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A new economy has
emerged. People have applied their labour to the natural resources around
them. It has become an ordered society with a high division of labour. From
people's labour has come the production of tangible and essential assets;
those things essential to the sustaining
and improving of human life. This 'production' is the direct result of their
labour, and so, this 'production' has become the stored wealth of the people
in the economy. Due to the natural 'division of labour', different people
produce different things, which are all exchanged
(bought and sold) in the market place. This pattern is as old as man walking
the planet. In yesterday's Daily Dig we described it as a 'Free Market
Emerging'; Stage One in the Life Cycle of Money.
In our new 'Free
Market Economy' the market place itself is functioning well. It has a natural
pricing mechanism. Because of their past labour, people are freely trading
goods that now have 'intrinsic value'. People barter price to close a
transaction; the higher the stored labour in
something, the more valuable and the higher its price will be.
The only real
problem is that, due to the difference in relative value between goods being
exchanged, it is often difficult to settle out all trades. For example, how
does one man trade a highly valued item for a small amount of perishables?
The market place needs something that
can fill the gaps; match value for value in unequal transactions. Or maybe a
person has something to sell now but doesn't want to buy anything else till a
later time; he or she needs something that will store the value of what they
are selling now until a later date. The market
place needs 'money'. Throughout all of history we have seen that money automatically
develops to aid the free market process in a barter of exchange economy;
something we call the natural 'Development of Free Market Money', which is
Stage Two in the Life Cycle of Money (1).
This money itself
must have a consistent and high intrinsic value for its size and weight. It
must be portable and recognizable to everyone throughout the economy and
beyond, its quality must be easy to test and determine and it should be able
to be stored for periods of time without loss of value.
Many things can
function as money providing they consistently and fairly represent the stored
value of man's past labour. For example grain (wheat) can function as Free
Market Money because it has intrinsic value, it is universally recognizable
and it can be stored. However grain
is poor when it comes to paying for high value transactions. Its intrinsic
value is too low for its size and weight.
But some men in
our new economy have turned their labour to studying the ground, prospecting
and mining gold and silver. Both these metals are beautiful and extremely
rare. They are very hard to find and even more difficult and dangerous to
recover. Each ounce of both gold and
silver brought into our new economy represent huge amounts of time, research,
effort and risk, and once mined, that gold and silver becomes highly sort
after in the free market.
Through nearly
5000 years of free market history, gold and silver have always emerged as the
Free Market Money of choice. Why? Because they function better than any other
commodity or thing in fairly and intrinsically representing the combined
labour and wealth of man.
Philip Judge
Anglo
Far-East Company
Also
by Philip Judge
Philip Judge is the 3rd generation of a family that has had
substantial involvement in the Precious Metals markets. He has researched,
written and spoken on the gold, silver and commodities markets for over a
decade. Philip works in the marketing and operations department of The
Anglo Far-East Bullion Company, an internationally based Bullion Banking,
Investment Management and Financial Services Company
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