Only in the Western financial system, which is built upon a mountain of worthless paper assets, can those of the highest net worth say with a straight face that gold is no longer money or a valued commodity. And although more than 50% of the world ignores or refutes this belief that gold is a metal of little monetary value, on Nov. 27 the Chief Economist at Citigroup, Willem Buiter, issued a statement attempting to entrench this false belief in the public mind just days before the game changing Swiss gold referendum is to take place.
Chief Economist Buiter pulled no punches in attempting to castigate gold as a bubble, a relic, and an equal to the niche properties of digital currencies like Bitcoin. And Buiter even went so far as to say that restricting central banks from selling their gold, which is one of the foundations of the Swiss gold referendum, would cause the value of gold to go to ‘zero’, intimating that the millions of gold working and gold owning professionals such as jewelers, dealers, and even consumers are idiots in believing that gold has value, and that unless a central bank determines the price and can regulate the markets as they see fit, the metal has no place in the economy.
Gold is a fiat commodity currency (with insignificant intrinsic value), comparable with Bitcoin which is also a fiat virtual peer-to-peer currency (without intrinsic value).
Gold and Bitcoin are costly to produce and store, and gold as an asset is equivalent to shiny Bitcoin.
Central bank fiat paper currency and fiat electronic currency are socially superior to gold and Bitcoin as currencies and assets.
There is no economic or financial case for a central bank to hold any single commodity, even if this commodity had intrinsic value. Forbidding a central bank from ever selling any gold it owns reduces the value of those gold holdings to zero.
So if gold has positive, albeit wildly fluctuating value, it is because we are in a benign bubble for gold. Likewise, Bitcoin’s positive value represents a benign Bitcoin bubble. The gold bubble is, of course, pretty impressive. Intrinsically useless gold has positive value. It has had positive value for nigh-on 6,000 years. That must make it the longest-lasting bubble in human history.- Zerohedge
Economist William Buiter is not the only high level financier to make the case that gold no longer carries any intrinsic value, and that its worth as a store of money is both antiquated and obsolete. Former Federal Reserve Chairman Ben Bernanke was famously quoted during a House Congressional hearing as saying that ‘Gold is not money’, and that central banks only hold it according to tradition.
Additionally, the second or third wealthiest man in the world, Warren Buffett, decried gold as something that Martians would ‘scratch their heads’ about, wondering why humans put any value at all into it.
But the real fact of the matter is, gold was and is the foundation for nearly all money in all countries for thousands of years, and only went into disuse by the banking systems around 43 years ago. The era we live in now is the first time in history that every nation and financial system runs on a purely fiat paper currency, that is backed not by a physical commodity, but by force and trust in governments.
“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” – Warren Buffett
“It gets printed from nothing. It requires force or programming to get people to accept it. It’s historic lifespan is less than 40 years before it becomes devalued to zero. It is backed not by value but by the barrel of a gun, and anyone with more than 100 IQ wonders why societies continue to accept it as currency. – Ken Schortgen
Comparison Between Buffett on Gold and Schortgen on paper fiat money.
What is at stake for men such as Willen Buiter and the Swiss people is at its purest form, control over money. Central banks have used the fiat currency system as a means to leverage money to exponential levels where in the U.S. alone, the dollar has lost over 98% of its value since the Federal Reserve took control over it in 1913. Subsequently, when Switzerland was on the gold standard a few decades ago, their currency was one of the strongest in the world, and only became devalued once they left the gold standard and began functioning in the global realm of paper fiat currencies.
Sunday’s referendum vote is not just a potential paradigm shift for Switzerland, but it may also be the catalyst for several countries to break away from the dollar and paper hegemony, and once again put their monetary systems on a commodity backed mechanism. And like Holland recently repatriating their gold from the U.S. Federal Reserve, and countries like Russia, China, and India all building massive surpluses of gold in their own central banks, the 6000 year old ‘bubble’ that Willem Buiter is fighting against may prove to be the savior of the financial system, and not the worthless relic the establishment is so fearful to see come back into being.