July 21, 2011; Infinite Investment Options Now Being Reduced to One – Gold

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Kevin: David, you are just getting back from the conference in Las Vegas. I know you had a chance to spend a little bit of time meeting Herman Cain.

David: Kevin, while I enjoyed the interview that we did with him here on this program, I have to say that I enjoyed meeting him even more. To take the measure of a man is to shake his hand and have a reasonable conversation with him in person. You get to look into his eyes. You get to hear the real timbre of his voice, and I was very impressed, Kevin – impressed by his stature as a person. I can see why he was an effective CEO.

Kevin: David, when you came back and told me about it, the first thing I thought was, when you meet a person with integrity, where they don’t have something to hide, you can sense that. It rings true with your own integrity, and I think that is probably what you sensed when you were talking to Herman.

David: It is certainly a confidence that runs deep, a man of authority, a man of internal strength and power, and someone that I don’t know that I would necessarily want to tangle with in a boardroom. I think he is very self-assured and, if proven wrong, not so frail as to run and hide, but to accept where he has been wrong, and move forward.

Kevin: Something that really makes me laugh about Freedom Fest. It is in Vegas each year, and I know Vegas is seen as a fun town, but the guys who are actually up there speaking, for the most part, don’t fit in Vegas. “What happens in Vegas,” they say, “stays in Vegas,” but a lot of people stay away from Vegas.

David: And I probably would prefer to stay away from Vegas, too. It is not my favorite place in the whole world, and as far as places to stay, Bali’s, as you have suggested, is sort of the boxed wine of Vegas.

Kevin: You do get a lot of square footage for the money.

David: Exactly. Quantity over quality is certainly true, and I am grateful to be back in Colorado breathing fresh, non-recycled air again, after four days in Vegas. I feel like I must have been training intensively for some sort of smoking competition. I am now ready for a pack a day, because I think that is what I must have been inhaling in terms of secondhand smoke.

Kevin: I know a lot of people wanted you not to lose your voice because of the smoke, because you were talking, again, about why you feel gold at $5,000 an ounce is a reality. But David, you have said this before, and it seemed like it was an extreme reality, an outside chance. At this point, it seems like it is coming into something that is much more acceptable as a reasonable amount that gold might rise.

David: The first thing I did when I got to Vegas was a CNBC Asia interview, and it was televised within Asia, and they were surprised by that $5,000 an ounce suggestion. I think what they don’t realize, is that it is becoming more common by the day. Standard Chartered has recently issued the same opinion – $2,000 in the immediate, with a long-term projection of closer to $5,000 an ounce.

Kevin: Jim Sinclair has said, “Now that we have topped $1,600, and if we punch through a couple of other levels that we are fairly close to, we could be looking at 5-digit gold prices before this is over.”

David: Today, as we spend some time looking at the European debt markets, and the U.S. debt markets, as well, I think we will come to something of an agreement that $5,000 may, in fact, be conservative, versus an aggressive estimate.

Kevin: Let’s go to that. You said something that was compelling to me yesterday. The bond markets, which is really now people price risk, that tells us so much, and you had made the comment that you believe that the bond market in Europe is actually defining what the new Europe will look like, as far as who will still be participating, who won’t be participating, and what the outcome will be after all these debt talks have gone through.

David: Correct, Kevin. What we are looking at, in the European debt markets, is that capital is flowing, and bond yields are now giving us an indication of who is likely to remain as a part of the euro project. If you are watching the difference between what is happening, people buying French sovereign debt, buying the debt of the Netherlands, buying German paper, as opposed to people walking away from Greek debt, and Spanish debt, and Portuguese debt, and the yields rising in those countries. Greek bonds collapsed this week, as we have seen yields now surpass 39%.

Kevin: 39%. That is something that, if it was safe, we would all just sign on for.

David: This is where bargain hunters are beginning to feel not like the hunters, but the hunted, and I think it is important to remember that old Wall Street adage: “Never catch a falling knife.” What was a value two weeks ago, or two months ago, is now representative of an investment slaughterhouse.

