Three years ago I sat in a financial advisor's office at one of the banks and he proceeded to sing the praises of the latest mutual fund that a few of his buddies in Toronto had concocted. He highly recommended that I invest in this fund. I wanted to get some insight into this advisor so I asked him a simple question: “What is money?” (Of course I am referring to the paper notes that the Bank of Canada calls money. I view this paper as currency and gold and silver as true money.) In response, I got a deer in the headlights/Scooby Doo look from this person. I was then told that money (currency) is wealth. My view of his response? Wrong: Money is Debt. Every single central bank around the world today issues debt- not money. Historically, currency was backed by gold and silver. In my opinion, historic gold and silver backed currencies could actually be called money. Today, all the currencies around the world are backed by nothing. This is the first time in history that this situation has existed. Today, when currency is issued by a central bank it is pure debt: nothing else. It is a promise by a central bank to repay something in the future. Honesty, I’m still trying to figure out what that “something” is. In Canada, maybe it’s a unit of Stephen Harper's time. In that case, I would like to cash in my currency and have Mr. Harper come clean my floors. I don’t have enough room in this article to address the fiat currency issue here. (Fiat Currency - Currency that is backed by nothing but a government promise.)

I wanted to pry further into the depths of this advisor's economic understanding of what was truly going on in the global economy so I asked his opinion about owning physical gold. Sadly, I got the response that I was hoping I would not get. I was told that gold was a barbarous relic that was purely psychological. “Besides,” he said, “how are you going to store it?” To address the latter comment, when I was a little kid my dad walked me over to our local bank branch and showed me what a safe deposit box was. I felt like taking this financial advisor by the hand and walking him over to the great big metal door behind the tellers and showing him what mystery lies beyond the steel archway.

To address his first objection, I would simply state that 13 years ago it took a bit more than 42 ounces of gold to purchase a share of the Dow Jones Industrial Index. In 2007, the Dow posted a new all-time high and it only took approximately 21 ounces of gold to buy the index. Today, as the DOW threatens to break this all-time high of 2007, it now takes less than 8 ounces of gold to buy the Dow. Financial planners, advisors and stock brokers do not make a commission on selling physical gold and silver. This is why you will rarely hear them speak about this barbarous relic.

The take away here is not so much about the increasing value of gold, as it is the decreasing purchasing power of the global fiat currency scam. Also, that gold is playing an increasing role in the global economy as the central banks around the world continue to debase their currencies. The truth of the matter is that gold hasn’t even hit the stage yet. Less than 1% of North Americans own any gold at all. This is very concerning. Once the true value of gold is understood (a store of wealth and real money) the nominal price of the yellow metal will rise faster than Justin Bieber’s singing career. My bet is that it will have a much longer life span than the career of Mr. Bieber. (Is he old enough to be called “Mr.”?) 

Photo: Contributed

Monthly Gold Price in US dollars from 1970 ($20/oz)-Sept 2012 ($1,770/oz)