Gold is a Currency
By Greg Hunter’s USAWatchdog.com
We have long been told that gold is a commodity–that it is no different than a bushel of corn or a barrel of oil. In many newspapers, it is listed under the commodity section. With the advent of the Federal Reserve’s recent announcement of “unlimited” Quantitative Easing (QE) or money printing, that has changed. The view of gold as a commodity has circled back to what banker JP Morgan proclaimed to Congress in 1913, “Gold is money and nothing else.” Many folks in the blogosphere have long agreed with the original JP Morgan. It was the rest of the fiat world that wanted us all to believe the enormous lie that gold was only a commodity and not money. Never mind that every central bank on the planet holds gold (and have been buying gold hand over fist for the past few years).
Now, a modern day version of JP Morgan is telling the world, “Gold is a currency.” That’s what $120 billion hedge fund manager Ray Dalio said recently about the yellow metal. Dalio, founder of Bridgewater Associates, doesn’t give many interviews. So, I find it very telling that when he does speak, he says, “It’s not sensible not to own gold.” When asked if he owned gold, he quickly replies, “Oh yeah, I do,” and said people should have “10%” in their portfolios. (Click here to see the complete Ray Dalio interview.) This is what Mr. Dalio said the day before the Fed announced its now infamous “unlimited” QE.
Just last week, Dalio was riding the gold band wagon again and told CNBC the yellow metal “should be a part of everybody’s portfolio to some degree, because it diversifies the portfolio. It is the alternative money.” (Click here for the complete CNBC story.) I find it interesting the man Time Magazine included in its 2012 “100 most influential people in the world” is sounding this warning. I can only speculate, but I wonder what he sees. Is it a banking holiday? Is it a Treasury bond bust as holders of U.S. debt sell in a panic? Does he see inflation or hyperinflation down the road? I wonder if he is anticipating a new currency, or a global derivatives meltdown that leads to a worldwide depression. Maybe it’s all of the above. I don’t really know what he sees, but he sees something, and gold is his choice to counter a black horizon.
You would expect someone like Jim Sinclair to talk up gold. His nickname is “Mr. Gold.” And, if there were a “Mr. Silver,” that would be Eric Sprott of the $10 billion Sprott Asset Management. Sprott is heavily invested in physical. Both men have been instructing investors to buy precious metals for more than a decade, and BOTH have been spot-on. For these guys, it was never a simple commodity play, but a currency play against an enormous amount of global money printing. For years, Sinclair has said the central banks would issue “QE to infinity.” The Fed calling the most recent round of money printing “unlimited” looks like a direct hit to me.
Don’t get me wrong, Ray Dalio is a very good investor, but he is hardly considered a legendary gold investor. I cannot remember a time when he was touting gold like he is now. Why would he do this? I think it is a matter of respect and trust for Mr. Dalio because he sees something very big coming. Dalio can’t do what the mainstream media (MSM) did in the wake of the 2008 meltdown. In almost complete unison, the MSM said, “Nobody saw it coming.” It’s Dalio’s job to see “it” coming, and he can’t sit quietly by when something this big is barreling down the tracks. He has to be able to say, in the future, he saw it coming and warned people to protect themselves. Call it his civic duty and a career prolonging move. It’s a twofer!
The last time Dalio said something big was coming, he was warning about the financial meltdown of 2008. We all know how that story ended. In July of 2011, Dalio said in the New Yorker, “I think late 2012 or early 2013 is going to be another very difficult period.” (Click here to read the complete New Yorker post.) I think that is a nice way of saying another meltdown is coming, and this time, you better have some gold or you’re screwed.
Why else would a top hedge fund manager tell people to buy some ancient relic and just hold it? Warren Buffett isn’t doing that. After all, gold pays no dividend. It pays no interest. You must pay for secure storage, and it cannot magically split like a share of common stock. If gold is a currency, why not just hold U.S. dollars? That is a currency, too, isn’t it? Holding gold is a very defensive play. So, my question is what is Dalio really worried about? I don’t know, but he is so on edge, that he’s saying “gold is a currency,” and I think that means gold has turned a psychological corner.
I see less articles on platinum over silver & gold. How about platinum?
Has platinum ever been confiscated? If not, wouldn’t that be a better way to play it safe over gold?
