August 23, 2010The Ethics of Gold
By Ron Robins, Founder & Analyst - Investing for the
Soul
The rising price of gold stands as the ethical barometer
of the mismanagement of our fiscal, monetary, and
currency systems. Gold is in the early stages of
re-asserting its historic role of helping to bring order
to monetary and currency chaos. Its price has risen more
than fourfold over the past ten years as a result of
investors anticipating the predictable financial and
currency chaos we have today—and what is likely yet to
come.
The central banks and government treasuries,
particularly those of the U.S., Europe, and Japan, have
been weakened and our trust in them eroded. For decades
they assured us that only they and their paper
currencies and fractional reserve banking systems can
keep our economies growing forever. They are now failing
for all to see. And before the ships of state sink and
economies further submerge they bail out their banking
friends.
The monetary and currency systems and organizations
responsible for them are deteriorating because they
essentially lack an ethical standard. That is not to say
that most individuals in these organizations are
unethical. It is that as organizations they implemented
policies over the past several decades that knowingly—or
they should have known—would eventually lead to great
financial and economic hardship.
One such policy was the encouragement of debt creation
way beyond income or economic growth. When this policy
failed, it led to tens of millions of people losing
their jobs globally, millions losing their homes, and
retirees in developed countries losing their savings as
interest rates were reduced to near zero. It is in this
sense that these organizations were, and are, without an
ethical standard.
To rise to the top among many of these banking and
financial organizations, requires not only brilliance,
but usually subservience to base instinctual values of
status and greed.
According to Dr. Paul Ray’s research on Americans’
values, close to half the American population’s primary
values include those of status and greed. It could be
argued that even Timothy Geithner, the U.S Secretary of
the Treasury, exhibited these values. Before his
appointment it was divulged that he owed taxes that went
back several years. He then hurriedly paid them to
smooth his appointment to head the U.S. treasury, the
most powerful treasury on earth. About those taxes—he
says he just ‘forgot’ to pay them.
When many in the financial, banking and political elites
are motivated primarily by greed, unethical financial
behaviour asserts itself. ‘Moral hazard’ is the term
economists give to this condition. Until we as a species
are able to have an inner compass that is driven by
higher ethics and consciousness, then some form of firm
control in regard to credit and debt creation has to be
enabled. Gold is ideally suited to act in this
controlling capacity.
However, anyone who studied economics at Western
universities and colleges since World War II, left with
the understanding of gold as a ‘barbaric relic.’ This is
how John Maynard Keynes, the ‘guru’ of today’s
economists, famously referred to gold. It is perceived
wisdom today that we are capable of managing our
monetary and currency affairs more wisely than having
them subjected to the hard discipline of a gold
standard, or some system where gold acts to control the
issuance of currency or credit availability.
What modern economists choose to forget is that during
the late nineteenth and early twentieth centuries while
the world was on a gold standard, global economic growth
was unprecedented.
As is now obvious, the perceived wisdom of modern
monetary and currency management is shown to be false.
Monetary conditions are increasingly calling for the
kind of control that only gold can offer. However, it is
unlikely that we would go back to a traditional gold
standard—where everything is linked to gold. What is
more probable is the tying of gold to a new
international currency or to some form of monetary or
credit measure. It is known that because of the vexing
issues with all the four major global currencies—the
dollar, euro, yen and pound—that the International
Monetary Fund (IMF) is developing proposals for a new
international currency.
Countries such as Brazil, Russia, India and China (the
‘BRIC’ nations) as well as Western countries like France
are demanding the establishment of a new world currency
as well. Soon it will be realized that all paper
currencies have the same historical deficiencies: their
administering agencies and human governors lack the
necessary restraints on credit creation unless they are
tied in some way to a commodity standard. And that is
best fulfilled by gold.
Jim Sinclair, one of the world’s greatest experts on
gold, believes the U.S. will eventually be forced to
anchor the dollar to gold. He says the tie will be the
gold held by the U.S. Federal Reserve and Treasury
versus a measure of international liquidity (i.e. money
and or credit).
Already some central bankers are acknowledging the
inadequacies of the present system and beginning to
resort to gold.
After more than two decades of mostly gold dishoarding,
central banks are again becoming net buyers of the
metal. They include China, India and Russia. A Bloomberg
story reported in June on a UBS survey of central bank
reserve managers and other financiers, found that 30 per
cent of them cited gold as being the best performing
asset they could own for the balance of this year. That
was the highest percentage for any asset class.
We are in the midst of major currency and monetary
upheavals the like of which we have not seen since World
War II. Deep, fundamental fissures have been exposed.
Most notably: the lack of an ethical compass by
institutions managing our monetary and currency systems,
the policies of our monetary authorities who see the
only way forward as the promotion of excessive debt, and
the increasing moral hazard among bankers and
financiers.
Investors and the global public are viewing these
developments with alarm. Gold’s rising price represents
an ethical barometer of their views. Gold is in the
early stages of re-asserting its historic role as an
anchor to our monetary and currency systems. It may well
yet save the floundering ships of state.
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