Who
Are the Experts on Gold? By Gary North | September
23, 2010
The experts on gold are the people who publicly
recommended that investors purchase gold when gold was under
$300. They recommended that people purchase gold when gold
was at $300, $400, $500, $600, $700, $800, $900, $1000,
$1100, and, finally, $1200.
The non-experts on gold are the people who
never told investors to invest in gold at any price, and
who are now saying that gold is going to decline in price,
and therefore it is not a good investment.
I have personally monitored the gold market
ever since 1963. I guess you would call me an old hand in
the gold market. I have seen gold bugs come and go, and
I have seen gold haters come and go. I have seen many arguments
in favor of gold, and I have seen many arguments against
gold.
What I have not seen is someone who could
consistently time the markets in terms of buying gold low
and selling it high – people who went public with
this information just before the turning points.
HOW TO BECOME AN EXPERT
It is easy to become an investment expert
in any field. Study it on an almost daily basis for about
10 years. Follow every aspect of it in the public press.
Get an understanding of why and how the market operates
with respect to this particular commodity, stock, or asset
class.
It would not hurt if you spent 20 years
on this study. Frankly, it would not hurt if you spent your
whole life on this topic.
Over time, you will develop skills at market
timing, but you will never get the timing perfect. The market
will always fool you. The best that you can hope to do is
to buy in shortly after the market has begun to move up,
and to sell out shortly after market begins to move down.
With respect to the arguments in favor of
this or that commodity, you can become an expert here a
lot easier than you can become an expert in the actual timing
of the changes in price of the commodity. The arguments
do not change very much. This is because the same people
push the same arguments, year after year, decade after decade.
Those were bearish remain bearish, and those were bullish
generally remain bullish. This is a matter of human personality;
it is not a matter of market pricing.
THE ARGUMENTS AGAINST GOLD
The arguments against gold all stem from
one idea: that private property is insufficient to establish
a reliable monetary system. All of the arguments, without
exception, rely on one version or another of a rival idea:
central governments must intervene in the market for gold
and silver in order to provide a reliable monetary unit.
When I say government, I also mean the government-licensed
monopoly that we call the central bank.
All opponents of a gold coin standard adopt
some version of the anti-free-market ideology. They may
be free-market people in other areas of their thinking,
but in the area of monetary policy, they do not trust the
free market. They do not trust individuals who act in their
own self-interest, and who establish voluntary contracts
with other individuals.
This is certainly true of the monetarists.
The monetarists, following the arguments of Milton Friedman,
have always opposed the idea that individuals are sufficiently
reliable, trustworthy, and knowledgeable to make their own
decisions about what kinds of money are best for them.
The monetarists have always opposed the
standard free-market argument that individuals who pursue
their own self-interest are capable of making their own
decisions. These monetarists also oppose the idea that the
decisions of individuals relating to their choice of a monetary
standard will produce, collectively, a reliable monetary
system.
This hostility to free-market money is opposed
to the official position of the monetarists with respect
to other aspects of the market economy. Some of them believe
in antitrust laws. Some of them do not. But all of them
believe that the central bank, when backed up by the power
of the Federal government, is the only reliable institution
with respect to the establishment of the fundamental policies
governing monetary policy. These people trust the central
bankers.
When you find scholars who oppose the full
gold coin standard, you can be certain that these men do
not really believe in free market. They believe in it for
some areas of the economy, but they do not believe in it
with respect to the central institution of all economic
decision-making in a modern economy: the money system. They
believe in government, which means they believe in coercion.
They believe that somebody with a badge and a gun has the
right to stick that gun in the belly of a decision-maker
and demand that this individual use the money provided by
the central bank.
Because academic economists are overwhelmingly
Keynesians, and because a minority are monetarists, they
believe in the legitimacy and wisdom of people who carry
badges and guns. They believe in coercion in the area monetary
policy, and they recognize that gold is the greatest single
threat to government coercion that there is.
Individuals make decisions day after day,
in almost every area of their lives, by using money. They
establish the rules of the game on their own authority.
Most people will never think of getting their hands on a
gun in order to fight the central government. But in their
daily decision-making, in the free market, they establish
their own authority over government activities by means
of the monetary system.
Control over governments by people who have
the right to make exchanges in terms of non-government,
non-central bank monetary systems is a crucial control over
government. This is because such control is constant. Using
gold coins is not self-consciously a means of exercising
control over government, but it functionally is control
over government. It forces the government to restrict its
spending and its taxing as no other single legal right possessed
by citizens and non-citizens.
This is why the overwhelming opinion of
the opinion-makers in the modern world is opposed to a full
gold coin standard. The reason for this is that the overwhelming
opinion of the opinion-makers is in favor of government
power. The individuals who openly favor the establishment
of a full gold coin standard are in opposition to the dominant
outlook of the intellectual world.
