Mr. Dines: A Gold Bug In The Fed?

Written by James Dines
Posted July 27, 2019

Publisher's Note: President Trump recently nominated a prominent gold bug, Judy Shelton, to the Fed and the politicians and partisans on both sides are abuzz.

Read on for an excerpt from The Dines Letter for a realistic look at how investors should consider the Fed, currencies, and gold.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

He is rich who owes nothing, and is satisfied.


This is a financial letter, and we specifically reject politics to instead focus on financial markets. Politics can affect currencies. All people use a currency, regardless of their political leanings, so any issue with the dollar could affect everyone who uses it.

Inflation is an invisible tax on anybody in the world owning a currency, and works like a low-level embezzlement by reducing government debt in real terms, also stealing from workers who can buy less with each dollar annually. Our quarrel is with government economists who keep overprinting paper money, deliberately attempting to push prices higher, demanding higher inflation like robotic morons. Government economics have also led to an unpayably high level of debt.

We have repeated our predictions that printing more paper money in this economy would not result in higher “inflation,” would not cause higher prices, and that full employment would not create inflation. The Fed is now stumped by the resulting absence of inflation despite the current low unemployment, as our predictions come true. Because higher wages don’t cause inflation! Government overprinting of paper money causes it, until the cycle ends!

The current media obsession with the level of the Fed’s controlling interest rates is the equivalent of barking up the wrong tree. The culprit is not politics, but government economists, whom we dare to call out for not even comprehending what “inflation” is! That’s right, it’s simple semantics that many assume “inflation” is the same as higher prices — a falsehood. To the contrary, when too much money is printed, more paper chasing the same goods and services normally results in pushing prices higher by the law of supply and demand, but not when there is no deflation. Economists confuse “inflation” of paper money with “higher prices.” Overprinting that doesn’t result in rising prices means they are not synonyms. Above all, we seek the deracination of that fallacy.

For decades TDL’s position on the Fed has been that it should be abolished, and interest rates be allowed to float freely in the market, based on the law of supply and demand. That hasn’t happened yet, and it will.

The link between currency and gold is inextricable. This has been TDL’s unchanged policy through all the different political administrations for many years, and we indignantly reject any attempt to politicize it.

We were thus startled when President Trump, who we had never even heard use the word “gold” before, nominated a prominent gold bug to the Fed: Judy Shelton! We are still pondering what to make of it, aside from our rejecting either political party opposing the issue because, as noted, all parties use a currency. A healthy currency must be coldly aloof from political selfishness.

The true issue is that paper must be linked to something of value — anything — or else any nation could print its own, trade it for dollars or pounds or any other currency, and walk away richer! In fact, it recently happened, as noted in the last TDL, when blocks of freshly-printed Russian rubles were sent to a Danish bank, converted to American dollars in the open market, and the proceeds sent back to Russia — perhaps to buy real estate in America, England, or anywhere else worldwide. The world’s current currency system is clearly corrupt, and it might already be too late to cure it. Trump recently sought to foil what he called “currency manipulators” by ascertaining the realistic value of each currency — an impossibility because now every currency fluctuates rudderlessly based on the unknown amount printed by each nation.

We were impressed by an editorial headline addressing our primary topic, currencies, having appeared in London’s Financial Times: “Fears Rise of China Banks Collapse.” Our prediction is finally breaking out into the open. See the new confirmations of our theory that currencies are the source of trouble. Look at the substitutes for paper money being announced: Bitcoin, all the other cryptos, even Facebook is considering launching one! People with fiat paper money are hedging out of it, into available havens — cryptos, utility shares, U.S. bonds, especially gold-mining stocks. And silver. The flight from unbacked currencies has begun, and the unwary might be left with less useful money.

What to do? We wrote our Goldbug! book precisely wanting to serve you at such a moment — so we recommend reading the full hardcover version. Then at least TDLrs would know what to do.

James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline, and The New York Times, among others.

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