Gold is the answer to financial crisis
Prudent investment portfolio managers should not invest 100% of the funds under their care, but look to include gold bullion into the mix as "insurance" against the current global financial upheaval and falling value of money.
Tuesday, October 6th 2009, 7:43AM 
9 Comments
by Sonia Speedy
This was the message from Louis Boulanger, founder of LB Now, to the CFA Society this week. He believed it was "imprudent" to ignore gold as a currency and said that after years of irresponsible money creation the global financial system is in serious trouble, trouble that "throwing more money at" can ultimately not fix.
Boulanger argued the idea that the gold standard is a "barbarous relic" is a myth that needs debunking and said the world is in serious need of monetary reform. In the meantime, gold has an important role to play in prudent wealth management. "Fiat" money - that declared by a Government to be legal tender - is in crisis and is "dying", with all fiat currencies being devalued because there is "too much of it" being created, he said.
Boulanger described the world as being in "unchartered territory" and disagreed with the idea that the financial crisis - which he described as a monetary crisis - was dissipating.
"I don't believe for a minute the worst is over, because of the nature of this crisis and because of how it's being papered over," he said.
In order to protect wealth in this environment, a strategy of not investing all assets was required, with Boulanger arguing that bullion is the only asset to have successfully protected wealth in past systemic crises. The amount of bullion purchased should correlate to the investor's faith in central bankers, he suggested.
Boulanger also stated that beliefs such as the idea that Government guarantees are as good as gold; that Governments cannot default on their debt; and that inflation is dead or no longer a worry, are all false. He also argued that quantative easing is a form of default in itself.
"It may not technically be default, but it's a foot in the door towards that," he said.
Boulanger is also an authorised dealer for BMG BullionBars.
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Comments from our readers
However, there are a couple of main points here.
(A) Gold is not an investment asset class which is distinct from the recognised '3.' SHARES/PROPERTY/FIXED INTEREST (incl cash).
To quote a recent comment,
"True believers (like a religious or political position) stick through thick and thin. When gold goes up, they are insufferable, when it goes down, they are unrepentant..!"
Rather than invest in gold itself, are the teachings we should have received not really saying that we should buy gold-producing companies, so that we can receive income (dividends) while we wait for any gains?
That is the most prudent theory with beloved property after all.
Don't buy an empty section, because there is no income (rent) while you wait for the gains...!
(B) INFLATION, and the suggested "hedge" that gold may provide.! Chris you alluded to "inflation", which suggests that you believe in what 'they' are saying exists?
It is not 'inflation', it is more accurately "devaluation" of our money.
Rob Muldoon openly 'devalued' our NZ money at the rate of 1% PER MONTH.
This is what 'they' refer to as 12% pa INFLATION.
Buying a house for $300,000 and selling it for $600,000 say 10 years later does NOT mean you can go and buy two houses in the street, so the 1st house did not "inflate" in value, it is accurate to state that your money was DEVALUED by 50%.
The importance of this fact is relevant to the way that investment portfolios should be constructed...and maintained along the way.
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