When I was a young adult, my parents gave me some recordings of the financial celebrity Dave Ramsey. He taught me a very valuable lesson: get out of debt. So that’s what I did early in life, and it was a good move that enabled me to hang on to more money. Thank you, Dave! I hadn’t checked on Dave’s material in a long time though, and last night someone messaged me, asking what I thought about Dave Ramsey’s post on fiat. Well I read it, and here’s what I think…financial celebrity Dave Ramsey and a whole lot of other people could go bankrupt in the not-so-distant future, if they follow their own advice. Below, I have broken up his post and explained where I think he is misguided on fiat. Read it, do your own research, and decide for yourself.
Dave Ramey’s 1st Point
It sounds to me like Dave thinks “fiat” was a political word, invented or twisted by the unjustified disconcerted to defame the dollar when President Nixon took it off the gold standard in 1971. While I don’t typically like to put people on the spot, I think this is dangerously misleading. The well-established characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability. This is stated on the Federal Reserve Bank of St. Louis website. The dollar is not in “limited supply” and therefore is not really money anymore, even though it is used as such. Meanwhile, numerous countries are rioting and protesting inflation. As of yesterday, inflation was a whopping 60% in Argentina. Americans could soon have a “come to Jesus” moment and the world could also.
Dave doesn’t mention that Nixon usurped and overthrew the official global monetary system that pegged the currencies of 44 countries to the dollar and the dollar to gold. This was known as the Bretton Woods Agreement of 1944. He also doesn’t mention that Nixon himself said that taking us off the gold standard was only temporary, and it’s now 51 years later. And he doesn’t talk about how creating money out of thin air and issuing more and more debt has caused the dollar to lose 99% of its original value. I wrote this last week, but it’s worth rereading:
We are not in control of global events, but one thing we do have control over is where we put our dollars. First, though, we have to know what is real money, because currency backed by ever-increasing debt doesn’t hold its value in the future. And anything that doesn’t hold its value is not money, and doesn’t allow you to save or trade fairly in a complex society. It causes excess waste, supply-demand miscalculations, corruption, complacency, income disparity, tyranny, slavery, and poverty. The more debt that backs a currency, the more dysfunctional its society. Let me give you an example of something liquid that holds its value. Do you see the real estate ad from 1955? Pretend for a moment that it’s 1955 again. Whoopee! You’ve got $7,450. Do you save them for the future or buy 212 one ounce gold coins for $35.15 each? Now hold that answer and fast forward to 2022. If you had saved the dollars under your mattress, you would probably still have $7,450. If you had bought gold coins in 1955, you could sell them now for $363,975. What does a new two bedroom, one bath home cost today in Westwood Lake, Miami? If it’s more than $363,975 minus all your expenses, then gold is undervalued once again. Long term, gold always does the accounting for fiat currency, one hundred percent. At first, slowly. Then all at once.
Of all people, I just kind-of expected Dave to understand debt. Governments aren’t special and can’t cash unlimited blank checks forever or sell their debt to the world without end. After World War 11, the U.S. was the world’s bank. Now, the world is bank to the U.S. and it may be time to foreclose. This is truth: borrower is slave to the lender. No exceptions other than force…zero.
Dave Ramsey’s 2nd Point
There’s a lot to unpack here. The term ‘fiat’ comes from Latin and is often translated as ‘it shall be’ or ‘let it be done.’ It makes me think of God in Genesis…let there be light and there was light. Fiat currencies only have value because the government says so. In other words, its value is forced illogically, by an empire’s army, evident by the 800+ U.S. military bases around the world. Other than “declaration,” fiat has no inherent value, and ultimately goes to zero. But Dave missed this point about the dollar not having any inherent value or utility. He also missed the fact that this “declaration” is made by playing God, through military force and power, not by the laws of nature. Empires are bullies, and they eventually collapse.
