What Glitters Is...Sweet??!??

I met a chap while waiting in the queue to ascend the Grand Montets, after a particularly heavy snowfall. Unlike the ultra-gregarious Swedes, the loud but polite Brits, or the serious and contemplative back-country types with the Phat boards, shovel and extensible avalanche pole, he had his nose buried in Soros' latest book, as good as a conversation starter for an obsessive financial type as there is.

Starting with the [now seemingly forgotten] crisis, we talked of many things, before it turned to "Gold", which he volunteered, he thought was dumb. Not that he thought the vaulting price was stupid. He offered no opinion of that. But, he said, the war years were tough. Really tough. (He was not of Serbian descent, as it would happen). He'd seen his friends, he explained, do the smash-n-grab (not literally) thing following the disintegration of what was Yugoslavia, rolling up ill-gotten gains into (amongst other material objects) hoards of gold. Their hedge. Their so-called mad money, for which he said chided them at the time, though to little effect. But, he went on, when things got really dire, there was no market for it. There was no way under the circumstances to reasonably convert the hoards to what one really needed. As a result, the going rate was all over the map, but half-ounce or ounces were commonly traded for sugar and flour in ratios that would make the wealth-hedging gold-bug weep. I listened intently, though it was just an anecdote, but an interesting one nonetheless.

And so it is with some wonder that I notice that a great number of admirers of the most precious metal also seemingly (if I might take liberty with a generalization) are predisposed to believe that coincidental to the impending fiat money collapse will be a breakdown in the Rule of Law. Admittedly, gold may serve (or already have served) well as a tonic against large monetary dilution, incessant quantitative easing, continued unsterilized central bank consumption of newly-issued Treasury debt or merely fears of the aforementioned. But but do they think will happen when they really need it, like, trading those coins pure-gold coins (bling broach, or watch), for something tangible. If history is a guide, they will get sooooooo totally hosed. There is a non-sequitir in their belief structure that somehow a few guns, bit-a-ammo, stash-o-gold, a Kazcynski-cabin maybe some C-4 and a coupla' detonators, will keep them more-than-buoyant during ummm errr the re-ordering.

Viewed from this point, gold is a trade, for ruminating upon my Bosnian acquaintance's anecdote, there is a point - call it the "Oh Fuck moment" beyond which Gold is quite sub-optimal, and sugar, petrol, some vegetable seeds, a goat or two, an alembic, all make seeming better sense. Or, perhaps in the extreme, the best hedge in the event (if you believe in the event) of a breakdown in the rule of law, is to BE the baddest thug, and/or join/align yourself with the meanest thugs around, a paradoxical feedback loop that leads one down a disturbing rathole indeed.

But what is Jim Rogers thinking will happen when and if law and order breaks down? Does he expect to cross the border (on his motorcycle?) to the (recently nationalized) Swiss depository holding his metal, and expect it just to be handed over to him? "How would you like it, Monsieur - in the big shiny bars or the shiny petite pieces??" Will he put it in his sidecar? How will he get it home - to Singapore? He would presumably need a small and loyal army, which if well-organized might, themselves, think twice about prevailing errr ummm distribution of wealth. I say this somewhat tongue-in-cheek, but I am sure readers can conjure others.

The fear trade is obvious, but it's a fear trade. I have no answers. But I can spot a financial non-sequitir from a distance, and it deserves some exposition and further mental kneading.