Kevin: So, if Greek debt isn’t a value, then how about Portuguese debt?

David: Their two-year paper is pressing 20% this week, after the fresh discovery of a 2.74 billion dollar hole in the budget, so we basically had a gift which was left by the outgoing socialist party, and this, to us, is a replay of what we saw in 2009 in the Greek drama, where the deficit was found to be two times the previous estimate, and they had sort of an ah-ha moment, more like an uh-oh moment.

Kevin: Speaking of ah-ha moments, David, we all know in the back of our minds that the euro is not going to look the same in a year as it does today, nor the European Union, as a matter of fact. The secession of the PIIGS countries has been suggested, which would actually be initiated by the Germans, the Finns, the Austrians, the guys who actually have their financial houses somewhat in order. Do you feel that it is the northern countries, the people who are actually somewhat disciplined, that are going to force this issue?

David: I disagree. I think that the southern secession is more likely, and it is going to be, in my opinion, driven more by the popular discontent with Brussels and with Frankfurt than driving the austerity measures. We have individual countries which are already in the throes of rapidly rising unemployment.

Kevin: Yes, unemployment. Spain – 40% unemployment for people who are less than 30 years old.

David: It is clearly something that is a rising problem in terms of a populist issue to be addressed by local politicians. They stand to benefit. Those individual countries stand to benefit from a monetary devaluation, from a partial default, and frankly, from independence from the euro body.

Kevin: Let me ask you this, Dave. Is monetary devaluation ever a good thing? If you were in a country and you knew you couldn’t pay your debts, and you could no longer stay with this particular union that is forcing this, what else would you do? Is it ever a good thing?

David: I think, Kevin, philosophically, you can look at issues like that and play the role of the idealist and say, clearly, we don’t think that is a good idea. We don’t like the idea of default because it is a measure of dishonesty in your business dealings where you have gone against what you originally obligated yourself to, and I think, in practice, you are faced with circumstances where you must choose measures of expedience. I remember my brother being in Banda Aceh. He was dealing with people who had been injured in the tsunami.

Kevin: Of course, this was right after the major tsunami that Christmas a few years ago.

David: Yes, within 48 hours he was on the ground and there were people whose limbs were going septic and very quickly could have had their bodies going septic, and he was dealing with issues which were growing by the hour – someone who could be dead within six hours if an arm or a leg was not immediately amputated. Again, in principle you could say, “Let’s try to revive this body in a healthful fashion.”

Kevin: Sure, like you would here in the United States. We were talking earlier about a great friend of yours and your father’s, Patricia Bragg. This is a lady whose father was an amazing model of health, and she is an amazing model of health also. She wouldn’t say, “Let’s cut the arm off,” right off the bat. She would say, “Drink apple cider vinegar and let’s make it better.”

David: Let’s make it better, let’s see what is wrong with the system, let’s fight it at the level of the system, and in that circumstance, there is something that circumstantially precedes the ideal, which is, “We may not have the time to solve the body or the systemic issue if we don’t take immediate action.”

Kevin: This would be monetary devaluation, this would be a breakaway from a union, these types of things that would have seemed just out of the ordinary five years ago, and at this point, are ordinary thoughts.

David: And it is something that I think would be of benefit to these countries. I have spent a lot of time studying the Latin American debt defaults, and the countries that did, in fact, default and devalue, were the ones who had their economies back on a normal growth trajectory much, much sooner. In this case, I think the race goes to the swift. The first to leave the EMU and devalue will be the first to return to regional competitiveness two to three years from then. I am not saying that devaluation is part and parcel to a healthy economy. I am not presenting that as an ideal scenario, at all.

Kevin: No, but the tsunami has hit and there are arms and legs that are rotting at this point.