Regarding what happened during the Gulf War, U.S. power seized Iraq’s gold and never accounted for it. This is a well-documented fact. It’s not because gold didn’t work the way it was supposed to work, it’s because someone bigger and stronger broke into their house and stole it from them, so to speak. There’s a big difference! People all over the world have enabled this fiat empire to grow because they believe in the promise of greater wealth in the future if they surrender their wealth today. Stocks, bonds, crypto, etc. are all future promises which require you to surrender your wealth today. Even the dollar is a promise: full faith and credit is an unsecured method of backing debt based on trust and reputation. That trust and reputation is not carved in marble, and it’s fading fast. On the other hand, gold is not a promise; it’s a precious commodity hoarded by 100+ sovereign nations as a global reserve asset.
The government cannot allow the public to know or understand the true value of gold. They want you to think they are fighting for justice when they are really bullying for oil, and they want you to think gold is worthless and the dollar is strong. Here’s another example from one of my posts:
NATO invaded Libya, to take out “the bad guy” Gaddafi. They turned the country into a shadow of its former self, a failed state to fear. Many years later, WikiLeaks released Hillary Clinton’s e-mails, which painted a nefarious plot on the part of the West to help themselves to Libya’s oil. Then Gaddafi’s gold mysteriously disappeared. Makes you wonder what really happened, and again, what money really is. BRICS seems to know what money is, don’t they? Just last month, Cambridge University Press posed the question: Can BRICS De-dollarize the Global Financial System? The answer was yes, “BRICS’ coalitional de-dollarization initiatives have established critical infrastructure for a prospective alternative nondollar global financial system.”
Dave Ramsey’s 3rd Point
Yes, I do believe money is spiritual also. And the Bible is clear on this point, first stating that “Gold is good” and establishing it as “riches” in the book of Genesis. Money is spiritual in the sense that it’s how we treat each other, trade with one another, and make society work as a collective whole. Fiat, not real money, let’s you cheat and encourages fraud. Again, here’s a relevant excerpt from my last post…
In Genesis 24:22, we see the first monetary transaction. “When the camels had finished drinking, the man took a gold ring weighing a half-shekel, and two bracelets for her wrists weighing ten shekels in gold…” Notice money was weighed, not counted. There was no such thing as currency, which was originally created as an IOU for real wealth that was safekept by a trustworthy administrator. I won’t spend time explaining here, but if you want to understand the currency scam, take 10 minutes to watch John Law and the Mississippi Bubble, one of the most sensational schemes of all time. Whether you are religious, or not, you can appreciate the wisdom the Bible imparts: “You cannot serve God and mammon” (Matthew 6:24)….I recently learned that “gold” is the 214th most frequently used word in the Bible. It is found 404 times in 34 out of 39 books in the Old Testament, and 35 times in nine chapters of the New Testament. Gold clearly has a very significant meaning in Christianity that has largely been ignored, and the Bible is firmly against inflation of any kind.
Yes, to some extent gold is valuable because people declare it valuable, but people in the West don’t really recognize gold’s value or they wouldn’t be selling it now with all the geopolitical turmoil and market uncertainty in the world. It would be much higher today if people only remembered that gold has been money for 5000+ years. It was money back in the days of Genesis. It cannot be made by man and there is a limited supply of it. It’s on the balance sheets of 100+ sovereign nations. It has no counterparty risk, unlike all financial assets and the real estate market backed by debt in a gigantic credit bubble. Most importantly, it’s a proxy for energy, stored energy value, because it took energy to obtain. It wasn’t created out of thin air. The World Gold Council recently published a great little series called The Golden Thread. There are five episodes, all good:
The Golden Thread: Episode 1, The Next Frontier
The Golden Thread: Episode 2, Unlocking the Extraordinary
The Golden Thread: Episode 3, Making Meaning
The Golden Thread: Episode 4, Transforming Life
The Golden Thread: Episode 5, The Spark
Like Dave, I do not support crypto in any way, shape, or form. Maybe someday there will be government declared digital currency, but right now crypto is just another sponge to hold gobs of U.S. dollars under the false promise of greater wealth in the future. I explained this also in my last post, but Dave thinks differently than I about crypto. He said crypto is fiat because people declare it be fiat. I don’t believe it’s fiat, but a pyramid scheme, a scam. It doesn’t meet the characteristics of fiat or money. It’s a speculative bet under a get-rich-quick pyramid scheme. People have fallen prey to a false narrative that it will be money in the future, another promise. Not to mention, libertarian crypto doesn’t mesh with totalitarian government. The Fed loves and needs sponges to keep all these dollars from escaping into the real economy. If they escape, there will be a hyperinflation, and that’s truly the end of this fiat system. Perhaps that is where the World Economic Forum’s Great Reset comes into play?
