When Government-Issued Money Dies, Gold Comes Into Its Own

Gold performs splendidly when money is being devalued, and such devaluation is yet to be widely understood by the great mass of…

by Chris Powell of the Gold Anti-Trust Action Committee (GATA)

Dear Friend of GATA and Gold:

The London Telegraph has a surprisingly if begrudgingly favorable commentary on gold by the newspaper’s assistant editor and economics columnist, Jeremy Warner. Those who follow GATA and gold may find his main point only obvious — that gold performs splendidly when government-issued money is being devalued — but then such devaluation is yet to be widely understood by the great mass of users of government money

Those who do follow gold may be most interested by Warner’s acknowledgment that the British government’s gold sales that began in 1999 were meant to “rescue a number of banks from ruinous short positions in the metal.” This point was made at the time by gold price manipulation litigator and GATA consultant Reginald Howe —


— but has yet to be accepted by other establishment market analysts.

Unfortunately Warner repeats a common error, asserting that the economist John Maynard Keynes called gold a “barbarous relic” when in fact Keynes reserved that term for the gold standard in currencies.

Warner concludes: “A rising gold price reflects, above all other things, a loss of trust in the value of fiat currencies, for which there is good reason right now. But for the metal to really come into its own requires a prolonged period of relatively high inflation, similar to what occurred in the 1970s after the United States came off the gold standard and President Nixon effectively opted for money printing and inflation over tax rises to pay for the Vietnam war.

“For the moment, the presiding consensus view remains the opposite — that we are heading into a great deflation. I’m not so sure. The least painful way of dealing with a big debt overhang is to inflate it away. Who knows? The gold bugs might actually be on to something.”

For anyone in a mainstream financial news organization, Warner’s commentary today is enough to earn a tinfoil hat.

Because of some left-wing totalitarian vandalism that hampered publication of this weekend editions of Britain’s major newspapers —


— the pay wall has been removed from the Telegraph’s content today and Warner’s commentary, headlined “When Money Dies, the Barbarous Relic — Gold — Comes into Its Own,” can be read here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
[email protected]

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