19/03/2016

Why Gold Is Money - by Doug Casey

Jeff Fitchett: Gold and silver are money.  The reasons for owning precious metals in this day and age are almost countless.  Trillions upon trillions of currency units have been created out of thin air by central banks.  The establishment loves fiat currency because they are allowed to create currency and then pillage the physical wealth of nations.  Think about it; currency can be created out of thin air and then used to buy oil, food commodities, land, precious metals, art work...  Fiat currency is based on confidence.  As long as the masses remain docile and believe in the value of their digital or paper currency the game will continue unabated.  All throughout history paper money always reverts back to its intrinsic value; zero.  The article below is worth a quick read.  

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Government fiat currencies can, and currently do, function as money. But they are far from ideal. What, then, are the characteristics of a good money? Aristotle listed them in the 4th century BCE. A good money must be all of the following:

• Durable: A good money shouldn’t fall apart in your pocket nor evaporate when you aren’t looking. It should be indestructible. This is why we don’t use fruit for money. It can rot, be eaten by insects, and so on. It doesn’t last.

• Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size. This is why we don’t use things like porcelain for money – half a Ming vase isn’t worth much.

• Consistent: A good money is something that always looks the same, so that it’s easy to recognize, each piece identical to the next. This is why we don’t use things like oil paintings for money; each painting, even by the same artist, of the same size and composed of the same materials is unique. It’s also why we don’t use real estate as money. One piece is always different from another piece.

• Convenient: A good money packs a lot of value into a small package and is highly portable. This is why we don’t use water for money, as essential as it is – just imagine how much you’d have to deliver to pay for a new house, not to mention all the problems you’d have with the escrow. It’s also why we don’t use other metals like lead, or even copper. The coins would have to be too huge to handle easily to be of sufficient value.

• Intrinsically valuable: A good money is something many people want or can use. This is critical to money functioning as a means of exchange; even if I’m not a jeweler, I know that someone, somewhere wants gold and will take it in exchange for something else of value to me. This is why we don’t – or shouldn’t – use things like scraps of paper for money, no matter how impressive the inscriptions upon them might be.

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