Since 1970 platinum typically commands a 30% premium over gold
Platinum is now a 27-year low compared to gold.
If platinum mining were to stop today, the above ground supplies would last only 2 years.
Greg, A well written article. I give you so much credit for acknowledging Jim Sinclair for his call for QE TO INFINITY years ago. So many people now use that term without giving him credit and he does not even get upset. He for whatever good reason has tried to help people see what is coming down the road, and his vision of the future is legendary. I also give you credit for trying to lay out the news in a truthful way. Thank you, Armistead
Armistead, I think Sinclair got the term from Buzz Lightyear “TO INFINITY AND BEYOND!”
The statement that “Gold is a currency” can mean a lot of things. Let us agree that Gold is a precious metal, that it is a portable asset, that it is a protection against Debt-ridden and broken banking systems, that it is a store of value that rises and falls historically, according to the fiscal piety (or madness) of Governments and their Bankers. Since we are now in the era of QE to infinity (Jim Sinclair’s term), the possesion of Gold as a store and safehouse for wealth is a prudent move. Having said that, I will challenge anybody who argues that FIAT paper money will disappear from the world or that the world will be henceforth paying for used cars and movie tickets in gold or silver trinkets…
Criminal politicians will always seek to curry favor with the ne’er do wells and steal the people’s wealth through fiat currency and inflation. I have been in places where the main population held U$D, Pounds Sterling, Deutschmarks instead of local currency due to the high inflation of the local economy. The wealthy held gold in addition to these other currencies. The U$D was considered as good as gold; but then that was 1990 and America was strong and free.
Yes, and how many people will take this advice and put their dollars into paper gold? I tried to purchase some gold coins from a dealer the other day whom I used in the past and he was steering me to GLD. I also have friends who claim they are heavily invested in gold, but in reality it is in stocks or paper gold. Again, for gold to become a currency, it has to be in your pocket and not folded up in a portfolio under some strangers promise of safekeeping.
Did you see Morgan Stanley’s warning earlier this week that predicts QE4 before year end? Stewart Thomson repeated it at http://www.321gold.com/editorials/thomson_s/thomson_s_092512.html
I see Gold and silver as way to counter the deflating dollar…. it preserves your buying power. The price of gold and silver are being actively suppressed and when the “gold certificate” bubble pops you will see real gold and silver take off. As part of the working poor, I don’t have any retirement account but I do save silver coins …. not gold… if the SHTF. gold will be harder to barter with; food and bullets will be as valuable as gold and silver and most important, clean water…..
Mitch, I agree 100% about silver. Gold will be so valuable that even a tenth of an ounce will be way too much for day to day transaction. Even now, a tenth of an ounce of gold is about $175. I think a good stockpile of silver is prudent along with protection, food, and water. However, a few ounces of gold along with some silver in your bug out pack is probably a good idea too.
Bravo Greg … debt-free currency IN CIRCULATION is the only way to purge existing debt from circulation. Gresham’s Law prevented this in past bullion based systems where gold had fixed values and did not have the valuation and distribution advantages of real-time gold-as-money within the 21st century. Who was it that said “you cannot pour new wine into old wineskins” ? Real-time capabilities have been key. In 1971, the real-time genie was loosened from the bottle but in that same instant, the evil debt genie also escaped. The irony is that the real-time genie holds the only key on how to get the debt genie back into the bottle. Gold is real-time money. The USD’s new role is much more powerful than just being a currency. It now doubles as being the real-time measure and servant to gold-as-money that it was really designed to be , IMO. The bigger picture is not going from debt to asset based currency. It’s going from asset based (FIXED) to debt based and then back to asset based (in real-time), where the dollar’s floating role (as a currency) has been a necessary evil and a stop gap measure in history.
We really need to get the term “real-time” into the conversation more …. much more. It takes the emphasis off gold, alone, which “didn’t work” in days gone by. What do ya think ?
I continue to find your views provocative. However, when it comes to hedging bets against a financial calamity, the overwhelming solution I hear from you and your guests is to buy gold, or sometimes silver.
While I’m sure you have the best intentions in mind, I’d really appreciate knowing whether you and your guests are somehow benefiting from this gold mania. Please reassure me that there isn’t some conflict of interest that I’m not aware of.
