You have to start to wonder: have the past ~50 years of economic history been a total mirage? A mass formation psychosis of monetary misunderstanding?
We tried with lawyers, guns and psy-ops to base global money on nothing but trust and a floating network of variously flawed fiat currencies.
It seems like it’s not working.
In advanced western economies, we’ve seen the fallout of a currency untethered from reality. The website wtfhappenedin1971.com goes into great detail about what happens to a society that’s underpinned by dishonest money.
Everything from the breakdown of the family to drug abuse, depression, wage growth and of course, inflation, gets much worse.
By severing any convertibility of dollars to gold, it’s been made trivially easy for central banks to reward and prosper the rich and politically connected at the gradual expense of everyone else.
Especially people who work for a living…
But people are slowly starting to realize that not only does the Emperor have no clothes, but everyone else’s clothes are non-existent as well.
It’s no longer just the much maligned “gold bugs” who are starting to realize that if you don’t hold it, you don’t own it. Or worse: if you can’t hold it, it’s not real and you don’t own anything.
We’re seeing constant talk of repatriation of gold out of the NY Fed’s vaults back to Europe. We’re also seeing record retail gold purchases, with places like Costco having a hard time keeping 1 ounce gold bars on the shelves.
And gold is now the 2nd biggest holding among central banks, slowly creeping up on the dollar.
As I mentioned recently, the BRICS (Brazil, Russia, India, China and South Africa) are meeting next week to talk about the possible creation of a joint currency unit partially backed by gold.
These countries (in theory) seem to understand that a global currency that’s backed by nothing is not going to cut it. The Eurozone experiment has revealed that a joint currency backed by nothing creates all kinds of problems, and it’s mostly because there’s no reason for people living in different countries, composed of different cultures, languages, values, to have any real trust between each other if it’s not backed by anything.
If there’s a real gold-backed currency out there to compete with the dollar, the illusion could break completely.
We may look back at this period of time in monetary history as a crazy worldwide hypnosis. People may ask, “did they really trust world governments to run their currencies backed by nothing? What were they thinking?”
As gold investors, we’re a bit ahead of the curve. We’ve probably been asking these kinds of questions for years.
What are they thinking? When will people realize that trust in a government is not a good form of money?
We could be about to find out.
Have a great weekend,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio