Gold Wars As Relevant As Ever

In the era of “main stream junk-noise”, at least a growing minority of people is starving for information that is not coming from the government sponsored and dominated propaganda machine. Edward Bernays, father of Propaganda, described the task of main stream media as the conscious and intelligent manipulation of the organized habits and opinions of the masses as an important element in a democratic society.”

It is one thing to survive a government organized and controlled schooling system and to hang on the lips of central planners of this world, it is another thing to stay unbiased by starting the process of de-brainwashing itself through autodidactic education. In that respect, we believe it is important to scrutinize certain dogmas simply by using the most powerful human capacity: thinking.

In that respect, we believe every self respecting individual should at least look for answer on very obvious questions, like the following ones (non-exhaustive list):

  • If it would be true that simply creating money out of thin air would pave the way to prosperity, then why are the central planners not distributing a long life salary to everyone. Or, making their lives easier by avoiding mathematics, simply reward every citizen with a round amount, for instance 1 million dollar or euros?
  • If it would be true that gold has nothing to do with money and that only paper (money) is valuable, why are giant countries like China and Russia purchasing whatever gold they can get on the physical market?
  • Why are Indians smuggling more gold into their country than drugs, since the government imposed so many restrictions to import gold officially and legally?
  • How is it possible that the physical demand for gold and silver has exploded in 2013 while its paper price has crashed within the same period? After all, since the gold price crash of 2013, gold has had delivery delays of 5 to 7 weeks, while Swiss refineries, which are responsible for about 70% of the global gold refining, are still working 24/7 since then to meet demand?
  • How comes the 20th century has had some many hyperinflations? Why is the leverage in the financial system ten times bigger than the world economic output (world GDP is close to $70 trillion while derivatives are valued $700 trillion), a phenomenon accelerated since the central bank interventions in 2009.
  • What can we expect from the future when inequality between poor and rich is growing to all-time highs and what can we expect if the establishment has the power to define who will be “system-relevant” and “irrelevant”?

These questions are as important as ever. Unfortunately, the amount of people looking for unequivocal answers remain limited. This is where the book “Gold Wars,” released by Ferdinand Lips in 2002, can help. The book provides answers by simply looking at history from a different angle than centralized governments used to teach us.

“Gold Wars” reveals how the world economy has swayed off the right path, away from a safe and prosperous economic system. Governments launched a vicious and determinant war against gold, which led to a painful 21st century with hyperinflations, economic instability and massive debt. Lips traces these changes in the economy to the departure from the gold standard in favor of creating the fiat system as early as World War I.

Gold Wars is a great source of information on monetary history, the part of monetary history that isn’t taught, neither at schools nor at universities. In fact, the majority adopt the mainstream Keynesian line of thought, which basically does nothing else than dividing manhood into rulers and slaves. The basement to achieve such a system used to be (and still remains) to gain control over the money supply. Therefore, it is understandable that this kind of people saw free market money such as gold and silver as their biggest threat in achieving this goal. That’s why they called the gold standard a “barbarous relic”. Because of this ignorance on gold and the past successes in gold-based markets, fiat money has taken the world by storm.

Unfortunately, little is written on the history of the gold standard and the departure from it, which was the main drive for Ferdinand Lips to write his book. Lips provides numerous statements and quotations of key players in that system, whether pro or anti-gold, thereby offering a thorough and comprehensive documentation of the gold wars in the 21st Century. In particular, the book provides the historical background of gold up to the early 21st Century, when governments launched their gold wars. The book describes how governments, primarily the United States, tricked and manipulated the system to endorse its dollar over gold, trying to give their dollar a higher value – a value it did not have.

Claudio Grass, managing director of Global Gold in Switzerland, specialized in sound money matters, just released a book summary of “Gold Wars,” which is embedded at the bottom of this article. Ferdinand Lips was his mentor, teaching him to never stop talking about monetary history. Lips has always seen a deep misconception regarding this matter.

Claudio Grass, having spent some time with Ferdinand Lips, looks at the evolution since Lips passed away and observes that nothing has changed. By contrast, the key premise of Lips has only become stronger: debts have grown bigger and the crisis has been delayed (resulting in a harsher collapse to come). More than ever has the economy been artificially propped up. Lips used to say that an economy can only work when real products and services are produced. Moreover, history has learned that all empires and nations collapsed when they started to manipulate the currency, which went together with increased corruption, centralization of power, destruction of the middle class. Today, we are on the same path, with the same systemic trends.

In that respect, although Lips his book has been written more than a decade ago, it is still very actual when it comes to the destructive power of a fiat money system. The signs are all over the place. One of them is the massive centralization across Western economies. In that respect, one should think of the euro currency system, euro zone political power, US government interventions with initiatives like the Patriot Acts, too-big-to-fail or an oligopoly controlling the whole media. Another sign is the financial system that has evolved to a much higher degree of complexity. That’s the opposite of what a sound money system stands for, especially reducing risks which can only happen in a decentralized environment.

The impact of the ongoing developments are being felt in the currency landscape. Being in the third year of a global currency war, things risk to spiral out of control. Although the dollar hegemony, based on Bretton Woods and described by Lips as “an American dictate,”  is still standing on its feet, it is not expected to remain the world reserve currency forever.

In general, we don’t know what might work for the future in a world full of uncertainty. But most of us know for sure what does not work or, in the words of Nassim Taleb, “the greatest and most robust contribution to knowledge consist in removing what we think is wrong.” (he calls it the subtractive epistemology). Consequently it can be said that printing wealth out of nothing is nonsense; it can work for a short time but will always end in a full scale collapse.

However, the establishment and their central planners will not give up fast. They will fight tooth and tail to keep their system going. They will push for inflation in markets such as the USA, UK, Japan and the Northern region of the Euro Zone and will try to accelerate deflation in countries such as the southern nations of the Eurozone to improve their competitiveness. However, the outcome will be that only the players which are defined as “system-relevant or too big to fail” will manage their way through this storm and the rest is going to pay with their “artificial” wealth, in a system which can inflate or deflate property rights away.

In such an environment, we believe it makes perfect sense to allocate some of one’s wealth in physical precious metals, outside the banking system, as a personal insurance against the dangerous threats of a centralized and artificial system, which we, just like central planners themselves, do not understand.

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