Gold

An interesting short essay on why the price of gold is currently through the roof.

Alan Greenspan knows all this. Before he became an integral part of the nanny state's machine, he wrote the following in a 1966 essay titled "Gold and Economic Freedom":

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

Essentially, Greenspan's point is that gold enforces consequences. That's why Nixon officially decoupled the dollar from gold in the early 1970's; as the U.S. printed excess money to pay the debts from the Vietnam War, it sought to disguise the consequences. Greenspan refers above to the government making the holding of gold illegal. In 1933, Roosevelt outlawed the ownership of gold by U.S. citizens as the government tried to remove any constraint on its ability to reflate during the Great Depression (history buffs can view a copy of FDR's executive order here).

The essay also contains a truism I've heard from a number of traders:

"All of economic history is one lie and deceit after another. Your job as a speculator is to get on when the lie is being propagated and then get off before it is discovered."