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.    

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Comments
  1. dean

    Greg ,

    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!!!

    • Greg

      Dean,
      You are probably right about Buffett. If he did go all bullish on gold there would be a avalanche of buying that’s for sure. Thank you for weighing in.
      Greg

  2. Sarkis

    Greg,

    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.

    Sarkis

    • Greg

      Sarkis,
      Platinum probably would not be confiscated, but it is not as passable or trade-able as gold or silver. I don’t see how you go wrong with any of them with what’s coming.
      Greg

      • Sarkis

        Thanks

  3. Armistead Garrett

    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

    • Greg

      Armistead Garrett,
      Thank you for your kind words. It looks like we are both fans of Mr. Sinclair. He is a good man.
      Greg

    • Nathan Hale

      Armistead, I think Sinclair got the term from Buzz Lightyear “TO INFINITY AND BEYOND!”

  4. Alma

    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…

    • Greg

      Yes Alma, but those paper dollars lose buying power relative to gold and silver. That’s what we are talking about.
      Greg

    • George Too

      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.

  5. Sandy

    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.

    • Greg

      I am with you Sandy. I would NEVER invest in a gold or silver ETF. That’s not owning the precious metal but a trading position.
      Greg

  6. PRice

    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

  7. Mitch Bupp

    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…..

    • George Too

      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.

  8. therooster

    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 ?

  9. Ben

    Greg,

    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.

    Thanks,
    Ben

    • Greg

      Ben,
      I DO NOT sell gold or silver in anyway. I have no hedge fund. All I have is this site and Google places adds on it, I also sell some adds on it. Do you think Ray Dalio is making money by telling people to have some gold in their portfolios? This is protection advice for you that is free of charge. I don’t care where you buy your protection. How much you need is up to you.
      Greg

  10. RUSS SMITH

    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)
    [email protected]

    • g.johnson

      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 🙂

  11. Denton

    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.

    • Greg

      Amen Denton.
      Greg

  12. BOB D

    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