The Rule of Gold
By Jeff D. Opdyke, Executive Editor of The Sovereign Investor
With Nazis pressing in from the West and Soviets on the march from the East, officials inside the Polish central bank had but one option: get their country’s gold out of Poland.
It was September 1939, the eve of war. In the dark of night, Polish officials secreted the country’s gold – estimated at between 75 and 83 tons – onto trucks and sent them packing for Constanţa, a port on Romania’s Black Sea coast 1,000 miles to the south. All along the way, Nazis tried to intercept the shipment as it switched between trucks, buses and trains. Through sheer luck, the Poles managed to sneak their valuable cargo onto the SS Eocene, a British tanker that had been diverted to Romania to help Poland protect its national treasure from the fascists.
Over the next several weeks Poland’s gold landed in Istanbul, Beirut and the vaults of Banque de France in Paris before ultimately coming to rest at Threadneedle Street, London, the address of the Bank of England, where Poland’s patrimony has spent the past 74 years.
Now, after all these years, Poland wants its gold back.
The message: Even governments no longer trust the global, fiat monetary system. Nor should you.
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Poland is just the latest in a collection of governments that no longer want their gold held in U.S. and U.K. vaults, the resting places for much of the world’s sovereign gold for decades.
Finland, Germany, Switzerland, Venezuela, Ecuador, Mexico, Romania and Poland: They’re all either talking about repatriating national gold or they’ve already done so. Some are clearly countries run by leaders with a populist agenda – to wit, Venezuela and Ecuador. Others are run by sober governments making sober decisions about national wealth.
These countries want their gold back because they’ve lost trust in the U.S. and the U.K. banking authorities. Better to have local gold in local banks than exposed to the shady finances of the world’s greatest Ponzi scheme. Taking back their own gold is, effectively, a vote of no confidence in the monetary policies pursued by the U.S., in particular.
Who can blame them?
Consider the state of the global union. The West has accumulated so much debt that the International Monetary Fund now says that meaningfully large, one-off levies that tax every Westerner’s wealth are the only way to save the world from financial calamity. Politicians in too many Western nations – except maybe the Germans – have reached the point that French political philosopher Alexis de Tocqueville predicted in the middle of the 19th century – namely that democracy will survive only to the point that lawmakers discover they can bribe the public with the public’s own money.
We have reached that point in much of Western society, most ominously in America. Politicians no longer press for any semblance of fiscal prudence, only for the preservation of personal power by spending ever larger sums of public money on various forms of welfare and regulation that hurt one class over another.
This will not end well for those of us with any degree of wealth to protect.
That so many nations are now seeking to repatriate gold is that trite canary in that proverbial coalmine. The end might not come today – it might not come tomorrow or even next year. But it will come. It always does. And it will come in my lifetime (I am 48, for those who want a reference point.)
Will You Be on the Wrong Side of History?
To anyone who has sold their gold in recent months, I say this: Big, big mistake.
Why is it that central banks the world over refuse to sell their gold reserves? Why is it that many continue to add to their holdings – officially Russia, Turkey, Kazakhstan and Indonesia, and, unofficially, China?
The wrongheaded nincompoops on Wall Street, inside the Fed, and wandering around looking for a Dairy Queen and a Coke in Omaha, Nebraska, would have you believe that gold has no intrinsic value. Yet all over the world, central banks in countries giant and small cling to their gold, are adding to their gold reserves and are increasingly demanding that their gold be returned to national treasuries. Those that have parted with any gold have sold off just the tiniest fractions of what they own.
No country has sold a meaningful amount of its gold reserves – though I am betting the U.S. has sold a very large sum of gold from Fort Knox that, to date, has gone unreported by the Federal Reserve, but which will come to light soon enough.
Is owning gold such a crazy notion that central bankers in 100 countries are all delusional?
Or, might it be that gold really is of value as the ultimate insurance policy against the destruction of fiat money that is now necessary to help the West manage a half-century’s worth of excesses?
Poland went to extraordinary lengths to protect its gold from fascists and communists in the late 1930s. Now, it’s going to extraordinary lengths to protect it from Western financial decay.
This is a game where, ultimately, you have to pick sides. Do you side with U.S. officials who talk down gold as a quaint tradition out of step with modernity? Or do you side with 100 central banks around the world that are increasingly putting their reserves in gold rather than fiat currency?
I absolutely know what side I’m on … which means I know my wealth is protected on that day a fiat currency crisis erupts.
Until next time, keep a global view …
Jeff D. Opdyke
Executive Editor, The Sovereign Investor
P.S. A revelation about the status of U.S. gold is on the horizon and I think it has the potential to change America forever. If you’d like to learn about the little-known government document that holds clues to one of America’s biggest deceptions, click here.