Louis Boulanger presented on gold and fiat currencies. He argued that gold has historically served as money because of its desirable properties, unlike fiat currencies which are backed by government debt. Central banks have recently become net buyers of gold again, suggesting they see value in it. Boulanger advised accumulating physical gold as a hedge against continued currency debasement through financial repression policies. He outlined possible future scenarios and encouraged attendees to educate themselves on monetary issues.

1. Gold Is Beyond
‘Economics’…
Louis Boulanger, CFA
Founder & Director, LB Now Ltd
BMG Bullion Bars Authorized Dealer
Presentation in Sydney at The Gold Symposium 2012
“The reigning error of mankind is, that we are not content
with the conditions on which the goods of life are granted.”
Samuel Johnson

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Important Notice and Disclaimer
This presentation and any investment views expressed in this presentation handout and
verbally in the presentation itself are for general information purposes only. To the extent that
any such information or views constitute advice, they do not take into account any person’s
particular financial situation or goals and, accordingly, do not constitute personalised financial
advice under the Financial Advisers Act 2008, nor do they constitute advice of a legal, tax ,
accounting or other nature. We recommend that recipients seek advice specific to their
circumstances from their adviser before making any investment decision or taking any action.
The information in this presentation is given in good faith and has been prepared from published
information and other sources believed to be reliable, accurate and complete at the time of preparation but
its accuracy and completeness is not guaranteed. Information and any analysis, opinions or views
contained herein reflect a judgement at the date of provision of the presentation and are subject to change
without notice. The price, value and income derived from investments may fluctuate in that values can go
down as well as up and investors may get back less than originally invested. Past performance is not
indicative of future results, and no representation or warranty, express or implied, is made regarding
future performance. Where an investment is denominated in a foreign currency, changes in rates of
exchange may have an adverse effect on the value, price or income of the investment. Reference to
taxation or the impact of taxation does not constitute tax advice. The rules on and bases of taxation can
change. The value of any tax reliefs will depend on your circumstances. You should consult your tax
adviser in order to understand the impact of investment decisions on your tax position. To the maximum
extent permitted by law, no liability or responsibility is accepted for any loss or damage, direct or
consequential, arising from or in connection with this presentation or its contents. No person guarantees
the performance of any investment made as a result of advice from Louis Boulanger or Louis Boulanger
Now Limited. Personalised financial advice from Louis Boulanger or Louis Boulanger Now Limited can only
be provided after you have read the appropriate Financial Adviser Disclosure Statements.

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4. About money…
“In effect, there is nothing inherently
wrong with fiat money, provided we get
perfect authority and godlike intelligence
for kings.”
- Aristotle
(384 BC - 322 BC)

5. 5
All currencies are fiat money
 What’s ‘fiat’ money?
 money declared by a government to be
legal tender (i.e. bank notes or paper money)
 What’s ‘legal tender’?
 anoffered payment that, by law, cannot
be refused in settlement of a debt
 Examples of fiat money?
 FederalReserve Note (better known as the US dollar)
 Reserve Bank of Australia Note (Australian dollar)

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That’s not how money began...
 Carl Menger’s essay (1892) is the most
important reading source to fully grasp
and understand the true origins of money
 a social phenomenon of practice/habit
 money is... a social (not a state) institution
 a gradual realisation of the different degrees
of saleableness of goods and commodities
 money is the “unpremeditated resultant” and
“spontaneous outcome” of human actions

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The role of the state...
 Came much later...
 Precious metals became money before ‘coins’
 Not as a rule, but because of their saleableness
 No accident or state compulsion effected this
 State recognition and state regulation of what
people had already decided was money:
 caused the state to coin (administrative role)
 perfecting use of precious metals as money

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Compare that with today’s…
BLATANT FIAT ABUSE!

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Hiding behind aggregates!
 Lots of aggregate measures of its supply
 M0, M1, M2, MZM, M3, etc.
 But what of the basic unit (of measure) itself?
 Nothing to be found in absolute terms
 Abundance of data in relative terms:
• Currency exchange rates
• Price levels in terms of currencies

10. 10
Unscientific measurement
 In all scientific endeavours, the standard used
for units of measure is fixed; it does not ‘float’
 Think of weight, length, time: their units of
measure are fixed and precise, not ‘elastic’
 The ONLY exception is economics (assuming
it is a science) particularly monetary economics
 Fiat money floats! It is based on what could
only be described as a highly elastic measure

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Once upon a time…
Money WAS a science:
“Gentlemen, in order to measure,
you must define your unit.”
- Isaac Newton
(1643 - 1727)
Master of the Royal Mint (1699-1727)
He declared the above in 1717, when he
moved the Pound to the gold standard.

