Alan Greenspan: Physical Gold – Ray Dalio: Paper Gold
Alan Greenspan: Physical Gold – Ray Dalio: Paper Gold by Rory – The Daily Coin
It has been stated many times over that gold is part of the monetary system but it is just not used in everyday global transactions. If gold is of no importance to the global monetary system then why do most governments and central banks still hold vast sums and why is gold reported on every business day through most every large and small scale financial media agency? If gold is nothing more than a pet rock why bother reporting how it is moving up or down in value?
Gold and silver are so important to us at The Daily Coin we have four different charts to review these monetary metals from a variety of angles.
If you remember it was Alan Greenspan that actually reminded the world that gold is part of the monetary system. During his conversation with Gillian Tett at the Council for Relations in 2014 Greenspan, very clearly, stated the following.
“…intrinsic currencies like gold and silver are acceptable without a third party guarantee”
Gold serves a very important place in monetary reserves…
Why did Central Banks put money into an asset which has no rate of return, but cost of storage and insurance and everything else like that; why are they doing that? If you look at the data, with very few exceptions, all of the developed countries have gold reserves. Why?”
TETT: Do you think that gold is currently a good investment?
ALAN GREENSPAN: Yes… Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can macth it. – October 29, 2014
Apparently that was part of an interview that never made it into the transcript published by the Council on Foreign Relations with Greenspan by the Financial Times’ Gillian Tett. You can listen to the 4 minutes of the “after show” by click here.
The above comments were made after Alan Greenspan had stepped down as Federal Reserve Chairman and long after he had written “Gold and Economic Freedom” originally published in 1966.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard. Source
Fast forward to 2017 and we find another “marquee name”, Ray Dalio, making waves as he is discussing gold. The difference is Mr. Dalio, like the “big club” member that he is, is making a lot of noise that has to do with paper gold and nothing to do with physical gold.
You would’ve thought Dalio and his Bridgewater account had scooped up all the gold on the planet a few days ago when the mainstream media and ZeroHedge were falling all over themselves to report the latest change. Paper gold, just like the propaganda, produced by the COMEX and S&P “markets”, is there to satisfy paper chasers. When a person buys into something like a GLD ETF they are merely buying exposure to the movement of gold on a chart. Had Dalio and the Bridgewater account acquired physical gold, well, then we would have something to discuss. As it stands it is no different than discussing the weather – nothing of substance and nothing of value, unless you’re a farmer.
ZeroHedge’s headline made it sound like Dalio was really crushing the gold market.
Until last quarter, the world’s biggest hedge fund had, curiously, never held a position (according to our records) in any of the most liquid gold ETFs, whether the SPDR Gold Trust, the GLD, or the iShares Gold Trust, the IAU. That changed in the second quarter of 2017, when Bridgewater made its first tentative purchases in the gold ETF space, buying up 577,264 GLD shares, for $68.1 million, as well as 3.1 million IAU shares worth $36.8 million.
That was just the beginning, because as readers will recall, back on August 10 Ray Dalio urged investors to buy gold in case “things go badly.” This is what Dalio said:
When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don’t have a unique insight that we’d choose to bet on. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen and treasuries) would benefit, so if you don’t have 5-10% of your assets in gold as a hedge, we’d suggest you relook at this. Don’t let traditional biases, rather than an excellent analysis, stand in the way of you doing this.
And that’s also what he did, because in the third quarter Bridgewater was very busy buying gold: in fact, according to the just released 13F, after $3.8BN and $2.9BN positions in EM ETFs VWO and EEM, as well as a $1.3BN position in the SPY ETF, Bridgewater’s 4th largest position as of September 30 was GLD, with 3.894 million shares, worth $473 million. In other words, in Q3, Ray Dalio went on a gold buying spree, increasing his GLD holdings by a whopping 575%.
One would think by stating “Dalio went on a gold buying spree” they were stacking bricks of gold in a vault when, in truth, it is nothing more than a few clicks of a mouse and done. These words paint a picture that makes it sound as if physical gold is flying around like so many pet rocks – it’s not. This is a kin to the Federal Reserve teaching people that Federal Reserve Notes are “money” and they have value. Federal Reserve Note’s are neither money nor have value, they are in fact an instrument of debt. GLD is not gold it is a paper illusion of gold and not a very good one if you read the prospectus as James Turk has done.
In Mr. Turk’s article he makes the case that maybe, just maybe, this fraud is less than legitimate and may in fact be an out right fraud since there is no way an audit can be or ever will be conducted. Also, in order to take delivery of any physical gold associated with GLD one must have have an over the top number of shares. The typical retail investor, like the ones that make up Mr. Dalio’s Bridgewater account, are not interested in achieving such lofty goals as set forth by GLD. These investors want exposure to what Dalio is selling this week and it just happens to be a paper illusion called gold or GLD for short.
If “things go badly” for the investors, like war, grid down or some other disaster, in this paper scheme they will not have the insurance of physical gold. They will not have the time honored protection that physical gold offers and they will not have any access to their account if their is a bank closure (holiday) or a “glitch” in the system that keeps the electronic doors closed to their account. Physical gold at arms reach, and let’s not forget about physical silver, is the only way the insurance of gold and silver works to protect it’s owner. But please, don’t believe me, go back to the beginning of this article and read what the Maestro, Alan Greenspan, had to say about how gold works both in historical terms and modern terms.