Aiken, South Carolina
Yesterday, the Dow registered a 74 point gain. Gold was up too.
No one asked us. But we gave our reply anyway. 'Are we in a new bull market in gold' was the question. Our answer: we don't know. But our reply suggested that it didn't make any difference. Gold has survived hundreds of paper currencies and hundreds of empires. Though the dollar may have gained ground last year, gold will survive it too.
Colleague Braden Copeland thinks gold stocks may have entered an explosive bull market too. He notes that not only are prices rising...more importantly, so is volume.
"There's no fever like gold fever," says old timer, Richard Russell. And when gold fever takes hold...the results can be spectacular.
Here at the diary, however, we are not speculators. We are observers. And what we notice is that gold is real money...ultimate money...the kind of money people turn to when the other kinds seem unreliable. It is also what great empires tend to accumulate. Like trophy wives, gold goes to winners.
In the 16th century, Spain collected the world's gold.
In the 17th century, Holland was where the gold coins rolled.
In the 18th century, France was the world's richest nation.
In the 19th century, Britain brought home the world's gold.
And in the 20th century, the USA was number one...with the largest gold hoard on the planet.
So, who are the biggest buyers of gold today? The Chinese. They are preparing to take their place on the world's largest stage.
Recently, we were asked to update our book, Empire of Debt, written with Addison Wiggin. Most observers, we pointed out, have concentrated their attention on the growing pile of debt, scheduled to reach 200% of GDP by 2020.
We preferred to focus on the empire itself. Debt has its lifecycle. So do empires. Both expand. Then, both...without exception...contract.
An empire funded by debt is an especially ungainly, grotesque thing. It lurches from one disaster to another ...going deeper and deeper into debt each time. The Vietnam War pushed Richard Nixon to abandon the gold standard. Now, wars Iraq and Afghanistan wars further weaken the empire's finances...with costs approaching $5 trillion and up.
But it is not the debt that kills it. Debt is just a razor...conveniently left on the side of the tub.
In the meantime, Mr. Market can do whatever he pleases. And it may please him to push the price of gold stocks considerably higher.
We will see...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.