Uncivilised anonymous

Bogpaper’s very own Jan Skoyles has written the piece below, it originally appeared on The Real Asset Co’s pages, but they’re a nice bunch and they let us share it with our fellow Bogpaperites.


Civilized people don’t buy gold

Charlie Munger, vice-president of Berkshire Hathaway

Hi, I’m Jan and I’m uncivilised.

Becoming uncivilised was a gradual thing, but it mainly started when I began to question why governments are allowed to just devalue my savings without asking me.

I realise I probably shouldn’t question why both my own bank and central bank are able to embark on credit creation, but I do.

The only way I can make myself feel better though is when I remember that I’m not the only one who is uncivilised. In fact, it turns out most Chinese and Indian citizens are just as uncivilised as I am. They all invest in gold too. And there is a growing number of people embracing being uncivilised all over the world as we watch more of them invest in gold every year, despite the increasing gold price.

In Europe, the Swiss are the most uncivilised of all of us Europeans. Obviously worldwide Indians take top spot. But just focusing on Western investors, the Swiss are definitely the most uncivilised.

In the EU, Germany is the worst of us all. But it’s not all bad for them, don’t worry, they’re working quite hard at being civilised. So much so that even though their Central Bank has more gold per capita than any other EU country – they are trying to balance this out with the civilised action of forcing the Greeks, Italians, Spanish, in fact any broke EU country, into bailing out the banks, removing democracy and punishing their citizens with unprecedented levels of public debt. Meanwhile German people are the biggest private investors in gold on the continent. They’re obviously too uncivilised to have faith in policy makers’ actions.

What concerns me is that I suspect Mr Munger likes to think of his home country as a leader of the civilised world. But it turns out, it’s not so much. Several states in the US are now trying to allow gold and silver to become legal tender. This uncivilised bunch has begun to question the right of the Federal Reserve to not only create money but also set a price for it as well, through the interest rate mechanism. They believe their money should be free from the shackles of the Federal Reserve and should be controlled through demand and supply, i.e. the medium of exchange is successful depending on how many people respect it.

But perhaps I’ve misunderstood, perhaps I am the civilised one and those who think differently to me are not.

Dr Ron Paul recently wrote that central bankers were ‘morally bankrupt’ as they believe prosperity is built on debt and cheap credit. Central banks were set up in order to eliminate the volatility in the banking sector. However, because central banks also issue us with, literally, monopoly money then we now experience far greater volatility on a much larger and intricate scale. This has led us to these apparently civilised times where we are living beyond their means in the belief that they deserve everything for very little.

I do not work in a business where if someone deposits their money with me that money becomes mine. I do not work in a business where if someone deposits money then there is a chance they won’t get it back. I do not work for a business where these things may happen because that would be theft, which is uncivilised and immoral. Who does work for a business where these things may happen? Bankers.

Hugo Salinas-Price says this of our civilised society:

“…the trouble in our declining civilization: men and women in these times wish to live in illusions, and the politicians, the bankers and their economist lapdogs have been providing those illusions for many decades now. Those illusions were enabled by the “Welfare State”… On the other hand, it would also be reasonable to say that men and women today live in illusions, because they were forced to do so by the fiat money they had to use. Once fiat money is in place, all becomes illusion and gambling and people give up trying to make sense of life. Pretty soon they take illusions to be realities.”

Charlie Munger likes to say ‘There are answers worth billions of dollars in $30 history books’. Maybe he’s skipped some of his reading and missed the chapters on how whole civilisations have been destroyed on the back of un-backed paper currencies. They were destroyed so badly that they were quickly returned to a gold based currency, because people knew that in order to carry on with life in a civilised manner, they had to save in something which kept its value and was respected by everyone. If Mr Munger had read this then he would realise gold’s value and would have watched with interest as it has increased in price over thousands of years.

As many others have commentated, what is uncivilised is the ease at which governments believe the current monetary system is right for the development of societies. The casual manner in which cash can now be generated has hugely increased the gap between rich and poor, both within and between nations. Those closest to the printing presses, and who held the assets prior to their use, benefit the most.

It’s true that those escaping Nazi rule left with gold on their person, but just because they flocked to gold during times of unimaginable terror does not mean it was an uncivilised thing to do. Throughout every economic crisis; from Weimar Germany to Argentina’s hyperinflation to the collapse of the Icelandic Kroner the local price of gold has shot up as people embrace its safe haven status. These economic crises were not caused because we have a civilised world, they were caused because we have a world where politicians insist upon, but are unable to, control of our money. That is uncivilised. People wanting to protect themselves from the threat of financial destruction is only natural and understandable.

Gary North provides a suitable conclusion to this uncivilised debate:

‘[Charlie Munger] fails to realize that the economy is being managed at the top by people who are not reliable. It is being run by Congress, the executive bureaucracy, and the Federal Reserve System. It is being run by men who share the views of Keynes, namely, that the gold standard is a barbarous relic and that politicians and bureaucrats and central bankers are the people who should set policies under which companies become profitable.

Civilized people should buy gold when uncivilized people are in charge. They should also buy it when civilized people in power adopt the economic policies of uncivilized people.

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