global gold outlook report november 2014

8/10/2019 Global Gold Outlook Report November 2014

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GLOBAL GOLD OUTLOOK No.8NOVEMBER 2014

Global Gold Inc.Herrengasse 98640 RapperswilSwitzerlandTel. +41 58 810 1750Fax +41 58 810 [email protected]

Please feel free to contact us if youhave any questions.

On November 30th the Swiss publicwill decide whether or not to returnto a gold-backed currency system. IfSwitzerland, the dominant nancialhub in terms of o shore wealth, wouldreturn to gold, this would be a gamechanger and would determine manythings in the policymaking of our nation.On the monetary level, the power of theSwiss National Bank will be somewhatconstrained and the Franc will be (at leastpartially) backed by gold. It will mean thatthe Swiss Franc will not be just a gure,but this gure will re ect value andwealth. I rmly believe that a strong andstable currency is the cornerstone of anysociety that respects individual liberty andprivate property rights. You will therefore

nd that this issue of the Outlook isconcerned with individual freedom andliberty. It is my great pleasure to includean interview with a person I am gratefulto have met and who was able to inspiremany people for the cause of liberty:Dr. Ron Paul. Additionally, we includedour book summary by the spearhead ofAustrian Economics, Prof. Friedrich A.Hayek where he proposes to separatethe state from currency production.

All the eyes of hopeful believers in freedom and individual libertyon this planet are set on Switzerland and the upcoming GoldInitiative. On November 30th, the Swiss people can correct amistake done 14 years ago and return to a currency backed(partially) by physical gold. Some of us are still aware whileothers have only recently realized that a strong currency is theprimary guarantee for sovereignty, stability and prosperity of anation, as well as the safeguard of the freedom and liberty of itspeople, because it o ers the best protection against governmentdespotism. Until the end of the 1990s the Swiss constitutionclearly stated that money in circulation needed to be backed

by a minimum of 40% of gold, with the aim to limit the power ofthe central bank to create unlimited currency out of the printingpress. It has now become obvious that weakening the currencynever really created wealth, instead it was just redistributed tocertain political pressure groups and lobbyists at the expense ofthe hard working and productive people of Switzerland (and theworld for that matter).

Switzerland: The Last Bastion of LibertyThe Swiss model is unique and exemplary! But the truth isthat this small federalist country is the last bastion of liberty,where the people can and do limit the power of politicians bycollecting 100000 signatories to challenge a decision made byour parliament (in a so called referendum) or by launching aninitiative. This a rms that the Swiss people themselves and notthe parliament are the real sovereign. This mechanism protectsthe Swiss against a totalitarian state. In the etatist world we livein today some may consider it a privilege. In this regard I alwayslike to refer to the interpretation of the word democracy whichgoes back to Aristotle. Demokratia in Greek is simply the rule

of the people. Demos represents the village or the people andkratia stands for strength, power or rule. In a democracy, thepower lies with the people. Although, the Athenian model of eliterule is not the example we strive for here, the point being madeis that democracy does not turn into a wild animal as long as

Growing distrust of an increasingly centralizedgovernment among the people of Switzerland

Do the Swiss PeopleUnderstand that Gold isMoney?

Claudio GrassManaging Director at Global Gold AG


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power within a society is exercised at the lowest possible levelwhereby people only decide about things which a ect themdirectly in their municipalities, cities or cantons (State).

Independent Currency = FreedomWhen we look outside of Switzerland it is easy to recognizehow the Swiss model successfully protects individual libertyand the property rights of each person better than in anyother surrounding centralized government system. Outsideof Switzerland politicians have the power to make the lawand decide on behalf of the people, whereby the individual isdowngraded to a tax paying subject. Therefore an independenthard currency is the most important ingredient when creatingthe basis for an order based on freedom and liberty. AlanGreenspan wrote back in the following passages in his essayGold and Economic Freedom (originally published in AynRands Objectivist newsletter in 1966) before he changed sidesand took over one of the most powerful jobs on the planet:

In the absence of the gold standard, there is no way to protect savings from con scation through in ation. There isno safe store of value. () The nancial policy of the welfarestate requires that there be no way for the owners of wealth

to protect themselves. This is the shabby secret of the welfarestatists tirades against gold. De cit spending is simply ascheme for the con scation of wealth. Gold stands in the wayof this insidious process. It stands as a protector of propertyrights. If one grasps this, one has no di culty in understandingthe statists antagonism toward the gold standard.


