Anyone who has a thorough understanding of what money IS and how it evolved can make a very good case for Gold. We did that, to our own satisfaction, a LONG time ago. In fact, we did it quite a few years BEFORE Gold embarked on what is so widely called its "20 year bear market" after the blow-off $US 850 high of January 1980.
Once that necessary groundwork has been done, it becomes easy to be VERY patient. This needs to be emphasised. In dealing with ANY investment market, knowledge and understanding of basic economic and financial principles are a necessary pre-requisite. Such knowledge does not guarantee success in investment markets, but it does maximise the chance for success. Even more important, it puts the individual on an even keel and minimises the possibility of making unconsidered and rash actions. And most important of all, it imbues the great virtue of patience.
Patience, in this context is simply the calm which comes from recognising that if "A" is being done, then "B" must follow. It may not follow right away, it may take years for it to follow, but it WILL follow. To take one simple example: If a nation increases its sovereign debt from $US 1 TRILLION to $US 6 TRILLION over a twenty year plus period, and if most of the new "money" created on the base of that sovereign debt goes into the stock market, then that stock market will boom. At some point, the point where the debt saturates the financial system beyond the capacity of any conceivable means invented in the meantime to "share out" the risk associated with that debt, the boom will end.
Another example: If the government of a nation or the governments of of ALL nations have NO constraints on the amount of debt they can issue, they will accelerate the creation of new debt until a saturation point is reached. At that point, monetary discipline will be re-imposed. Either some or all of the governments will stop their debt creation, or if they don't, they will suffer the consequences of a debt collapse and a subsequent crash dive in the exchange value of their currency.
Financial history is littered with the worthless debris of what were once sought-after certificates of sovereign debt issued on the "full faith and credit" of one government or another.
Actions have consequences - ALWAYS. If an engineer miscalculates the load his structure must bear either by making an honest mistake or by negligence, his structure will not stand. Depending on the level of the miscalculation, it may fall down at once or it may not fall down for a long time. But fall down it will - inevitably - every time. If a Central Banker flouts the known laws and principles governing the level of interest rates, that Central Banker will distort the economy - inevitably - every time.
The correct and proven principles and laws of economics and finance were discovered in many places by many great men. They have been known, in their entirety, for almost 100 years. For most of the past century, these principles and laws have been questioned, then ridiculed, then twisted, then ignored altogether. The result - inevitably - has become the financial world we see around us today.
If the majority of individuals in any given nation truly understood the fundamental principles and laws of economics and finance, the situation would never have been allowed to reach the stage it has. If, by some "special dispensation", a large number of individuals were to all of a sudden have this knowledge imprinted on their brains, they would instantly stand aghast at what they could suddenly see going on around them.
But the gaining of such knowledge cannot be "implanted", nor can the understanding that such knowledge is important, nay vital, to every individual. Either one takes the time and makes the effort to acquire it, or one does not. Tragically, and in most cases for no fault of their own, most people do NOT have this knowledge. They simply do NOT understand what is going on.
Thus, they are increasingly uneasy, they are increasingly bewildered, and they are increasingly untrusting of anyone who professes to be able to tell them what is REALLY going on. What they do NOT have is patience, because they do NOT have the knowledge and understanding upon which that patience rests.
I recently sat with a gentleman who I had just met and who politely asked if he might see an example of my work. I handed him a hard copy of what was the latest issue of The Privateer. He read it, and remarked that while he was pretty sure that he grasped the arguments and analysis, he found it of little value. "Why", I asked him. "Because it doesn't tell me what to do", he said.
There's the problem, in one short phrase. Right now, there are untold millions of people everywhere who have blithely relied on being told what to do in regard to their investments (and many other areas) for their entire adult lives. And it has "worked". The problem is that they never thought to question the BASIS on which the advice was being given. Because it "worked", they never thought it necessary to gain any personal understanding of what was going on in the financial world around them.
And now that it is "not" working, they literally don't know what to do. That is because they never discovered the means by which to decide what to do in the first place.
Patience, serenity, clear-headedness, confidence, and happiness itself are states of mind which come from the same root, the ability to think for oneself and confidence in the conclusions one reaches. That doesn't come from being told what to do.
What we strive above all other things to do, both in these commentaries and in The Privateer itself, is to give food for thought. We tell you what has been done, and why we think it has been done, and what we think the consequences are most likely to be. All of it is based on the most basic and fundamental laws of economics and finance.
Yes, these ideas are so simple that they are almost banal. But few people think about them any more, and VERY few of the people who do think about them apply them when they are deciding what to do in the markets. If they did, Gold would be a LOT higher than it is right now. Once just a few of them start, then Gold will start going up in earnest.
The principles won't change, nor will they go away. We are CERTAIN of that, so we are quite content to wait until they hit in a BIG way. In the meantime, we are enjoying the ride thoroughly. Hope you are too.