David: If you don’t deal with it as triage, you won’t have the privilege of fixing the systemic issues. I think, ultimately, the systemic issue might even include something like a gold standard in Europe, and we can talk about that in a few minutes, Kevin, as it applies to the U.S., but the issue is, we don’t get to get there if we don’t take a strong view and know that time is not on our side.

Kevin: Okay, Dave, let’s play a thought experiment here. Scientists do this all the time. They will say, “Let’s think this through. What would be the ramifications if….” Have you thought about, or has anyone actually sat down and thought about, what would happen to the currencies of the euro that are still part of the European Union, that are still part of the euro, versus the currencies that would break away? Has someone done the math and seen what would balance the equation?

David: Yes, and essentially, there ends up being two collections of countries – the strong ones and the weak ones, if you want to put it in those terms. Right, Kevin, those are the previously mentioned stronger states – Germany, Finland, Austria, the Netherlands, maybe even France. They could perhaps find some sort of a tolerable fiscal union as a “closer to equals euro mix.”

Kevin: Quite a bit different than Greece, Spain, Portugal, Ireland, etc.

David: Right. You could call those the peripheral euros, if you will. HSBC’s currency team has already estimated that that core euro mix could see a currency swing to the upside, an appreciation of roughly 29% from current levels.

Kevin: That would be the euro, basically, that you are talking about. The core countries that would stay in the euro would rise almost by a third, 29%, in value, because it would take the stress of these dragging countries off.

David: Have you ever gone to the pool and taken a large, inflated ball, and tried to suppress it under water? You are what is holding it down. As soon as you release it, as soon as your weight, as soon as your drag, is no longer in the equation, guess what happens? There is an immediate buoy, and that is the potential of a 29% or 30% buoy to the euro.

Kevin: So what would happen to the currencies that broke away?

David: Probably at 50-60% devaluation of the peripheral euro, again, those countries being unhinged, and you say, “Well, devaluation, that’s terrible.” Yes and no. Think of what happens to the tourist trade in those areas where, now, Northern Europe and the rest of the world can go to Greece and have basically a beach vacation for pennies on the dollar. We discussed this with Bill King a few months ago. They don’t export anything. They really don’t offer much to the EU in terms of a strong, productive component. But if you go to Italy, if you go to Greece, if you go to Spain, these are great tourist destinations, and all of a sudden, a vacation to Rome, from Colorado…

Kevin: It is half of what it was before.

David: Exactly. Or a vacation to the Greek Isles, again, is quite reasonable once you’ve paid for the airplane ticket.

Kevin: Okay, so Dave, we did this thought experiment, sort of in an isolated container, because, in reality, as we have talked about for months, the real risk right now is the credit default swaps that would trigger, when that occurs. Can you address that? The banks that are over there would be affected by a default, but how about the banks in London and New York?

David: To rephrase that, the banks on the continent would stand to lose if sovereign paper were simply marked down, not that it defaults, but they have a lot of that paper on their books, and what they are protected against, what they have bought insurance for, is default. So, in fact, in the case of default, a lot of European banks are okay. It is in the case where they have to mark their assets to market and we can see that the Greek paper, the Spanish paper, the Italian paper, is trading at an extreme discount, that their balance sheet today is impaired. In fact, if there is a default in any of these countries, they get a free pass by having insured against the default to a certain degree, and the risk gets shifted from them to the Anglo banks. So you go to New York, and you go to London, and that is where the plot begins to thicken.

Kevin: And that is very, very, close to home for the Americans who are listening right now, because it is the insurance companies, it is the banks, it is pretty much everything.

David: Right. Look at the main wirehouse firms here in the United States and say, “Well, how can they possibly be impaired?” Because they were the counter-parties, if you will, to these insurance contracts, which guaranteed that the person holding the sovereign paper would not get into trouble if, in fact, there was a default.

Kevin: We have been using the Lehman crisis from 2008 as an analogy, but are there differences at this point from back in 2008?

