Monday, April 25, 2011

Gold's Rise Inversely Correlated To Trust In Bankers

On the face of it, Julian Phillips's commentary about bankers reads like something you'd read in The Nation or The Guardian. He castigates bankers for single-mindedly pursuing profit while cutting ethical and even legal corners. He criticizes them for ignoring their "social responsibilites" - his phrase.

Yet, he ties distrust of bankers - in his eyes, thoroughly earned - to the bull market in gold.
We are of the opinion that there is little chance of bankers moving away from the profit motive or of lawmakers enforcing social responsibility on bankers.

What is remarkable in the last few years has been the increasing visibility of the actions of bankers and the very public loss of reputation. How long will it take for developed world investors to turn away from their financial systems as Indian investors have done for so many decades and use cash and gold and property in an ‘alternative' financial system? Or are they too locked-in to escape?...

In India, cash and gold yield income in the hands of its owners. Their activities escape corrupt bankers and government officials and corrupt lawmakers. They must laugh when they read reports such as the above and say, ‘haven't you learned yet?' Not only does gold provide for private commercial deals of many kinds, it increases in price. Their total return on gold has been nearly 500% in the last 11 years. What's been the return on the broad spectrum of developed world investments, including bank deposits? Who cares that there is no annual income on gold and silver, there's been an incredible total return? They would laugh at the concept of getting small ‘real interest' returns from their investment in banks.

Most importantly, gold and silver bullion, by itself, are places to escape dishonesty and all the common, unethical, core practices of the financial system. Precious metals don't lie, cannot be unethical, do not have conflicts of interest but are respected by all their investors, whatever the state of these investor's own morality.

So long as this situation persists in the banking world, gold and silver will be bought as long-term money and honest investments.

How's that for unusual? Given the central-bank bashing that's long been part of the goldbug world, and the increasing corporatist nature of the banking system, I wouldn't be shocked to see this long-term side effect of the '08 crisis: the rise of a new crop of left-wing goldbugs. It does seem time for the Guardian to take on a pet goldbug.

Stranger things have happened...

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