GoldMoney. Title Slide Box Document slug: date/pp # Title & Headline The Role of Gold in The 21 st...
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GoldMoney
Title Slide Box
Document slug: date/pp #
Title & HeadlineTitle & Headline
The Role of Gold in The 21st Century
James Turk27 January 2011
Cheviot Sound Money ConferenceLondon
GoldMoney
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
One of the best performing asset classes
Gold % Annual ChangeUSD AUD CAD CNY EUR INR JPY CHF GBP
2001 2.5% 11.3% 8.8% 2.5% 8.1% 5.8% 17.4% 5.0% 5.4%
2002 24.7% 13.5% 23.7% 24.8% 5.9% 24.0% 13.0% 3.9% 12.7%
2003 19.6% -10.5% -2.2% 19.5% -0.5% 13.5% 7.9% 7.0% 7.9%
2004 5.2% 1.4% -2.0% 5.2% -2.1% -0.0% 0.9% -3.0% -2.0%
2005 18.2% 25.6% 14.5% 15.2% 35.1% 22.8% 35.7% 36.2% 31.8%
2006 22.8% 14.4% 22.8% 18.8% 10.2% 20.5% 24.0% 13.9% 7.8%
2007 31.4% 18.1% 11.5% 22.9% 18.8% 17.4% 23.4% 22.1% 29.7%
2008 5.8% 33.0% 31.1% -1.0% 11.0% 30.5% -14.0% -0.3% 43.7%
2009 23.9% -3.6% 5.9% 24.0% 20.4% 18.4% 27.1% 20.3% 12.1%
2010 29.8% 14.0% 24.3% 25.3% 39.1% 25.0% 13.2% 17.0% 34.5%10-Year
Average 18.4% 11.7% 13.8% 15.7% 14.6% 17.8% 14.9% 12.2% 18.3%
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
Gold is money
Crude Oil Prices (Base of 100)January 1950 through December 2010
50 55 60 65 70 75 80 85 90 95 00 05 100
2000
4000
6000
8000
British pound
US dollar
euro
goldgram
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
Portfolio measurement
LIQUIDITY
INVESTMENTS
(wealth producing assets)
(wealth preserving assets)
- Safety -
- Risk / Reward -
100%
0
50%Units of
Wealth
Title Slide Box
Document slug: date/pp #
Title & HeadlineTitle & Headline
• Gold is special because it is different– accumulated (saved); not consumed
– large aboveground stock relative to annual production
– value derives from usefulness• food
• shelter
• communication (interaction in society)
• Gold is special because it is money
GoldMoneyGold, money & currency
Title Slide Box
Document slug: date/pp #
Title & HeadlineTitle & Headline
• Money is a mental tool that enables economic calculation– unchanged throughout history
• Currency is a medium of exchange– improves as a result of technological innovations
GoldMoneyGold, money & currency
Title Slide Box
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Title & HeadlineTitle & Headline
• Bank of England established, 1694– ‘invention’ of paper currency
– banknotes circulated current in place of gold/silver coins safely stored in vault
– currency changes from a tangible asset to a bank liability
– creation of payment risk a/k/a “Herstatt risk”
– first bank crisis in 1696
GoldMoneyGold, money & currency
Title Slide Box
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Title & HeadlineTitle & Headline
• Newton’s Gold Standard, 1700-1914– defined one British pound as an unchanging weight of gold
– pound banknote redeemable into gold on demand
– Bank of England responsible for ensuring redeemability
– voluntary rules ensure system’s automaticity
– gold is backbone of British empire
GoldMoneyGold, money & currency
Title Slide Box
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Title & HeadlineTitle & Headline
• Peel’s Bank Act, 1844– limits quantity of pound banknotes
– unintended consequence is the development of deposit currency
– payment risk escalates
– new British banking model eventually adopted worldwide
– seed for “too big too fail”• 2 functions within one bank
GoldMoneyGold, money & currency
Title Slide Box
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Title & HeadlineTitle & Headline
• Keynesian revolution begins– “The gold standard is already a barbarous relic.” J.M. Keynes,
1923
– governments chafe at the discipline imposed by the gold standard
– governments claim that currency managed by central banks can eliminate the boom/bust cycle
GoldMoneyGold, money & currency
Title Slide Box
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Title & HeadlineTitle & Headline
• Keynesian revolution succeeds– ‘Gold Standard’ finally disappears 1971
– US dollar and other currencies no longer redeemable into gold
