goldmoney. title slide box document slug: date/pp # title & headline the role of gold in the 21...

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%


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


Portfolio measurement

LIQUIDITY

INVESTMENTS

(wealth producing assets)

(wealth preserving assets)

- Safety -

- Risk / Reward -

100%

0

50%Units of

Wealth

Title Slide Box



• 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



• 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


Title Slide Box



• 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


Title Slide Box



• 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


Title Slide Box



• 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


Title Slide Box



• 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


Title Slide Box



• 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


Title Slide Box



• 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



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


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


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



• 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


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



“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


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


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


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

Title Slide Box



“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

Title Slide Box



“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

Title Slide Box



[email protected]

www.goldmoney.com

GoldMoney

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