12 astonishing things about gold

Vox, money is nothing more than what any society will accept in any barter situation. Barter can be the interaction you face when buying something at a market in Mexico, Greece, Spain, India, or any other country where you need to come to terms on how much you will pay to have the merchant hand over what you want. Purchasing from stores is a more formal interaction and the store will limit the item it takes in trade (barter) for its goods to something it can easily place in the bank or use to pay suppliers, employees, utilities, and taxes. I know you feel gold makes for poor money but it is the only universally accepted item that can be used to purchase goods. For instance, if you were to try paying for groceries with US dollars while in Germany you would get a blank stare just as you’d get if you tried using a gold or silver coin. However, if you were to purchase from merchants in a less formal market place you could conclude the transaction with gold or silver and probably pay a little less in terms of overall value that you hand over. This comes from personal experience having traveled and had the opportunity to try various methods of payment. Agreed, the market merchant will be more likely, possibly even eager, to take US dollars in place of the local currency, at times but the reasons for this will change and possibly not exist.

Allow me to recall a personal experience. PM’s are more stable in many cases and therefore more likely to be accepted. Many years ago while traveling through what was Yugoslavia I was stopped for speeding. They tagged me going 10 Kph over the limit with radar (Radarska Controla). The fine was to be paid on the spot. We had Swiss Franc’s, Deutsche Marks, Lira’s, British Pounds, US dollars, and a few other countries’ currencies but none of their Dinars. The only thing they would accept for this pittance of a fine (about $2.00 US at the time) was local Dinars, or my gold pinky ring. Given that these officers knew very little English, German, or French the conversation took quite a while but resulted in me getting off with a warning. I never thought about it much at the time but looking back it makes a lot of sense. If the police officers were taking advantage of a tourist and wanted a few bucks for their pockets then taking foreign money would be bad idea. It could be seen as “they were bribed”. However Dinars would be in their pockets already and a gold pinky ring couldn’t be traced to anything or anyone. Universal money.

No matter what any government declares to be money the fact is that if people agree to use shells in parallel there is nothing to stop them from doing so. Ultimately we need to pay our taxes in fiat but outside of government transactions we really can conclude a purchase with whatever medium we and the seller/buyer agree on. Of course the governments don’t like that they are not getting their tax cut off the transaction but the reality of life is that a very large percentage of all trade in any country is done on a barter basis and they will never collect on these transactions.

So is gold money, yes. It’s universal money. Silver enjoys this same acceptance. While in Yugoslavia, besides the chat with the local police we also experienced huge inflation. We never exchanged more dollars or Marks then we needed for the day as tomorrow they would be worth 20% – 30% more. In this two week period of time that we stayed in the country, you could still exchange a silver quarter (CDN) for a cup of coffee, croissant, and have enough left over for a tip. I know this because we did it on a few occasions when the café owners knew how to identify a silver coin and it’s worth.

So again is gold or silver money? Yes. These metals are the only universal money. I know there will be many that will try to tout the benefits of US dollars but in many country’s you could actually be tossed out of an establishment if you tried to purchase with US dollars so this invalidates it as a universal money. Are gold and silver widely accepted as a unit of exchange today when conducting business in North America or western Europe outside of market places or personal transactions, no. Does this detract from PM’s being money, no. We can though in recent history find instances of when gold was used as money. When APMEX leased space off of Trump (I recall it was in Manhattan) both parties agreed to use gold instead of fiat to conclude the agreement. A local auto dealer a few years back ran a promotion to accept gold for cars. I’m sure there are many more.

In today’s society when we think of buying something at a store or paying a dentist there isn’t much of a chance we’ll be able to use silver or gold but the problem is we’ve got to a point where we take this same attitude towards every purchase even when it’s not in a formal establishment. Fiat is convenient, folding money is lighter to carry but when an economy starts going bad wait to see how long it takes people to fall back to using a stable money such as PM’s, or if you’re on an island somewhere possibly shells. I wont delve into the world of what will be exchanged in an SLAE, things like ammunition for food, as this is not part of what the discussion is about and is an extreme situation and not part of a more 'normal' every day routine.

