The Bear Empties His Pocket And Shows His Heart

At the G8 conference a few days ago, the President of Russia, Medvedev, pulled a "gun" from his pocket. He held it up for all to see and without firing it, the world was told in no uncertain terms that the sheriff would be returning to town and that things will change.

Dear readers, the leaders of the G8 were presented at the meeting with gold coins inscribed with the words UNITED FUTURE WORLD CURRENCY. Medvedev drew his from his pocket, held it up and said, "the question of a supranational currency concerns everyone now, even the mints....I think it is a good sign that we understand how interdependent we are."

The change has been coming for a long time and for the impatient it has been most damaging as they chose to invest on the stock and bond markets of the world. Be certain of the change but do not imagine that it is just around the corner. There is much that has to be dismantled and demolished before gold can return to its rightful position.

President Obama however, would never have the fortitude to do what Medvedev did. He knows that the gold coin is everything the US dollar isn't. He knows that the paper on which US notes are printed require the felling of innocent trees. He understands that the pictures of principled men such as Jackson and Franklin is at total odds with what has been done to the once proud nation of the USA by virtue of the printing press. The result has been nothing but a continuous string of foreign conflicts, unbalanced budgets, and out of control Medicare and social security expenditures.

Despite all this, even I have to admit that the printed note could be just as good as gold as a standard of value. The problem is however, that there has never been and never will be any government determined enough to resist the urge to print money rather than to tax or to cut public spending.

In this last decade gold has outrun, outperformed and outshone all paper opponents without support from the western establishment. This is illustrated in the following tables:

There are in fact only two asset classes in this case - paper and gold. Anyone for instance who held $US289 in June 2000 would have been able to buy one troy oz of gold. By June 2009 that person would be able to buy only 0.31oz of gold. This represents a 69% loss of value in the dollar over the nine year period. At times the variation in individual currencies can create the impression that gold is lagging paper. This is why all paper currencies should be put in the one basket. After all, they ARE a basket case. As a group they lost 62.6% over the nine year period.

Many would argue, and rightly so, that the US$289 (as well as all the other currencies) would have earned interest. Let us assume then that the currencies held on hand in June 2000 were invested at 4% per annum compound throughout the period.

The table would then look something like this:

So there you have it. Even after investing your hard earned scraps of paper money on a 4% compound basis you still manage to lose 46% (5.0oz v's 2.67oz) as compared to holding gold over the 9 year period.

Many would argue that I have been selective in choosing a period that was positive for gold. My answer to that has been given in an earlier article (see Toilet Paper Production Defies Manufacturing Slump - 16/4/09).

And my last trick is to totally depress those that used their scraps of paper to invest in other scraps of paper sold on the stock markets of the world.

The DJIA on June 30, 2000 stood at 10,447 and at June 30, 2009 the figure was 8,447 - a loss of exactly 2,000 points or 20.7% of the capital value. In other words $289 invested in 2000 would be worth $233. Dividends of 4% per annum or $11.56 would be another $104 for the nine years assuming the dividends were not re-invested on the stock market. The grand total of share market investment plus dividends comes to $337 with which you could buy only 0.36oz of gold on June 30, 2009.

Conclusion: The person who invested in gold on June 30, 2000 is almost three times better off by June 30, 2009 than the person who invested in the US stock market.

SO WHO HAS BEEN THE BETTER FUND MANAGER OF YOUR WEALTH IN THE LAST NINE YEARS? It wasn't Greenspan, Bernanke, Madoff, Paulson, the banks, your broker or your adviser. No my dear readers, it was instead that silent gold coin sitting in the bottom of your drawer or preferably in a safety deposit box at a bank. So much for all the flash suits and offices, degrees and talking heads on TV. Please stand up Senator Ron Paul, Peter Schiff, Antal Fekete, the Great Mogambo and the countless other contributors to this site who in their own words identified and have described the slow motion train wreck taking place.

The last 9 years have seen every conceivable sleight of hand to support the dishonourable system of paper money. Cheap and cheaper interest rates, quantitative easing, rescue packages for discredited banks. The list goes on but so do life and the pain that has been caused. Pain that will be felt for another generation and which will alter the dynamic of human enterprise.

As someone on the radio said recently "life is like cricket, it can be very slow with precious little happening for a long time. Suddenly within minutes a whole lot of things happen."

Note well, Greenspan, Bernanke, Paulson and the others are not stupid men. Far from it. They are in fact highly intelligent. However, the greed of those around them and the power they hold in their hands, made them believe that morality is not an essential part of the financial architecture or the solutions required to repair that structure when it starts to crumble.

The USA has only one last chance. It must revalue and use its massive gold stockpile (if it's still there) to back its currency and it must curb the culture of entitlement and mindless consumption that have embedded themselves not only in the general populace but also amongst the "bankers" of the system.

My last thoughts and prayers are for the little man who is both helpless and clueless, but who is expected to react like Pavlov's dog every time there is a drop in interest rates, a handout from government or a contrived lift in the Dow.

"Dum spiro spero" as the Romans use to say.