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Gold Is Money – Everything Else Is Credit – J.P. Morgan – Part II

Money and Gold

Money – sound and unsound - Click to enlarge

Interview with Rafi Farber: Part II of II

Rafi Farber, pen name Austrolib, is the publisher of The End Game Investor, a daily market commentary written from an Austrian economics perspective focusing on precious metals, the Comex, and monetary analysis. His work is followed by leaders in the precious metals industry including Eric Sprott. He also writes a weekly column on the gaming industry at CalvinAyre. Contact him at [email protected]

Claudio Grass (CG): Throughout this ordeal, politicians in all major economies seem to be competing on who will spend the most and who will provide the greatest fiscal stimulus. Yet nobody’s talking about how they’ll pay for it. The core idea behind Modern Monetary Theory, namely that “deficits don’t matter”, seems to have entered the mainstream for good. Do you think taxpayers and voters should be concerned? 

Rafi Farber (RF): The MMTers are not the first ones to believe that money grows on trees. Most 5 year olds believe it, too. The combined arrogance and stupidity of the elite, the so-called “intellectual bodyguard of the House of Hohenzollern” is bottomless. It’s too late for taxpayers to protect themselves. Direct taxes are irrelevant now. They’re spending so much they couldn’t possibly raise taxes fast enough to pay for even a tiny fraction of it.

By the same token it’s too late for voters to do anything about this. It’s completely irrelevant who is in charge. I’ll tell you who is going to pay for this. All holders of paper money all over the world are going to pay for this, simultaneously, and soon. The dollar is going to be destroyed, and with it all unbacked paper money all around the world, and then we will be free. Literally, free to live. Just make sure you have enough real money and protection to enjoy it.

The only possible escape from this is to get out of this collapsing black hole now. Get out of dollars, out of euros, out of yen, out shekels, out of any government currency unit, and get some real money now before this thing completely implodes.

CG: Israel was among the first nations to enforce a second lockdown this autumn, and a very strict one at that. There’s been fierce opposition and protests against the policy and widespread concern over its economic impact. How do you evaluate the economic damage so far and what are your expectations going forward?

RF: It’s hard to assess the damage when the government locks you inside your house so you can’t see anybody. Lockdowns are a fantastic way to destroy cohesiveness and just numb you. They hide all the pain from your eyes. You simply don’t see anybody. The mask mandates double that effect by hiding the searing pain on people’s faces when you do see some sad soul walking in the street.

What I can tell you for sure is that Judaism as I have known it is under a relentless assault, and it’s hurting my soul. Jews cannot pray together anymore. On Sukkot, the Feast of Huts, we were forbidden from visiting one another, from having guests. The Sodomites were infamous for being a society of rapists, but what is generally overlooked is that they were the only society in the Bible that actually had laws against hosting guests. That’s why the Sodomites insisted Lot kick out his guests in the first place. Raping them in the street was just a way to encourage them never to come back. They were xenophobes. Israel is now Sodom.

But I will survive. I learn Torah every morning as the very first thing I do, for the sake of liberty. I’m working on a systematic libertarian commentary on the Torah, verse by verse. I’m calling it “Herut Al HaLuchot” or “Liberty on the Tablets,” gathering my sources.  It keeps my head together. I pray the morning service together with my kids at home and learn with them before I start work. I’ve never learned and prayed to God with more fervor and desire, never. I’m fighting back in my own way.

I’ve had friends I can no longer talk to because they are just so afraid. Some are completely losing their sanity, their marriages, their families. People are collapsing in despair and debt. Again, it’s the human mind, not the charts. My kids haven’t been able to hang out with their friends for months, but thank God I have a strong family and we will make it through.

My expectations going forward are simply that there will be no significant let-up in this until the entire monetary system collapses under its own weight. The faster the better. Just keep printing money and let’s get to the end of this already! Governments have simply gone too far to admit their own mistakes at this point. There is no turning back now. I just hope the Jewish people can lead the way somehow in rebuilding society after this is over, just like the Jews Mises and Rothbard led the Austrian School to what it is today, the last best hope for economic sanity and liberty. That’s what Jews are supposed to do, lead the fight for liberty. That is my hope, and I am trying to play my own role in this however I can.

CG: While the global economy is facing unprecedented challenges, it’s “business as usual” over in US stock markets. They rebounded in no time and even set new record highs, in a trend that seems entirely divorced from reality. What is your explanation for it and do you think this is sustainable or should we expect another dive? 

RF: As long as central banks continue to print money, the nominal price of stocks and bonds will keep rising. Just look at the stock markets of hyperinflationary economies and you’ll see what happens. Look at the Caracas Stock Exchange Index in Venezuela, up 540% since March. So what? Who cares? Not the Venezuelans, that’s for sure.

