Tuesday, July 1, 2014

The Great AUximoron

I recently spoke to a long time dealer in gold coins about the subject of gold. Without any prompting on my part, and probably due to the many times he's been asked about the enigmatic "price of gold", he seemed compelled, if not obligated, to volunteer his opinion on the matter, based on many decades of buying and selling physical gold:
When people believe things are under control, the price of gold is soft. When they start getting scared, it goes up.
And there you have it. Nothing you haven't heard before. Nothing you don't already know. But when you examine this statement, you realize that it is nothing more than "thoughts about the value of gold" that price gold - thoughts that matter, when the level of confidence (investment) in these thoughts is high enough to move price. Those are the thoughts that move the gold price today, with a little help from the issuers of those thoughts on paper, held as claims relative to future thoughts.

The major players in "gold" whose thoughts about value matter (CBs, Sovereign Wealth Funds, Pension Funds, etc.) also view "gold" for the most part as a sort of insurance policy within their portfolios. And what they believe they are insuring against is an "economic collapse", i.e. "a collapse of their paper portfolio" (thoughts of value, recorded on pieces of paper, held as contracts).

So by analogy, the thought process is quite simple at first: You have hazard insurance on your home, and you're home burns down, your claim is paid in dollars. You have auto insurance, and you total your car, your claim is paid in dollars.

Now you have portfolio insurance. The portfolio collapses. Your claim is paid in ... ?

You see, Gold is the only form of insurance which satisfies a claim against a systemic collapse of the same forms of paper wealth (including currencies) which currently "denominate" real physical gold. Yet those who determine that denomination hold it almost exclusively in paper form ...

My friends, if you hold nothing more than a paper claim upon physical gold, and paper currencies collapse, that is one thing. If you hold physical gold in your possession and paper currencies collapse, that is another.

It's been said many ways by far wiser men than I, but the great oxymoron of real, physical gold is that it has NOTHING to do with it's "price" in our derivative (thoughts of value) world ... because we price it in something that has NO intrinsic value at all (paper currencies), yet which denominate the value of all things on planet earth which people need or want.

And the great oxymoron of paper currencies (debt) is that while they have little to no intrinsic value, they cannot be legitimately created or copied by the common man. Rather, they are created exclusively by governments and bankers, who decree them "legal tender" in the satisfaction of themselves (debt).

There could not be a more perfectly managed mass delusion designed to enrich the merger of banking and government (corporatism) to foster the irresistible, yet sustainable Ponzi scheme that brings us to the egregious wealth inequality of the 1% vs. the 99% we have today.

And that same inequality eventually collapses all fiat empires, time after time, re-asserting gold's role in equitably settling these imbalances.

When gold assumes THAT role, it's value is far, far higher than the paper proxy used to insure against a default of all paper proxies.

If you hold real world physical gold and live to see this happen, your gold will set you free. If not, perhaps at least your children might have that chance.

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