Hi!, Patrons Of USAWatchdog.com Et Al:
Here’s an after thought or two which may require your due diligence plus further disussions but you decide. My deceased mentor who started purchasing the barbaric relic when it was far more dispised as a monetary unit @ $11/troy oz. He pointed his finger at me; calling me a JOHNNY COME LATELY who would pay a steep commission to a broker to own gold. 1st the gold that is deposited in Fort Knox is the peoples’ gold is it not? Why isn’t it circulating among us?
One day my mentor said, after I’d paid a commissioned broker to buy some Kruggerrands @ around $125, that the time was coming when gold could be dropped from my investor’s list, because he was anticipating the screwballs in Washington to come out wih a New Paper currency 100 to 1 meaning you give them your present $100 for $1 of their New Paper Whatever. Russ, he asked me, how do you protect yourself and the price of your gold when they do that? Say gold is $5,000/troy oz. in today’s present Federal Reserve Notes but they drop 2 zeros off that price using their New Currency and now your previously priced gold @ $5,000/troy oz. becomes $50 gold in their New Currency. What’s your plan, Russ, he asked me to circumvent that chess move on the part of those running the Country and impoverishing the people on purpose? This guy was so well read he even had a printed copy of the Intimate Papers Of Coloniel House, the alter ego of President Wilson who regretted his role in allowing the imposition of the Federal Reserve into position for running (ruining) the US monetary system plus he had a copy of the book, Philip Drue Administrator, the story of how a future president would beome the dictator over our impoverishment. Of coarse the easiest way for any regime to impoverish its’ population is to debauch its’ currency via inflation. Let us not forget that, afte Rosevelt took our citizens gold, he increased the price by some 60%. Here now the US mint; instead of minting the Fort Knox gold and handing it out to the people is minting newly mined gold into Gold Eagle coins to “sell” to US with their literature making those sales inferring that the gold price will climb thus covering for their debauching of OUR US $ & so the process of defauchery continues doesn’t it? Some are fearful that the screwballs will confiscate gold if they buy it but the real way the government can confiscate OUR gold is to exchange the presnet US $ for another curency and thus dilute the gold price but, in watching what the Helicopter is doing presently with QE3 etc., this move isn’t yet. There is more debauchery ahead, before they pull the plug on the Federal Reserve Note program and evidently the Helicopter wants to keep his debauching job!
So, what’s the answer to the question my mentor posed to me many years ago? He said: “Russ exchange some of your paper for coins, because no matter what paper is being used, 4 quarters will buy that $’s worth of goods won’t it?” Say gold goes to $5,000/troy oz. in Federal Reseve Notes like some commentators think; you sell that oz. of gold for Federal Reserve Notes but then you exchange that $5,000 for quarters nickels and dimes etc. When the New Currency is issued, the $40,000 automobile, priced in Fedeal Reserve Notes, will cost you $400 in the New 100 to 1 Currency and from there you should be able to start building a prosperous Nation again right? He added that the coins come out from the US Treasury & not from the Federal Reserve System plus they are of limited quantities having to be mined unlike paper or digits that can be expanded to infiniy easily. Now, this is important information that in my view needs to be further discussed and brought to light for all to know and deal with its’ TRUTHS ASAP!
RUSS SMITH, CALIFORNIA (One Of OUR Broke States)
gold fever anyone?
let’s take a quick stroll down the yellow brick road to reality street.
there is roughly 180,000 tons of gold total above ground in the world. there are roughly 7 billion humans on the planet. this works out to just under (23-25 grams) an ounce of gold for each human being.
of that total, apprx. 25% is “owned” by a combination of governments and institutions such as banks. the rest is privately owned as jewelry., bullion, electrical connectors, etc. the dollar value of all the gold in the world at todays price is roughly (give or take) ten trillion dollars. the western bankster’s derivative load alone is somewhere between 600 trillion and a quadrillion. (yep, a trillion here and a trillion there and pretty soon yer talking some real serious money). of course that gold is tangible and those derivatives are, in reality, numbers on a spread sheet, but gold aint gettin us outa this one.
as for the s hitting the f. the first two things you better have if you want to survive are people skills (the ability to get along and even be liked) and a useful skill or talent that cannot be taken away from you.
oh yeah, fort knox. rumor has it that the u.s. treasury has approx 8,100 tons of gold that it keeps here. since this is not confirmed or substantiated in any way, and since this supply has in some freakish way become unauditabl even by our own congress, it can only be what it is. a rumor.
but, just supposing that our government is actually, in good faith, gaurding this supply of “wealth” for we the people, the same problem exists. there is just not enough to go around to base an economy on it.
ergo, accumulating gold as a hedge is an elitist act that, when tshtf, will betray you in some very unsavory ways.
good job as usual greg.
fun site 🙂
Gold is money, not currency. Currencies are created, and currencies always fade into history. The dollar will fade away, too. The future might have been different were the dollar backed by real money, but it isn’t.