– governments can now create currency without limit
GoldMoneyGold, money & currency
Title Slide Box
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Title & HeadlineTitle & Headline
• Keynesian revolution is ending– when currency can be created without limit, there are consequences
– these include inflation, global imbalances and sovereign wealth funds
– “Gold still represents the ultimate form of payment in the world.” Alan Greenspan, 1999
– gold remains the standard by which all things are measured – gold is money
GoldMoneyGold, money & currency
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
Gold is money
Crude Oil Prices (Base of 100)January 1950 through December 2010
50 55 60 65 70 75 80 85 90 95 00 05 100
2000
4000
6000
8000
British pound
US dollar
euro
goldgram
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
Dow Jones Industrials in GoldDecember 1913 through December 2010
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10
50
100
200
500
1000
1
2
5
10
20
3040
Log Scale
goldgrams ounces
DJIA expensive / gold cheap
DJIA cheap / gold expensive
Stocks or Cash
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
Boom & Bust
December 1913 through December 2010
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10
50
100
200
500
1000
1
2
5
10
20
3040
Log Scale
goldgrams ouncesStocks expensive / gold cheap
stocks cheap / gold expensive
DAX
Dow Jones FTSE
Title Slide Box
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• A safe place to put our money–Not banks because of the boom and
bust cycle caused by fractional reserve banking
• An efficient – low cost – currency for global commerce–No clearing, settlement & payment
risk
GoldMoneyMoney for the 21st century
Title Slide Box
Document slug: date/pp #
Title & HeadlineTitle & HeadlineGoldMoney
GoldMoney
•Open system
•Modern built
•Asset based
• Private issued
•Market based
National currency
•Cartel
• Legacy built
• Liability based
•Gov’t issued
• Politics based
Title Slide Box
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“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to
produce as many U.S. dollars as it wishes at no cost.”
Federal Reserve Chairman Ben Bernanke
GoldMoney
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
The path to hyperinflation
Correlation of Fed Monetizing to S&P 500 IndexJanuary 2, 2009 through January 21, 2011
2009 2010 2011
700
800
900
1,000
1,100
1,200
1,300
$0.5
$1.0
$1.5
$2.0
$2.5
Fed Announces "Quantitative Easing"
trillions
Fed Announces End of "QE"
S&P 500
Fed Ends "QE"
S&P 500 Index(left scale)
Fed Monetizationof Securities(right scale)
"QE2" Begins
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
The US dollar’s problem
Federal Tax Receipts Tumble As Outlays & Debt SoarJanuary 2000 - December 2010 (US dollars in billions)
00 01 02 03 04 05 06 07 08 09 10 11125
150
200
250
300
350
4,000
6,000
8,000
10,000
12,000
15,000
Federal Debt, quarterly - right scale
Outlays (12-mon. mov.avg.) - left scaleReceipts (12-mon. mov.avg.) - left scale
Log scales
Title Slide BoxTitle & HeadlineTitle & HeadlineGoldMoney
The British pound’s problem
UK Tax Receipts Tumble As Outlays & Debt SoarJanuary 2005 - November 2010 (British pounds in billions)
05 06 07 08 09 10 11
35
40
45
50
300
400
500
600
700
800
1,000
UK Debt, quarterly - right scale
Outlays (12-mon. mov.avg.) - left scaleReceipts (12-mon. mov.avg.) - left scale
Log scales
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“The main thing we miss today is a universal money, a standard of value, the link between the past and the future and the cement of
civilization linking remote parts of the human race to one another.”
Robert Mundell, Nobel Laureate, 1999
GoldMoney
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“Money in the 21st century will surely prove to be as different from the money of the current century as our money is from that of the previous century.”
Jerry Jordan, President, Federal Reserve Bank of Cleveland, 1996
GoldMoney
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www.goldmoney.com
GoldMoney