Posted Sep 2, 2014 by Martin Armstrong
Yes – to answer a lot of questions. We still see the future rally in gold reaching the $5,000 level. Keep in mind this requires an asset rally. Those who tout the German Hyperinflation omit the fact that ALL tangible assets rose not only gold and the replacement currency people accepted was backed by real estate not gold. So the rally in gold will be part of an asset rally – not gold by itself, which has never taken place even once in history.
The current special report on the metals provides the targets and the timing for the high in gold and silver with the projections in price and time for the low prior to the rally. As for those who insist gold is money, let me make this point very clear. Money is ONLY a medium of exchange it has NEVER been a store of value for money has NEVER retained a specific buying power from one day to the next EVER! I understand people hate me for saying this for they just have to cling to their myths and theories to justify their losses. Some people cannot admit they are wrong and those are typically the people who cannot trade and why most people who try to trade lose money.
This argument that gold is money has been around since the late 19th century. It was the battle between the Silver Democrats and the Conservatives. The governments starting with Germany dropped silver as money. The USA followed and the silver promoters called it the Crime of 1873. This was a return to a gold standard only. It was then argued that a gold standard created deflation so they wanted to create inflation like Europe right now to pump-up the economy. This was instigated by the silver miners (promoters) who needed government to buy their production. This led to the flood of silver dollars that drove gold out of circulation. This became Gresham’s Law – bad money drives out good. This was the result of the silver miners promoting that silver should be raised in value relative to gold. The US foolishly then tried to force the rest of the world to adopt their silver/gold ratio. But instead, the silver poured into the USA and the Europeans took home gold since the Americans were overvaluing silver.
The US was on the verge of bankruptcy in 1896 flooded with silver as the gold migrated to Europe. This Crisis led to the Presidential Election and William Jennings Bryan’s famous speech – thou shalt not crucify mankind on a cross of gold. The Wizard of Oz was written as a political satire portraying the gold standard as oppressive and deflationary. The tin man was industry, the scarecrow was agriculture, and the cowardly lion was Bryan. They were off to see the Wizard who was Congress to complain about the unemployment following the yellow-brick road symbolizing the gold standard.
So these arguments are very old and the debate between austerity (gold standard) and inflation has never ended, albeit the gold promoters keep up the same stories regardless of the facts. They have turned from silver to paper money assuming that it is now paper money rather than a flood of silver dollars that is the great evil. Silver became rehabilitated after it was freed in the 1960s with the collapse of the silver standard. After that, the tax on silver imposed in 1934 was abandoned.
This idea of returning to a gold standard is still argued more than 100 years later with nothing new to add to the debate. A return to the gold standard would create deflation and high unemployment for it would introduce austerity. If a gold standard were truly implemented it would shrink the money supply and economic growth would decline as we see in Europe with these same ideas of austerity. Europe is now being forced into massive inflation because of the austerity policies they did not understand.
The problem with gold that turns off the MAJORITY of investors has been these wild stories. They sit well with the die-hard goldbugs, but they fail to convert the masses and thus will not increase the buying power of the advocates. Unfortunately, I can find no such historical support for that idea that gold is either a store of value different from anything else that fluctuates in value or exclusively money when the majority of society disagrees and that is all that counts. The business cycle cannot be defeated – even Paul Volcker admitted that much.
Governments are moving to electronic money and will never return to a gold standard. That is reality. Gold standards have been attempted countless times but have always failed because there is a business cycle that cannot be manipulated.
I have warned that if society implodes too far, we end up with the Mad Max outcome. What is that? It is where the only medium of exchange becomes food – not even gold. It is returning the cycle to its beginning. Money began as food (cattle), moved to sheep skins for clothing, then to bronze that was cast in large ingots the shape of the medium of exchange it was replacing – sheep skins. The four pointed edges were the legs. Neither silver nor gold served as money. They were both luxury items and that has NEVER provided a medium of exchange until the basics are in place. So if we are headed into a Mad Max event, sorry, stockpile food.
Gold ONLY became a medium of exchange when it became common. For thousands of years Gold was restricted for the use of kings. It did not circulate as money. We find kings buried with gold from Philip II of Macedon to the Pharaohs of Egypt. Agamemnon’s gold death mask has survived. Gold was not some inherent form of money from day one. Its value increased only as a function of DEMAND – people liked it. That was all.
As gold became more common, it then migrated down to the aristocrats in the form of jewelry. Only with the discovery of gold in Turkey in vast quantities did it finally emerge as a medium of exchange based solely upon agreement by the people who saw it as desirable. That means DEMAND. It was something only kings could afford. The same thing took place with PURPLE dye that was restricted to only Roman Emperors. That is what the term refers to saying someone assumed the PURPLE. In the Catholic Church, the vestments during lent are still PURPLE symbolizing that Christ is King.
During the Middle Ages as trade was resurfacing, the bankers were called “Peppermen” because the spice pepper was MORE valuable than gold by weight. This reflects the entire issue. The medium of exchange depends ENTIRELY upon demand. Money is what people find desirable at that moment. An example of this is looking at the fine art of Rubens. The women he painted were always robust – not the model type of today. Why? A skinny woman was a poor woman. If she was rich she had weight to her. In Russia, having decayed teeth was a show of wealth for you could afford sugar.
This insistence that only gold is money has no foundation in history. They are distorting history to fit a predetermined agenda they do not even understand. This idea that if money is tangible then there will be no inflation is without any support in history whatsoever. Spain was the richest country in Europe after bringing back all the gold from America which created massive inflation throughout Europe. Like Bretton Woods, it did not prevent the collapse of Spain, which thanks to becoming a serial defaulter successfully converted itself from the richest nation to the third world pauper status. Spain became a serial defaulter on its government debt starting in 1557 followed by 1570, 1575, 1596, 1607, and 1647 ending in a 3rd world status. By the end, nobody would lend them anything. They destroyed the Italian banks and then wiped out all the German bankers. Only a fool buys government debt.
Gold did not save Spain nor did the gold standard postwar world with Bretton Woods! Why? BECAUSE IT DOES NOT MATTER WHAT THE MONEY IS – THE PROBLEM IS FISCAL MISMANAGEMENT OF GOVERNMENT. Returning to a gold standard will NOT make politicians honest. Sorry – we need real reform for that one and that does NOT center upon what we use as money.
This should be about making money – not supporting a predetermined idea because that is what someone would like to see happen. No matter what evidence is presented, there are those who will refuse to believe anything other than what they want to believe. That is life. They have to learn the hard way.