David: I think there are huge differences, and it is just that the market has matured a bit in seeing that sovereigns and central banks don’t have all the answers to these problems. We have had creditors who have lost a degree of faith in sovereigns and their ability to address, not only the short-term issues, but also larger structural issues as well. That was not the case in 2008. You looked at one degree of corporate incompetence and you said, “Bear Stearns and Lehman Brothers. I can’t believe they mismanaged… can’t believe the amount of leverage… they should never have gotten to this place. But at least we have a formal bailout from the big brother, and actually in this case it was, truly, Big Brother. We don’t have that same confidence, because, essentially, we used up the Big Brother balance sheet, and the next bailout – you can’t push that one up a notch in terms of the ladder, because we have gone as high as we can go.

Kevin: That brings me to an interesting thought, Dave. Last week, Ben Bernanke looked Ron Paul right in the eye and said, “Gold is not money.” Now, you have been talking about this loss of faith in sovereigns and that there really is no next step. There is no sovereign above a sovereign. They are the top of the ladder. But when you get to the top of the ladder, and you have nowhere else to go, you go to gold, and as of this moment, gold is trading in the $1600 range.

David: One more point on the bond market, and this comes from a recent Jim Grant interview, a very bright guy in the interest rate markets. He said, basically, that the bond market is operating on muscle memory today. The operative principle in the bond market is that which has driven it consistently for 30 years. We have been in a 30-year bond bull market here in the United States and it is not being driven by fundamentals.

I have wondered, and we have suggested in this program before, if a new form of bond vigilantism isn’t, in fact, found in the gold market, not in people making a strong counter-attack move against the bond market, shorting the holy heck out of it, but, in fact, saying, “I don’t know that I can play in a rigged game. As a bond trader, I don’t know that I am going to win in a rigged game, but I do know where the pressure outlet will be, and that is going to be in the gold market.”

Kevin: A little bit of explanation for those who have not heard the term, bond vigilantism before. The bond market is so gigantic. I remember your dad, one time, explaining it when I first came to work here 25 years ago. He was explaining the stock market, and he showed me a little cup of water, and he said, “This is the stock market.” Then he said, “Imagine your bathtub. That is the bond market.” It is so much larger, and it is so much harder to manipulate, because people are buying and selling based on what they perceive as the risk of repayment. Bond vigilantism simply means, and correct me if I am wrong, Dave, that the bond market is going to do what it is going to do, and it really cannot be manipulated long-term by any kind of federal official.

David: That is the truism that most people familiar with the bond market are aware of, that the short end of the curve is controlled by politicians and political interests.

Kevin: But the long, 20-30 year…

David: That is market-driven. The market determines the price. So, if there are concerns about credit quality, if there are new concerns about solvency, then the market will determine the direction of the interest rates, and the other side of that equation is, the price of bonds.

Kevin: Then let’s talk about the gold revaluation. If you are saying that this is where we are actually going to see the impact this time around, tell us about the gold revaluation, not just here, but you made a comment last week that it was hitting new highs also in the euro.

David: What that is indicating is, essentially, a fiat free-fall, with some currencies seeming to have more gravitational weight than others. If you look at the euro, it is over 1,100, about 1,125 to 1,140, in euro terms. In British pounds, it is nearing £1,000 an ounce. It sounds funny to say it that way. (laughter) In Swiss francs, it is over 1,300 francs an ounce. Then the U.S. dollar is well over 1,600 an ounce. And everyone is surprised that we are getting to new highs, but we have been getting to new highs for the last year-and-a-half to two years. Only now is it entering the minds of investors that something is really wrong, because it shouldn’t be this high, in their humble opinion.

Kevin: David, you were talking about a breakdown in sovereign faith, but there is really a breakdown in faith in paper assets as a whole. Let’s face it, many years ago, there were so many options, a person would say, “I have gone to my financial planner, and he has me in bonds, he has me in mutual funds, he has me in stocks, he has me in various currencies.” We were all taught, maximum diversity was maximum benefit. It seems like the options are being narrowed very, very precisely at this point.

