David Lentz

Gold, Silver and the Great Unwind: No Conspiracies Here

Pul-lease! ENOUGH of the "Gold is Money" claptrap!

What is money?

Money is the medium we use to facilitate the exchange of things, like wages paid for effort/results, or to facilitate barter by providing a common denominator (or currency, if you will). That is the acid test for whether or not something is money.

Can you buy groceries with gold? NO.
Can you put gas in your car with gold? NO.
Can you exchange gold for stocks, bonds, or other capital investments, without going through the medium of credit? NO.

Gold is not fungible (mutually interchangeable). In this country we use CREDIT as money. That is how the Fed creates money. CREDIT (including the instantiation of it in the form known as "cash", or promissory notes) is accepted everywhere.

Gold is simply a commodity, and one that has a minor fraction being added to the global supply and being consumed via industrial use, so it has a fairly nonvolatile global "open interest". That is what differentiates it from oil or corn. Diamonds could be treated on a par with gold, except that diamonds have a much greater usage in industry, and they are now synthetically created. So gold has some handy characteristics as a commodity.

But it is NOT MONEY. I know that you know this, but there are plenty of simple-minded people who grab onto that as a mantra, and do stoopid things (like accumulating a commodity whose bubble has burst, sacrificing legitimate cash to do so).

And for those who believe that a gold standard would prevent our elected officials from spending more than we give them, and not borrowing to spend ever-increasing amounts, ask yourself how likely this really is. Adopting a balanced budget amendment would work as well with a fiat currency as with a gold standard. And without fiscal discipline, administrations and Congresses would continue to borrow beyond the taxpayers' ability to repay, stealing from the future to fund their present wastrel ways -- this will happen regardless of whether we are on a gold standard or not.

Gold is not magical, it is NOT MONEY!

One could buy several other commodities to afford some protection against the past financial excesses coming home to roost. Gold is not the only commodity for this purpose. Platinum, or some of the scarcer metals are better bets than gold, because they are not only scarce, but they have more industrial uses, and the supply of those items is getting smaller over time.

Compare the charts of platinum vs gold and oil to see the truth in this.

But still we hear this relentless drumbeat of GOLD IS MONEY.
Gold may well be a "store of value", but it simply ain't money, and is never gonna be.

What a pile.
Hope y'all can find a pony in it.