[Chapter 830: The Futility of Gold]
Whenever something significant was about to happen, the media in America became unbearable. It wasn't just one outlet or another--everyone, including White Media, seemed clueless.
Soros felt conflicted. He was one of the insiders with knowledge of the recent media buzz. However, the changes he hoped for were nowhere to be seen.
Every time he listened to William White dodge a question, Soros felt a pang of frustration. When someone asked if he was optimistic about the Asian economy, White would talk about how great Asian food was. When they inquired about worries over low oil prices, he'd say environmental concerns were more important. It was as if business meant nothing to him at all.
At this point, even with evasive answers, reporters wouldn't press him. No one wanted to anger a media mogul, especially one who was not only young but also rather sensitive.
"Gold? No, no, gold is worthless; it's just a visually appealing metal. You refine it, spend money and labor to store it, yet it has no monetary value."
"Ha! Ha! This old guy really thinks it has no value. If you gave me three to five hundred tons, I wouldn't even worry about storage fees."
Seeing Warren Buffett talk confidently on television, William White couldn't hold back his laughter.
"Dad, what does that mean, 'old guy'?"
"Ah, Athena, that's not exactly a compliment. Alright, Dad's wrong for using profanity at the dinner table. How about this, I'll punish myself with a week without ice cream."
Athena rolled her eyes in disbelief. She knew he never ate ice cream anyway, so it didn't matter.
This was the way American manners worked--no matter how wild one got outside, they had to be exceptionally mild at home. The word starting with an F was absolutely forbidden in the household.
"Dad, why does he say gold has no value? Does that mean my bracelet is worthless too?"
"Ha! It's because some people need a lot of gold. If they say gold is valuable, they won't be able to buy it. So, Athena, what others say isn't important; you need to understand the essence of the matter. Or, if gold prices drop, who benefits?"
Seeing William White discussing these things with his daughter, Suzuki also rolled her eyes. Not only couldn't Athena understand, but neither could she. Of course, William White didn't expect her to grasp it. That was the subtle influence of time and experience; eventually, one would figure these things out.
As for Buffett's claims, it wouldn't be entirely correct to say he was wrong. After America exited the Bretton system, gold lost its monetary function. In this sense, it was indeed just a precious metal.
But the real question was, could we trust your principles?
The U.S. dollar was fiat currency, with all other currencies based on it. If America abandoned its credibility, the world's paper money would become worthless.
Did the U.S. have any ethics?
No need to ask the Russians; just check with Wall Street. Everyone would tell you that when there are profits at stake, ethics mean nothing.
Buffett's theoretical basis was companies like Coca-Cola, Johnson & Johnson, and Nestle, which continuously created value. If you held their stocks, you received good dividends each year.
If you were just sleeping with gold bars, a hundred years later, it would still be the same gold bar, with no growth whatsoever. To protect that gold, you would have to put in a lot of effort.
It sounded logical, foolproof even. Unfortunately, his analogy was flawed.
Sleeping with gold? What an absurd choice! Couldn't you just mortgage it to a bank?
Worried about prices dropping?
Couldn't you hedge on the futures market?
Thus, Buffett's assumption didn't hold. You could mortgage your gold to a bank and still hedge on the futures market. The funds in your hands could still be used to buy the stocks he suggested.
"What? It's the same?"
How could it be? When gold prices plunge, or at least nearly so, once a rising trend was established, you wouldn't need to hedge any longer. Suppose you set a value of four hundred; if it dropped below that, you could hedge, and if it rose above, you could do as you pleased.
Twenty years later, you would realize that the so-called value investing had made you money. You'd also sidestepped the risks of inflation. Meanwhile, that gold bar never left your possession.
In Australia, they discovered a massive gold mine, yet a group of bankers found that none of this gold had entered what they called the circulation domain.
No need to think; it was undoubtedly all at White Bank.
Well, some people were quite unhappy. "Why do you hold so much gold if you're not in the gold trading business? Hurry up and sell it!"
"Filson, have you heard Buffett's words? Any thoughts?"
"Sir, he's being ridiculous. Investing in securities and holding gold aren't mutually exclusive."
"That's true, but unfortunately, many people don't understand that."
Filson smiled wryly, knowing that understanding didn't matter much. Different circumstances meant different strategies. At this level, everyone discussed investment portfolios, and nobody was going all-in on a single bet.
"No, Filson, that's not what I meant. It seems they'll soon make a move on gold too. Just like that damned oil price, they will surely drag gold prices down into the dust."
William White rubbed his throbbing temples in frustration. "These guys are truly shameless. If I hadn't had foresight, it would have all been taken from me in one fell swoop."
Most of Mister Rich's loans were collateralized by gold. Personally, there was no one in the world who held more gold than he did.
Oil prices shouldn't be that high. Forget about twenty dollars; at this rate, they might even drop to fifteen. This was still considering a good economic outlook; otherwise, oil prices would definitely slide below ten.
Considering the current situation, William White indeed faced some financial issues.
"Sir, we have hedges in place, and they far exceed your holdings."
"No, it's just a different feeling. Why do I feel like my wealth is continuously shrinking? I'd rather forgo these hedging profits. The gold prices are bound to fluctuate wildly in the upcoming period. Whatever the case, let's prepare for everything."
"Sure thing, boss. I'll keep a very close watch on them."
"To be frank with you, Filson, our central treasury might not hold that much gold. There's a great possibility they will borrow against this market wave to restock."
"No, it can't be that outrageous."
"Ah, let's not even go there; even if everything inside were just copper, what's the difference? There won't be any immediate issues."
Filson found himself at a loss for words. Forget outsiders; even Clinton had no right to investigate. The Federal Reserve operated on its own terms.
Of course, even if William White knew something, he'd never reveal it. For the wealthy, a small setback was nothing to fear. The Federal Reserve was a different beast entirely--utterly unsolvable.
When it came to the most powerful people on earth, old Bill wasn't in the running.
What? Greenspan has that much power?
Wrong. The Federal Reserve is the Federal Reserve, and the Fed Chairman is just one part of it. Essentially, it's akin to a secretary-general. You might say there's no power, but the power is still significant.
The Fed has seven executive committee members, and Greenspan was just one of them, serving a term of fourteen years. This meant that Paul Volcker, while no longer Fed Chairman, was still one of the seven powerful figures. As for the other five, count them--each one belonged to a prominent and influential family.
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