A Feast for Gold Bugs
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.
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.
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.
For information on a three-month trial subscription to Gordon Pape’s Internet Wealth Builder newsletter go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=562