Gold = 1 / T,
where T stands for the Trust that people have in the fiat Monetary System and the financial complex running it. Jim Grant points the finger at the central bankers, but they are merely creatures, albeit powerful actors, in a system of privilege and legalized looting.
In other words, the price of gold will run higher in response to the opacity, crony capitalism, insider dealing, abuses of power, and arbitrary valuations in the financial system and the overall system of governance.
Gold, and to a growing extent silver, are the safe havens for the world. This flight to safety is the fundamental driver of the precious metals bull market.
And I think that the ownership of gold and silver is still highly selective, based often on culture, financial sophistication, or a general predisposition against trust in monolithic organizations.
As a recognition of what is happening penetrates more deeply into the public consciousness, the spike in the price of precious metals may be much more impressive.
Is this weakening of confidence justified? One must ask themselves, how deeply has the corruption in the system been reformed?
Has transparency been restored, and the confidence of the members of the system been regained by things other than public relation campaigns, forced choices, subtle coercion, market manipulation, and even blatant propaganda?
These crony capitalists are so inward looking and corrupt that their policy response is to continue the looting and intensify the deception until confidence in the system is restored.
There is plenty of free choice to be had in this brave new world, from 401k's to the election ballot, as long as one chooses from what they give you.
That is the answer, the fundamental driver of the valuation.
"A bubble is a bull market in which the user of the word "bubble" has not fully participated. You can think of gold as a stock that went from 2⅝ to 18 in a dozen years. I'm not sure that's a bubble. It is the nature of gold that its valuation must forever be a mystery. It earns nothing. It pays no dividend. No conference call, no management to call up and complain to.
What I do think is gold is simply the reciprocal of the world's faith in the institution of managed currencies. It is one divided by T, where T stands for trust. And trust is a shrinking number and will continue to shrink. Therefore, I am still bullish on gold.
If a bubble connotes absurdity, what is absurd are the monetary conditions that supported this gold bull market. Gold is an expression of the world's justifiable distrust of the way our central bankers conduct their affairs. The poetry of it is that it can't be quantified. The central banks are unworthy opponents. The Fed has pledged 0% money-market rates for the next two years, so that's not much competition. And the governments of the world are taking under advisement this notion called financial repression—short-circuiting market mechanisms, capital controls, punitive taxes or intrusive taxes and the like."
Jim Grant: Gold Still Looks Good, Japan Still Doesn't - Barron's
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." Lord Acton
But before the people finally come to reform the Banks, the monied interests will throw quite a few patsies, traditional scapegoats, and red herrings on the fire in their stead. And if they have their way, they will burn down society rather than give up their seats at the top of the hill.