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Why gold was and still is money
 The only commodity accumulated for 1000s of years
 Entire aboveground stock exceeds 170,000 tonnes
 Gold’s relevant/total supply is its aboveground stock
 Gold mined each year only adds about 1-2% p.a.
 Gold has the highest stock-to-flow ratio
This is crucial to understand the role of gold…
Gold has the lowest diminishing marginal utility of all goods
Which makes it a reliable standard measure of value (=money)

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The true role of gold
 Gold is the ultimate extinguisher of debt
Alan Greenspan stated that very clearly many, many times.
Gold is an honest check on the amount of leverage that can
build in the financial system.
 Gold is the best substance known to man to
serve as a standard measure of value to keep
circulating money honest (e.g. USD=1/35thoz)
This key knowledge has been forgotten over two
generations since 1971 (Alf Field’s Moses Principle)

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Here’s the fundamental problem:
 Government debt is the basis for fiat money
 Government debt is still the key component of
banks’ capital (think LIBOR rigging scandal...)
 Government debt is still perceived as ‘risk free’
in the implementation of investment portfolios
 Government debt’s systemic role is the reason
why this crisis has no end in sight AND is being
‘engineered’ to last a lot longer than YOU can…

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US debt (i.e. US$) is the key!
 Since 1961 the US national debt has never gone down (50+yrs!)
 It took the US government 191 years – from 1791 until 1982 –
to run up its first US$1 trillion ($1,000,000,000,000) in debt
 When G. W. Bush was inaugurated the debt was US$5.7 trillion
 The debt stood at US$10.6 trillion when Obama took office
 Obama has already added more than US$5 trillion to that debt
(now stands above US$16.0 trillion (> Europe & UK combined)
 Debt ‘ceiling’ has been increased by more than US$2 trillion
since ‘crisis’ of August 2011 and now stands at US$16.4 trillion
 Not ‘if’ but ‘when’ will be the 94th increase of the so-called ‘ceiling’?

16. Picture taken in 2009… It’s more than $51,000 now… and growing!

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The delusionists’ challenge:
 Without the ability to redeem any currency on
demand in gold at defined weights, as a result,
today’s currencies are only as good as:
 the ability of the issuing state to pay its debts
AND/OR
 the belief that holders of financial assets have
that the value of currencies (in which all such
assets are denominated) will be maintained
So… confidence must be maintained at all costs!

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How they maintain confidence?
 By perpetuating ignorance!
 Are you familiar with cognitive dissonance?
 Study shows* the less people know about
important and complex issues, the more
they want to trust the system and avoid
becoming well-informed
* Source: Journal of Personality and Social Psychology

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Financial repression (again)
 What is it?
a process which involves governments using their
powers to force down the real cost of their debt
 was used to reduce debt/GDP ratios after WW II*
 a sheep shearing instruction manual (sheep=you)
 Negative real interest rates are a deceitful tool
 Other elements of the deceit are:
 inflation, involuntary funding and capital controls
*Source: NBER Working Paper 16893, by C. M. Reinhart and M. B. Sbrancia, March 2011

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Meanwhile…
Central banks are buying gold!
 After being net sellers for decades...
 Central banks bought 440 tonnes in 2011
 That was the highest amount since 1964!
 Net buying trend began in 2nd half of 2009
 2012 to June, official* purchases > 220 tonnes
 And that does not include China (not reporting)…
* Sources: World Gold Council, IMF (as reported)

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Be your own central bank…
 YOU TOO CAN BUY & HOARD GOLD
 If it’s good enough for the central banks…
 BUT make sure it’s real bullion that you own
 One does not need to invest to increase one’s
purchasing power after 40 years of fiat abuse
 Gold hoarders more than tripled theirs in 10yrs
 And Warren Buffet pretends not to get this…

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To invest or not to invest? TITQ
 Ben Bernanke now says zero rates are here to
stay until at least mid-2015 (almost 7 years!)
 The Fed, BOE, ECB, basically all central banks
are expected to continue to debase currencies
 This means real interest rates will likely remain
negative for quite some time to come…
 These are perfect conditions to defer investing
… instead save in gold until it’s value = its price!

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Bubble ‘illusion’ is nominal price
Source: http://www.sharelynx.com/gold/AUVolatility.php

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Price governance ‘evidence’?...
Source: http://www.sharelynx.com/gold/AUVolatility.php

25. The future…
“Trying to predict the future is like trying
to drive down a country road at night
with no lights while looking out the
back window.”
- Peter F. Drucker
(1909 - 2005)

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Do you believe in magic?
 A good magic trick consists of three stages :
 The Pledge
 The Turn, and...
 The Prestige
 We’ve seen the Pledge (fiat paper promises)
 The Turn (turning gold into fiat paper money)
 Will there be a Prestige? (turn paper into gold)

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Possible scenarios (next 2-3 years)
 Status quo (global repression)
 IMF’s SDR as new global currency
 China’s RMB redeemable in gold/silver
 Eurozone fiscal union & Euro gold backed
 US dollar becomes redeemable in gold again
 Gold and silver coins are legal tender again
 War, financial collapse, revolution, chaos…

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What can you do?
 Lift the veil of ignorance about ‘money’
 Be aware of any ‘cognitive dissonance’
 Accept our system may be collapsing
 Realise that this has happened before
 Know that real wealth is not destroyed
… it merely changes hands/owners…
So don’t worry…just buy & hoard gold bullion!

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Simply send me an email OR go to my web page:
www.lbnow.co.nz

30. Thank You.
Any Questions?
Louis Boulanger, CFA
Founder & Director, Louis Boulanger Now Limited
P O Box 25 676 St Heliers, Auckland 1740, New Zealand
tel: +64 9 528 3586; mob: +64 275 665 095;
louis@lbnow.co.nz; www.lbnow.co.nz