There will be periodic spikes and collapses in stocks that I don’t try to time so I just ignore them. All I know for sure is that as it happens, gold and silver will continue to climb in real purchasing power, and furiously. My trading and investment philosophy, what I always emphasize to my subscribers, is first and foremost to maintain emotional balance. It’s not primarily about making the right calls at the right time (though that certainly helps), but mainly balancing your positioning so that your emotions are always under control, so you can handle any drawdown without panicking, trade rationally, and always maintain calm. Hold enough cash to buy the dips, and have enough real money at all times for when there are no more dips, because one day soon there won’t be.

CG: In these surreal times in the markets and in the wider economy, it is hard to build a realistic and effective strategy as a conservative, responsible investor with a long-term view. What role do you think precious metals can play in such a portfolio and how do you evaluate gold’s long-term prospects? 

RF: Precious metals are not an investment. They are money. What most people still do not understand, even gold bugs, is that even today, right now, this second, gold is literally money. When you buy a carton of milk at the supermarket, you are not buying it with dollars or euros or yen or whatever. You are buying it with a gold intermediary called a “dollar”. Dollars only have value right now precisely because they can still be exchanged for some (ever smaller) amount of gold. The minute they can no longer buy any real money at all, the dollar is effectively dead.  In all hyperinflationary economies, the price of gold always approaches infinity. There is no exception to this rule, and I guarantee you the dollar will not be the first.

The dollar price of gold is going to infinity. That does not mean that the value of gold will be infinite in real terms. That’s impossible. It simply means that the value of the dollar will be zero, and anything divided by zero is infinity. All real purchasing power will then be transferred to owners of real money in a frightening global transfer of wealth that will scare the crap out of even me, because I won’t know what to do with it. Really. In a way I’m looking forward to it, but in a way I’m really not. I do not want to get rich this way, but given the alternatives, there’s nothing else I can do.

Back say in 1910 nobody “invested” in gold. You can invest in a gold mine, but not in gold because gold is money. You use gold for investment, not the other way around. Now is not the time to invest in anything except maybe gold and silver mining stocks, which will effectively be the world’s central banks after the dollar collapses. There will be no “reset”. No successful one anyway. Yeah, they’ll try, but new fiat cannot replace broken fiat. Mises’s Regression Theorem precludes this. Now is the time to protect yourself from monetary calamity by owning real money that cannot be inflated. If you have any sense and you are a productive person who values liberty, we are going to need you for the rebuilding of civilization. So protect yourself now. You are a valuable commodity.

CG: With the US election result still hanging in the balance, do you expect the winner to make a difference in the nation’s economic outlook?

RF: No. I think the US election outcome is completely irrelevant. Could Biden quicken the pace to the end a little? Maybe. Maybe not. I really don’t know, and I don’t think it matters. Maybe I’m wrong. Politics is not my area of interest. From what I can see, the Titanic is already sinking and we’re busy counting votes about what music should be played as it goes down. I am busy doing more important things, like securing a lifeboat rather than worrying about the damn music.

CG: During this crisis, we’ve witnessed an abrupt shift towards further centralization: more government control over the economy and over people’s lives and more “executive” decisions on new rules that get enforced without discussion and debate, let alone the consent of the governed. As a result, there has been widespread and vocal opposition worldwide, defending individual liberties and promoting self-determination and personal responsibility. After the dust settles, which worldview do you think will prevail? 

RF: In the 1970’s Murray Rothbard wrote a libertarian angle on the history of the United States called Conceived in Liberty. In the introduction, he frames the progression of human history as a constant struggle between power and liberty. It is so true. Power can win battles from time to time, but it can never win completely. Power destroys everything it touches, and complete victory for power would mean the end of human history entirely. That is impossible. As I quoted Rabbi Nahman earlier, “There is no despair in this world at all.”

Let me close with this. The story of the exodus from Egypt introduced the very idea of liberty as a value in and of itself into humanity. Ethical monotheism, the idea that all humankind was created by One Source, and that therefore involuntary slavery is illegitimate and evil. The Jewish People brought the story of the exodus to the world, upon which all of Western civilization in its entirety is based.

I admit the Jews are doing a terrible job of spreading the message of liberty right now. We are not always on the mark. The way the Israeli government behaves makes me ashamed to be a Jew, to live in this sick prison. But we are a stiff-necked people and we have survived much worse than this. Liberty will prevail. I am 100% certain of that. We didn’t come back to Israel to be this pathetic. We have a job to do, and I’m staying with my people no matter how much they exasperate me. Family can drive you mad. But they will turn around and figure this thing out at some point. I only hope I can prod them in the right direction.

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Claudio Grass
Claudio Grass is a passionate advocate of free-market thinking and libertarian philosophy. Following the teachings of the Austrian School of Economics he is convinced that sound money and human freedom are inextricably linked to each other. He is one of the founders of He is also founder of GlobalGold Switzerland ................. Keeping assets outside of the country you live is key. Switzerland remains the best jurisdiction for private property rights. Why? Because of its federalist structure in combination with direct democracy. It assures that the power of politicians is limited and that the people and not the politicians are the sovereign.
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