Technically any gold or silver coins stamped by a government mint with a $ value are money. Of course the value stamped on the coin is a ridiculously lower value than the metal is worth but the coin is none the less money. I certainly wouldn’t hand over a one ounce gold Eagle or Maple to pay a $50 bill but legally I could. It’s this last item that completely nullifies your attempts to persuade anyone that all gold and silver are not money. You yourself state that you own PM’s as a hedge against government stupidity. This means that you have placed a value upon the metals and expect that some other human will want to accept them in payment or exchange for fiat or something like real estate at some future point. It’s this transaction you expect to happen in the future that again proves that your PM’s will be used as a medium of exchange, money, to conclude whatever business you might wish to undertake in whatever country you happen to be. Gold and silver equal universal money.

OK I'm getting a better picture now. I have heard you use the phrase "hedge against government" before also. I agree that much of what can be read about gold is untrue, or worse still 98% true with some false misdirection or conclusion.

I think it was Greenspan that said "gold is money in extremis" and I think that is a fair statement. That's happening right now with Iran and Turkey. Gold is THE most liquid asset, bar none. Recognised everywhere - from an Indian peasant farmer to the prince(s) of England. Central banks don't hoard diamonds, or real estate or fine art but they DO hoard gold. Gold may not be money but it certainly is a special kind of "asset", more akin to money than any other thing and perhaps the most successful at its job when used as such.

I don't confuse the massive oil-fuelled growth in the world's past 40 years as the result of some "freeing up" of the world economies under a paper money system. That growth would have happened any way, mostly due to industrialisation, science and innovation, skill concentration and other movements in society over that time. Paper money merely facilitated that to happen a little faster, if at all. Many could argue that the quality of life obtained after 40 years at the paper game is basically the same as when we started, despite all the leaps and bounds of technology and industry.

But I do agree that in today's world gold is not money. Not really... but even money is not money - cash only makes up a small portion of the world's "money". Most of it is a digital record in a bank. If we are going to entertain notions like gold contained in the sea then we should also entertain possibilities like the sun giving us a hiccup and causing a massive EMP shock to wipe out huge portions of these digital records of money. The world's financial systems can get a big "reset" at any time, regardless of central banks, politics, markets or war.

I was actually born in 1971 - that year gold officially ceased to become "money" as a common medium of exchange. My mother was born in the 40s after WW2. She was told she would *never have to work a day in her life*. Her grandfather had amassed a rather large fortune in England and invested it into a very long-term fixed interest rate fund of some kind back after WWI. To cut a long story short, gold was denounced as money, paper came in and the meagre interest accrued by the fund was being overtaken by inflation in a big way. By the time my mother got her inheritance it was enough to cover a 15% deposit on a mortgage for a 3 bedroom house. So much for never having to work a day in her life. As it turns out she's had a wonderful life as a teacher and is well respected, but that's beside the point.

For somebody like me, who has known nothing but paper as money and knowing this story how is it that I can see value in gold? Well it is precisely this story that draws me to gold. Think about it. A wise business man with a fortune gained by a lifetime of good skills, sharp wit and savvy business sense. The fact that he placed this money into a fixed-term fund for some 50 year period is testimony that INTEREST RATES WERE STABLE AND LOW under the gold standard that existed at that time and had existed for what must have seemed like forever. The world I live in is all over the place, we get 20% interest one year and 5% the next but almost ALWAYS more than under gold. It's a rollercoaster of ups, downs and free-falls with no stability and little to trust. The only reliable truth being that if you don't play the game you're bound to lose. They've up'd the stakes and cranked the treadmill to a blistering pace.... where a lifetime of wealth can be eroded away to almost nothing in less than a lifetime.

What I cannot believe is the level of complacency about the subject. The good citizens of the United States fought for their freedom in a civil war against the British Empire and won. This happened (correct me if I'm wrong) due to the English wanting to impose on them a 1% tax on TEA. Yet today most of the world is content to accept much greater ongoing loss due to fiat money abuse without so much as lifting finger. It is this complacency that scares me the most at times.