David: If you look at market practitioners today, Kevin, they have grown up in an era of nearly infinite options. It was just a question of good, better, or best. There was no good, bad, and ugly. Today we have ugly, uglier, and ugliest, as really, the investment options of the day, with a few standouts. It’s not good, better, and best.

In a trust-building environment, where things are positive, you have innovation, you have change that is rewarded, you have new financial products that proliferate, and there are, however, very limited options for investors, when on the other side of the coin, sentiment begins to change and trust begins to break down. That is the era that we are in. We have practitioners looking at the old days, more recently, 1980s and 1990s, and saying, “We have so many good options and they are all really well priced. I think we need to be buying stocks, I think we need to be buying bonds, I think we need to be buying real estate.”

Kevin: The other options that were created in the 1980s and 1990s, and the early 2000s, were to eliminate risk, but all they did was add complexity. I think about the person we interview every so often who wrote, A Demon of Our Own Design – Bookstaber. He talked about how complexity was added to the markets to the point where they were unintelligible.

David: Unintelligible. Now we are in the back to basics reversion, as people cut anything that is “fancy” or “complex.” Those complex, previously, just recently, viewed as very sophisticated, products, are now something to avoid, and all of a sudden all those many options that you have, traditional asset classes, and their many derivations, are something to be protected against, preservation of assets, protection of assets, becoming the real priority for a truly sophisticated investor, identifying the right trends and taking a clear appraisal of what is happening in the world today.

Kevin: Yes, and speaking of a clear appraisal, back when the stock market was just shooting up every year, nobody really paid any attention to what the real rate of return was, because they figured, “Well, inflation is a couple of percent, but, hey, I made 11% this year, or 15% this year.”

David: Or 25%, or 54%.

Kevin: Exactly. But at this point, when people are trying to squeeze out 1% or 2% out of their asset, but they know they are losing 3% or 4% to inflation – that’s what the government says, it’s probably twice that – negative real rates of return right now seem to be the norm.

David: This is one of the core themes that need to be understood by investors if they really want to understand the gold picture. Why would everyone be moving to gold? Not everyone is moving to freeze-dried food, and not everyone is moving to AR-15s. I just read an article in Harper’s magazine that says you have to be a crazy, rightwing fanatic to be buying gold in this environment. In fact, you are one of the causes of destabilization of the world financial system, if you happen to be buying gold. Read the article. We’ll get to the Harper’s article in a minute.

Kevin: Yes, I’ve been feeling pretty guilty myself, Dave, that it’s my fault that our government is deficit-spending, and this thing is falling apart.

David: My point is simply this: There is a contingent in the financial system, and in the news media, that does not understand basic, fundamental investment thematics. That is why harping on a negative real rate – there is nothing extreme about this. This is just the facts. Why are people buying gold in China? It can be boiled down to this simple fact: The official rate of inflation is 6.4%, and deposit rates are 3.5%.

Kevin: That sounds negative to me.

David: You’re negative! What about in the U.S.? We have an official inflation rate of over 3% and there is a deposit rate of less than half a percent, closer to a quarter of a percent. We are deeply negative, in terms of our rates of return. And investors have to look themselves in the mirror every day, or whenever they have a CD coming due, and say to themselves, “How does this make sense?”

Kevin: What do you say to the guy who bought gold at $300, and he bought gold at $500, he bought gold at $700 or $800. Now he is looking at it at $1600, and he is saying, “Gosh, this is higher than I’ve ever seen it before.”

David: I would say, Do-Not-Sell-Your-Gold-And-Silver. They have not solved the fundamental problems of our day. We spent just a little bit of time today talking about the European debt issues still in play. The U.S. debt ceiling is an utter political farce. It will be solved – it will be solved at the last minute.

We have bigger issues which both parties have failed to address, going back over a 40-year period – debt obligations and entitlement payments, which have basically put future generations in hock. Kevin, it is deplorable, it is unethical, what we have done to future generations. But it is both parties that have been complicit in this crime, and both parties that should pay at the polls and in the 2012 elections.

