Michael Maloney's Gold & Silver Preface

CaptainDan

Active Member
I can already tell that I'm going to love this book. I've been thinking about how best to go about writing about it and I've decided to cover it with a skeptical eye. I'd be foolish to take any investment advice for face value, especially in the realm of precious metals. Lots has changed over the past thousands of years and to compare historical gold investing with investing of today, or, how to say this more clearly, to act as if the investing of precious metals in 1900 is closely aligned with that of today would be akin to burying my head in the sand. You'll see what I'm referring to below.

I do want to tell you before I begin, though, that I love gold and silver. I truly believe that no matter if you've ever seen either of these things before in your lifetime, you would hold them tightly and cherish them if they were given to you. There's something innate in the human spirit that finds these metals precious. No one needs to tell you this. If you were a native who's people were locked in the forests of South America for the past thousand years and someone handed you a piece of gold, you'd treasure it as if you knew its value in the outside world. There's something magical about gold. I'm not sure anyone has ever discovered what that is, but it's certainly there.

Michael Maloney's preface is only a few paragraphs long. I'd like to pick it apart and discuss each of its ideas. There are a few general assumptions that I'd like to counter. Or talk about.

The first few paragraphs of Mike's preface discuss how fiat currencies have always been debased by governments globally. Essentially, because of borrowing and the expansion of a currency in a set market (my words), that currency eventually loses the value it once had, driving up prices. Or, to put it more simply, you'll need more pieces of paper to buy the same thing. Because wages rarely rise with costs, the average person generally feels the pinch. Mike says that once the debasement of a currency reaches a certain point, the citizens of a society realize that it's no good anymore and they turn to gold and silver. Two metals that seem to hold their value steadily. This rush to precious metals will cause a realignment of its value in comparison to their debasing currency. I assume this is why we see gold valued at $300 per ounce one year and then $1,800 per ounce a few years later.

At first glance, this all seems to make sense. I would, however, like to discuss how today's world differs from yesterday's or even how the currency of a first world nation differs from that of a third world. To begin, Let's talk about the world of the past. A hundred years ago, there was no such thing as a computer. Financiers on Wall Street and across Europe relied on letters and telegraphs for communication. If a market in any particular area was crashing, the response was slow. For a central bank to intervene, it took ages and that intervention was oftentimes too late. And because much of the world's currency was tied to the value of gold, bankers had to locate and secure their wealth before injecting it into the market as a correction. As you can imagine, this took time and sometimes it didn't happen at all. It's my guess that, aside from the inherent corruption of the financial markets and some bankers themselves, there wasn't a lot a financial organization or government could do if something fishy was going on in the markets. To put it bluntly, to talk about today's currency market compared to markets of one hundred, two hundred, a thousand years ago is pretty much useless. In today's world, and we've seen this time and time again, if there's a blip in the market, a computer can simply make a buy large enough to calm the blip. No one even needs to be at the computer operating it. Triggers can be coded into the Fed's software that simply makes purchases when needed and sales when needed. We've seen this type of thing occur wildly across the past decade and especially in 2019 and 2020. So all those written letters and telegrams of old don't need to be discussed any longer. Things aren't the same. Let's not compare apples and oranges.

Next, I'll discuss banking systems of developed countries versus those of under developed countries. Okay, let's just get this out there right now - banking systems are oftentimes used to manipulate the actions and political values of a nation. If you aren't sure what I'm referring to, read up on Andrew Jackson. The book The Age of Jackson by Arthur M. Schlesinger Jr. is a good one. You can also read Confessions of an Economic Hit Man by John Perkins. And let's not forget the most important book of all, The Creature from Jekyll Island by G. Edward Griffin. These three books should enlighten you to the shady activities that go on around the world every day. So when someone talks about how a currency is inflating into oblivion, don't for a second think that it's due to some force of nature that's out of our control. Banks inflate currencies to ruin them, put pressure on governments, consolidate currencies, and establish central banks and other banking structures. This happens much more frequently in under developed countries than developed ones because there simply isn't the wherewithal, education, experience, or framework in under developed countries to counter the effort by the banks. The savvy isn't there and oftentimes the political structure is corrupt to its core. Eventually, all nations and currencies will fall to the bankers, but again, don't be fooled into thinking that it isn't their fault. It is and it's completely planned and on purpose. But just because this is the case, it doesn't mean that you shouldn't protect yourself by buying and storing gold and silver. Now that you're slightly more educated about the process, you should actually have more reason to do so. So basically, I think what Mike Maloney says is true, it's just that his reasoning and rationale need to be fleshed out more extensively. Perhaps it is, as I haven't even begun to read his book yet.

In the second half of Mike's preface, he talks about transfers of wealth. I agree with him wholeheartedly on this one. Since I've begun entertaining myself with global finance and learning about the many stock markets around the world, I've seen this phenomenon occur time and time again. Markets rise and fall and as they do, I watch who buys and sells. More often that not, the little guy sells when markets are at their bottoms and big guys buy. When markets are at their tops, little guys buy and big guys sell. A few years ago, I decided to do my buying and selling when I thought the wealthy do their buying and selling. It's worked out marvelously. I will tell you though, it's gut wrenching to go against my instincts. But it's worked out so well. Of course, market fluctuations don't have much to do with gold related transfers of wealth. Bigger things do. Currency collapses. Runaway inflation. These things can make millionaires out of thousandaires. Owning a few hundred ounces of gold under the right conditions can set a man up for life. Now there's a transfer of wealth worth learning about.

Finally, I will note that I've yet to see the price of gold increase or decrease based on any sort of actual currency valuation. The gold bugs like to talk about the coming collapse of the dollar and the "big one" that's going to carry the price of gold to $8,000 an ounce. I honestly don't think any of these types of things are going to happen. The only factors I've seen influence the price of precious metals have revolved around uncertainty. Sure, slow rises in prices can be attributed to massive government and central bank stimulation, such as we're seeing now under the guise of COVID 19, but by and large, the huge jumps in the prices of gold we've witnessed over the past two decades have had more to do with the housing and mortgage market crash and the global pandemic. Neither of which had anything to do with inflation. Of course, that's not to say that both of these things haven't and won't cause inflation, but I've yet to see any evidence that they have. And this goes back to how keenly and quickly central banks can inject and remove liquidity into the financial markets. Unlike days of old.

So there you have it. My thoughts on the preface written by Michael Maloney in his book titled, Guide to Investing in Gold & Silver.
 
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