A Feast for Gold Bugs

gold prices investing

Gold at $10,000 an ounce? The author of a new book thinks it may happen sooner rather than later.

Two summers ago, Nick Barisheff and I were sitting outside on a patio, having lunch and talking about his favourite subject: gold. Nick, who knows more about precious metals than anyone else I have met, told me he was writing a book on bullion. Having written a few books myself, I asked what his main premise would be. Boiled down, his reply was that paper money would eventually become worthless, driving the price of gold up to $10,000 an ounce and beyond.

We talked about the book some more and at one point I asked about his working title. I can’t remember his answer but it sounded like an academic thesis.

“Who’s your audience?” I asked. “Is this a book for economists or for everyone?”

“For everyone,” he replied.

“Then give it a title that will say exactly that,” I said. “Why not simply call it ‘$10,000 Gold’? If that doesn’t get attention, I don’t know what will.”

Now $10,000 Gold is a reality. Subtitled Why Gold’s Inevitable Rise is the Investors’ Safe Haven, the book has just been published by John Wiley & Sons Canada Ltd.

Nick Barisheff, who is the founder and CEO of Bullion Management Group, strongly believes that western governments and central banks have put the world on a course to financial meltdown so it is not surprising that this book is something of a polemic. At one point, he describes such central bank strategies as quantitative easing as being “in the final analysis, an act of counterfeiting”.

He is especially critical of the United States government which he accuses of lacking the “political will to make the necessary changes to avoid catastrophe” by continuing with a “program of reckless debt creation to the tune of $1.5 trillion a year.”

Paper currency, referred to the “fiat model”, is fundamentally flawed as long as it is not backed by gold, he contends. “It is a house built on sand, and rather than rebuilding on the more stable foundation of gold, governments will continue adding to the weakened structure until it collapses. The example of an avalanche being caused by that one final snowflake is apt. No one knows what the breaking point will be…but without a solid foundation it will eventually give way

The end result of continued money printing to monetize debt is hyperinflation “when currency becomes essentially worthless”, which has occurred 56 times since 1795, always in individual countries. In order to prevent that occurring on a global scale, the author expects an international structural change, “likely involving the formal recognition of gold as money” – in other words, a return to the gold standard or something akin to it.

History shows us that the buying power of paper currency gradually erodes over time. What is intriguing is Mr. Barisheff’s contention that gold works the opposite way. In 1971, it took 66 ounces of gold to buy a compact car and 703 ounces to purchase an average house. Today you can get the car for 10 ounces of gold and the house for 228 ounces.

His advice to investors is predictable: buy gold. You wouldn’t expect anything different, being that he is in the precious metals business. For over 3,000 years, gold has been “the most stable form of money, without exception,” he says.

“The machine will continue moving towards the cliff. As it does, the exponential function will cause it to speed up. Those who step off the train while there is still time and allocate personal assets to gold, silver, and platinum will have the best chance of economic survival. Those who continue to trust the machine of big banks and governments will have the poorest chance.”

Gold ownership won’t solve all the world’s problems, he admits, “but it will begin to return power and freedom to the individual. The world will change one person at a time – not through blind conformity, but through independent thinking.”

This is scary stuff and the scenarios described may be a long way in the future. But there’s a lot to think about here, both for gold bugs and for anyone else who is concerned about the way the world is heading.


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