My point is this: We have not solved any of the fundamental issues which are driving the financial markets today. The instability in the debt markets, the very frail earnings that are coming out on Wall Street today. Look at the bank earnings in the recent week or two. It is fascinating to watch. “So-and-so is beating estimate, so-and-so is missing estimates.” All of them are borrowing from loan loss reserves to pad results for the quarter.

Kevin: That was an amazing fact, looking at Citigroup, when they had shown a profit, but actually, they didn’t have a profit, they just moved money…

David: Out of their loan loss reserves, reducing their loan loss reserves, and bumping their earnings on that basis. And everyone seems to think that is healthy.

Kevin: That was 50% of their gain, wasn’t it?

David: That is balderdash, and anyone who is investing in Citigroup, on that basis, needs to have their head examined. This is the point, Kevin. There are fundamental issues that have to be addressed, and up until that point, you have good reason to take evasive action, to do something to protect your assets. To address someone whose concern is that gold has gone too far, too fast: If we were at the tail end of the gold bull market today, if we were there already, the rate of change, the rate at which the price of gold is accelerating, would be, just as in every other bull market, regardless of asset class, between 100 and 200 percent per year.

Kevin: So $1600 gold, going to $3200 dollar gold.

David: Or $4500, within a 12-month period of time.

Kevin: At that point we might be getting close to a top.

David: Ding, ding, ding, ding. You are ringing the bell, if you are seeing that kind of ROC, a rate of change, in a condensed period of time. But if it is between 12 and 18, as much as 25 or even 50 percent, it means that you are in a very strong market. That is what I am saying, Kevin, is that a blow-off phase is marked by that 100 to 200 percent annual rate of change. We have not seen it, at any point, during this bull market in gold.

Kevin: David, I would encourage any of our listeners to go back, you can go to chart programs on the Internet, and look at gold for the last ten years. It is amazingly regulated. I don’t mean regulated by the government, I am talking about regulated by the market. It has gained about $100 a year, average price, for 10 or 11 years. Granted, it is starting to steepen at this point, but for the guy who did buy at $300, $500, $700, or $1000, who is now looking at his real rate of return on his other paper assets, not only should he hold the gold that he has, but within reason, he probably should continue to add to his portfolio.

David: Let me just give this as a confirmation, as an affirmation, as an encouragement to our listeners. It is not like we are going to be silent when it comes to that period in time where we think a reduction in your holdings makes sense. We have prepared an exit strategy. We have the next 25 years, as best we can, theoretically, mapped out for our clients. It is not as if we will be silent. You just have to stay tuned in.

Kevin, and staying tuned in, to some degree, is also tuning out some of the noise. I would encourage any of you listening to at least get a copy of the Harper’s article. Frankly, I wouldn’t encourage you to buy the Harper’s magazine, because after reading this article in the airport the other day, I was appalled, and thought, “Why did I spend the money for this magazine? This is ridiculous.” If you look at the lead article, it essentially is saying, why, what they very disparagingly call metal heads, are buying gold and how wrong-headed it is. It is a classic political blunder, in their opinion.

Kevin: Gold isn’t money. That’s what Bernanke said last week.

David: And I think what we are seeing is, actually, in that article, a classic media bias, driven by political views, and what they are failing to recognize, is their inability to remain objective across asset classes. Their assessment of the markets is so blind, given their political predisposition. It is tragic, because you are talking about good people who read that article and will conclude that it just doesn’t make sense to own gold.

I think, Kevin, this is where we come into conflict. We have a conflict brewing between the statists, and those who see the free market playing some role in the solutions to the problems we have today. Let me just borrow from Alan Greenspan. This is early-era Greenspan. “An almost hysterical antagonism toward the gold standard is one issue that unites statists of all persuasions. They seem to sense that gold and economic freedom are inseparable.”

