3 Minute Gold News – Jim Rickards – The New Case for Gold – Mises Institute – May 11, 2016

3 Minute Gold News

A Quick Read for Busy People

A synopsis of an interview with Jim Rickards, New York Times bestselling author of The Death of Money, Currency Wars, and the newly released The New Case for Gold by Mises Institute.

Jim is the editor of Strategic Intelligence, Chief Global Strategist for West Shore Funds, former general counsel for Long Term Capital Management, and a consultant to the U.S. Intelligence community and U.S. Department of Defense.

Topics:

The New Case for Gold
Gold as Money
Physical Gold
Economics
Central Banks

 

 

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Jim Rickards

 

THE NEW CASE FOR GOLD

Jim’s new book The New Case for Gold is a national bestseller, ranking #6 for hardback business books in the Wall Street Journal, with over 50,000 books sold in one month.

GOLD AS MONEY

Gold is Money. Period. Full Stop.

There are certain arguments against owning gold which appear over and over again, and they just don’t hold water.

Arguments such as there not being enough gold in the world, and mining input not growing fast enough, are shot down in the book.

One of the arguments people use against gold is that they say gold has no intrinsic value.

They say a stock will pay dividends, a bond will have a pay off, and a machine or car has some intrinsic valu,e but gold is just a pile of shiny rocks with no instrinsic value.  It’s not a rock it’s a metal.

But the theory of using intrinsic value as a way of valuing anything was discredited and shot down in 1873 by Carl Menger, one of the founders of Austrian Economics.

Before Menger came along it was the input — the labour and capital that went into making a thing — that was used to give its intrinsic value.

Menger said that was all nonsense. There are inputs that can be measured, but that’s not how we decide what things are worth.

Menger advanced the subjective theory of Value Based on Utility — everything, whether it’s money or an object, has some value to a consumer or user based on their own subjective preference for that particular good or service.

The user decides what the value is.

That’s the foundation of Market Economics.

Jim has taken Menger’s approach to value and applied it to gold.

Gold is money. Dollars are money. Euros are money. Bitcoin is money. They’re all forms of money.

If you want to know what gold is worth then ask anyone who uses money. We have a subjective view of what each kind of money is worth.

In a world with high confidence in Central Bank money (eg. dollars and euros) then gold might not be worth very much.

But in a world where we start to lose confidence in Central Bank money then our subjective preference for gold as money would start to go up.

This is exactly what Menger would have said. He would have said you have many kind of money competing in the marketplace for the preferences of consumers based on their assessment of utility.

If you think gold is a better form of money than paper dollars, as Jim does, then you’re going to have a bid for gold and the dollar price of gold is going to go up.

Menger had it right.

Today, based on subjective utility, which is an Austrian economic concept, gold is coming into its own as a preferred form of money.

PHYSICAL GOLD

Gold is dug up out of the ground.

You need a mining industry, capital investment, geology and surveys etc. to find gold.

It’s quite scarce which is an interesting aspect when you’re thinking of money.

Gold trades on commodity indexes and its price is reported on TV.

But it doesn’t really meet the definition of a commodity. A commodity is a uniform input that goes into the creation or manufacturing of other things.

For example, copper is a commodity and goes into copper pipes. Steel is an input in manufacturing and construction. Coal is an input in energy production. Corn is food. Cotton is used to make clothing.

All the other commodities go into making something else. Gold isn’t really good for anything.

Gold isn’t really used for anything except money and a store of wealth.

Gold is used in jewelry but gold jewelry is just ‘wearable wealth’ — it’s decorative and pretty, but it’s a way of holding wealth.

Gold isn’t an input for anything, but it’s a great form of money.

ECONOMICS

The School of Historical Economics looks at large historical forces that tend over time to dominate the evolution of economic systems.

Complexity Theory is a late 20th century and early 21ist century science coming out of physics, applied mathematics, network theory, and behavioural psychology.

Jim uses the tools of Historical Economics and Complexity Theory, as well as a mathematical formula called Base Theorum and history to understand economic systems.

CENTRAL BANKS

If you look at the bios of the heads of the world’s central banks you’ll see they all went to the same schools.

It’s a very small club.

They’re all taught the same things and they believe the same things.

Collectively they control not just the U.S. dollar printing press, but all the printing presses in the world. Why would they want to give up that power?

Since gold was de-monetized in the 1970s, 45 years which is 2 1/2 generations ago, there are two plus generaitons of scholars who have never been taught about gold as money.

Jim was studying at MIT in 1972-74 and he studied gold as a monetary reserve asset. He was the last class to learn gold as money.

If you joined the IMF in the 1960s or 70s you had to pay for part of your IMF quota in gold.

Since that time students have been done a disservice and been taught things like:

–  Gold caused the Great Depression, which is not true.

– There’s not enough gold in the world to support finance, which is not true.

These and other points are covered in the Introduction and first 20 pages of The New Case for Gold.

Jim isn’t a gold salesperson and doesn’t make anything if a person does or doesn’t buy gold. He wrote the book to fill in the need for an education in gold.

 

The New Case for Gold is available now at Amazon.

 

Jim Rickards can be found on Twitter and at James Rickards Project.

 

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Not Much of a Holiday
words and music Elaine Diane Taylor
© 2015 Intelligentsia Media, Inc. All rights reserved.
SOCAN/ASCAP
Single available on iTunes

The Greek bank holiday and long lines to get a few euros for the day. Debt deals behind closed doors. The media telling us what opinions to have. China building islands in the South China Sea and claiming all the international waves. More dealing to come. More standing in line for those who owe. Who owes? There’s a long line of nations in debt and this is far from done.

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AlbumCover.PreparingfortheFall

Preparing for the Fall live boutique album available on iTunes — featuring Wag the Dog, Black Swan Dive,  American Pie and Gods of the Copybook Headings.

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Coins and Crowns
words and music Elaine Diane Taylor
© Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes

Single featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.

When a nation leaves gold as money and borrows to go to war. Hunger goes up, hope goes down, anger goes up, then it all goes down.


The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
©2014 Intelligentsia Media Inc.
SOCAN/ASCAP
from the album Preparing for the Fall available on iTunes

The copybooks of the early 1900s were filled with wise saying. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.

Another Week on Wall Street
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes

See the bankers wave their Wall Street wands and conjure piles of paper green. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.

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