The intellectuals are committed to the expansion
of the power of the state. Even those members of the academic
community who say that they are not in favor of the expansion
of the power of the state are, in fact, in favor of the
expansion of the power of the state in the central institutional
area that coordinates all other economic decisions: the
monetary system.
Because of this, individuals who have decided
that the fiat currencies of the world are unreliable, because
the politicians are unreliable, face an uphill battle. They
face ridicule. They may face self-doubt. They hear constantly
that gold is not a good investment, that gold is not a reliable
standard for the monetary system, that gold is a barbarous
relic. They must take a stand against these anti-gold opinions,
and they feel hard-pressed to come up with answers against
the technical criticisms of the gold standard. I have watched
this for over 40 years.
We see today that a tiny minority of citizens
in the United States are beginning to rethink the legitimacy
of the central bank. Ron Paul has made famous the phrase:
"End the Fed." Because the popularity of this
phrase is beginning to grow, people are beginning to rethink
the question of whether or not the central bank is a reliable
institution to control the money supply. As doubts are raised
regarding the reliability of the Federal Reserve System,
doubts are also raised about the reliability of the arguments
against the gold coin standard.
SALARIED PUNDITS
When we hear on the financial media that
some expert has said that gold has peaked or soon will,
so that anyone who invests in gold today is taking a terrible
risk, we can be sure that this person did not tell people
to buy gold at any time in his career. That person is a
standard knee-jerk gold hater.
The hatred of gold is ideological. It is
based on a love of government. It is based on trust in the
Federal Reserve System. It is supported by most academic
economists, and it is supported by an even higher percentage
of politicians at the national level. This constant barrage
of opinion against investing in gold is a concerted effort
to keep people from protecting themselves against the expansion
of Federal power by means of the expansion of the money.
These people are ideological purists. They
oppose the free market system. They want a rigged economy.
They may say they believe in the free market, but what they
really believe in is the right of insiders to manipulate
the markets by means of government policy and central banking
policy. They want a rigged market, because they do not trust
the authority and legitimacy of individual citizens making
their own decisions with their own money.
So, when you hear these arguments, you can
be sure that you are listening to someone who does not believe
in the free market. This person is a spokesman for the government.
He may not be on the government payroll, but he has bought
into the worldview which says that individuals do not have
the authority or the wisdom to make their own decisions
with respect to the currency that they choose to use in
voluntary exchange. These people are part of the government-financial
complex.
If you trust the government to tell you
the truth, then you probably also trust the proclamations
of these self-appointed experts in gold, who never told
anybody to buy gold, that gold is a bad investment. These
people have been wrong for a decade. They have told you
to buy stocks, but stocks were higher in March 2000 and
they are today. They told you not to buy gold in 2000, if
they even mentioned gold in 2000, and gold is up over 4
to 1. These people missed the investment of the decade,
and they told you to buy and hold stocks, in what was a
bad investment for the decade. It would have been a better
investment to stick your money into an FDIC-insured savings
account and leave it there. You would be ahead of the game.
You did not need these experts in gold or experts in stocks
to tell you what to buy, because they did not know what
to buy.
They are spinning the same old party line
today about buying and holding stocks and not buying gold
that they were spinning in the year 2000. They were wrong
then, and they are wrong now.
THE GREENBACKERS
Within the conservative movement, there
is a pro-fiat money group called the greenbackers. They
have been around since the 1860s. They are radicals, leftists,
and believers in the welfare state. They oppose the gold
standard with the same enthusiasm that they oppose the Federal
Reserve System.
They oppose the Federal Reserve System because
they oppose banking. They oppose banking because banks charge
interest. They favor the creation of pure fiat money, which
the government issues in order to expand the welfare state.
They oppose the gold standard because the gold standard,
meaning individuals owning gold coins and using them in
exchange, restricts the expansion of government expenditures
beyond tax revenues. They do not want to see the government
restricted by any factor other than voting pressure from
citizens. If the government wants to expand its spending,
the greenbackers approve. They do not want any kind of monetary
restraint placed on the Federal government, whether by a
full gold coin standard or by lenders who do not wish to
lend the government any more money at low interest rates.
So, there is a far left element within the
conservative movement that cries out against the Fed, not
with the idea of replacing the Fed with a voluntary system
of money and banking, but with the Congress of the United
States being totally in control of the money supply. They
believe in government with the same enthusiasm that the
Keynesians believe in government, and they adopt almost
identical arguments with respect to the legitimacy of the
gold standard.
CONCLUSION
Pay no attention to the little men on the
TV screens. That's because they are the little men behind
the curtain of coercion. It is not an iron curtain. It is
a fiat-money curtain. They believe in the wisdom of men
with badges and guns.
There are too many men with badges and guns
today: badges and guns and fiat money. Take away their fiat
money, and a lot of them will have to turn in their badges
and guns.