DGC Alex Stanczyk In Beijing china “It is becoming more clear from day to day how important gold may truly be...” MARCH 2012 #52 DGC Digital Gold Currency Contents ALEX StaNCZYK, 5th Annual Conference PUBLISHER/EDITOR on Analysis of Mark Herpel International Financial Markets, Beijing China Page 5 http://www.dgcmagazine.com DGC Magazine is committed to expanding the legal use of digital gold currency around Paxum Ends the world. Slowly, legally Association with and ethically we are trying to Bitcoin Exchanges move digital gold currency By Tom Hymes from and sound money forward into everyday business. http://news.avn.com Page 17 Contact Us [email protected] Skype “digitalcurrency” Twitter @dgcmagazine Proponents of Gold Standard May Be ADVERTISING Violent Extremists; Report ALL Suspicious [email protected] Activity To the FBI by Mac Slavo from DGCmagazine is published monthly. SHTFplan.com Page 33 © 2008-2012 DGC Magazine All Rights Reserved DGC magazine ISSN 2159-791X Open Transaction Updates & Bitcoin Happy Thoughts from Fellow Traveler Page 44 DGC Magazine March 2012 Issue 52 § 3 http://www.goldmoney.com 4 § DGC Magazine March 2012 Issue 52 http://www.e-dinar.com A SPEECH DELIVERED AT THE 5TH ANNUAL CONFERENCE ON ANALYSIS OF INTERNATIONAL FINANCIAL MARKETS, BEIJING CHINA JAN. 7TH, 2012 BY ALEX STANCZYK, CHIEF MARKET STRATEGIST and FOUndER, THE PrEciOUS METALS FUnd – LFP PRIME SICAV SIF Text of this speach is featured at Three thousand years ago the Chi- rency is a matter of confidence. It is financial sense: nese were weaving silk, carving confidence in currency, or rather in http://www.financialsense.com/ jade, casting bronze, and producing the government if you are dealing in other alloys; creating sophisticated paper currency, that I would like to Ni hao, it is an honor for me to speak pottery, growing wheat, millet, and address with you today. to you today. rice, and recording events in a writ- ten language of thousands of char- As many of you are well aware, the Briefly about myself, I am not a for- acters. US Dollar is the reserve currency of mally trained economist, rather as a the world. To understand why the young man I spent some years in the The crossbow, used in Europe in dollar fills this role, we have to go US Military serving in both the US the Middle Ages, was invented in back in history a bit. Navy as well as the US Army, with China some fifteen centuries earlier. several years of combat experience A thousand years before the Eng- After World War II, the United in the deserts of the Middle East. lish Industrial Revolution, China States held over 20,000 tons of gold Because of this, I tend to view things had advanced coke ovens and steel in its reserves much of it having plainly, and I will speak plainly to blast furnaces. The Chinese also in- come from Europe to pay for war you today. vented paper, ink, the printing press, supplies and arms. The world was the clock, and suspension bridges. in desperate need of rebuilding, and I am going to talk to you today I could go on with other Chinese there was a general agreement that about gold’s potential role in the achievements. what was needed was a stable re- future economy, more precisely the serve currency. monetary system. I realize this is a Chinese science, which was passed topic that has been hotly debated for on to Europe in waves, has laid the This was the environment that gave decades by people who are proba- foundation for much of the innova- birth to the Bretton Woods Agree- bly much smarter than me. I am not tion of the modern world. The Chi- ment of 1944. Under this agree- going to try and make an argument nese were also ahead of the west in ment, the United States guaranteed that we should be on a gold standard the use of paper currency. Some of that the US Dollar, which would be nor a paper standard. I would like to the first recorded examples of paper used to settle international trade, simply point out that gold may mat- money date back to the Song Dy- would be redeemable for gold at the ter as we move forward, and for an nasty in China in the 7th century fixed price of $35 per ounce. entirely different reason than use as AD, almost a thousand years before daily money. the west figured this out. This was acceptable to the nations of the world, because at the time the I intend to share with you a series of Whether your view is for a gold stan- US held over 80% of above-ground observations and encourage you to dard or for paper, I think it is fair to officially-held gold reserves. In ef- form your own conclusions on this say that we all agree a key criterion fect, the dollar was as “Good as matter. to the acceptance of anything as cur- Gold.” It is important to note that DGC Magazine March 2012 Issue 52 § 5 6 § DGC Magazine March 