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SNB at a loss after leaving gold standardAfter no longer being committed to the 40% backing of physicalgold, the Swiss National Bank (SNB) has had the freedom tomaneuver its monetary policy as it pleased. For example: Itexpanded its balance sheet since 2008 by 500% and triedeverything to protect the export and banking industry, thoughthis came at the expense of savers and the working population.But history proves that such a monetary policy does not workand that by weakening the currency they can only provide atemporary remedy. None of the past 50 hyperin ations in the20th century would have occurred if it were possible to createwealth out of the printing press. It only weakens the purchasingpower of the currency and favors those people who receive

the newly created money rst because they can buy goods andservices at existing price levels before the prices go up due tothe increased money supply. This is the true reason for thedecimation of the middle class and for the increasing gap amongthe haves and have nots.

In our Global Gold publications, we made the case time andtime again that additional liquidity out of thin air can only createan arti cial boom for a limited time. However, the consequenceis that the longer one pursues an uncovered and expansionarymonetary policy, the deeper and harder the nal bust becomes.The outcome is in ation which either leads to higher consumerprices or it goes into certain asset bubbles such as nancialinstruments, stocks, real estate etc.. We havent seen a hike inconsumer prices as of late, however we have seen a massivein ation in asset prices. Again, these booms are fake, notsustainable and will correct themselves sooner or later. J.P.Morgan was right in saying that Gold is Money everything elseis credit!

Left to Chart:The chart showsthe dramatic drop in the SNBsgold reserves since departingfrom the (partial) gold standard.Since 2000, the SNB has sold60% of its gold reserves!

Source: Swiss National Bank

2000 2001 200 2 2003 2004 2005 2006 2 007 2008 2009 2010 201 1 2012 2013 2014

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2500

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Swiss Gold Reserves 2000-2014


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Surprise in Swiss Opinion Poll.. It looks like AClose Call!It is no surprise to me that there is hardly any debate takingplace in Switzerland or in the international press when it comesto the gold initiative it reminds me of the year 1999 whenour politicians informed the people that they will modernizethe wording of our constitution without making any substantialchanges. Not a single word was mentioned on their intention tocancel the gold backing clause, which assured 40% gold backing.However, it is interesting to mention that already back in 1997the Swiss National Bank asked our political leaders to go back to0% gold backing but were told that they can only reduce it downto 25% and would have to wait for the o cial changes in theconstitution planned for 1999. Too many interests are at stakefor those pro ting from this system, especially bureaucrats,politicians, big business conglomerates and of course thebig banks in the fractional reserve business. If the upcomingreferendum passes, the SNB will have ve years to build up itsgold holdings to 20%.But the real surprise was to see the turnout of the opinion polltaken last week. Among 13000 people asked in this poll, 45%were in favor of the gold initiative and 39% were against it. Thisis certainly much better than anyone had expected, but signi es

that the publics distrust of our system is growing.We will keep you updated!

Probably No11%

No28%

Undecided

16%

Probably Yes16%

Yes

Swiss Gold Initiative Opinion Poll, 21 Oct 2014

TotalAgainst:

39%

TotalIn Favor:

45%

Source: www.Mineweb.com

Left to chart: This chartillustrates the results of theopinion poll taken on the SwissGold Initiative. The fgures showthat the Swiss public remainsindecisive on what course totake.

29%


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Dr. Ronald Paul is an Americanphysician and renowned politicalactivist for the cause of libertyin American political venues. Herepresented the Republican Party asformer Congressman of Texas andtwice as presidential candidate. Healso entered the 1998 presidentialrace as the Libertarian Partyspresidential nominee. Dr. Ron Paulis also known for his strong advocacyof Austrian economics, which isre ected in his demands for limitedconstitutional government as well asadopting a free market economy andreturning to a gold-backed currency.He is widely known for his strongcriticism of the Feds monetary policiesin the 1980s that drove up in ation.He is currently a senior Fellow ofthe Mises Institute. Dr. Ron Paulfounded a number of organizationspromoting his cause, namely theFoundation for Rational Economicsand Education (FREE), the Campaign

for Liberty, and Liberty PAC. As aform of media outreach to the public,he created the nationally syndicatedpodcast Ron Pauls America, inaddition to his online network TheRon Paul Channel. Dr. Paul also hasa number of publications, includingThe School Revolution: A New Answer

for Our Broken Education System, inaddition to a number of books onAustrian economics and classicalliberal philosophy, such as The Case

for Gold, A Foreign Policy of Freedom,Pillars of Prosperity, The Revolution: A Manifesto, End the Fed, and LibertyDefned.

