Sunday, March 16, 2014

The Exaggeration: Gold, Currencies, and Central Banks

Today’s Daily Bell interview is with Andy Hoffman. 

It can be summed up as follows: gold is completely suppressed and will eventually go to infinity, all fiat currencies will go to zero.

A few excerpts, interspersed with my thoughts:

Frankly, who knows if the Fed will even survive the inflationary carnage of [Yellen’s] four-year term?

I do.  The Fed will still exist in four years.

In my view, Japan is likely to be the first "first world" nation to experience hyperinflation in the 21st century.

Keep in mind, when reading the rest of his comments, that this is an 86-year window.  Eighty-six years.  One.

…the handful of communists making the decisions have pushed [China] to the brink of implosion; an implosion, I might add, that will be remembered for generations.


ALL fiat currencies will ultimately crash against items of real value…

All fiat currencies will almost certainly lose value against real assets, but crash?  Like, within a week, a month, or even a year “ALL” fiat currencies will go from being a functioning medium of exchange to becoming virtually worthless?

This hasn’t happened to the British Pound, even after centuries; nor the US Dollar after a century.  It hasn’t happened to the fiat currency of any major industrialized country outside of cataclysmic defeat in war, to my knowledge.

The fact that such [gold] manipulation is finally going mainstream will only accelerate "the Cartel's" demise…

Does Andy really believe this?  Let’s ask:

Daily Bell: Has the "hate" for gold dried up on Wall Street? Doesn't seem so.
Andy Hoffman: LOL. It never will – as gold is the enemy of the paper-loving, Fed-supported banks.

If Wall Street (cartel) hate will “never” dry up, what does “demise” of the cartel (Wall Street) mean?

Daily Bell: We've asked this before: Are gold and silver still in a bull market long-term?
Andy Hoffman: NEVER have fundamentals been better, NEVER have prices been more undervalued and NEVER have more potential catalysts been on the horizon. 'Nuff said!

NEVER?  In all caps and everything?  Ever, in history?

Daily Bell: Are we headed for a new gold standard? What kind of standard?
Andy Hoffman: Ultimately, we must go back to a gold standard; after the upcoming fiat crash, no one will accept anything else but REAL MONEY. Of course, there is no way of knowing when and how this will come about.

“Of course, there is no way of knowing when and how this will come about.”  “Japan is likely to be the first "first world" nation to experience hyperinflation” sometime in the next 86 years.

…the only way to protect oneself from the ultimate "financial Armageddon" is to own gold and silver before the system comes crashing down.

When?  Eighty-six years?  For the first one?

Daily Bell: Let's discuss currencies, in particular. Where is the dollar headed, long-term?
Andy Hoffman: To ZERO, as have the previous 599 fiat currencies; and that goes for the other, nearly 200 fiat currencies worldwide.

Five-hundred-ninety-nine sounds so specific, so well researched.

It is a very safe statement – it is likely true over the course of centuries to come; it hasn’t been true of the Pound or the Dollar.

Daily Bell: The euro?
Andy Hoffman: ZERO…
Daily Bell: The yen?
Andy Hoffman: ZERO…
Daily Bell: The yuan?
Andy Hoffman: In its present form, it must collapse…

When?  In my lifetime?  In the lifetime of children yet to be born?

Daily Bell: Are central banks on the way out?
Andy Hoffman: Per above, YES! No central bank has ever survived…

Let’s take a look at the poster-child of central banks, one which manages a laughingstock of a currency:

The Central Bank of Argentina…Established by six Acts of Congress enacted on May 28, 1935, the bank replaced Argentina's Currency board, which had been in operation since 1899.

Either 80 years or 115 years, depending on when you want to start counting.  Still alive and kicking.

Finally, as if to add good measure, some faulty economic thinking:

Ukraine's problems were likely catalyzed by the inflation created by Western central bank money printing, which is coming back to haunt them in a potentially cataclysmic way.

Every central bank has tools to deal with the results of inflation in another currency; that they choose not to do so for politically expedient reasons (kicking their own can) is their own decision.

The Conclusion?

The Daily Bell After Thoughts: A great interview, as always.

What good does such talk do?  What useful information was learned in such an interview?

There have been many great interviews at DB.  This isn’t one of them.


  1. Thinking that you can say what will happen when, to all of the world's currencies, is as hubristic as Stalin or Mao.

    I have to guess that the DB organization as a whole is losing a bit of their zest for truth, in being more focused on making money. If so, it is a pity.

    1. This is one of the things that bothers me about such interviews - if the objective is to make money, what good is it? If the objective is to promote free-markets or Austrian economics, these statements do more harm than good.

    2. Longtime Bell reader here speaking out on behalf of DB. There are few alternative media organizations that have been as accurate or courageous as DB. Even fewer that have taken on the corrosive disinformation of the "usury" movement complete with its disinfo agents. As for fiat, well ... the dollar has lost perhaps 95-99 percent of its value since the founding of the Fed. And what fiat currency HAS survived over time? Gold and silver remain, as always. Sure Hoffman is talking up his book. But in doing so he speaks relevant truths that may seem tiresome to jaded sophisticates of alternative journalism but not to many more who need to be reminded of fundamental truths about monetary value. In this day and age, it is sophisticated to temporize and fashionable to parse. But is that what we have come to? Is that really the point?