Down through the centuries, gold and silver has been money. It will in the future.
A little town of ten people had nine people with nine coins of gold, one had ten potatoes. The man with potatoes ate one potato. That made nine potatoes and the people scream sale me a potato. The potato man just laugh and ate another spud. The people bagged, sale us your eight potatoes and you can have all the coins.
If I sale all my potatoes I’ll have nothing to eat. So he say, how about seven potatoes for your coins, it’s a deal they say.
One fatter women save part of a potato and hide it away for a few days. She soon trade that potato for all the gold and left town.
Half way to the next town she stop buried all but one coin and dug up another bag of potatoes. She would give those potatoes to the greediest person in the next town. As she rubbed her one coin, HA HA just the sweat little lady who gives food away.
The key to gold and silver’s acceptance as currency will be when people can have DDA ( Demand Deposit Accounts AKA chequing accounts or checking accounts ) deposited and denominated in gold and silver. Such accounts could be accessed by paper cheque, of course, but would more likely be accessed solely by the ubiquitous Debit Card. The nightly DDA processing would convert whatever Funny Money the incoming transaction was denominated in – Dollars, Euros, whatever – to grams of gold or silver and debit the Account accordingly. It’s do-able, right here, right now, it only requires some banking institution with the prescience and foresight to do it.
actually, you could do that right now. my brokerage let’s me write checks. if your gold was in an etf you could just sell small quantities and then write the check. the problem with this and with the dda scenario that you describe is counter party risk. the minute you let someone else hold your asset, you just have an iou. in a bankruptcy situation, your assets would at best be frozen and at worst transferred to another creditor of the institution. but it’s your gold, right? wrong. just look up mf global or sentinel management group and see for yourself.
Who will be stupid enough to trust a bank that is part of the Fed Reserve after this crash?
I think Mr. Dalia is subtlety screaming ( is that possible?) to the public that the banks are buying gold hand over foot across the globe — and that you should be doing the same. Mr. Gold ( I am bowing ) has been very much less subtle as has Mr.Silver ( I am sorry but that could only be Ted Butler) about buying the precious metals. I will leave you with a similar thought – the Dept. of Homeland Security and the IRS are buying ammunition hand over foot — act on that anyway that you see it.
P.S. – I love your site and can’t imagine the effort that it takes you to provide such a service — I do believe though if it was at all possible to give a shout out to “THE Mayor” of NYC – no not the occupy loving big gulp banning mayor Doomsberg – but to Mayor Guiliani to air his views and defend the despicable rant of the Canada bound blowhard – pint sized G Celente. I lost one friend on 9/11 ( I can’t know how many people The Mayor knew ) and will never forget his demeanor through those nightmare days as many of us were grieving. Any clowns who belittle him now could not have been there , to chastise rather than admire a powerful voice that took control and reassured a stunned city and took control when a lesser man would have folded like the cheap suits that run the country now.
i don’t want to get into an argument about giuliani but i have to disagree with martin. i have lived 6 blocks from the wtc my whole adult life and i was displace for several days after 9/11. guiliani was a reassuring presence during those difficult days but the fact remains that the firemen and the police despise here despise for the way they were treated by him when he was mayor. he is not popular in this city.
Both Dalio and Buffett have their own agendas (read “Book”).
As a hedge fund guy why wouldn’t you (Dalio) talk up gold to get the masses into a cold sweat frenzy so that you short the hell out of any alpha move above moving averages ? Sinister minds work in devious ways. Sure its going to the moon but hell ..why not make (more) money out of the wiggles ?
When he makes a statement like “Gold should be part of everyones portfolio” that would cause enormous price escalation given the current 1-2 % ownership across the globe.
