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In the furnace of Hell, you''ll do better with metal than with paper
By Bill Bonner
Friday, December 10, 2004
Mr. James Surowiecki wrote a wise and moronic piece
on gold in The New Yorker. His wisdom is centered on
the insight that neither gold nor paper money are true
wealth but only relative measures, subject to adjustment.
"Gold or not, we're always just running on air," he wrote.
"You can't be rich unless everyone agrees you're rich."
In other words, there is no law that guarantees gold at
$450 an ounce. It might just as well be priced at $266
an ounce, as it was when George W. Bush took office
for the first time. That was just four years ago. Since
then, a man who counted his wealth in Kruggerands
has become 70 percent richer.
But gold wasn't born yesterday ... or four years ago.
Mr. Surowiecki noticed that the metal has a past, just
as it has a present. He turned his head around and
looked back a quarter of a century. The yellow metal
was not a great way to preserve wealth during that
period, he notes. As a result, he sees no difference
between a paper dollar and a gold doubloon, or
between a bull market in gold and a bubble in
technology shares.
"In the end, our trust in gold is no different from our
trust in a piece of paper with 'one dollar' written on it,"
he believes. And when you buy gold, "you're buying
into a collective hallucination -- exactly what those
dot-com investors did in the late '90s."
Pity he did not bother to look back a little further. This
is, of course, the moronic part. While Mr. Surowiecki
has looked at a bit of gold's past, he has not seen
enough of it. Both gold and paper dollars have history,
but gold has far more of it. Both gold and dollars have
a future too. But -- and this is the important part--
gold is likely to have more of that too.
The expression "as rich as Croesus" is of ancient origin.
The king of historic Lydia is remembered even today for
his great wealth. Croesus was not rich because he had
stacks of dollar bills. Instead he measured his richness
in gold. No one says "as poor as Croesus," do they?
We have also heard the expression "not worth a
continental," referring to America's Revolutionary-era
paper money. We have never heard the expression
"not worth a Kruggerand."
Likewise, when Jesus said, "Render unto Caesar that
which is Caesar's," he referred to a denarius, a coin of
gold or silver, not a paper currency. The coin had
Caesar's image on it, just as today's American money
has pictures of Lincoln, Washington, or Jackson on
them. Dead presidents were golden back then. Even
today a gold denarius is still at least as valuable as it
was then. America's dead presidents, whose images
on printed in green ink on special paper, lose 2 to 5
percent of their purchasing power every year. What
do you think they will be worth 2,000 years from now?
A few years before Jesus, Crassus, who had made his
fortune on real estate speculation in Rome, decided to
put together an army to hustle the east. Alas, such
projects almost always meet with disaster; Crassus's
was no exception. He was captured by the Parthians
and was put to death in an unusually cruel and costly
way. But he did not end his days with paper money
stuffed down his throat ... and certainly not dollar bills.
No, they poured molten gold down his gullet -- or so
the story has it.
Gold has a long history. And during its history, many
were the times that people were tempted to replace it
with other forms of money -- which they believed would
be more convenient, more modern, and, most
importantly, more accommodating. After all, gold is
hard to find and hard to bring up out of the earth. As a
result, its quantity is always limited -- by nature herself.
By contrast, paper money offered irresistible possibilities.
The list of bright paper rivals is long and colorful. You will
find hundreds of examples, from assignats to zlotys. But
the story of paper money is short and always sad. Since
the invention of the printing press, a new paper dollar or
franc can be brought out at negligible cost. Nor does it
cost much to increase the money supply by a factor of
10 or 100 -- simply add zeros. It may seem obvious, but
adding zeros does not add value.
Still, the attraction of being able to get something for
nothing has been too great to resist. That is what makes
goldbugs so irritating: They are always pointing it out.
Even worse, they seem to enjoy saying that "there
ain't no such thing as a free lunch," which comes as
a big disappointment to most people.
Once people were able to create "money" at virtually
no expense, no one ever resisted doing it to excess.
No paper currency has ever held its value for very long.
Most are ruined within a few years. Some take longer.
Even the world's two most successful paper
currencies -- the American dollar and the British pound
-- have each lost more than 95 percent of their value in
the last century, with is especially remarkable since
both were linked by law and custom to gold for most
of those years. For the dollar, the final link to real
money was not cut until August 15, 1971. That was
when the world found out what the greenback was
really worth -- nothing much.
Whatever promises the Feds made with regard to
the dollar, they could unmake whenever they wanted.
Some paper currencies are destroyed almost
absent-mindedly. Others are ruined intentionally.
But all go away eventually. By contrast, every gold coin
(and silver, for that matter) that was ever struck is still
valuable today -- and the coins almost always have
more value than when they first came out of the mint.
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RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
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info@mocoin.com
314-965-9797
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1-800-BUY-COIN
FiGoldstein@swissamerica.com
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