    3. "And what fiat currency HAS survived over time?"

      Are you speaking millenia, or even a meaningful horizon for purposes of action? In the first case, none; in the second, many.

      "...he speaks relevant truths..."

      Relevant, perhaps for Methuselah.

      "...that may seem tiresome to jaded sophisticates of alternative journalism..."

      Infomercial financial advice and economic analysis.

      " that what we have come to?"

      Yes, that is what I am asking as well.

    4. Why don't you just get it over with and endorse Keynes? "In the long run we are all dead." Since when did restating freedom's truths become subject to a time horizon? One cannot denounce tyranny unless its death is imminent? Is that a new rule?

    5. Someday the sun is going to run out of energy, or so they say. Do you suggest I should order my life in accordance with this eventuality?

      Is Mr. Hoffman a history professor or does he work for an investment advisory? Double-check that, and then get back to me regarding the context in which one should read his remarks.

      Just get over it.

    6. Oh, come on. He's not credible unless he works for the US education/industrial complex? Because he works for a private firm (directly revealed) his views mean nothing? Expect better from BM. Also, there is only one DB but there are thousands of mainstream publications. Libertarians often shred each other in search of "perfect truth." Here, too?

    7. "Oh, come on. He's not credible unless he works for the US education/industrial complex?"

      Did I write such a thing?

      "Because he works for a private firm (directly revealed) his views mean nothing?"

      Did I write such a thing?

    8. Well ... We'll let your readers decide. Thanks for engaging.

  2. The dollar will collapse when Putin says "no more dollars for Russian oil". Other oil producers will follow suit, and there will then be a global stampede to dump dollars and all dollar-denominated paper derivatives. He might say this in the next 24 hours, or not for awhile yet. But the day will come. Invest in food, water, silver, and lead.

  3. Greetings!

    I always enjoy reading the posts and comments on this blog, as they are thought provoking. I'm not interested in Mr. Hoffman's view, but am intrigued by yours.

    First, as Doug Casey always says, I'd like to make sure we agree on definitions of terms used in the above discussions.

    Will this do for a definition of fiat money? Currency that a government has declared to be legal tender, but is not backed by a physical commodity.

    If you agree with this definition would you not have to amend your statement about the US dollar? The dollar still had ties to gold until Nixon removed them in 1971 with the failure of Bretton Woods. I believe the British pound was also involved with Bretton Woods.

    So, the planet has only been on this experiment with world wide fiat currencies for 40+ years. Do you agree or disagree?


    1. As backing by a physical commodity is not so easily tested or verifiable when not subject to market conditions, I am not sure I can agree to this definition.

      A more important consideration might be the monopoly aspect, in any case.

    2. That's fine. Please define what you mean by fiat currency so I can better understand you.


    3. from
      fiat-an arbitrary decree or pronouncement, especially by a person or group of persons having absolute authority to enforce it

      In other words, a fiat currency is simply the means of settling debts that is imposed by force (legality). The price of a fiat currency, then, could take on any number of values, some even approaching something resembling a "market" price. But a fiat currency is ipso facto a price fix no matter how accurately it is priced because it is set arbitrarily and imposed by force.

      How's that?

    4. Phil

      Is there some specific context that you are getting at?

      I pointed to the monopoly. I think this is sufficient for me.

      The definition and further explanation provided by Alaska appears workable.

    5. Good morning,

      I'm trying to understand your point of view as it pertains to when the US dollar became a fiat currency. Until reading your post I had always thought of Nixon's 1971 pronouncement as the beginning of the dollar's fiat era. In your post you speak in terms of a century, which would coincide with the creation of the most recent US central bank and World War I, when many governments went off the gold standard.


    6. This comment has been removed by the author.

    7. Central banks have been responsible to manage a gold-backed currency, as you point out. However, I keep concluding that the issue is the monopoly - possible only through government force.

      As to a gold-backed currency, this is only market-driven (not a monopoly) when any individual has the contractual and legal right to demand gold for his notes. In other words, even when a government dictates the "money" (via edict), as long as it is both gold-backed and open to exchange there is competition: physical gold competing with notes.

      The right to demand physical gold (or whatever commodity is backing the notes) would be key. When governments have a gold standard without this check by the general public, manipulation is possible and likely.

      Where to draw the precise line of "fiat." I guess it depends on whom one places his faith - the market or the state. Both FDR in 1933 and Nixon in 1971 demonstrated the value of the gold backing. It was meaningless.

    8. Phil
      The line between fiat and backed is a little blurry with the dollar.
      Whether or not the gold belonging to the treasury (which most likely is not where it is said to be, and no longer even in the country) could be said to back FRNs is debatable. Also, treasury notes have circulated alongside FRNs, and were convertible on demand (for instance, as silver certificates). So, for several decades, calling the dollar fiat, or backed, would have been inaccurate.