The gold standard made possible much of the civilization of the ancient world
- 02 Novembre 2018
- by Blogger
The British economist, John Maynard Keynes, is famous for one aphorism, “In the long run, we are all dead,” which he applied to the operations of the price system, and one phrase: “barbarous relic,” which he applied to the gold standard. He believed that the free market needed to be policed by bureaucrats to be made efficient. He also believed that the gold standard’s restriction of State power is a great evil.
Keynes’ hostility to the traditional gold standard is shared by all inflationists and statists. It places temporary limits on the government’s ability to create fiat money and thereby spend without taxing directly. I say “temporary,” because the traditional gold standard is a promise made by a government. It is made to be broken later, during an emergency that is declared by the government. It is ultimately paper gold. It is a misuse of the people’s trust.
The gold standard made possible much of the civilization of the ancient world, until gold was abandoned in the third-century by the government of Rome. Then classical civilization disappeared in the West. But in the Eastern Roman Empire (Byzantium), a reliable gold coinage lasted for over a thousand years.
Even in the Alexandrian and Roman empires, the government needed gold to pay its troops. When the costs of maintaining Rome’s war machine and its bread and circuses at home grew too great for direct taxation to fund them, the government began to debase its coins. This debasement paralleled the decay of the Roman Empire.
The 10-Year Gold Bull Market... Strats Now
“If only I could go back and invest at the start of this 10-year bull market…”
It seems like every week I hear some variation of this statement. People are frustrated that they didn’t invest when the market was on sale in the wake of the financial crisis ten years ago.
Missing out on a 10-year bull market is a tragedy, especially for my friends who promised themselves they would never invest in stocks again… And are only now willing to think about taking a more balanced approach to investing.
Hopefully you’re not in the same boat. After all, we’ve been pointing out the many opportunities this market has been offering for several years now.
But what if I told you there’s a new bull rally kicking off in a special area of the market… One that could last for 10 years or more.
Would you have the courage to pull the trigger?
Gold Is Set For A Multi-Year Run
What does it take for a long-term bull market to begin?
Well as counter-intuitive as it may sound, people have to hate the market that’s about to take off. Because the more non-believers there are today, the more potential buyers there are who can eventually jump back into the market.
We need buyers on the sidelines because for a bull market to be sustained for years at a time, you have to have buyers steadily coming back in.
That’s exactly what we have in the gold market right now.
Investors love to hate the precious metal, and this hatred has been brewing for a number of years now.
The arguments are predictable…
- “Gold has no practical purpose.”
- “It costs money to store gold.”
- “Gold is an archaic relic with no place in our modern financial world…”
And on and on. You’ve heard them all I’m sure.
But the truth is that gold has historically been a reliable storage of wealth and a great way to protect your wealth against inflation.
So we have an abundance of investors who hate gold right now which has caused gold to trade lower for the last several years, stagnating near its current price around $1,225 per ounce.
But with inflation finally starting to pick up again and so many people looking for ways to protect their wealth from a falling market, this is a lot of ammunition to drive the price of gold higher.
Passing a Key Test
Whenever I consider investing in an area that could be a brand new bull market, I like to see my investment pass a test.
Maybe there’s a pullback that is met with enthusiasm from other investors. That tells me that demand for the particular commodity, market, or industry is very strong.
Maybe it’s a particular challenge an industry is facing. If that challenge can be overcome, I can be more confident that the bull market will continue.
In the case of gold, the yellow metal is actually in the process of passing a big test right now!
You see, the U.S. dollar has been very strong over the past six months. And a strong dollar should make it tougher for gold prices to rise. Because it typically takes fewer “strong” dollars to buy an ounce of gold.
But that’s not what is happening. Instead, gold is passing the test, moving higher as investors look to this area of the market for protection.
Considering the fact that it’s been seven years since gold’s last bull market ended, we’re definitely overdue for a bull market. And with so many investors looking for ways to protect and preserve their wealth, I’m expecting the next gold bull market to last a long time and move a long way.
So make sure you’re allocating a portion of your investments to gold — whether it be in the form of physical gold, ETFs that track the price of gold, or even gold mining companies that should see sharply higher profits as the price of gold advances.
Here’s to growing and protecting your wealth!
Source: Daily Reckoning
This article does not constitute investment advice and is not a solicitation for investment. Auromoney does not render general or specific investment advice and the information on this article should not be considered a recommendation to buy or sell gold or precious metals. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.