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Federal Reserve Chairman Ben Bernanke says
gold is not money. Berkshire Hathaway’s Charlie Munger
claims it’s only for pre-holocaust Jews and that civilized people don’t buy it. The oracle of Omaha
Warren Buffet scorned it
as an unproductive asset and
says he’ll never invest in it. Financial advisers rarely, if ever, recommend it for personal retirement portfolios and many
people will argue that it’s not a worthy personal reserve because you can’t
eat it.
For
all intents and purposes,
some of the most influential investors, monetary officials and financial pundits in the world completely deny gold’s value as a unit of monetary
exchange and crisis reserve.
As
worthless as it is, however, tens of billions of dollars have recently
been shifting into this archaic asset of long forgotten
empires.
In
the last seven months alone the People’s Republic of China has added
more gold to their reserves
– over 500 tons – than the entire
holdings of the European Central Bank. They aren’t alone.
Russia’s President
Vladimir Putin has been aggresively
investing into the precious metal over the last
five years – spending
some $500 million monthly
as he diversifies his country’s assets out of
Dollars and Euros. Currently, 9% of Russia’s reserves are held in gold.
This,
of course, begs the question: why?
According to the World Gold Council, Russia has more than doubled its gold reserves in the past five years. Putin has taken advantage of the financial crisis to build the world’s fifth-biggest gold pile in a handful
of years, and is buying about half a billion
dollars’ worth every
month.
…
No
one else in the world plays
global power politics as ruthlessly
as Russia’s chilling
strongman…
…
Putin’s moves may
matter to your finances, because there are two ways to look at gold.
On
the one hand, it’s an investment
that by most modern
standards seems to make
no sense. It generates no
cash flow and serves no practical
purpose. Warren Buffett
has pointed out that we dig it
out of one hole in the ground
only to stick it in another, and anyone watching this from Mars would be very confused.
…
But
there’s another way to look at gold: As the most liquid reserve
in times of turmoil, or worse.
The
big story of our era is not that
the Spanish government is broke, nor
is it that
Paul Ryan apparently feels
the need to embellish his running record. It’s
that the United States, which
has dominated the world’s
economy for several lifetimes, is in relative decline.
…
We will soon be the first people in two hundred years
to live in a world not dominated by either Pax Americana or Pax Britannica.
This sort of changing of the guard
has never been peaceful.
The
declines of the Spanish,
French and British empires were all accompanied by conflict. The decline of British hegemony was a leading
cause of the First and Second World Wars.
What will happen as the U.S. loses its pre-eminence?
Maybe this will turn out better than similar
episodes in the past. Maybe the Chinese will embrace an open society
and the rule of law. If you believe that,
there is probably no reason to hold any gold.
On
the other hand, we may be about to enter a much more turbulent and dangerous
era of power politics and
international competition.
Source:
Market Watch [via Ulsterman Report]
Throughout history
we’ve seen what happens when nations collapse under the
weight of their own debt.
It
has almost always led to war across
the entire known world.
And
when those nations collapsed and were overtaken, their conquerors often exterminated their populations
and always confiscated their treasure, which usually amounted to gold, food and other physical resources.
Is
this what is coming?
Valdimir Putin, like many precious
metals investors, seems to think so, and he’s preparing for a world where the
U.S. Dollar, the Euro and other paper
assets no longer exist. Nearly 1/10th of his country’s reserves are held in gold. The Chinese officially report 2% of their reserve assets to be held in gold – but it’s often the case that the Chinese don’t like to show all their cards, so there is
a strong possibility that they have much more in precious metals holdings than we’re able to verify.
Those who
have lived through serious global paradigm shifts and studied history understand what has value when the prevailing political, social and economic systems collapse.
Financier
George Soros, who knows a thing or two about crisis and calamity, was there when the Nazis were rounding up Jews in his home country of Hungary. He’s seen the signs before and recently warned of a massive financial collapse, conflict across Europe and
violent riots in America.
In August he unloaded all
of his holdings in major financial
institutions, and like Vladimir Putin,
moved a portion of his wealth into
gold.
If
you believe that the economic recovery touted by the elite political class and mainstream experts is real, then by all means take out some more credit and buy a new car, pick up an investment property, and take a two week vacation to a far-off island.
If,
however, you think that Vladimir Putin, George Soros, the Chinese and the many others who are warning of an unprecedented global crisis may have an understanding of geo-politics and the real state of the global economy, perhaps it’s time you follow their lead and diversify into investments that will keep you
alive in a worst-case scenario.
Physical assets
– they’re the only things that
will matter when it hits the fan.
It’s time to double down.
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