The Golden Revolution – book review
Earlier this month I interviewed John Butler, author of The Golden Revolution: How to prepare for the coming gold standard.
When I spoke to John he said the only word which was missing from the front cover was ‘inevitable’. And, as he explains in his book, the return to gold truly is inevitable.
The book is broken into three parts:
Part I – Why the days of the fiat dollar are numbered
Part II – Running the golden gauntlet: Transition scenarios back to a gold standard
Part III – The Economic, Financial and Investment implications of the coming global gold standard
Why the days of the fiat dollar are numbered
In Part I, Butler provides a brief synopsis of why the world is undeniably headed back towards some form of a modern gold standard. Like many writers in this space we are taken through a miniature history from 1971 to the present day. However Butler does present his own take on the decades leading to the financial crisis and provides a crystal analysis of the 2008-2009 downturn.
I found his discussion of the fatally flawed value at risk (VAR) risk models and why they are still embraced by much of the financial industry to be a valid explanation of how and why failure is rewarded in the banking sector. It was also interesting to read Mr Butler’s response to Jim Rickards’ belief that greater regulation will better determine how Wall Street should be run, he disagrees with this citing past examples of failed regulation and the need for the banking industry to be ‘thrown to the wolves’ as opposed to tasking a ‘dysfunctional regulatory system’ being tasked with ‘such an important initiative’.
As an economics and business graduate who spent hours on the Nash equilibrium and game theory I, weirdly, enjoyed the application of the Nash equilibrium being applied to the set of monetary arrangements which we find ourselves with. I thought it was an innovative way of looking at a set of problems and something which would place students of Keynesianism and business (such as me) in the right mind-set in which to be open to understanding the flaws in the system.
Part I aims to bring you to the inevitable conclusion that the unstable equilibrium which is currently present in the financial and monetary systems has led us to gold.
Running the golden gauntlet: Transition scenarios back to a gold standard
Part II examines what the transition to gold may look like. Many proponents of a future gold standard believe that examples can be taken from history as to how the move to gold may one day occur. Mr Butler does not disappoint, using history as his guide he finds that whilst the move to a new gold standard may be orderly, perhaps if the US were bright enough to have the foresight to make the transition, however he believes this is unlikely and instead we are likely to see a ‘crisis driven, disorderly, even dangerous process, similar, indeed, to that which the fiat dollar emerged in the first place.’
A key point which Mr Butler makes is that for any kind of gold standard to be sustainable, it must be credible. He argues that technology now has the potential to make a modern gold standard even more credible than that seen in both the 1870 to 1913 and Bretton Woods eras.
Mr Butler looks at various options as to how we may find the world back on a gold standard; ranging from the US taking the initiative after Russia forces them into making such a decision to the BRICS taking the lead. As the author points out, gold is already gaining attention and use in the international markets and so it may not be one country that has to make the decision. Mr Butler also takes us through how a country, applied to the US, may prepare for a return such as learning from Mr Churchill’s mistakes and managing the money supply.
The Economic, Financial and Investment implications of the coming global gold standard
Part III is most certainly the most interesting and unique part of the book. It is the part which makes me suggest the book to people who are not sure how to prepare themselves during times such as these. In this section, the author explains how investors can maximise their investments in the face of the coming gold standard.
This section is not aimed at fund managers or financial advisors; I believe it is accessible for anyone who can make their way around the business and money sections at the weekend. Here, Mr Butler explains how a return to the gold standard will affect the inflation, the role of central banks, and therefore the interest rates.
The penultimate chapter, Chapter 15: Golden Winners and Paper Losers, I found the most perceptive. Here, the author looks at how different assets will perform in the transition period to gold. He looks at both financial shares, industrial shares and other equities such as mining and utilities.
As for how the book is concluded, I will let Mr Butler himself do the talking:
The book concludes with a few thoughts on how the future gold standard will impact society more generally. It is my strong opinion that a world that has returned to a gold standard will be a far, far more pleasant, productive, peaceful, stable and moral place than that which we for a time have allowed ourselves to be deluded into believing was, in certain respects, the best of all possible worlds. After all, they don’t call particularly prosperous historical episodes ‘Golden Ages’ for nothing.
Ultimately a return to the gold standard will realign our moral compass – ‘it returns the basic virtues of thrift, savings, and good old fashioned hard work to the centre of society thereby strengthening [the] mutual trust required for the advancement of economic and societal progress.’
Of all the books I have read in this space, this was the most informative for intelligent investors who are perhaps not walking around with apocalyptic fears, as some gold bugs seem to be. Unlike some books which describe, in often great detail, the complex economic systems which have created our doomed global financial system and how it will all come to an end but without any indication of how or what we can do, this book is a far more exploratory and preparatory approach which does more than predict a return to gold.
This timing of this book works in its favour. Unlike many other books which predict the return to the gold standard, this book has arrived at a time when the yellow metal is appearing more in the mainstream media and many major countries are expressing their concerns over the US dollar’s stability, some are even trading in gold now.
John Butler is realistic that even though we may well return to a gold based monetary system, life will still continue. Even if there is zero growth, or even negative growth, commodities such as oil and wheat will still be in demand by someone somewhere. Investment decisions will still need to be made.
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