James Delinpole Friday Column: Sell everything and buy gold, well that’s what I thought would be a good idea…

This time last year, I’ll be honest with you, I thought the only option was to sell everything, buy gold, silver and ammo, take to the hills and try to hold out till it all blew over.

But I was wrong. As you might have noticed – (telltale signs: your house hasn’t been burned down; there are no marauding gangs trying to steal your secret stash of baked beans; the cashpoints still work; you haven’t yet been forced to eat your pets) – the “it” hasn’t yet happened. Instead it has been pretty much business as usual: another year of money-printing; of economic stagnation; and of near-total denial by our political class of the epic scale of the problem we face.

As an example of the latter, I give you gay marriage. Personally, I’m agin. This isn’t because I don’t have lots of gay friends whom I love very much. (I do: and, incidentally, they all share – to a man – my views on gay marriage) Rather, it’s that it represents yet another attempt by the State to stick its tentacles where it has no business. Homosexual couples already have exactly the same rights and protections under law as heterosexual ones. (And rightly so). But if churches, or other non-state institutions, don’t wish to “move with the times” that should be up to them. No more do I believe the Catholic church should be compelled to recognise gay marriage or an evangelical Christian B & B to allow gay couples – even married gay couples – to share a room than I believe that your favourite neighbourhood club with the hoist in the back room should be forced to admit heterosexuals.

That’s just me, though, wearing my libertarian purist hat. I’m quite sure there are some compelling arguments in the other direction, but that’s not really my point.

My point is that for David Cameron to be wasting parliamentary time on the immeasurably trivial gay marriage issue is a bit like Winston Churchill, on the eve of the Battle of Britain, deciding to push forward a vital new parliamentary bill banning the practice of docking tails on pedigree dogs.

It’s silly, it’s irresponsible, it’s dishonest. It smacks of the image-over-content approach to politics that was tested to destruction in the Blair era. Our country deserves better than this in what is most certainly its darkest hour since at least the early 1940s.

So what should the government be doing instead of worrying about gay marriage? Well, seriously addressing the deficit would be the first thing. And then, obviously, the debt. As we’ve just seen from his lacklustre Autumn statement, the Chancellor simply hasn’t the cojones to do this. Which means that our best hope, under the current political plan, is decades of Japanese-style stagnation. But which also increases the likelihood of the doomsday scenario I vaguely outlined at the beginning. Just because it hasn’t happened yet doesn’t mean it won’t.

Last week, I attended the dinner of an exclusive investment fund, run on Austrian lines, heavily weighted towards gold, and which for the last decade has massively outperformed almost every other fund, including Warren Buffett’s, by a country mile.

Why has it been so successful? Because its philosophy is much the same as Bogpaper’s: it believes that the best way of ensuring the most effective – and socially just – allocation of scarce resources is for governments to get out of the way and allow markets to operate as freely as is practicable. Around the world, however, what we’re seeing is the exact opposite of this: more regulation, more interference, more corporatist stitch-ups like Solyndra and the great wind farm boondoggle. The markets aren’t free so the price mechanism is being distorted and it becomes harder and harder for anyone to work out where true value lies. Which is why that particular fund is so heavily weighted towards gold investment. And why – one reason at least – it has performed so well this last decade.

The brilliant man who runs the fund was at pains to point out that he is not in gold by eager choice but rather as the default option, faute de mieux. In other words, what he’d much rather be doing is investing in well-run businesses and watching them create value, rather than holding a resource whose value has almost nothing to do with intrinsic worth and almost everything to do with the (deliberate and cynical) devaluation of the currencies in which it is priced and the ongoing uncertainties in our utterly debased and corrupted global market.

This cannot continue forever without a messy and ugly reckoning. For me, the only question now is “How messy and ugly?” That and, of course, “When?”

I’m reading The Big Short at the moment – Michael Lewis’s account of the sub prime Ponzi scheme which brought about the current global economic crisis.

What has struck me again and again is that we’re inhabiting exactly the same unreal world now as we did in that crazy – and supposedly lessons-learned-from period – when the credit agencies were granting triple A status to mortgage packages which should have been classed as junk. All that has happened is that, instead, of sub prime, the new Ponzi scheme is the market in government bonds.

If you’ve read The Big Short, you’ll recall that one of the heroes is a man who ran a fund which bet heavily against sub prime mortgages knowing – because it was so obvious and inevitable – that one day they would collapse. He made his clients a killing in the end but that’s not the interesting part. The interesting part is how much stick from he got from his clients before his (one-way) bet came good. They all wanted to be on the other side of the bet because that’s where everyone else was. Most people are like this. They want to belong. They don’t want to be with the outliers or the freaks, regardless of how ultimately right they may be.

As one of life’s outlier/freaks myself, I’ve just about grown used to the stigma which invariably attaches to those who go against the herd. Indeed, I’ve actually started to enjoy it because I find myself in such splendid company. On economics I’m with Douglas Carswell and Dan Hannan and all those wise loons at the Cobden Centre; on climate change,  I’m with a fabulous, all-star A team which embraces everyone from the brilliant economist Ross McKitrick to the brilliant theoretical physicist Richard Lindzen.

I don’t want to be right about the way the world economy’s heading, really I don’t. I’d much rather there was a super-dooper economic recovery just around the corner – one which made us all richer and happier and gave us wonderful new jobs which were fun to do and incredibly well-paid with all sorts of amazing health and pension benefits.