Kevin: This is Alan Greenspan. I believe it was 1967 when he said that, David. But this is Alan Greenspan before he finally went over to the paper side, the dark side. Yeah, I think of Darth Vader. (laughter) I don’t mean to make him out to be that bad, but this was a guy who wrote really well about gold, economic freedom, and non-deficit driven economics.

David: Kevin, I hope our listeners of any political persuasion would see that this is not driven by party loyalty, that if you take a birds-eye view, one can see that history is littered with fiat currency experiments gone haywire. This episode is no different. What we are looking at in Europe will be solved, ultimately, by a correction in one or more currencies. What we see here in the U.S. will ultimately be solved by a correction in the currency.

How do we know this? Because we have already seen the intransigence to do the right thing fiscally. We have already discussed, for the last two years, how politicized the budget is, how unwilling politicians are to cut their political throats in an effort to cut the budget, because that is essentially what would happen. They would not be re-elected if they didn’t bring the bacon home. So we have this naturally corrupt system. Unfortunately, this is the nature of a democracy. It starts very clean and very neat, and ultimately becomes corrupted as politicians figure out how to redistribute wealth to their own constituency groups.

Kevin: I think of the verse from Ecclesiastes. There really is nothing new under the sun. When you were talking about this being an experiment with paper currencies, this is not the first time. You and I were talking the other day about, “What if we lived 4,000 or 5,000 years, and we could actually take a real bird’s-eye view?” We would have seen paper currencies and other types of experiments, with non-real things as money, come and go. I think of 700 B.C. when the Greeks went off the silver standard and it went so horribly wrong, it meant the death penalty, once they re-established the standard.

David: If you corrupted the system again, you would be killed.

Kevin: And then the Romans did the same thing. Julius Caesar paid his troops with real gold.

David: And you can look at different eras of the denarius and they changed the silver content over time to be able to fund an over-bloated budget. They had too many entitlements, too many outgoing obligations and not enough tax revenue.

Kevin: But what always happened after that? There was a return to a real standard.

David: There was a return to a real standard, and Kevin, I think for the first time in my adult life, the gold standard is, in my mind, not something that could or should be entertained, but will be entertained in our lifetime. Put it in a ten-year time frame, or a twenty-year time frame, maybe it is even a five-year time frame, but reasonable minds will discard the unreasonable criticisms that you will find in a Harper’s article, and see that there is only one way to elegantly balance an economy and manage a currency system.

Kevin: David, sometimes we are thinking privacy is everything. On other occasions, we think, “Well, gosh, if everybody is private about their gold holdings, and saying nothing…” We have the Harper’s Bazaar out there, and a lot of different people who are saying, “Oh, well, gold is not money, don’t even bother with it.” Is this the time to become vocal about the way to solve the problem?

David: Kevin, this is the time that your voice needs to be heard. This is the time where if you have an opinion, you need to make it known. Coming into the 2012 election, this may be the most important election we see in our lifetimes, because we are at a tipping point. We will either go the way of the statist conclusion, and that is, toward greater and greater controls, or we will allow free market forces to solve these problems, and one of the greatest ways to empower free market forces is to take away the Ph.D. standard and go back to the gold standard.

Kevin: A man on the street, several hundred years ago, owned a printing press and he created brochures that talked about the British influence on the American colonies. He had such a profound effect, just because he was vocal, he was bold, but he was simple. These were simple brochures. Of course, David, I am thinking of Thomas Payne’s vignettes, out of the series that he called, The Crisis.

David: “These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of his country. But he that stands it now deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered. Yet, we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly. ‘Tis dearness, only, that gives everything its value. Heaven knows how to put a proper price upon its good, and it would be strange, indeed, if so celestial an article as freedom, should not be highly rated.”

Kevin, think of the willingness to put into word and to give a voice to what they believed 200 years ago. It needs to happen. This crisis will either be solved, with greater controls by an incompetent system of bureaucracy that brought us the crisis in the first place, or we will solve it – we – every man and woman of this country.