Perspective

The fact that so many gold commentators are at present so "definite" about gold's impending rise has caused me to stop and think about the subject from base principles. This approach often serves to allow one to clear one's thinking.

One important base assumption is that the irrefutable degradation in the US Dollar's purchasing power is a "bad thing".

Let's consider this:

My late father's first motor car was a 1952 Ford Prefect, which he bought whilst he was on a salary of around 25 pounds a month.(At the then exchange rates, this would have been roughly the equivalent of US$125 a month) The vehicle was designed to take four passengers, and had a top speed of around 50 mph. It had a high centre of gravity which made it prone to roll over. Indeed, my mother actually broke her neck (from which she fortunately recovered) in an accident in that car - which occurred at a speed of maybe 10 mph when another car hit us directly side-on at an unguarded intersection. The car rolled several times and, as a 5 year old kid, I was fortunately thrown clear and escaped with some bruises. My old man was also pretty lucky to escape unhurt.

Some years ago, when my eldest daughter was 18 years old, our family bought a Mitsubishi Lancer which, since then has been driven by all three of our children. Had I had the same profession as my father (he was a teacher) my salary at that time would have been around A$3,000 a month (equivalent then to around US$2,700 a month - or 21 X my old man's salary).

The Mitsubishi has a top speed capability of around 130 kph. The body is designed to crumple on impact, and the vehicle has a low centre of gravity. My son was driving it one evening at dusk. He was travelling at around 15 kph, when the other driver shot a red light and hit his vehicle side-on - in a manner that was almost identical to the circumstances surrounding the Ford Prefect's accident. The car spun (it did not roll) and my son escaped without a scratch.

From memory, the Ford cost around 200 pounds (equivalent then to US$1,000), and the Mitsubishi cost around A$17,000 (around US$15,750 then)

It cost one pound (US$5) to fill up the Ford's tank, and it cost around A$18 (then) to fill up the Mitsubishi's tank. (equivalent to US$20) Today (we still have that car over ten years later - and all of my kids have used it as their "first" car) it costs around A$35 to fill it from empty (Equivalent to US$26).

So, what conclusions can we draw from this?

• Comparable incomes have risen by 21X
• Cost of comparable sized vehicles have risen by 16X
• Cost of filling up the tank has risen by 5X
• The quality of the comparable sized vehicles has improved dramatically

Are we materially better off today than we were in 1952? Of course we are! And it is a sad reflection on the negative and destructive predispositions of those people who whine and complain about only one (selected) side of the equation, and who point fingers and throw rocks at the "dishonest" and "immoral" central bankers because these "evil" people have caused the purchasing power of the US Dollar to fall by 90% since 1913.

We, in the West, are without doubt materially better off than we were in 1952. There can be no argument about that . Furthermore, guess what? People in the emerging nations in Asia are also enjoying more (and better) material things in life.

I was originally born and brought up in South Africa and for several years travelled extensively throughout Latin America, and I have seen poverty and squalor first hand - right up against the coal face. It is not pretty. But let's understand that the main drivers of this poverty and squalor have been:

• High birth rates leading to exploding populations
• Lack of water treatment infrastructure (until the late 1980s less than 10% of sewage throughout the continents of Africa and Latin America had any form of treatment at all)
• Lack of education, leading to inability to do any work for pay, other than "menial" tasks
• Absence of "certainty" regarding home ownership in underdeveloped areas. (Many peasants merely "squat" on government owned land)
• Corruption on the part of the politically empowered "haves" leading to a misdirection of foreign aid, away from its intended destination in a large proportion of cases.
• "Political Empowerment" in third world countries typically flows from a totalitarian approach to government. The strong "assume" power by whatever means they can muster and, in turn, use every dirty trick in the book that may be expedient to prevent this power being taken from them. This typically occurs to the detriment of the population at large.

But the preoccupation with materialism has certainly had "unintended consequences".