Last month, Global Golds Claudio Grass met with Dr. Ron Paulin Lake Jackson, Texas at the Ron Paul Institute for Peace andProsperity. Here we show you how their discussion unfolded.

Dr. Ron Paul says no matter how powerful

governments are, the market always reigns

Global Gold Talks toDr. Ron Paul

Dr. Paul, thank you very much for taking the time to speak with us. It isa pleasure to meet with you and learn your perspective on political andeconomic developments. But rst, how would you describe your dayssince youve retired from Congress?

Im staying busy! Ive been involved in several things in my life. One waspracticing medicine. That was very important, but I dont do that anymore.Even when I got started into politics, I did both for a long time. When I leftCongress and went back home I practiced medicine for twelve years. Theother activity was promoting the cause of liberty, believing that its the lackof liberty that causes war and causes poverty and su ering and that ifpeople were to understand the importance of personal liberty that the worldwould be a much better place. So the organization that I created was calledCampaign for Liberty but all those years whether I was in Congress or outof Congress, I have been campaigning for liberty in di erent ways. When I ranfor o ce, it gave me a chance to speak about the issues. It actually all startedwith the breakdown of Bretton Woods in 1971. That was a big monetaryevent for me because Ive been observing the developments and had studiedAustrian economics. Even though it was anticipated, it was still very dramaticwhen it happened. So, a couple of years later I decided to run for o ce. Idid not expect to win any election because, as you know, my philosophy wasdi erent. It didnt seem to t the pragmatism that everybody wanted. When Igot elected in 76, I started an organization called The Foundation for RationalEconomics and Education, the F.R.E.E. foundation, which is also the parentof the new organization now, the Institute for Peace and Prosperity. Sinceleaving Congress, I went in di erent ways, including Internet broadcasting,programming and interviews; I do a bit of that. I also have a speaking activity,where I go as frequently as I can. College campuses have received me prettywell. I enjoy that and do a lot of it.I also started a Ron Paul curriculum for homeschoolers, believing onceagain in the importance of education. I dont believe that everyone shouldbe homeschooled or that some are more inclined than others but there is

a certain group that can handle it - parents and students. I think that is veryimportant. I stay pretty active and though I am retired from Congress, I amnot retired from promoting the cause I am talking about.

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Fantastic! What has changed since you left Congress? Are you freer inthe way you can speak and address people?

When you look at the United States, or lets say the western world in

general, what do you think of the shape were in? The stock marketis skyrocketing and the real estate market seems to be recovering oreven spiking in certain areas.

My schedule is more under my control and I only go where I want to go. And

if I dont want to y every single week, I dont. When youre in Washington,government is on autopilot, it just goes. The old saying used to be boy yourelucky the legislature is out of session, liberty is safe. This isnt true anymore,because right now the President uses executive orders to go to war, issuesstatements, violates civil liberties and gets involved in the economy throughthe central bank, his central economic planner. Even the judicial system rulesagainst us and violates our liberties. The whole thing is so out of control. I feelI am much better o now because I can still do what I think is important, asfar as writing and speaking out is concerned. At the same time, I dont haveto spend a lot of time with those politicians in Washington.

If you look at things from the surface, it looks like things are great. I amconvinced, however, that we are probably in the worst shape the world hasever been nancially. Thereve been bubbles and distortions and currencybreakdowns for thousands of years, but I dont think that the world has everhad a universal acceptance of a at currency like we have with the paperdollar, US Dollar, today. It is being used endlessly as the reserve currency.Debt and investments have been pyramided. Even now, stock markets aredoing well and people think that bonds are lovely. Its all a deception and evenif people claim theres no consumer price in ation, I think there is plenty butnot as much as we are still going to see in the future. A lot of people forgetthat the distortions created by the in ation of the money supply will anddoes lead to higher prices and these may arise in di erent areas. In stocksand bonds, prices are very high, so the distortions are great. Somebodymight say the housing market is back and doing well again. However interestrates are distorted. Interest rates tell you the right thing to do, they give youa hint. Business people arent perfect, half of them might do a good job,the other half might do it badly, but its all ironed out and taken care of.But when governments x the rate of interest, everybody, in a way, makes amistake. Some are lucky and make more money than the rest, but this is stillbased on bad information. That is why debt is out of control, and the bubbleskeep building. If you look at the malinvestment and the amount of debt as

