The Golden Revolution: How to Prepare for the Coming Global Gold Standard
A reserve currency can only function as such if there is a general consensus that it provides a stable store of value. Without this trust, money, no matter what form it takes, will be abandoned—either suddenly in a crisis, or gradually over time—in favor of something else. The Golden Revolution looks at how the world is rapidly moving toward some form of global metallic standard, in which money, at least in official, international transactions, is linked directly to gold, silver, or both.
The practical reality of the transition to the coming global gold (or bimetallic) standard is going to be substantially different from the global fiat monetary and financial regime of today. It is not just money that is going to change. The nature and business of banking will also be affected, as will finance in general.
- Incisive and thoughtful, The Golden Revolution is a treatise on the broad effects of the current and future monetary structure
- Looks at why the world is headed inexorably back towards a metallic money standard
- Explores what the transition period might look like, including some historical examples of both orderly and disorderly transitions
- Examines how the world of banking, finance, and investment, including asset valuation and portfolio management techniques, will work under a future gold standard and which industries, countries and markets are likely to benefit and which are likely to suffer
Full of advice on how investors can profit and protect themselves during this critical time of change, the book knows that those who are prepared will prosper, while those who won't stand to lose it all.
Introduction: Why a Gold Standard Lies in Our Near Future 1
Part I Why the Days of the Fiat Dollar Are Numbered 7
Chapter 1 The Window Closes 13
Chapter 2 Stagnation, Stagflation, and the Rise of "Darth" Volcker 23
Chapter 3 Of Bubbles and Bailouts 35
Chapter 4 Why Financial Genius Fails, or, a Forensic Study of the 2008–2009 Global Credit Crisis 41
Chapter 5 An Unstable Equilibrium 51
Chapter 6 The Inevitability of Regime Change 73
Part II Running the Golden Gauntlet: Transition Scenarios Back to a Gold Standard 79
Chapter 7 A Golden Bolt out of the Blue 85
Chapter 8 Golden Preparations 95
Chapter 9 Long-Forgotten Suggestions for How the United States Could Return to Gold 115
Chapter 10 The Golden BRICs 125
Chapter 11 When All Else Fails, Enter the Gold Vigilantes 133
Part III The Economic, Financial, and Investment Implications of the Coming Global Gold Standard 137
Chapter 12 The Role of Central Banking under a Gold Standard 143
Chapter 13 Valuation Fundamentals under a Gold Standard 155
Chapter 14 Estimating Risk Premia under a Gold Standard 167
Chapter 15 Golden Winners and Paper Losers 181
Chapter 16 Some Implications of the Gold Standard for Global Labor and Capital Markets 189
Conclusion: The Golden Society 193
Further Reading 199
About the Author 206
The protracted global economic crisis has awakened the long-dormant debate about whether the United States or other countries should reinstate some form of gold standard. While not surprising given that there is now general agreement that excessive money and credit growth played a key role in the near collapse of the global financial system in 2008, US government officials, including Federal Reserve Chairman Ben Bernanke, do not believe this would be in the best interests of the United states, or other countries for that matter.
Taking a bold, contrary view, veteran financial markets strategist and founder of the independent investment and advisory firm Amphora Capital, John Butler, demonstrates how both economic history and theory point to not only an inevitable but even imminent return to gold. Butler makes a compelling case in his new book The Golden Revolution: How to Prepare for the Coming Global Gold Standard (Wiley; April 2012; Hardcover & ebook; $39.95; 978-1-1181-3648-5) that there is simply no other way to restore a sufficient degree of credibility and trust in the dollar, or other major currencies for that matter.
As the dollar's role gradually declines, global monetary arrangements are likely to become increasingly multipolar, as there is no single currency that can realistically replace the dollar as the preeminent global monetary reserve. As students of economic history will note, it was precisely a multipolar world amid rapidly growing international trade that ushered in the classical gold standard in the 1870s. The world's 40-year experiment with purely unbacked fiat currencies is thus rapidly approaching its conclusion.
“A new global standard is coming. It is only a matter of time and how orderly or disorderly the transition is,” says Butler. “Those who are prepared will prosper or, at a minimum, protect their wealth during the potentially rough transition period and be ready for what comes next. Those who don't may lose entire fortunes built up with the hard work of several generations. The stakes are high and they are real.”
Butler provides not only a compelling vision of the future, but also a detailed road map for navigating what is likely to be the most challenging investment landscape in generations. To explain how the coming transition back to gold will play out and how to best prepare for it, Butler divides the book into three parts:
- Part I expands on why the world is headed inexorably back onto some sort of gold standard and why the fiat dollar standard was always potentially unstable.
- Part II explores what the transition period might look like, including some historical examples of both orderly and disorderly monetary regime changes as well as provocative, hypothetical ones.
- Part III explores how the world of banking, finance, and investment will change under a future gold standard and how, once back on a gold standard, what factors will determine interest rates, credit spreads, equity valuations, risk premia, and which industries, countries and markets the are likely to benefit and which are likely to suffer.
The Golden Revolution looks at how the world is rapidly moving toward some form of global metallic standard, in which money, at least in official, international transactions, is linked directly to gold. The practical reality of the transition to the coming global gold standard is going to result in a substantially different investment landscape from the global fiat monetary and financial regime of today. It is not just money that is going to change. The nature and business of banking will also be affected, as will finance in general. Investment strategies and asset valuation methodologies must adapt accordingly.
“There have been previous claims that conclude that the price of gold is going to go way, way up and that investors should buy gold. But there is so much more to gold standard investment strategy than that,” adds Butler. “Just because we go back on to a gold standard does not mean that financial markets disappear and with them the world of investing. My hope is that this book can be used as a general 'gold standard investment manual.'”