Why Money For Nothing is Good for Gold

The Japanese have their general election coming up in December. In the lead up, the challenger from the Liberal Democratic Party, Shinzo Abe, is calling for ‘unlimited’ monetary easing from the Bank of Japan. The goal is to ‘beat’ deflation by targeting inflation of 2-3% and spending more on public works and defence.

Yes, with a public-debt-to-GDP ratio already over 200%, Japan obviously needs more public spending. Because that has worked so well to ease the pain of Japan’s burst credit bubble. Really though, do you notice the trend now globally?

Central banks used to be the puppet masters in the economy and the political system. They acted as lender of last resort to the financial system and the government. But as the debt crisis has consumed governments (after their bailouts of banks), central banks have now become hostage to growing government deficits. As Das explains in one of today’s other articles on the US debt problem, the Fed now buys 60% of US Treasury debt.

In simpler terms, central banks have lost even the appearance of political independence. Governments are so deep in debt, and so unable to win re-election by cutting spending or raising taxes, that the only way they can retain the appearance of legitimacy is to have the central bank pay for everything by printing more money.

Thus we reach the logical conclusion of the Nation State relying on the central bank to fund the Warfare/Welfare State. Money for nothing from the printing press provides money for everything that can’t be paid for with hard work or virtuous saving. Has there ever been a better time to own gold?

The jury is still out on how gold will behave during a deflationary collapse. But if you want to educate yourself on the matter while you still have time, we’d urge you to buy the on-line video collection from this year’s Gold Symposium in Sydney. Once your order is confirmed you’ll be able to watch all the videos from the comfort of your own home.


Dan Denning
for Markets and Money

From the Archives...

Why Australia’s Economy is No Economic Wonder
16-11-2012 – Greg Canavan

The Ills of Fractional Reserve Banking
15-11-2012 – Nick Hubble

Avoid the Slaughter: Watch This Key Stock Market Pointer
14-10-2012 – Murray Dawes

Molto Moderato
13-10-2012 – Dan Denning

Vote for an Honest Election: Democracy on eBay
12-10-2012 – Bill Bonner

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

Leave a Reply

2 Comments on "Why Money For Nothing is Good for Gold"

Notify of
Sort by:   newest | oldest | most voted

Japan has known only two games since their isolationism ended, the first game of shooting to create an Asian empire didn’t go so well, so that leaves the legacy game of mercantilism on its lonesome. Their printing is about driving down the Yen and keeping the higher value add production at home.

truth and integrity

Who is getting the money and who has the gold?
I know the collectivists will be deniers on both fronts.
The wise seem to be the individuals who are acquiring gold.

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au