a consequence of the dollar being the reserve currency, I think that theproblem is gigantic. Despite the power of the central banks, especially ourFederal Reserve and the power of politicians to spend money, ornamentally,markets are more powerful than governments. The market always reigns.I was watching and waiting for 1971 and the breakdown of Bretton Woodsafter we dumped almost 500 million ounces of gold, trying to prove that thegovernment is smarter than the market. I even remember Lyndon B. Johnsonin the 1960s saying I am going to mint so many Kennedy half dollars that thepeople will never be able to hoard them. But it didnt work. Silver reachedUSD 1.23 and people started hording them, because the silver value washigher than the nominal value of the coins. Markets are very powerful. Themarkets overwhelmed Bretton Woods! We printed money and pretended

it didnt matter. And thats why we had that breakdown. Now we have thatstrange phenomenon of this unbelievable trust in the US Dollar. This couldonly happen because our country is (still) wealthy, but a lot of the wealth issuper cial because its based on debt. So, the people are going to be reallyshocked when the hit nally comes because this system has existed for solong and longer than any paper currency before it. The other thing that gives

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some con dence is the size of the economy and the perceptions of its health,but there is also the size of its military. If you have a very solid currency,even if you have the strongest currency, but people anticipate you will bedefeated in a war next week, then all of a sudden that particular currencyloses value even though common sense says its a strong currency. Militarypower puts some support behind the currency. That is why I dont think theUS is vulnerable economically, but I think its vulnerable militarily. We cannotsustain what we do, even though it seems like we can. We go everywhere andsolve everybodys problems. Just recently weve been talking in the newsabout what we should do in Syria and Iraq. Should we continue an 11-yearwar in Iraq and go back? Some politicians have come up with this astuteidea that its our moral obligation. But somebody has to pay for it! We didget a couple of dollars back when we went in to ght Saddam Hussein whenhe invaded Kuwait, for example. The question wasnt whether it was morallycorrect for us to get involved in the war, or overthrow governments and thatwe should do it without following the constitution. The only point being made

was we can do it and we will but we wont pay for it. In a way, that statementmade by politicians was translated to we are the mercenaries of the world.Well, thats not going to work for very long. When its realized what kind ofa problem we have with the currency and the debt, the military is going tocontinue to shrink. I believe that, right now, the military is on the defensive.It took a long time for Obama to really work the war propaganda to be ableto enter Syria. The day will come when the dollar will weaken and we wontbe able to a ord our welfare state. The debt will be a big burden and wewont be able to maintain our military presence around the world. And then,believe me, the world is going to change.

When you look at the Japanese economy, theyre printing money like

theres no tomorrow. And now we have a lot of countries in Europe backin a recession and in ation in the Eurozone is non-existent. So, MarioDraghi is trying everything to depreciate the Euro and at the same timeput more money into the system. The ECB even recently introduced anegative interest rate for deposits at the central bank.

When interest rates are zero or even negative, everyone wants to buy more.Back in 1979-1980, you could buy a US government bond and earn 15%.Nobody wanted it. Right now, of course, what people dont quite realize isinterest rates are lower because the dollar is strong, but the average personwho wants to educate their kids in 10-15 years is not actually investing ingovernment bonds. Its all being bought by people who are playing this biggame. Sometimes we even give money to another country just so they end upbuying our treasury bills. It is amazing that this gimmick keeps working. WhatI believe is that one day we will wake up and the system will dissipate just asfast as it has grown, maybe even faster. It has taken lots of years to build up.It keeps getting knocked down; things have been rocky and Ive see this quitea few times in my lifetime: in the 70s with high interest rates, asset bubblein 2000 and then the housing bubble. And we had this horrendous bailoutand people still came back to rebuild the bubbles. They will not concede thatit is better to use a hard asset as money than pieces of paper that a coupleof people in a secret room decide how many of them there will be, and thatwhatever they decide they execute it with a click on the computer.The foreign nations are all at fault. Americas not at fault, because they keeptaking our money. Were not going to go back to work! In fact, Americanswould never have to work again, because we can just print more money andbuy everything that we need. Almost everybody knows that something willhappen at some point along the way. But thats not going to happen anytimesoon. Right now theres a lot of trust by foreign takers of our dollars, theykeep taking them. And as long as they do that, I guess, were going to limpalong and the bubble keeps getting bigger and bigger.

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We believe we are witnessing a geopolitical power shift like we hadright before the First World War where the British Empire was ghtingagainst the rising Kaiserreich. We have a power shift where China, otherAsian countries and the BRICs, are taking over. Also the US contributionto world GDP has been shrinking in the past ten years. How would youinterpret this?

