I’m not only an avid reader of precious metals articles on the Internet, I also love to read the reader comments that follow.
This morning, I was struck by the comments that followed a brief interview with Peter Schiff (conducted by a reporter on The Wall Street Journal’s “marketwatch” website).
Schiff, per his custom, was defending and touting gold. Many readers, also per tradition on MSM sites, were disparaging Schiff, gold bugs in general, or both.
After reading these comments, I couldn’t help but wonder about the mind frame and thinking process of the millions of Americans who denigrate gold and scoff at it as a legitimate investment choice.
These people completely reject gold and silver as an asset any sane person would want to acquire. To them, precious metals have no real value. Both substances are just a solid blob of metal that perhaps might have utility as a door stop or paper weight.
Paper (fiat) dollars, however, do have great value.
I don’t understand their thinking for two reasons:
This thing called ‘history’
1) Gold (and silver) have been considered valuable assets and a protector of wealth for 5,000 or so years. Forget what you think about it today or why you hold these views, this is history talking to us.
For whatever reason(s), countless millions of people through time have clearly shown that, to them, gold and silver are either “real money” or a good “thing” to hold onto.
To me, it’s always unwise to ignore perceptions and realities that have clearly stood “the test of time.”
Maybe you think a gold bar is no different than a dumbbell, but people from multiple societies through multiple centuries have shown they think otherwise. And are still showing they think otherwise.
To dismiss gold (and silver) as a “barbarous relic” is to dismiss ages of collective wisdom.
It’s a free country (well, maybe) and people can accept or reject any notion they choose, but these people (in my view anyway) should at least acknowledge that their opinion is not shared by, say, billions of people.
Faith in ‘The full faith and credit of the U.S. government’
2) Why do they have this great belief in paper fiat money and the government that backs it?
To me, anti-gold bugs are pro-fiat “dollar bugs.”
When it comes to stuff that can be considered money, there aren’t many choices: Paper dollars, gold and silver .... and, I guess now, bitcoins.
The people who disparage or dismiss gold enthusiasts are essentially saying that gold is not needed, that it serves no important purpose.
Which is the same thing as saying that when it comes to money, the paper fiat version is fine and all that’s needed.
Nothing, I’ll stipulate, “backs” gold except for the perception that it’s a store of wealth.
Okay. What “backs” paper dollars? “The full faith and credit of the U.S. government.”
So dollar bugs, who despise or poke fun of gold bugs, are betting on this government to ensure (in perpetuity) the “value” of their federal reserve notes.
To this I say, are these people insane? Or if this is too harsh a description, overly confident, misguided, naive, brain-washed, possessors of a false picture of the world and incapable of making judgements about likely future events?
Do they understand anything about macro economics or future governmental outlays?
Picture ALL of these people ....
I’ll try to paint a picture for anyone in this group who might be reading this.
The official U.S. debt (the sum of all previous federal government deficits plus accrued interest on debt) is now approaching $18 trillion.
This in itself is a mind-boggling figure, but it’s not the whole picture. Add in “unfunded liabilities” of the U.S. government and the figure (according to some credible analysts) tops $100 trillion.
This represents the (conservative) amount the government will have to pay out in the years and decades to come.
Who will receive (or is supposed to receive) these dollars? A full list, broken down by category of recipients, might fill up an entire column.
For illustration purposes, picture (if you can) EVERY current and future recipient of Social Security, Medicare, Medicaid, every employee from every government agency who has qualified for a pension (this includes postal workers and military retirees (active duty and reserves).
Picture also those who currently or in the future will go on “disability” or receive Pell grants.
The above categories do not include payments that will have to be made by state and local governments. As I read recently, 40 percent of the full-time workforce in America now consists of those who work for (receive payments from) a government source.
So add every teacher (janitor, guidance counselor, principal, assistant principal, coach) who will or has stuck it out 20 years in public education. Throw in the professors and administrators at the public colleges.
Police officers, fire men, building inspectors, road crews, waterworks employees, sanitation workers - all of these (and more) expect to receive pensions and other benefits in their retirement (which might end up being one month or 50 years).
This is just what government will be obligated to doll out to previous workers. It doesn’t count the costs of paying current workers, interest on the current debt or costs of the next war.
Indeed, $100 trillion is a very conservative figure in my view.
The money to make all of these payments will come from two sources: tax payers and from printing money through borrowing.
Dollar bugs, I’ve decided, must think that this money will just grow on trees. Or it will come from the printing presses of the Fed and Treasury Department.
Apparently they think and expect that printing and borrowing unlimited amounts of money will not effect the value of their dollars. Their confidence in the dollar - as a store of value and medium of exchange - is unwavering.
Maybe they fully expect that the economy will grow at such a clip that making all of these future payments will be no problem.
Perhaps this is their thinking:
“Yes, we agree that government is going to have to spend a lot more money in the future, but there will also be a lot more workers paying taxes and a lot more businesses that will be created which will create even more wealth to be taxed.”
Again, (no disrespect intended) are you people insane? Blind?
Look out your window. Any giant new factories opened in your town recently? Are the strip malls in your region at full occupancy? Ask your banker friend in Rotary if he is making loans for start-up entrepreneurs (or is instead making loans for existing entrepreneurs who are scrambling to make payroll).
If you are a “dollar bug” you DO have “full faith” in the credit worthiness of the U.S. government. If you are a “gold bug,” you don’t.
Two groups. Two ways of looking at the world. It’s this simple.
The government is home to our society’s (brilliant?) “central planners.” These are the people who give us the U.S. Postal Service and from time to time lead us into wars to build other nations.
So this is the organization dollar bugs trust to pay today’s and tomorrow’s astronomical bills, and to protect all of their assets that are denominated in these same dollars
To quote the great Billy Joel, when it comes to whether you are a believer in the U.S. dollar or gold, it’s a matter of trust.
Make fun of me if you will, but I trust gold a lot more than I trust the people who print paper dollars.
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Bill Rice, Jr. is managing editor of The Montgomery (AL) Independent. He can be reached by email at: bill@montgomeryindependent.com
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