There lived a certain man in Russia long ago
He was big and strong, in his eyes a flaming glow
Most people looked at him with terror and with fear
But to Moscow chicks he was such a lovely dear
He could preach the bible like a preacher
Full of ecstasy and fire
But he also was the kind of teacher
Women would desire – “Ra Ra Rasputin” by Boney M. 1978
The biggest concerns of just about every investor and trader I know are: how are we going to survive the next crash, the next crisis, the next natural disaster, the next political standstill.
I spent the last four years trying to help us see past all of those types of concerns in large part because of all the other political, economic and Bubble Blowing Bull Market dynamics that were all ready in place were likely to trump those bumps in the road.
But as usual, I want to try to Flip It and see the other side of the coin. It’s easy to become myopic and it’s hard to remember our place in this history of this planet and the societies that live on it.
For example, in a historical perspective, I think it’s easy to see that the dollar dominance over all other currencies on the planet is dying. That is, the dollar’s long-held status as the world’s Reserve Currency (meaning that oil and many other global commodities are traded and settled in dollars rather than some other currency) has likely already peaked and we’re seeing Russia and China and other powerful nations start to formally talk about moving off a petro-dollar reserve currency.
Let’s underscore some long-term historical and societal trends using this very good article called “Why do we value gold?”
Gold’s relative inertness means you can create an elaborate golden jaguar and be confident that 1,000 years later it can be found in a museum display case in central London, still in pristine condition.
This is a great point that modern day man seems to forget. US Dollars have been around for a couple centuries now, but the idea that a dollar in your digital bank account or under your mattress is “stable” is silly in this context, isn’t it?
Most recently for example, the price has gone from $260 per troy ounce in 2001, to peak at $1,921.15 in September 2011, before falling back to $1,230 currently.
That is hardly the behaviour of a stable store of value.
What a egotistical statement to make about gold, a de facto currency over the last few millennia vs. our modern day de facto currency. Is it gold that has been unstable store of value? Or has it been the dollar itself that has been an unstable store of value?
As we’ve seen, it also needs to be stable, portable and non-toxic. And it needs to be fairly rare – you might be surprised just how little gold there is in the world.
…And here lies the problem with gold. Its supply bears no relation to the needs of the economy. The supply of gold depends on what can be mined.
Here’s another incredibly egotistical modern day economic theory. That some panel of bureaucrats or politicians or Central Bankers or King or whatever can somehow manipulate the value of a modern day currency to meet the “needs of the economy”. I know it is sacrilegious to say this in our financialized and propagandized system of economy today, but there was a time when people believed that the economy and the money in it served the needs of the people and not the other way around.
In a couple centuries (or sooner), people will look back at our Central Bankers and Treasurers and Economic Advisors of today in the same way that we look back at Rasputin and other advisors of yesteryear. You can simply replace Rasputin in Wikipedia’s write-up for that old Russian Guru and see for yourself:
Grigori Yefimovich Rasputin (Ben Bernanke) was obsessed by religion (Modern Monetary Theory) and impressed many people with his knowledge and ability to explain the Bible (economy) in an uncomplicated way. It was widely believed that Rasputin (Bernanke) had a gift for curing bodily (economic) ailments. For more see: http://en.wikipedia.org/wiki/Grigori_Rasputin
I have no doubt that our society and the people of the planet are more connected than ever before and no doubt that society and life for billions of people has improved over the last few thousand years. But let’s not make the mistake of thinking that we live in a time that won’t have real crises and crashes and collapses and natural disasters that will impact our lives and our money.
I’m using the recent pullback in gold, which is again about 50% off is recent highs as measured in US dollars, as an opportunity to scale into some more gold coins. I suggest all Revolution Investors consider doing the same. I also suggested putting up to 1/2 of 1% of your portfolio into bitcoins a few months ago, but with bitcoin up 10-fold since then, I would rather buy gold at $1200 than bitcoin at $1000.
Indeed, I have spent and donated some of my bitcoin money while they’re here near $1000, just FYI.
The fact is that no currency is ever actually safe and/or stable. Certainly not the dollar.