I dont doubt that NET NET he’s probably long….but I bet he’s playing the rallies/corrections to his advantage.
HF’s, MM’s and PF’s are moving these markets.
He’s right about Buffett though IMHO…Gold is Money and soon will be as good (if not better) than cash.
Buffett is wrong about Gold…It does earn interest..it always has and always will. Once again a highly intelligent man saying one thing to work to his advantage…”buy stocks which pay a dividend” mantra. He knows the TRUTH about gold but if he were to divulge, that would destroy his empire.
Central Banks buy it for two important reasons.
You touched on one of those ..the other being the suppression of the price increment. We all know that ultimately they will be overwhelmed ..that is what Dalio is probably alluding to. Stating the obvious (debt , money printing etc ) without committing or declaring the underlying reason.
The game is over. The debt induced world economies are in a death spiral. What was once a virtuous cycle of growth and expansion (albeit based on a fiat monetary/fractional banking system) will now fester into a downward trajectory that will gain velocity and be almost impossible to escape from.
In the END…..Those who hold the Gold will be King.
I do agree that Dalio is 100% NET Long Au too as stated in my comment(HF’s can have positions on both sides of the trade nonetheless). He is one of many of the “smart money” crowd who have positioned themselves for the next move in precious metals.
I’ve been on the right side for some time (just like Jim Sinclair).
Knowing what the impact of ZIRP and Currency debasement is, makes it clear what actions are required to be taken to avoid destruction of wealth. If one understood the impact of interest rate policy in 2001 together with the govt debt escalation then it becomes a no brainer. What we have now is a desparate govt./fed with no other course of action. Dalio is merely bringing to a head what has already been written in stone. The smart money is already in (Phase 1 of the secular Gold Trend). Phase 2 is where it becomes more acceptable to acquire and hold (Current). Phase 3 (Mania Phase) where it becomes a necessity to buy it, is still ahead. Everything is pointing in that direction. One must however have the conviction to not only buy…but to hold. Greed and Fear will continue in abundance with “Fear” having the greatest influence.
You could say I am literally “banking” on Gold to once again reclaim its mantle as the only TRUE Money.
Thanks for bringing this to my attention
In real world Roshambo, the three most important metals are copper, lead and brass and they trump gold and silver every time. The Dementedpartment of Homeland Tyranny (Sorry-I meant Department of Homeland Security-whats the difference?)and numerous other federal agencies’ acquistions of over 1.4 billion rounds of ammunition (aka copper, lead and brass) prove this point irrefutably.
As I said in a post last week, I feel like I am on an airliner that has been hijacked by economic and political terrorists and the only thing I can see in the foreground is the World Trade Center (Deja vu?)
This will not end well at all!
I will recommend the Perth Mint for any type physical holdings. It’s been around for over a century in the most isolated city on the face of the earth. Fees and overall quality is excellent. The people and operation is as good as it gets. Minimum balance for people outside of Australia is 50K.// I have deposits there,but i’m not affiliated.
Gold is not currency. Gold is money. There is a difference between the two.
Currency is the medium of exchange of a particular country. This is precisely what gold isn’t – it is not the medium of exchange of any country.
Money is a lot more. It can be a medium of exchange (i.e., it can also be a currency) – but doesn’t have to be. Before anything else, it must be a store of value – and this is precisely what gold is. Money can also be a unit of account – and, if we look at it honestly, this is what gold is, too – while fiat money isn’t. Fiat money keeps changing its value (down), so it cannot be a standard for measuring value.
Golf is money not currency. Money is a tool. Currency isa debt that is due and current. Learn the words you use.
Only “10%” of ones portfolio? Good grief! How about 90% PM’s? … 80% Gold and 20% Silver.
“Currency is the medium of exchange of a particular country. This is precisely what gold isn’t – it is not the medium of exchange of any country.”
Been to Zimbabwe lately?
Thanks for your response, Greg.
Some people march to the beat of their own drum. In my case, there’s no drum.
I’ve pretty well got my sustainable, tangible assets in order, at this late stage of the melt down. My weak link still, is aligning my Self with “Community”. But that’s coming, whether I take the path of least resistance and embrace the inevitable now, somewhat effortlessly, or, I’m force-fed through something like Agenda 21 (God Forbid!).
