You often hear historians site “hording of gold bullion” or “lack of circulating currency” as among the reasons for the fall of the Roman Empire. You also hear things like looting of the Roman treasury by Barbarians, lack of leadership, inflation, wealth concentration in the hands of a few, trade deficits, feudalism and a host of other issues. I don’t think the global economy is headed for a Roman Empire type collapse but it’s worth looking at in some respects. As a physical gold investor, the “hording of gold bullion and lack of circulating money” part intrigues me. Why would the hording of gold bullion cripple that economy while today, the accumulation of debt and printing of currency to fund things we can’t afford seems to be equally dangerous? How does this relate to the need for holding of physical gold today to protect against the very thing holding physical gold may have caused then? The difference,  is printable currency.

As an economic recession takes hold the central banks and government, in an effort to stimulate recovery, will step in and try and speed-up the volatility of money. They do this via some very familiar (yet, rarely understood by the people) terms like; “stimulus programs”, “Quantitative Easing”, “jobs bill” (more stimulus), “zero interest rate policy” and a host of bail outs and other money printing and spending exercises. As they do this debt rises and as a result of more debt accumulation, so does the price of gold (see: Gold is Mathematics). Unfortunately Rome couldn’t try stimulus, easing programs, spending bills and massive printing and loaning to keep money flowing like we can now. When people don’t spend and governments don’t spend the whole economy slows, unemployment rises, manufacturing stagnates and a host of issues creep up. It’s called deleveraging and, unfortunately, deleveraging is painful and takes time. Remember; as an economy slows down, the profits of central bankers and governments slow down and they can’t have that so they will print, stimulate, ease, spend and spend some more to get their profits back up. So how does holding gold hinder the above efforts of the bankers and government? And why does that shed light on why they (Central Banks around the world) hold it and why, more than ever, you need to hold some as well?

When you hold gold, real gold, your money is in real savings that is out of the system. Meaning… you are not spending it and you are not sitting it with a banker who can lend out 90% of it (fractional banking) to someone else to spend. Bankers hate that. If your money is not in a bank or the market, it is very difficult for them to steal it. This is exactly why gold will stay high in dollar terms and go much higher. The world’s central banks have been net buyers of gold for four years now and they have a vested interest in making it less attainable to the common citizen because it is counterproductive to their goals. The financial headache that gold gives central bankers is probably why they scammed every American citizen out of their gold in 1933 with an “executive order”. But this is not 1933, the citizen has no gold, there is no reason to steal all the gold from the people to re-liquefy an insolvent banking system and increase the volatility of spending. Instead, it is in their interest to run the price up because $5,000 gold will re-liquefy a currently insolvent system and keep the common man from owning any.

I think we are on the precipice of secular changes in the economy not cyclical ones in many ways. While bankers have for centuries maintained a strategy of keeping the price of gold down for the same reasons hording gold may have contributed to the fall of the Roman Empire and be counterproductive to their efforts, they now have a vested interest in a Gold price explosion. In 1981, when gold peaked at $870, it made up 5% of the average investment portfolio. Now, even at $1800 an ounce, exposure to gold makes up less than 1.5% of the wealth in the US. The wealth is still concentrated in paper. As gold rises in price from here it becomes less attainable to the middle class and the masses. The price of gold, for many reasons but mostly the central bankers’ need to keep nations indebted and US debt accumulation, will go much higher. Unfortunately that will benefit only a few and the central bankers, who hold all the gold. The central bankers around the world hold gold to hedge the green paper reserves they hold. If you hold green paper, earn green paper, spend green paper and use green paper as your “reserves”… you might be smart to be your own central bank.

Read more from Damon Geller:  Ask the Expert