2012 Issuehttp://www.bullionvault.com 52 gold was one of the primary fac- United States. This last part is what globally. When you view the abil- tors in the psychological foundation may be of concern, as it is clear ity to repay the debt of not only the behind the confidence of the dollar that by any reasonable standards, USA but also the Euro nations with playing this role, not just because of the US creditworthiness is in a hor- these factors in mind, the likelihood confidence in the US Government, rible position due to the current debt of sovereign default or a change of or the US Economy. structure and lack of GDP growth. the global monetary system seems This is before we consider possible much more likely. It was assumed that a currency additional bailouts and quantitative which is redeemable to physical easing moving forward. We have seen five consecutive gen- gold would act as a means of disci- erations of Federal Reserve Chair- pline to prevent governments from It has been pointed out that the US men with a specific policy of mak- irresponsible printing of paper cur- has been in a worse Debt-to-GDP ing it appear that gold’s role in the rency. situation before and was able to sim- global monetary system has come ply raise taxes in order to pay this to an end. I have with me a declas- The failure of the Bretton Woods debt. I would remind you that the sified letter written on June 3rd of system may not have been so much environment then versus now was 1975 by Federal Reserve Chairman that the USD was exchangeable for very different. The American baby Arthur F. Burns addressed to US gold, but rather that there was no boomer generation, often accred- President Gerald Ford. limit under Bretton Woods as to how ited as being the “greatest American much paper dollars the US could generation” in terms of productive- In this letter Mr. Burns quotes an create. This clearly offered no such ness, provided a substantial number IMF communiqué that states, “Free- monetary discipline or restraint. of workers to pay off the debt. dom for national monetary authori- ties to enter into gold transactions Over time, this had the important The amount of debt held by the baby should ensure that the role of gold effect of eroding confidence in the boomers was much smaller than in the international monetary sys- dollar and led to a slow bleeding of consumers today. Many of these tem would be gradually reduced.” the US Gold reserves as countries boomers today are retiring, or at- continually exchanged their devalu- tempting to retire, today with fewer I think these gentlemen may have ing US dollars for gold. This culmi- workers to replace them while at the gotten their wish since gold is no nated in 1971 when US President same time pay for social programs longer taught in American univer- Nixon “closed the gold window” that are many times the size they sities. Anyone who really knows and ended convertibility of dollars were at the end of the war. anything about gold is either very into gold. old or self taught. They have been Add to this a current environment of so successful in erasing gold from There are two important points to declining cheap oil production, the public consciousness that out of ev- take away from this. The primary pressures of inflation on food prices ery single exam one could take in reason that the US Dollar was ac- and other necessary goods required the United States for any form of ceptable to the world as the reserve for basic survival, a declining stan- financial license, you will not find currency is because: dard of living in the west, and you a single question about gold. It is have an environment where the my understanding that Chinese eco- 1) the US held more gold than newer generation that is inheriting nomics students often attend the any other nation and this mess may not be so willing to very same universities. sacrifice everything for a fiscally -ir 2) that gave the world confidence responsible government that no lon- The letter from Mr. Burns to Pres- and the US dollar credibility ger holds their unwavering loyalty. ident Ford goes on to say in clear terms that the US Federal Reserve Ever since 1971 the entire world These factors of demographics, views gold as a critical component has been functioning on a monetary energy trends, and inflation of ba- of controlling the global monetary system that is derived solely upon sic goods are not just affecting the system and that losing control of it, the “Full Faith and Credit” of the United States but also many nations and I quote, “…may well determine DGC Magazine March 2012 Issue 52 § 7 the shape of the world’s monetary to me that the gentleman chose to That said, if we look at gold as a arrangements…over the next gen- use gold as the tool to do it.