SovereignLife Freedom Blog

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.

The following YouTube clip suggests an interesting scenario – a potential motive behind the Chinese government’s encouragement for its citizens to buy gold.

I was having a conversation with some friends over the weekend, and the price of gold was one of the topics. And the big question was, “How high do you think gold will go?”

Then, just this morning, I came across this interesting article by Lorimer Wilson which is listing a significant number of gold market analysts – and quoting their predictions as to where gold is headed for. I was expecting the fairly conservative “$2,500″ of course, but did not expect the prevalence of predictions in the “over $5,000″ category – even as high as $15,000.

Take a look for yourself:  $5,000 Gold Bandwagon Now Includes These 65 Analysts – Got Gold?

With gold hitting the headlines more and more, and with national fiat currencies in disarray with currency “wars” etc, there is talk of the unmentionable – a return to some sort of Gold Standard.

However, there is more than one type of “gold standard”. And one can only assume – if it comes to pass – that governments will attempt to create a partially gold-backed currency that they still control.

This would be anathema to freedom lovers, as the most pressing “revolution” required in order to achieve meaningful freedom is to get the government out of the money business altogether. What we need is a totally free market in money – global money in the real sense. And the only global money on the horizon is gold, under some form of gold standard where monetary control rests with individual people.

But how would such a gold standard work, and is there any way to get from where we are to where we want to be – without shafting ordinary people?

Gary North believes so, and outlines his plan for a Gold Coin Standard in his essay: End The Fed: Get The Gold

Jeff Clark says: “We’ve got it easy right now. Click or call, and you can quickly and conveniently own a gold coin or bar. But if global concerns cause another panic or the dollar breaks down, you could find yourself standing in a line at the local coin shop or getting a busy signal. Simply, for reasons I discuss here, you may find it very difficult to get your hands on physical gold when that time comes.”

As gold rises in value, it confirms just one thing: paper money is falling in value.

History tells us that paper money always falls in value. This is euphemistically termed “inflation” – meaning prices increase when expressed in paper money. And history also tells us what happens when it falls in value rapidly – when people completely lose faith in it. Hyperinflation kicks in.

That’s what is in store for us – hyperinflation – if governments around the world think that all they have to do to reverse economic decline is to create more money.

Governments have only three sources of money. Taxation, borrowing or money-creating. So in order to “save” the economy they must plunge nations into higher taxes, increased borrowing and currency depreciation. Not a pretty scenario.

So what to do?

The issue is much more fundamental than that. The primary engine of economic destruction is the fact that all money comes into existence as debt. The more people borrow (which is why interest rates are being kept artificially low, so people will borrow), the more we get into debt.

We learned that our economic woes are because we all borrowed too much – individuals, businesses, counties, states, provinces and nations. And we’re told the remedy for our ills is to borrow more. Utter stupidity!

When people, rightly concerned about their economic welfare, start to spend less, save more, and pay down their debts – this is the equivalent of money destruction. Just as money is created by the act of borrowing, money is destroyed by the act of paying it back. That’s the way our crazy monetary system works.

So now we fear deflation, because we are all paying off our debts, spending less and borrowing less. Naturally, if millions and millions of people do this – so the monetary base shrinks.

Then governments must join the party, and trim their cloth accordingly. They pass austerity budgets, cut costs, sack bureaucrats – and in doing so attempt to reduce their own indebtedness – and once again add more fuel to the “monetary destruction furnace” of deflation.

So what’s the solution? If we can’t solve our problems of excess indebtedness with more debt, what can we do?

We change the very nature of the money system. We revert to what has always historically been money. We reinstate the time-tested system of debt-free money. And what is that? It’s gold. So instead of our money being paper only – based on nothing but the faith we have in our governments -we tie it to something of tangible and historic value, something that cannot be printed, deflated, destroyed and manipulated. And that commodity is gold.

The beauty of gold is that its value is known worldwide, as all civilisations and societies have known gold as money. It is globally accepted, thus it functions as a world money system and means of exchange. It is the money that naturally arises in the free market. Paper money, on the other hand, is fiat money – money by government decree.

When you own paper money it represents someone else’s debt. When you own gold it is a free and clear asset in your possession.

Does that mean we’ll all be carrying gold coins around with us in our pockets? Hardly. In this modern age – with computers, networks, global interconnection – all that is required is the issuance of monetary units that are fully convertible into gold on demand. Such units need only be mostly “virtual”.

Imagine how this would work. You have a “bank” balance of 1000 grams of gold – grams being the new monetary unit. You can access that balance using your debit card – and spend as you usually would. You are paid your salary in gold grams – once again as a credit deposit to your bank account. Life goes on as normal.

Will this happen? I don’t know. But I do know that this rotten debt money system is in its last days, and if the powers that be come up with another fraudulent paper money system, then its days will be numbered also.

The only long-term solution is to abandon the experiment in worthless paper money – money that has allowed the monstrous growth in government – and revert to that which has been proven over time. Gold as the basis for a modern money system is the only way to go – and the only way to put governments on notice that they will no longer be permitted to buy votes with funny money. No longer able to wage wars by debasing the currency. No longer able to maintain their power base by manipulating the currency.

No, with gold we get “money for the people” – real money. And more importantly, we get money that does not require any government authority or control to function as money – a money that would be accepted anywhere in the world.

Go gold!