Loading ...Our collective human conscious has for millennia deemed gold to be valuable because it is; portable, divisible, beautiful, extremely rare and virtually indestructible. How many things on this planet fit those criteria? The answer is nothing else except precious metals; fiat currencies fail miserably when it comes to the rare and virtually indestructible part. This is what gives gold intrinsic value and what makes it so vastly different than fiat currencies.
In the near future, I believe Citi’s chief economist will be embarrassed by his remarks, especially when comparing gold to pet rocks. He also claims that gold, since it is just another fiat currency, can reach zero value just as paper money can lose all its worth.
But contrary to what this gentlemen thinks, the value of gold is about to soar because central banks and governments have become trapped. These market manipulators need to keep asset bubbles inflated in order to keep the wealth effect in place and sustain whatever anemic economic growth they have been able to achieve. Most importantly, they need to keep sovereign debt out of public hands in order to keep debt service payments remain low. This means governments have no escape from their massive and unprecedented money printing campaigns. Therefore, the value of fiat currencies is set to plummet when compared to precious metals
These haters of gold are becoming more bold and desperate in their attempt to maintain confidence in government issued debt and currencies as asset bubbles have reached dizzying heights and debt levels have exploded into record territory.
Inflation has become the goal of every central bank on earth. This makes the mean reversion of interest rates inevitable, which will lead to a global sovereign debt crisis. To illustrate this point, the U.S. national debt officially eclipsed $18 trillion this week! This equates to a trillion dollars + per year just on interest payments once the Treasury is forced to pay a more normal rate on all that debt. Economic chaos and soaring inflation will then follow, which should send U.S. Investors flocking to gold en masse.
Buiter’s concludes his inane commentary by stating that gold, “has had positive value for nigh-on 6,000 years.” “That must make it the longest-lasting bubble in human history.” But history has proven the real bubbles have manifested in sovereign-issued debt and currencies; never in gold. Since the rate of debt accumulation and government money creation is exponentially greater than at any other time in human history, I can state with confidence the “bubble” in gold has only just begun.