The market is anticipating the vacuum that is building up and will comeeventually. With the Russian situation and the sanctions, were deliberatelyalmost pushing them out of the dollar. Theres a vacuum out there and theBRICs or somebody else is going to come along and create a substitute.Right now its not clear whats going to evolve, there are still some questions.Somethings got to ll the vacuum, but right now the vacuum isnt big enough.The dollar still does function, but there will be a day when it wont. I think itsa shift, as you say to the East, because we will keep selling gold and China isgoing to keep buying gold. I think it is so ironic that our policy is to deliberately

keep the gold price down. This might be really building the case for China.But the people who are doing this dont believe gold is money anymore,so they pretend at least they dont care, because then they would have adi erent monetary policy. They actually convinced themselves that theyresmart enough to manage money and not to have gold. One time I asked AlanGreenspan, because he had been pro-gold standard in the past and said:What about this? You know, when we have a balance of payments problemwe shift back and forth and make these adjustments. He said: Well, it isdi erent now, because we have learned to manage paper money as if it weregold. He said that very sincerely. And probably they do believe that they aresmart enough to substitute the market. They have to be arrogant, becausewhy should one person, like our Federal Reserve Chairman know how to x

the price of every transaction. One half of every transaction depends on thexing of the interest rates and at the same time they decide on the level ofthe money supply. And yes, they have the Federal Reserve Board, but it is oneperson that makes the decision. They can fool a lot of people for a long timebut markets will eventually catch on.

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You mentioned Greenspan. Usually when I have a presentation I alwaysquote Greenspan about the article he wrote about gold and economicliberty in 1966 when he was still a supporter of Ayn Rand. You askedhim a while back if he would like to repeal the article. What happenedexactly when you asked him?

I think he really created the biggest bubble.

I had him sign that particular article and I said Would you write a disclaimeron it?. He said: I still support everything I wrote. To me it was like Whatis going on here? Who are you kidding? He sounded serious. Maybe hebelieved in what he said but felt that the world wasnt quite ready for him.Ronald Reagan, for example, he was a loved president and he said all theright things, but de cits exploded and lots of nancial problems developedover time. To Greenspan it was: Were not ready to do it, the conditionsarent right. Ill be a good manager, you know. If someone has to manage themoney, Ill do it. Of course history is going to show he didnt do a good jobmanaging it.

History will show Bernanke didnt do a good job either. When low interestrates are the cause of the problem, what would you do? Lower them evenmore to make them negative?

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Youre a fan of the Austrian School of Economic. We recently publisheda report on ABCT, the Austrian Business Cycle Theory, because webelieve that economies operate in cycles and that the main driversbehind the cycles are the central banks by reducing the interest ratesand printing large amounts of money. We also believe that we have theshort-term debt cycles and the long-term debt cycles. When we go backin history, we see that the long-term debt cycle bursts every 50 to 70years. What do you think about this cycle theory? Do you also believewe will see a big bust?

In the United States, you now have almost 50 million Americansliving o food stamps. In Europe, we have a high unemployment rate,especially among the young, 30-60%. So what we are witnessing is thatthe real economy is basically not growing in the western world, we onlyhave this unlimited amount of money which is going into certain assetprices and spiking up the prices there. But its not going into circulation.Do you believe that this world is going to recover? Is it getting better inthe next few years or do you think the opposite is likely?

Well, I think there is some truth to the big cycles. I dont think theyreabsolute, but the cycle is there. What if youre o ten years or so? I dont thinkwe need cycle theories; I think that basic fundamental laws are su cientto understand what is coming: The longer you print money and distort themarket, the bigger the bubble and the bigger the bust. I wanted to studyall the details of the cycles, I just know a bit about them. I know there are a

lot of variables involved, because if the charts worked perfectly, that wouldmean that cycles would be predictable and the theories would be objective.However this con icts with the subjective theory of value. People place valueon certain things for other reasons, maybe because thereve been no warsfor a while, or maybe war breaks out and maybe somebody just dropped abomb - this changes things all at once. I think cycles theories are interesting,but I wouldnt depend on them.

It is not going to recover soon, because we havent allowed the correctionto come. The market wants it to correct. Right now, the market is saying thatthe conditions arent right and con dence hasnt been restored and theyrenot going to build new businesses for various monetary as well as regulatoryreasons. People arent ready and I think the old saying about pushing onthe string is pretty true. When you dont have con dence, you can push thatmoney in it and it doesnt go in the desired direction. The fact is that thecorrection has never been permitted. A correction means that when you

have malinvestment, a lot of debt and the market quits functioning becauseof this imbalance, that you have to allow a correction. You have to liquidatethe debt and have to get rid of the mistakes that were made and people haveto go bankrupt. Instead, in our so-called recovery, we printed a lot of moneyand we bought the debt. We just transferred the debt from the rich over tothe taxpayer who is ultimately behind the currency and the Federal Reserve.