• Human connectivity at a spiritual level has evaporated like the mist in the morning sun. In general, people nowadays don't even look into each other's eyes when they communicate with each other. In the name of entertainment, many popular "talk shows" and TV serials are designed to expose and exaggerate the seamier side of life; and the media more often than not "packages" information in a manner which is calculate to serve the purposes of their own particular agendas. As a result, the population at large typically has "slanted" information forced down its throats, and objectivity under such circumstances is virtually impossible. In the West, political messages have been reduced to sound bites and, as an example, very few people - in the West or the East, or the Middle East - have any idea what the true facts are behind any reported circumstances. As a general rule, the view that any one community as a whole might have of any other community as a whole - will have been based on prejudice devoid of spiritual warmth.
• Ethical values have been stretched to breaking point, and the principle of "Accountability" for one's actions is interpreted subjectively. Typically, the word "accountability" is interpreted in respect of a carefully defined constituency. Thus, for example, from the perspective of (say) the movers and shakers who put political leaders in power, these same leaders are certainly behaving with a sense of accountability - to them. One needs to keep a fairly cynical eye on the so called process of democracy. Yes, the public "votes" to elect a leader. Unfortunately, the leader that is put forward as a candidate is usually "hand picked" to represent special interests. More often than not, candidates on both sides of the political spectrum are hand picked by the same special interests - causing the process of democracy to become a travesty of ethical values.
• Unrestrained pursuit of material wealth has caused the Gayan environment to become so polluted as to now threaten to the very existence of humanity in particular, and to biological life on Earth in general. Waterways have become saturated with nutrients which - through a complex process - has led to de-oxidation of that water in which some toxic plants now grow uncontrolled. Topsoil has been eroded and land so overworked that farm production capacity per hectare is - on a world-wide basis - dangerously close to peaking out relative to a still growing world population.
• There has been a cascading breakdown in genetically in-built biological immune systems across more than one species, leading to diseases such as AIDS and Chronic Fatigue in humans, Mad Cow disease in bovines, Avian Flu in birds
• There has emerged a mountain of "debt" which will never be repaid as long as most of us draw breath. On a sovereign level it is arguable that this non repayment of debt in a zero/sum game of international economics is really irrelevant. At the end of the day it REALLY DOES NOT matter whether the USA owes trillions of dollars or is owed trillions of dollars. No country - at sovereign level - is expected to ever repay its international debts. There is one exception to this, and that is that the quid pro quo for this is that all sovereign nations must play the economic game under the "rules" set by Central Bankers, and those who do not will either be excommunicated, or their leaders face a "forcible overthrow - to be replaced by others who will play according to the rules. Unfortunately, the issue of debt at a private level is more complex. As long as incomes remain sufficiently high to service (as opposed to repay) the debt, and as long as asset backing remains sufficiently high to support (from a security perspective) the level of outstanding debt, then the absolute level of debt is a non-issue. The risks are that debt servicing capacity will shrink if interest rates rise relative to incomes (or if price inflation grows at a faster rate than income inflation); and that security may fall below critical levels in the event that rising interest rates give rise to a softening in real estate prices - given that real estate prices represent the backbone of the banks' security.

The author of this article would argue that the currently emerging "wave" of interest in gold as the ultimate currency - as represented by the "huge" number of hits on the Gold-Eagle web site and others like it - has less to do with a conscious fear of impending economic collapse than it has to do with an unconscious recognition that the issues relating to spirituality, ethics, environmental degradation and deteriorating capability of immune systems to cope with this degradation, are far more important issues.

There is a society wide welling up of an unconsciously motivated drive to ensure that the "quality" of (non material) life is raised to a higher level of priority.

The time has come for us to face the reality of what is happening here.

"Gold" is seen as an external discipline that will "force" private bankers and politicians (who ultimately control the Central Bank decisions and activities) to behave with less unbridled greed.

Unfortunately, dear reader, the fault does not lie with the bankers. It lies within ourselves. The bankers and central bankers have been allowed to get away with their activities over the generations because their activities have in fact given rise to an improved standard of material living for all of us - even as it has allowed these special interests to amass their obscene levels of wealth. The bankers have "gotten away with it" because their agenda has in fact led to an improvement in our material living standards.

A "Gold Standard" is not going to change our own inbuilt predispositions to "chase the buck" in preference to all other objectives - and, with this in mind, one can think in terms of a gold standard as a necessary but not sufficient condition.

In conclusion, it needs to be understood that those of us who are "praying" for a skyrocketing gold price are merely manifesting EXACTLY the same symptoms that we claim to be abhorring in the "evil" bankers and Political Elite.

The "problem" is not that "gold" is no longer the anchor within the world's financial system. The problem is that as a community, mankind has elevated materialism to the level of a deity to be worshipped. A Gold Standard is not going to solve this problem, but a groundswell move away from materialism and towards spiritual and ethical values - by the population at large - will.

What is needed is the emergence of a new breed of ethically principled and morally upright leaders who understand that the pendulum has swung too far, and that it needs to be brought back to the centre. With that as a starting point, we have a chance. Without that, the probabilities of human survival are - as they say in the statistical text books - "vanishingly small".