Tuesday, March 17, 2015

How to short Western Civilization

Below are excerpts from a St. Patrick's Day article written by Gary North.  The full article is accessible only from a paywall.

The Logic of Gold and Anti-gold Investing by Gary North

When you buy gold, you are shorting Western civilization.

I have been saying this for 50 years, and I will not stop saying it.

When you buy gold, you are shorting Keynesianism. You are shorting the Chicago School of economics. You are shorting the stock market. You are shorting currencies. You are saying to yourself, loud and clear, that you do not believe that a world controlled by central banks is a stable, reliable world. . . .

The best thing you have that will defend you against really bad times is a good job: voluntary exchange. You need continuing income, based on the sale of your labor services. . . It is your job, meaning your productivity, that is the source of most of your wealth. The rest of your assets are simply used as a temporary backstop to bail you out when you lose your primary source of income.

The average man believes in the promises of politicians. To the extent that he understands central banks, he trusts them too. He thinks the world is run by experts, and these experts are going to do whatever it takes in order to make the world safe for the average Joe. So, there are lots of reasons not to buy gold. You will be told by everybody that buying gold is foolish. Your investment advisor will tell you this. Your brother-in-law will tell you this. CNBC will tell you this.

The entire civilization is built on this presumption: gold is a barbarous relic. This is because modern civilization is built on the wisdom of central bankers. The modern world is built on permanent monetary debasement. . . .

Why should you buy gold if you don't own any gold? Because there should be something in your life that says this: "I don't trust the politicians, the central bankers, and the Medicare system." At some point in your life, you have to put it on the line. You have to have at least a symbolic amount of your net worth tied up into an asset that will protect you briefly if there is a major crisis.

I have not told people to put half their money into gold and silver. I have told them to put somewhere between 10% and 20% of their retirement portfolios in the precious metals -- but not in an IRA or a 401(k) program -- too visible to the IRS. I have told them to start with gold coins. . . .

People in China, India, and Asia know they cannot safely trust governments. They know they cannot safely trust the central bankers. They have been lied to all their lives by government officials, and they have been mired in poverty. So, when they get ahead in their economic lives, they buy some gold, because that's what their grandparents and their great grandparents did. Why? Because they knew from experience that they could not safely trust politicians and bankers.

But Americans still think they can trust politicians and bankers.They don't want to make a symbolic move to buy gold.

Anyone who refuses to own gold is saying, loud and clear, that he trusts Janet Yellen, he trusts Obama, he trusts Jeb Bush, he trusts Hillary Clinton, and he trusts his local Congressman, who has assured us Social Security and Medicare payments are guaranteed forever. He also trusts the business cycle. He doesn't think he's going to get fired. He doesn't think mass inflation is a possibility.

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