Just this past week, I was surprised to see this USD25 billion purchase ofmore mortgage debt by the Fed. We thought this was all over! How is thatwe are doing well? But evidently there wasnt enough money to keep thoseinterest rates down at 2 and 3%, so the Fed ends up buying even more debt.This is the exact opposite of a correction. We have to liquidate the debt andthats what happened traditionally, even biblically, it was known as the jubilee.

Debt getting too big seems to be human nature. When we compound thishuman factor with a currency that encourages debt, we nd ourselves ina very problematic situation. I think a little more jubilee is what we need.But the debt is still out there and people have trouble understanding it.When people think of Detroit they recall it is bankrupt. They cant tax them,everybody left town. Well, how are we going to pay the retirees? The money

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When we look back in history, economically unstable times areassociated with a lot of debt, which is often followed by war. We justwrote an article comparing 1914 to 2014, because we see some parallelslike massive centralization of the system, a lost generation due tomassive unemployment and many more. This created the foundationfor the extremism we saw at the time. Now when we look at what ishappening on the borders of Europe, in Eastern Ukraine, and whatshappening in the Middle East, Central Asia and North Africa. What is

your take on that? Do you think that the situation will deescalate or isthat just the beginning?

I personally believe that no one knows the future. Pericles once saidwe cant predict the future, but we can prepare for it.

So you invested your savings in physical gold? Whats your rationale?

No, I think itll continue but I think it will calm down just as the confrontationwith the Soviets did when they were spreading their empire and going intoAfghanistan. That situation calmed down because they went bankrupt andhad to go home. If people dont trust us or our money anymore, we will haveto tighten our belts. Once the trust is lost, the more money you print, theless the trust is going to be. Right now, they have no other place to go. Theycould go and beg Europe to print Euros, but they trust the dollar more. Aslong as they keep doing that, these insane policies will continue. I think thatgovernments need to fold, they need to be blamed for what they are doing.Central banks need to be able to defend hard asset money, gold and silver,because it works. And yet, right now, theres just a few of us who believe that,but I think the day will come where people will realize the truth. We havebeen through similar situations before. In the 1860s, during the civil war, wewent o gold for maybe 18 years. It can be done.

I think one can recognize trends, but knowing the timing of events is impossible.Thats a challenge for investors too and thats why people should be cautious.If people listen to me talking, they could go out and sell everything they haveand buy gold. But Ive been looking at gold since it was USD35/ounce, and

my assumptions made it pretty safe, buying a little here and there wasnttoo bad, but the trends are very de nite. I believe in a climactic end to ourcurrent monetary system. So, I am convinced that we cant tell the future,however recognizing trends is possible.

Yes, but I dont usually call it investing. I usually call it my little insuranceagainst those crazy people in Washington. I didnt want to pretend that Iknow how the charts are going to work. If I knew gold was going to go up thenext three years, I would have bought a futures contract, gotten leveraged upand made a ton of money. I didnt know when to get in and when to get out.I just wanted to have an insurance policy because I believe the governmentwill continue to do what theyve been doing: spend too much and run uptoo much debt. It was part of whats been engraved in our society. All thepoliticians, news, everybody believes that de cits are good, spending is good,printing money is good. So, it is going to last until someday all the peoplerush for the exit.

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is gone. That is a true bankruptcy but theyre even going to say: You cant letDetroit crumble, go to the federal government print some more money anddelay the inevitable. But on the federal level, nobody gets denied a cheque.More food stamps and more retirement bene ts encourage people notto produce. Again, its trust in our monetary system. As long as they trustthe money, it is going to go on for a while, the bubble gets bigger and theinevitable bust gets worse.


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Gold has been money for 5000 years and now we have been living ona pure at money standard for 40 years. Like you, we think of gold asa monetary insurance. China is buying gold, India is buying, Russia isbuying and Central Asian countries are also buying. Do you believe theythink of gold as money?

My nal question. Switzerland is a small country and we operatewithin a federal structure. We are the last remaining direct democracyleft on this planet and we believe in limiting the power of politician.Aristotle used the term demokratie: demos (the community) andkratia (power), meaning that power is vested in the people. I believethat democracy might work on a very small scale. I also believe that ifwere going to see more centralization in the future it will lead to moretotalitarianism. What do you think about these tendencies?

