"Actually, I've been thinking of something else, and I've illustrated it with the series of charts below. You see, something very unusual and important is going on. What's happening is that gold has been rising against almost everything else. You name it, and gold is rising against it. Why is that? That's a complex question, but I want to give you my reasoning. Gold is the universal, time-honored standard of wealth. Gold is pure, tangible wealth, and since pure wealth cannot be bankrupted or destroyed, gold is totally "safe." Gold is so safe that it doesn't need to pay any interest to tempt people to hold it. Wise men and women don't hold gold for income any more than they hold a ten-carat D color diamond or a Picasso picture for income. They hold these items because they represent timeless wealth.
But then I ask myself this question -- "Why here in the year 2008 is almost everything declining in terms of gold?" And this is my answer -- the world is now dealing with deflationary forces, particularly due to low-priced global labor and the great outpouring of cheap manufactured goods, in other words, oversupply. The governments (politicians) of the world will not accept deflation -- in fact, they're scared to death of it. Let deflation take over and the politicians will be voted out or kicked out of office. When deflation and rotten business and unemployment enter the picture, the politicians, blame the central banks. The central banks are fully aware of the unspoken political threats, and they do what they do best. They counter the forces of deflation and contraction by printing paper. Currently, this inflationary printing of paper is systematically reducing the value of almost everything against the one immutable single standard of value -- GOLD.
Of course there are variables. Chinese stocks are not the same as a barrel of oil or a parcel of real estate in San Francisco. But, it doesn't matter what it is you're talking about -- it's all losing value against gold. That's the great unspoken story of today. Massive quantities of various currencies are washing across the face of the earth. The result is that almost all items and categories are losing value against the single immutable standard of wealth -- gold.
This presents us with a huge problem. The logical strategy for you and I would be to put all our assets into gold. But that would be impractical. We buy our food with Federal Reserve Notes known as dollars. We pay our rent and our taxes with dollars. We do almost all our transactions with dollars. Try paying your next restaurant dinner bill with a little clipping of gold. The guy at the cash register won't accept it, and worse yet -- he'll probably call the cops.
No, in practice, you need dollars. You need dollars to live. There's no getting around it. Furthermore, you've been taught not to put all your eggs in one basket. And that applies to gold. Sure, based on the charts below you should probably have all your money in gold, but that "feels too risky." You just don't feel comfortable with it. So if you're a subscriber to Russell's writings, you buy some gold -- as much as you feel comfortable with, and you tell yourself, "Well, I've got more gold than 99% of the rest of the poor fools in America, and maybe that's enough." Of course, it isn't, but that's what you tell yourself.
But getting back to the big picture. The entire world, it seems, is being subjected to inflation. But various areas of the world are gaining strength and others are losing strength. Classically and historically, gold gravitates toward strength. And we see that gold is moving toward Asia. While the US accumulates debt and unfunded liabilities, Asia and particularly China, accumulate gold. While Americans are spenders and consumers, Asians are accumulators and savers."