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Governments Will Want – Will NEED – Much Higher Gold Prices! Here’s Why

That governments will want – and will NEED - much, much higher gold and silver prices in the future is counter intuitive, given that they have done everything within their power to throttle back and to keep a lid on bullion prices. Let me explain why. Words: 1300

So says Arnold Bock in an article written for (A site for sore eyes and inquisitive minds) and (Your Key to Making Money!). Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Bock goes on to say:

Although we have seen eleven consecutive years of gold bullion price rises, such increases have been incremental, measured and at levels which make the remainder of the commodities and equities markets look volatile – and anemic.  Governments have used their preferred bullion banks as agents in the paper futures markets and their central banks, in conjunction with their respective Treasury bureaucracies, to limit the inexorable rise in precious metals prices as much as possible to keep gold – the only ‘real money’ – from drawing unfavorable attention to their own failing fiat currencies and uncontrolled sovereign debt.

Recently central banks have become net purchasers of gold bullion after many years being net sellers.  In 2011 central banks purchased 430 tonnes of gold, five times more than in 2010 and the highest since 1964. Much of this new demand has come from ‘emerging markets’ central banks like Mexico, Russia, Turkey, South Korea and of course China and India.

This makes one speculate as to why governments would suddenly, however quietly, turn into buyers rather sellers of gold.

  • Could it be that gold is the only ‘real money’ in a world comprised of paper money backed up only by faith and confidence, or lack thereof?
  • Are ‘paper money bugs’ losing their confidence and swagger?
  • Are governments positioning themselves for a period when paper money loses its value faster than they can create additional digital versions of it?


The owners of the globe’s respective currencies, especially the important and freely traded currencies, are constantly, deliberately and competitively devaluing their currencies against those of other nations. They don’t admit that is what they want and are doing, which is to make their goods and services more competitive in international markets, because voter reaction would be too politically unpalatable, yet they must exploit every opportunity.

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Even more important, now and in the future, will be the need for governments to be able to meet the promises made to their own citizens for pensions and health care as well as payments for past debt to bond holders.  What better way than to pay debts than with nominal devalued dollars, euros, yen and pounds?

Financial repression (see my article entitled “Financial Repression” May Become Our Worst Nightmare! Here’s Why) is a tried and true public policy mechanism designed to take care of the massive debt following WWII.  It works its magic simply by keeping prevailing interest rates lower than the real rate of inflation.  Well managed, it allows for the imperceptible and inexorable devaluation of the currency.  Implemented with precision and stealth by governments and their central banks, it works magically over a relatively short period. It allows governments to pay for their promises and obligations with constantly devaluing money…almost unnoticed.

Given the role of price inflation in the process, citizens may even think they are getting wealthy as the nominal value of their investment assets increase.  Instead, it is form of taxation and confiscation invisible to the average person.  Government statistics using arcane methodologies such as seasonal adjustments, ‘headline’ and ‘core’ inflation numbers, hedonic adjustments and substitution are all facilitators of this deception.


The US dollar is in the process of losing its special status as the means of pricing and paying for the goods and services traded internationally.  This is happening daily with special bilateral arrangements between trading partners which use something other than the US dollar for political and financial reasons.  Before long:

  • the US dollar will be replaced by a basket of currencies, appropriately trade weighted, including International Monetary Fund SDR’s (Special Drawing Rights).
  • gold will also be a featured element of this new multipronged global reserve currency.  Given that gold remains the only real money in a world of the crumbling paper variety, a thick veneer of gold is essential.  Member nations of this new global reserve currency, of course, will not want the constraints or discipline of a full-blown gold standard, only its appearance for reasons of credibility.
  • the new global reserve currency will no longer be American which will be a big win for the internationalists and globalists who value multinational alliances and who will no longer have to defer to one dominant nation, namely America.
  • better yet, any institution comprised of several members will make it extremely difficult to assign blame, which in academic language means responsibility and accountability.  Clearly a global currency used in foreign trade, operated by a committee of nations, will be perfect for dispersing blame.
  • all nations will continue with their own faltering currencies for all internal pricing and transactions.  National fiscal and monetary policy will remain with individual nations thereby avoiding untenable constraints currently faced by countries such as Greece and Portugal in the Euro zone.
  • interest rates will invariably rise from their current arbitrary, market manipulated and unprecedented low levels in response to the growing concerns of bond holders about risk.
  • individual nations will point their fingers accusingly at other nations and especially at the global committee of nations responsible for the new reserve currency.
  • political scapegoating will become national pastimes designed to justify high taxes, lower currency values, price inflation and low economic growth all resulting in much lower living standards of the citizens.  Confused citizens will be inundated with multiple reasons for their deteriorating circumstances.


National governments almost universally want their currencies to devalue versus those of other nations primarily to protect their competiveness in international markets.  They also want cheap currencies to make good on their obligations to their own citizens for pension and health care promises too.  Cheapening currencies make paying off bond debts easier since the currency today is worth less than when the debt was originally incurred.

Ever higher gold prices, the only real money, have the effect of devaluing national paper currencies in relative terms.  This again is custom made for politicians and governments to point their fingers in blame, rather than assuming responsibility and accountability for their own profligate financial behavior and decisions. (Read a previous article of mine entitled America’s Political Process Guarantees Another Financial Crisis!)


Nations which have stocked up on gold will occupy the catbird seat.  Their large foreign exchange holdings comprised of gold place them in a particularly advantageous position.  Is it any wonder that nations such as China, India and Russia, as well as many other emerging nations, are feverishly working to acquire as much gold as they can afford while it is still available and cheap?


Private investors, institutional and individual, will become wealthy simply by being invested in gold in this environment.  Stupendous capital gains with gold priced at USD $5,000, $10,000 or $15,000 or more per troy ounce should be expected – but should we assume that hugely indebted governments, whose citizens are struggling with ever lower living standards, will stand idly by while investors reap what will be characterized as unwarranted and unearned capital gains?  Not very likely! I can already hear populist calls for a Windfall Profits Tax to confiscate these unwarranted gains in the name of fairness and equity. Owners of gold, therefore, might be wise to take appropriate evasive action which anticipates this eventuality.

Comments (1)Add Comment
written by bullionbullscanada, February 28, 2013
And what "appropriate evasive actions" are suggested?

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