The person holding the gold when the world crisis hits will likely establish thenew currency. We certainly were in the drivers seat after World War II forvarious reasons, because we still had a good gold standard. People who weresafe from all the bombings and the killing, came to us to buy goods and theypaid in gold. There was more gold in the United States back in 1945 than anyone place in the world. It wouldve been a perfect time after 1945 to establisha gold standard and live up to it, instead of saying we can print money foreverand nobody will ever notice. But the French woke up and started to take backtheir gold. But we were in the drivers seat back then. Were not in the driversseat now, even though it looks like we are. We have military might. We have

economic wealth, still. But we are not in the drivers seat because eventuallyit will be the East, mainly China, maybe Japan and Russia, India maybe too,the BRICs.

I think thats where Im optimistic. I think we live in a special time.Communications are better now than ever before. The fact is that I neverthought of myself as being an important Congressman, yet I was sayingthings that touched a lot of people. And all of a sudden through the internet,a lot of people heard about this and it was sort of like where did this comefrom?. This is just fantastic.Weve been testing dictatorships and authoritarianism for a long long time,from the pharaohs down to the authoritarianism of the 20th century, theNazis, the communists, fascists. They all failed. Even Keynesianism now isa failure and central banking is even going to be in worse shape. Havingfailed, there is going to be a replacement and its going to be seen in thedisintegration of the mighty states. I recently saw a map where they listed

every single spot of every unit of government that wanted independence,maybe they can all become like an independent canton in Switzerland.Everyone should be independent and if the canton or state gets too large,then go smaller, because the sovereignty in a free society is with the individual,and the individual who commits no violence against another person, shouldbe totally independent. That would be of course a perfect world, but thatsone that we should strive for. But the evidence says that the big states arefailing, that the people are waking up and they are sick and tired of them. Andlets hope this moves along rather quickly.

Global Gold:

Global Gold:

Dr. Paul:

Dr. Paul:

Thank you very much, Dr. Paul. It was a pleasure.Global Gold:

The Ron Paul Institute for Peace and Prosperity was founded in 2013 as a project of Dr. RonPauls Foundation for Rational Economics and Education (F.R.E.E.). The organization is dedicatedfor the purpose of education based on Dr. Pauls belief that education plays a fundamental role increating a peaceful and collaborative policy approach. To know more about the Ron Paul Instituteplease follow this link , or to o er support to the organization, please click here .
http://www.ronpaulinstitute.org/http://www.ronpaulinstitute.org/donations/http://www.ronpaulinstitute.org/donations/http://www.ronpaulinstitute.org/


12/14


The Austrian School tells us where we went wrong in managing our economy!

The Austrian Business Cycle Theory:The Documentary Movie

Last summer we published our rst issue of the The CleanSlate discussing the Austrian Business Cycle Theory. We wereencouraged by the positive feedback we received on our report

and therefore decided to develop a short documentary toexplain the topic in a simpli ed and concise manner.

The Austrian Business Cycle Theory was developed by Ludwigvon Mises and Friedrich A. Hayek. Its underlying argument is thatthere is no such thing as a surprise when it comes to economiccycles. They move from booms to busts and it is the actions orrather misactions of governments that determine the course ofthe economic cycle. In fact, if the economy were to experiencea bust, government interference will only make matters worse.

In this documentary we o er a simple explanation of how thetheory works and illustrate how it applies to the crises theworld has endured in the past, namely the Great Depression,the Recession of the 1990s, the Dot-Com Bubble and nally thesubprime mortgage crisis in 2008. After watching this video, youwill come to question how the world economy is managed todayand how easy it has become to just x the problem throughcredit injections in the economy or bailouts, even though therepercussions are severe. Finally, you will learn where we thinkwe are in the cycle and realize the ugly truth that even after the2008 crisis, we havent seen the real bust just yet.

To view our documentary on the Austrian Business Cycle Theory, please click here .If you are interested in reading our Clean Slate report, please follow this link .
http://www.youtube.com/watch?v=MUqSplUECeYhttps://www.globalgold.ch/fileadmin/user_upload/Clean_Slate_Reports/The_Clean_Slate_No1_ABCT.pdfhttps://www.globalgold.ch/fileadmin/user_upload/Clean_Slate_Reports/The_Clean_Slate_No1_ABCT.pdfhttp://www.youtube.com/watch?v=MUqSplUECeY


