THE NEW CASE FOR GOLD

Rickards (The Death of Money: The Coming Collapse of the International Monetary System, 2014, etc.) advises investors to “simply get some gold.”

Though some analysts may keep their silence, gold has never been out of the picture. The author argues that the shiny metal has been playing a shadow role ever since Richard Nixon officially ended its monetary function in August 1971. Leaning on the reputation of John Maynard Keynes, who was certainly no gold bug, to substantiate his case, Rickards asserts that the Federal Reserve, which is responsible for monetary policy and inflation management, is still dependent on the market value of the gold holdings on its balance sheet. Gold's function, writes the author, ought to be understood by anybody seeking insight into the workings of the world's monetary system and its relation to their personal financial assets. “Because the gold is held on the Fed’s balance sheet at only about $11 billion,” writes Rickards, “this mark-to-market gain gives the Fed a hidden asset of more than $300 billion.” Thus, confidence in the world's money and its top currency, the U.S. dollar, still depends on an underlying function for gold. This will become much more significant when the unresolved issues of the 2008 financial crisis erupt anew as a full-blown international monetary crisis. Then, gold will assume its proper function, helping to restore order amid financial excess. The institutional vehicle at that time, whenever it may be, will be the directors of the International Monetary Fund. The world's largest gold reserve holders and accumulators are among its leading members. Rickards strongly recommends that the physical metal be a part of anyone's portfolio of assets. He warns against financial and stock market paper substitutes, as the metal itself will be the best hedge when crisis returns.

A provocatively controversial alternative to a leading orthodoxy that should find room on the bookshelves of policymakers and investors.