Dave thinks that going off the “Fiat Standard of Gold” to the “Fiat Standard of Green Paper” is laughable as any kind of danger sign or end-times warning. But there is no fiat standard of gold because gold has no counterparty risk. Got it? No counterparty risk, but risk of theft and confiscation by tyrants. To think there’s a fiat standard of gold is laughable from my viewpoint (sorry, Dave!). There are paper/digital gold contracts not backed by physical metal, used for leverage and games in the market to artificially suppress the price of gold. I covered that in my last post too, in the final paragraph. Check out Don’t forget the golden rule: whoever has the gold makes the rules by
Dave Ramey’s 4th Point
Dave is basing his philosophy on recency bias: a memory bias that favors recent events over historic ones. All fiat currencies throughout history have gone to money heaven while gold has stood the test of time. I’d say gold has done really well according to that example I gave with the 1955 real estate ad, much better than net real estate (after taxes, insurance, maintenance, and repairs) has done since then. One thing to note about real estate is it’s a sponge for fiat…fiat needs debt-backed sponges when it’s printed in such grandiose quantities like today. I said it once, and I’ll say it again, these sponges exist because people believe in the promise of greater wealth in the future in exchange for their wealth today. It is public greed, people who fall for false promises that has enabled all central banks today to build their fiat empire together. Central banks rely on that greed. Another clip from my last post, on that 1955 gold coin example…
You might be wondering why I didn’t say the house was the best investment, especially if you were able to sell it today for over $363,975. There’s a reason, many reasons in fact. First, everyone is invested in real estate. We’ve been taught that real estate always goes up in the long term. But here’s why real estate went up before and won’t in the future. The discovery of oil fueled a population boom, but the decline of oil will bring the reverse. The baby boomers are the largest generation, and those with money enjoyed big beautiful houses. Younger generations will have to take care of the baby boomers soon, the cost of energy and everything else will keep going up, so smaller more efficient homes are needed. Taxes, insurance, and maintenance costs will most certainly rise dramatically. People will go on less vacations with oil depleting and getting more expensive, and they won’t have as much cash to spend on vacation rentals. Plus the sheer number of vacation rentals will drive the price down. Big expensive homes and buildings are not going to be liquid at all; they will be giant time-consuming liabilities, not assets. Lastly, if there’s any kind of fallout or collapse, everyone will want to sell their second homes, to downsize, and a glut of real estate will bring the prices way down.
Gail Tverberg, with a background in casualty actuary work and insurance forecasting, does a really nice analysis of the economy on her blog. Her latest post is The world’s self-organizing economy can be expected to act strangely, as energy supplies deplete. Ray Dalio has some good videos on credit cycles, long-term and short-term. The most recent video is Principles for Dealing with the Changing World Order. Never ever store your wealth in another’s liability at the end of a long-term credit cycle, unless you want to go broke. Whether this is the end of the cycle, you be the judge.
Dave Ramsey’s 5th Point
I get it, and I stay away from those types of investments too. But gold is not one of them. The world is having a tough time now dealing with an artificially engineered strong U.S. dollar. If sustained, or if the dollar goes higher over a longer period, it will result in many debt defaults and will completely destroy the global economy as we know it. Governments have a difficult choice to make between a strong currency or a strong market, but they can’t have both at this stage of the credit bubble. Somebody is going to have to pay the bill. Is it going to be you? The bill is inflation: $30T they need to make disappear. The only real way forward is to revalue the gold on their balance sheets, to absorb the debt. While I don’t agree with Luke Gromen on Bitcoin, I do think he explains well what we are up against, and he understands gold’s role in the monetary system. Let me know what you think.