Gold Is Not Money

Includes: GLD, UUP
by: Dana Blankenhorn

Not only is gold (NYSEARCA:GLD) not money, but neither is any physical good.

Money, in fact, isn't matter. Even the U.S. dollar (NYSEARCA:UUP) sitting in your wallet right now isn't really money, because money is not a physical thing.

Money is energy.

This is something gold bugs like our Chris Martenson, and all those who follow the Austrian "school" of economics, don't understand. Money is not a thing. Money is a medium of exchange. Money is not the fish, it's the water the fish swims in. It's not a noun. It's a verb.

Because money is energy, or water, money that's sitting in a vault claiming to be a store of value can lose its value. The same is true for all those trillions of dollars being squirreled away overseas by companies like Apple (NASDAQ:AAPL), and the trillions being hidden from view by the world's criminal classes.

If the financial system collapsed tomorrow, your gold would not make you rich. Having a ready store of grain, protected from theft, might make you rich. If you could trust the guards. Money that isn't being used simply doesn't matter. No matter the form it takes, if it's sitting in a vault, if it's not in active use, it's potential energy -- not real energy. And the power of that potential energy can be manipulated, just as a battery left in its package can lose its charge.

The reason the policies of "Helicopter Ben" Bernanke seemed to work was that the money he created was put to use. The reason his policies seemed at first, and may seem sometimes, to work ineffectively is because some of that money is being hoarded.

Think of it as music. Groups representing the recording industries love to tell me that there's a ton of "music piracy" going on, that artists are being robbed because files are being downloaded illegally. That's not piracy, it's hoarding. It only becomes piracy if you're spending time listening to that music that no one paid for. And time is limited.

Any store of value can become money, if it can be exchanged. The money is the medium between the exchange, not the goods on either side of it. When music files are exchanged and no money changes hands, it's not an economic transaction. Time is money and money is time. Time that's wasted has no economic value. The same is true for any store of value that isn't used. That value is also wasted.

Now it's true that if all the gold and all the trillions locked in the Caymans and elsewhere decided it wanted to come out and play all of a sudden, the value of money would decline, and the prices of all goods and services would suddenly rise. That's my point. Money that isn't in the market, that isn't engaged in buying and selling of goods and services, might as well not exist.

So if the price of gold suddenly drops, it just means fewer people want to hold or use gold. It has nothing whatsoever to do with money. The central bankers, the Gnomes of Zurich, the Fed, the Trilateral Commission, and the Queen of England didn't steal anything from you. You stole it from yourself by misunderstanding the nature of money, by thinking it's something you hold in your hand rather than something you can trade for something else. If you want money to have value for you, then put it to work.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.