But I don’t see any evidence that we’re doing anything that might bring this miracle about. Do you?

  • dr

    “But I don’t see any evidence that we’re doing anything that might bring this miracle about. Do you?”
    I’m sorry James, I don’t think it matters. If some genius invents some super new technology and this creates a rapidly growing industry, and it starts transforming most other industries on earth, then in theory, economic growth could return, despite the levels of debt in our economy.
    However, what do you think that the government response would be? Would the government say, “Gosh that was close, we’d better clamp down on spending and ensure that our debts get paid down”, or would they say “Oh the debt fuelled economic model is working again, we can start taxing and spending and running a permanent deficit of about 3% of GDP”?
    My view is that the government would simply allow a credit boom to occur on the back of the technological breakthrough.
    The net result of this policy would be that debts and unfunded liabilities would rise until eventually the dampening effects of those debts counteracts the expansionary effect of the aforementioned technology. Consequently, we would end up in the same situation we are in now, heading for a disaster, only with a higher level of wealth.
    If our current political system can destroy any economy no matter how innovative, competitive or creative it is, then really, at heart, we have a political problem rather than an economic one.
    As an analogy, the issue of “climate change” is not a scientific issue. The science now clearly shows that any anthropogenic global warming is not catastrophic or serious. As you show in Watermelons, the issue is a political one, where a small anthropogenic increase in a constituent gas in the atmosphere has been harnessed for massive political gain. Similarly here, the economy is being managed in the interest of government, rather than in the interests of the citizens.

  • John Richardson

    ‘Consequently, we would end up in the same situation we are in now, heading for a disaster, only with a higher level of wealth.’

    Dr

    I enjoyed reading your analysis ‘dr’ and share your contempt for the political class. However, economically I think your above idea must be wrong. Reason being pensions. A Welfare State with an ageing population and mass immigration from the third world? Not even your hypothetical ‘super new technology [that] creates a rapidly growing industry’ can keep that ship afloat for long.

    Nope the ship is going down.

    Now, you say we have a political problem and no thinking person can disagree.

    The State’s Welfare is creating malignancy and the State’s craving for control is eroding decent society etc etc . All agreed.

    I would like to suggest my own analysis and it is something that thinking people certainly can disagree on.

    Christianity.

    Al our countries problems stem from the ongoing war against Christianity. Every one.

    None of our problems can be solved without Christianity. None of them. Even the advent of something like fraking won’t make any difference if we are ruled by atheists. Cameron is a blasphemer (homosexual ceremonies in Church).

    Everything that is good about this county originates from the Faith (‘cept the countryside’). Our world is the result of our spiritual health and not the other way around.

    This is what I mean; briefly two points.

    You are correct to point out the destructive nature of our political class but there is a problem. People vote for them. Again and again and again.

    There are zero decent honest reasons for supporting the 2 1/2 party system. Anyone voting for them deserves what they are going to get. Greed and stupidity masquerading as ‘tribal loyalty.’ Immoral,

    Secondly, what is the point of economic activity? Working, earning and saving for what? For our children perhaps, but then what? What is the point of prosperity? We always judge ourselves in relative terms and someone’s house will always be bigger.

    It seems the people ‘in trouble’ with mortgages were not actually buying homes to live in and to grow to love but instead were ‘buying’ houses to sell on at a profit. Borrowing money they could never afford to then sell to someone else who had borrowed even more. Immoral.

    Spiritual poverty creates real poverty for a nation.

    We have all the answers and every solution right before us. We always have had.

    Regards.

  • Bob catley

    Too much Christianity already.

  • Simon Roberts

    Putting your money into gold (note: gold – not paper gold) is the smart move for the following reasons:

    Despite Central Bank’s constant intervention in the gold price, it will always retain its intrinsic value. If the official price moves too far away from the real value, an unofficial price will emerge. The market will always win.

    Taking your wealth out of the system helps protect you from Government intervention – eg Irish-style raids on pensions. As the economic situation continues to decline, these will become more common. “Out of the system” includes safety deposit boxes – search for “Operation Rize”.

    Under EU rules, Gold is exempt from VAT. This tells you where the influential people in the EU are putting their wealth.

    Gold and Silver will always be tradable, regardless of the value of the official currency or Government attempts to stop such trades. Zimbabwe is a good example – and don’t think it will never happen here just because Robert Mugabe didn’t choose to call his money-printing measures “quantitative easing”.

    When people are using wheelbarrows to carry their money again – or when the lowest usable denomination notes are £1million, a gold or silver coin will still be worth the value of the gold or silver contained therein.

    Gold “confiscations” don’t work. You can’t confiscate something you don’t know about. When FDR tried to confiscate all gold form US citizens, hardly anyone handed their gold in (we know this because of the huge amount of gold that materialised from nowhere when gold ownership became legal again).

    Hyperinflation is more common than you think. Wikipedia will gives 40 examples where countries have succumbed and they aren’t all “banana republics”.

    You don’t lose anything. In fact, with interest rates on current and deposit accounts being lower than the real rate of inflation, you are losing money if you keep it in a Bank.

  • http://brobinsonblog.wordpress.com Brian the Rhetor

    Very good, James.
    I’ve given up Sunday papers in favour of having time to read articles like this.

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