13/14


Friedrich A. Hayek calls for a competitive currency market

Denationalisation of MoneyOur previous book summary on the Tragedy of the Euro byPhilipp Bagus revealed how the single currency project of theEuro was a failed project and doomed to collapse. We nowexplore an interesting idea presented by the pioneer of AustrianEconomics, Friedrich A. Hayek, who presents his proposal of acompetitive currency market in the Denationalisation of Money .Hayek explains how the public is made to believe that thegovernment has an exclusive right to the monopoly issuanceof money. This idea was never questioned for over 2000 years.Hayek has no con dence in government actions nor does hetrust its intentions towards the public, for government hasfailed, must fail and will continue to fail to supply good money.Instead, Hayek calls on the public to free itself and explore thepossibility of government with no monopoly over the issuingof money. Governments do not seek a stable currency andtherefore cant have the money holders interest in mind. History

has clearly shown that they have only sought their own bene tat expense of public interest. Over the years, governments gotcomfortable with this exclusive right and got addicted to injectingcheap money into the markets. Hayeks objective, however, isthe creation of an e cient currency market based on credibilityand trust between consumers and issuing banks. This book isa manifestation of Hayeks conviction of individual liberty. Freemarkets will be able to operate as the sole true regulators onlywhen individuals free themselves from the perception of theneed of the governments monopoly of money.

If you are interested in reading our detailed summary of Hayeks Denationalisation of Money, please clickhere . You can also download the complete book from the Mises Institute website under the following link .
https://www.globalgold.ch/fileadmin/user_upload/Book_Reviews/Global_Gold_Book_vol5_Denationalisation_of_Money.pdfhttps://mises.org/books/denationalisation.pdfhttps://mises.org/books/denationalisation.pdfhttps://www.globalgold.ch/fileadmin/user_upload/Book_Reviews/Global_Gold_Book_vol5_Denationalisation_of_Money.pdf


14/14


Although it is possible that in the short term we continue to see some volatility in thegold price, our long-term fundamental outlook regarding the world remainsunchanged. Gold is THE asset to hold in uncertain times!

OUR CONCLUSION

OUR SCENARIOS

How we think the world will develop inthe coming months and years

We dont have, nor do we claim to have, a crystal ball. What you will be reading in this section is our view about the directionthat politics and economic developments will take. We use our common sense and refrain from using complicated models,which no one understands. In each issue we will introduce three scenarios. Each scenario will be explained andwe will discuss how probable we think each of the scenarios is and how this could impact your gold investment.

Under our status quo scenario,governments will continue as theyhave done so far, delaying any realproblem solving. They will continueto moderately in ate currencies,bailout banks etc. while growthremains low.

In this scenario central banksworldwide abandon their currentmonetary policy and return to amore prudent approach. This iscoupled with higher real economicgrowth in the world.

Due to the high debt levels inWestern economies, we hardlythink that central banks can returnto a normal monetary policy. Thelack of any real growth impulsesleads us to believe that this scenariois not a very realistic one for theforeseeable future. The taperinge orts of the FED will not changethis in any way.

Political hotspots, particularly in EastUkraine and the Middle East mayescalate at any point of time. Oureconomies are fragile and will not beable to redress the negative impactfrom any potential crisis escalationon our markets. Nevertheless, wedont see the tipping point on thehorizon that would translate into awide-scale war for the time being.

Crises can take many di erentforms, such as a complete collapseof the nancial and monetarysystem, a world war, civil unrest ormany others.

We believe that the generalmonetary policy approach ofgovernments will remain as is.Even though the Fed said it will nolonger buy bonds, it will continue tointerfere in the economy throughmanagement of interest rates. Also,the ECB will launch its own versionof quantitative easing. In both cases,the central banks refuse to addressthe roots of the problem.

As in recent years, the currentpolicies of governments positivelyimpact gold prices. Althoughshort-term volatility is to beexpected, as always.

A back to normal scenario wouldprobably impact gold pricesnegatively. Historically, gold hastended to perform badly whenreal short term interest rates haveexceeded 3%.

In a crisis scenario the price of goldwould likely dramatically increase innominal terms. In real terms goldshould be an ideal medium to storevalue over the long term.

Disclaimer: The following publication represents the opinion and analysis of Global Gold AG (GG), based on data available to the rm, at thetime of writing. This GG publication is not a recommendation, o er or solicitation to acquire or dispose of any securities, investments or any othertransaction. As trading and investing may involve serious risk of loss, GG recommends that you consult with a quali ed investment advisor, onelicensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of atransaction with nancial rami cations. GG assumes no responsibility for the content, accuracy or completeness of the information presented.

STATUS QUO BACK TO NORMAL CRISISDESCRIPTION DESCRIPTION DESCRIPTION

PROBABILITY: 70% PROBABILITY: 10% PROBABILITY: 20%

IMPACT ON GOLD IMPACT ON GOLD IMPACT ON GOLD

global gold outlook report november 2014

Documents