"His master said to him, ‘Well done, good and faithful servant; you have been faithful over a little, I will set you over much; enter into the joy of your master.'"
A year ago I mentioned that my in-laws were in India November and unlike previous trips, the U.S. Dollar was no longer accepted by vendors. About a year ago, my next door neighbor was in his home country of Burkina Faso. In previous years, the premium for exchanging US dollars for CFA (the Franc of French Africa) was reasonable. But when he was there last summer they started with 16% premium and negotiated from there.
Jim Rogers is right–the US has already lost its AAA credit status. When vendors and money changers overseas have rejected the reserve currency status of the dollar, small players, then the rest of the world will not be far behind. My utter rejection of dollar began in January 2009, as documented here.
The U.S. dollar has no intrinsic value. O sure you could use it for wall paper like people in the past have done with other failed currencies, but it would make for a very ugly wall.
The name of the first is Pishon; it is the one which flows around the whole land of Havilah, where there is gold; and the gold of that land is good; bdellium and onyx stone are there. Genesis 2:11-12
Economist Nouriel Roubini says that gold has no intrinsic value. He like many others, including Warren Buffet, take a utilitarian approach whereby the value of something is only what the market will bear at any given moment. So in a Black Swan event, such as when all are dying of famine, a bag of gold could potentially buy a loaf of bread to stave off starvation. In such cases, gold is only worth what people are willing to trade for it–so the thinking goes.
Others argue that silver is a better investment because at least silver has an industrial use. But the gaping hole in this entire utilitarian argument is it misses an important aspect of gold: its aesthetic value. Now, aesthetics is about an appreciation of beauty. The gold-has-no-intrinsic-value cult thus downplays the ornamental and the artistic value of gold in jewelry, in works of art, and in religious artifacts. But since the dawn of history, these qualities have made gold one of the most desired elements in creation. I would argue further, that God actually created gold to have this aesthetic value. But let’s not make the opposite mistake as Roubini et al. and downplay the utilitarian value of gold. Genesis 2.11-12, the first mention of gold in the Bible is making an implicit statement about why God created gold.
My very first undergraduate class in Bible was on the Pentateuch. Prof. Darrel Hobson at Northwest College taught that the theology of the entire Pentateuch was post-Sinaitic. If Moses is the essential author of first five books of the Bible–a traditional view–then he wrote everything from the vantage point which occurs after the Exodus and after his experience of God’s presence at Mt. Sinai. The Creation narrative tells us that God made the heaven and the earth and everything which is in them. He thus made the gold of Havillah and that gold was good–like everything else he created (see Gen 1).
This says something implicit about the function of gold in Moses’ time. In those days, gold had its obvious aesthetic value to make beautiful things. But it was also used as money. Therefore, Genesis 2.11-12 implies that the utilitarian function of gold as a intermediary of exchange and a store of value, i.e., the monetary use of gold was good and an aspect of the creational purpose that God had for gold.
Gold has great intrinsic value, especially when you compare it things like dollar bills which are printed on paper. So here’s a question. If gold has no intrinsic value, then why don’t we print (i.e., mint) the US dollar on gold instead of paper?
While in Grand Cayman over the Christmas holiday, I finished Justinian’s Flea by William Rosen–a little light historical reading. In the sixth century AD, when armies would besiege, cities could pay a ransom and avoid violence that could result in a massacre or a selling into slavery of the population. But in no case did the besiegers accept fiat currency–their preference was for gold and silver. Imagine the Emperor at Constantinople asking the invading hoards if they would accept a promissory note or nice pieces of papyrus with his picture on it? Thus, history teaches us that war helps people to sort out their values. The enemy wants what is mine, and the main thing I have besides my very life is gold and silver; otherwise, I am unable to ransom myself. It is better to relinquish precious metals than to die or to become a slave for the rest of my life.
Larry Norman wrote in his 1969 song, “I’d wish we’d all been ready”:
Children died, the days grew cold.
A piece of bread could buy a bag of gold.
I wish we’d all been ready.
It is a beautiful song marred by the flawed dispensational theology of the Rapture. Yet these lines have always haunted me. What has value in a time of war when everyone is desperately seeking merely to survive with life and limb and to protect their loved ones? Norman’s song evokes an image of a time so desperate that gold would have no value–only bread. Could this fit the mantra of some that gold has no intrinsic value? I would argue that in such a scenario it is not that gold has lost value: it’s that bread has become so scarce so as to increase in market value, and this is what actually happens in war.
Some of my African colleagues testified that during one of the many wars that Bangui experienced, the seminary community remained on campus fearing for their lives as shooting and shelling raged in the city’s streets. Some brave bread vendors dared to distribute despite the danger. But instead of asking the pre-war price of 50 CFA per mini-baguette (=$0.125US), they wanted 200 CFA. Those who were too afraid to step out into the open paid the premium or they went without. Scarcity led to higher prices. Economics 101. Even graduates of Father Guido Sarducci’s 5-minute University should be able to apprehend this basic concept.
The increased price of commodities during times of war notwithstanding, it is clear to me that history teaches us that in the most severe economic crises, gold and silver retain their value while currencies do not–particularly the debt instruments of the war’s vanquished. As a child growing up in America, I read several tales of people who had found millions of dollars only to learn that they were worthless Confederate notes. Bank notes are debt. Debt which the issuer cannot repay is worthless. Gold, however, does not suffer from such issues. So in the end, the victor walks away with the gold and the loser sits upon a pile of worthless paper. In times of war, it can be difficult to pay for supplies and soldiers with the promissory notes that we call currency. So for example, Niall Ferguson writes in his The Ascent of Money (81-85) about how the British, facing the refusal of their promissory notes, successfully received gold, thanks to the shipments arranged by the Rothchilds, and were able to win a decisive victory against the French at the Battle of Waterloo in 1815.
The Righteous Investor 