In a recent blog article we noted a comment Jim Rickards made about the fact that lately there have been some elite economists who have written about the idea of a major upward revaluation for gold as part of an effort to get to the desired inflation targets of the central banks. In a new two part article Jim explores this topic in depth. Below are the links to each article and a few selected quotes.
---------------------------------------------------------------------------------------------------Link to Part I
Link to Part II
Selected quotes from Part I
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"As you may know, the “Shanghai Accord” is a secret plan created by the G-4 (China, the U.S., the eurozone and Japan) on the sidelines of the G-20 meeting in Shanghai, China, on Feb. 26.
The plan is to strengthen the euro and the yen and ease the dollar. With the Chinese yuan pegged to the dollar, this combination gives China financial ease and a competitive advantage over its trading partners.
The Shanghai Accord will be an operative reality in global currency markets for the next several years."
. . . . .
"Below, I show you the one way to produce inflation that doesn’t require the Shanghai Accord or destructive currency wars. And the elites are finally starting to talk about it publicly. What’s their next plan? Read on…"
. . . .
"So there are three ways out of debt. One is default, which is not a good option. One is growth, but it’s not happening. The third way is inflation. The government has to have inflation. If it doesn’t, there’s going to be a crack-up in the national debt.
But we’re not getting inflation from monetary policy. There’s another option, however. The idea’s been around for a long time, but now it’s being spoken about publicly by elites. That’s to have central banks, whether the Fed or the emerging markets, bid up the price of gold.
A higher gold price will also drive prices in the overall economy higher."
Selected quotes from Part II
"The global monetary elites had a conference in Zurich, Switzerland, last week. Among the speakers were William Dudley, president of the Federal Reserve Bank of New York, and Claudio Borio, chief economist of the Bank for International Settlements.
The topic of the conference was the prospect of multiple reserve currencies in the international monetary system. The speakers generally agreed that a system with more reserve currencies (such as the Australian dollar, Canadian dollar and possibly certain emerging markets’ currencies in addition to the Chinese yuan) would be a desirable one.
There’s only one problem…
It’s a zero-sum game. All of the reserve currencies in the world add up to 100% of the reserve currencies. If new currencies have a larger share, then the U.S. dollar must have a smaller share. It’s just basic math.
That means a long-term process of selling dollars and buying the new reserve currencies. That selling lowers the value of the dollar and imports inflation into the U.S.
It also means a higher dollar price for gold. The elites won’t tell you that, but it’s true."
. . . . . .
"The key takeaway is that a higher dollar price for gold is just a lower value for the dollar. And that’s what the elite’s want.
It’s part of their global inflation plan…"
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My added comments: There is without question a belief by many that gold is going to play some kind of key role in the future in the monetary system. Jim goes into his view on a possible revaluation for gold in a lot of detail in these two articles. In April, he released his new book "The New Case for Gold."
Officially, I cannot find anyone who is saying that there is a plan in progress to return to a gold standard where a major currency or currencies would again be exchangeable for gold at a fixed price. However, gold is obviously important in the system as a key reserve asset. We have seen very large additions to gold reserves by a number of central banks with two of the biggest being in Russia and China.
Also, as Jim Rickards points out, for whatever reason some very highly respected economists have written about the idea of gold being revalued higher as one way to deal with the battle against deflation and global debt problems. Here is the comment Jim made earlier on this that we noted in a recent blog article:
"This is the third elite economist to say the same thing after the PIMCO paper (Rumplestilskin) and Ken Rogoffs piece. The power elites are now speaking openly about revaluing gold, which is just a form of currency devaluation."
This idea has been discussed for a good while (for example as we noted in this blog article) by some outside the system. The fact that more mainstream economists are writing about it is an interesting new development. In addition, I have gotten emails from people like Willem Middelkoop saying that he sees this idea being written about more and more in respected investment newsletters, etc. He wrote this article on his blog in early May and this new one on JP Morgan endorsing gold.
On top of all this, we have a number of high profile investors like George Soros making large investments in the gold sector and the state of Texas announcing it is ready to move forward with a state run gold depository to store physical gold and silver within the state. The University of Michigan also plans to stick its toe in the water in the gold sector.
I am not sure yet where all this is heading, but we will just continue to follow events and see what happens. It's clear that gold is attracting a lot of attention.
Added notes: Here is Jim Rickards latest online webinar and a big thank you to Willem Middelkoop for these kinds words on his twitter feed. Both Jim and Willem help me out from time to time in pointing me towards information I try to cover here.
Additional added note: This article was also published at TalkMarkets.com here
Added notes: Here is Jim Rickards latest online webinar and a big thank you to Willem Middelkoop for these kinds words on his twitter feed. Both Jim and Willem help me out from time to time in pointing me towards information I try to cover here.
Additional added note: This article was also published at TalkMarkets.com here
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