Getting the Financial Truth

Gold Never Lies!

If you are putting money in the bank, you are probably taking a real beating.  

“People who have money in the bank, in their savings, are losing 5 to 12 percent of their purchasing power annually.”  So says investment guru Kyle Bass.  He’s one of the guys who saw what was going on and made a fortune when the housing bubble burst. 

Bass is the founder and chief investment officer of Hayman Capital Management.  While the official Consumer Price Inflation report say that prices have risen at a 5 percent rate over the last year, Bass says the actual inflation rate is probably about 12 percent.

Appearing on CNBC recently, Bass said that investors and retirees need to start thinking about how to preserve their purchasing power.  “We think it [inflation] is running about 12 percent, and with short term interest rates still at zero, that means people who have money in the bank, in their savings, are losing 5 to 12 percent of their purchasing power annually. 

“We have 34 percent more money in the US system than we did 14 months ago.

“Of course, we’re going to have inflation and it’s going to be significant.”

 Bass is right to be skeptical about the government’s inflation numbers.  In fact, we think one also must be skeptical about everything said in the mainstream financial media.

Here is an example.  It is from a piece headlined “Why everything is costing you more money,” by someone called the editor-at-large and anchor at Yahoo Finance:

“If everything seems like it’s costing you more money right now that’s probably because it is — the saving grace being that perhaps things get a bit cheaper in the fall.

“But it’s important to understand as an investor— and consumer —why inflation has picked up. Indeed it has major implications on everything from monthly budgeting of one’s finances to investment portfolio construction.”

The author goes on for six hundred words or so, quoting people from Goldman Sachs and JPMorgan, about this and that behind isolated higher prices.  But his account, like so many we have perused over the last couple of months, make no mention at all of monetary policy.  It says nothing about the Federal Reserve.  Call it the elephant in the living room, if you like.  And that’s a good metaphor, since the Fed has jacked the money supply up to elephantine proportions.  

Or call it the crazy aunt in the basement, something that people know is there, but studiously avoid mentioning.  Since money is half of every transaction, it is simply unfathomable that an “editor-at-large and anchor” should try to explain why prices are rising without talking about money. Professional economists must be aware of what the Federal Reserve has been doing to the dollar. 

It is just apparent that many of them do not want to talk about it.  

You simply cannot rely on the government’s inflation numbers either, especially since the record is clear that the formulae for calculating inflation have been adjusted many times over the years in response to political pressures.  And, because when the mainstream press tries to explain why costs are rising without reference to the $28 trillion national debt or a word about the $4.2 trillion dollars the Fed has manufactured out of thin air to fund that debt, you simply cannot rely on them as honest or knowledgeable brokers of financial information. 

Inflation, it has been said, is like a country where no one tells the truth.  But gold is different.  Gold is not the money of states, central banks, or politicians.  It cannot be manufactured out of thin air or created by decree.  An ounce of gold is an ounce of gold whether it is minted in country A, B, or C.  

Gold seeks no political advantage.  It neither lies nor conceals the truth.  It answers to no cronies and is indifferent to the latest trendy economic theories.  That is why people have made gold the enduring and most trusted monetary asset of all time.

When the wheels come off the money-printing bus, when a real financial reckoning asserts itself in a crisis, when the truth, as it always does, wins out in the end, you will be glad to own gold.