In regards to “currency”. I actually only keep a very small balance in my checking account and “ALL” my moola’s in PM’s. If I need to make a withdrawal, just head on down to my local LCS and I’m back in the fiat. But I only use silver for that transaction. Never, ever touch the GOLD. That’s sacred.
One last thing. Having a background in Television Production (although I bailed out of that strange, cut throat world long before I could fry my nervous system, if I might just add a productive suggestion. I really enjoy your style of interviewing. It’s REAL and genuine; a breath of fresh air, for sure. Plus, you ask questions that I would be asking. Cut to the chase, kinds. Anyway, I love it when an interviewer is able to sit back and “listen”, as the audience does, when the person they are interviewing is on a roll. It’s a delicate balance; when to comment on their comment; and, or, when to go to the next question. Case in point, Gerald’s interview. Some speakers like to pause at certain points in their conversations, sort of adds to their drama; the Story. Gerald, I believe is one of them. The pause isn’t a signal to ask the next question, it’s a form of communication, unto itself. Some people are uncomfortable with silence, especially on tv or even more so, the radio. Again, it’s a delicate balance. It’s a rhythm, a subtle pulse that takes a great deal of skill, and confidence, to know how to read. As great as the interview was with Gerald, I think it could have been even greater, if you allowed him just a little bit more time in his “pauses”. I think it would add that much more to your already unique, genuine, heartfelt style, imho. It’s in that Silence where all of Creation manifests from. Can’t go wrong.
Keep up the great, inspiring and informative work.
I have read that fiat money will be going to zero, but, anyone suggesting how much gold one should have in their portfolio, 10% is always stated. My question is, why 10% when the other 90% will be worthless?
Gold is money!
Dalio and others will have you believe in balancing your investment portfolio. 10% PM (Gold/Silver) is a thumb suck at best.He talks incessantly about stocks, real estate, bonds, cash, Pm’s being part of everyone’s portfolio. I dont agree. I follow Buffet’s style of investing. Invest in what you know…and watch it like a hawk.
One should always consider the critical factors for investing…with the most important one being “Return of Capital” in REAL terms not nominal. In other words invest to cover the cost of inflation. If you cannot achieve positive net real returns on your investments..then you need to consider something else. My take on price inflation is somewhere north of 6 %.OUCH !!!!!
The conspiracy theorists will have you believe that the mis-information that is espoused from the financial literate constantly is to ensure that the public does not wake up to the critical fact that not everyone can hold significant allocations of “HARD” assets but having “some” is necessary. If that were to occur then we would see astronomical prices for the same in a very short space of time. Getting the public educated to some degree is paramount. BUT importantly they dont always get the WHOLE picture.
Some very astute people (billionaires) have got significantly more than 10% of their personal asset allocations in PM’s.
Follow the smart money.
There has to be a reason that one major money center bank is short 28 percent of the world silver market. That would require about 200 million oz of silver to cover.
They claim that they are “hedging” for customers, but just who are these customers that want the price of silver tanked (which is what a huge short position would do). Silver miners? They want low prices for their silver? The truth is that these are “naked shorts” put on for the purpose of suppressing the price of silver. There’s no way these shorts could be covered. One can guess who these silver short sellers actually work for.
The regulators could care less about manipulation unless it involves some some “small potatoes” investor some where so that they can prove they actually do something for their money.
The best way to “cure” this problem is to buy silver– lots of it. You can make money and slap the bankers across their dirty crooked faces.
joining this conversation late:
If Buffett, and indeed other managers similar to Buffett were to start buying gold for their portfolios, the price would be driven insanely higher.
My guess is they have for themselves, but not for clients.
The FED money is dead. ..Long live Real money,
Silver will be destroyer of banking cabal , swap all of your gold for silver !
It is my opinion that our little actor Buffett who is all in on the inside information and who makes bundles of fiat money while he participates in arranged deals with people in high places in our government and business is no dummy.
He hedges with plenty of gold and silver . I think he has a huge stash in the hundreds of millions of dollars worth . He is very diversified in all his companies and would not be caught dead without plenty of gold and silver in case you know what hits the fan. Well all Ben’s paper is flying right through the fan this very moment and he is not blind As far as the metals go what he says is not all he does. A few chips placed on gold would make anyone sleep better .
Best to you!!!