not hacked. A Bitcoin exchanger was – which is a vast difference. And to illustrate, if all those people with bitcoins in Mt Gox had instead kept their funds in their own “wallet” – on their own computer, then they would not have lost their funds.

The weakness in the system is the exchangers, and in this case Mt Gox’s system was not secure enough, and someone hacked into it and retrieved usernames and passwords of accounts.

Who knows, maybe it was a “false flag” attack – where some government agency wanted to create mistrust of Bitcoin as a way of discouraging its use. Stranger things have happened.

Anyway, for an excellent analysis and review of Bitcoin – from a post-hack perspective – I thoroughly recommend you read this article by Aaron Krowne:

A Computer Scientist and Gold Bug Analyzes Bitcoin

Peter Schiff looks at the dollar’s “competitors” for reserve currency status and concludes they all come up short – except for one – in his article: After The Dollar: What Comes Next?

What’s the world’s largest commercial bank? It’s ICBC - the Industrial and Commercial Bank of China. And boy, are the Chinese getting innovative. They’ve just launched globally the first credit card to offer two currencies – the Chinese yuan (RMB) and your local currency – according to the report from Xinhuanet.

In Jim Rogers’ case, his brand new card is denominated in both Singapore dollars (SGD) and RMB.

“A meme is now circulating that gold is in a bubble and that it’s time for the wise investor to sell. To me, that’s a ridiculous notion. Certainly a premature one.”

Doug Casey explains the case for gold in his essay: Debunking Anti-Gold Propaganda

By Andrey Dashkov, Casey Research

Several legislative initiatives caught our attention recently. All of them are related to the monetary role of gold and range from proposals to return to the gold standard, to minting gold and silver as an alternative currency, to having all state transactions carried out in gold and silver coins, to permitting citizens to run their own mints.

Do these proposals signal a significant attitude change among politicians and mainstream economic institutions toward gold? No. They are largely regarded as fringe ideas and dismissed out of hand. The third link above is written in a condescending tone that implies everyone knows that the gold standard is bad for an economy and it caused the Great Depression. Still, it’s quite telling that opinions that gold can be incorporated into a modern economy are becoming numerous, and actually making it onto the legislative agenda in various jurisdictions.

Last November, clearing house ICE Europe began accepting gold bullion as initial margin for crude oil and natural gas futures. This year, JPMorgan Chase announced that it would accept physical gold as collateral for a number of transactions. According to the Wall Street Journal, stock exchanges in New York, Chicago and Europe recently agreed to accept gold as collateral for certain trades, too. The World Gold Council is gaining traction in its push to have the Basel Committee on Banking Supervision accept the precious metals as a Tier-1 asset for banks, along with government bonds and currencies. Private and public institutions alike are clearly rethinking their attitude toward gold.

Perhaps most telling of all, the world’s central banks were net buyers of gold in 2010and in 2009, after being net sellers for the previous 20 years. As World Bank President Robert Zoellick said last November, gold has become the “yellow elephant in the room” that needs to be acknowledged by policymakers of major economies.

No one can predict exactly how this will all shake out, but Doug Casey has long said that a return to a gold standard, or some modern equivalent, is almost inevitable. That’s because, for the reasons Aristotle outlined 2,000 years ago (it’s durable, divisible, consistent, convenient, and has intrinsic value), gold is hands-down the world’s best money.

Now, Gresham’s Lawtells us that bad money drives out good, but that’s only true when legal tender laws hold sway (incentivizing people to hoard what’s perceived to be “good” money and spend the “bad” money as fast as they can). When people give up on the local legal tender, Gresham’s Law goes into reverse, and good money chases out bad. The dollarization of third-world economies is an example of this, the dollar being perceived as being good when compared to many shakier currencies.

So, what happens if fiat currencies as a class start to be perceived as bad money? Gresham, and history, tells us that they’ll eventually be abandoned, unless made good (put back on some acceptable standard of value, like gold).

The key point here is that it can’t happen just a little bit, just as you can’t get a little bit pregnant. Once it starts, the good money will drive out the bad, and in today’s wired global economy, the phenomenon will be worldwide, fast and devastatingly thorough.

The investment implications, broadly, are obvious; you want to own gold for safety and speculate on gold stocks for profit. The details on how best to do this are the current raison d’être of our metals publications.

In light of the information above, it seems that the Mania Phase of the gold bull market is getting closer every day. You’ll want to stock up on gold, silver and sound large-cap mining stocks before the investing crowd catches on. There’s still time, but it may be running short. To learn everything about prudent precious metals investments, give BIG GOLD a try today. Read our report on how Jeff Clark managed to boost his mom’s IRA – and his subscribers portfolios – by 90.4%… and how, for only $79 per year, you can do the same…

P.S. Watch this short video also: Richard Russell – Gold is The Safest Currency

Okay, you’ve decided to buy gold bullion for delivery. How should you store it – and where?

These questions are naturally on the mind of anyone considering the subject, and Jeff Clark takes a serious look at the issue and provides some solutions in his article: How Safe is Your Physical Gold?

This Charlie Rose interview – featuring John Hathaway of Tocqueville Asset Management, Peter Munk founder and chairman of Barrick Gold, and James Grant of Grant’s Interest Rate Observer - is definitely worth watching.