Friday, May 4, 2012

Gold and Money: A Tricky Concept

It can be tricky explaining the concept of gold and silver as money. How gold and silver have value as hard and scarce assets, to people who know very little about how money works and economics in general

Is it the 'glazed over eyes' reaction that tells you all is not being understood.

Am I a confusing kinda guy or too detailed? Why don't people get this? Why is it we have never been taught about what real money is?

So what I used to do in these situations is take out of my pocket two things. A 1/10th oz coin and a paper money note of, say, $10 or so. I placed these on the table in front of them and say, "One of these is paper representing value to purchase assets and one of these is an asset representing, well, the best asset ever to be used as money. Which one, of equal value, would you rather have? Of course it's a loaded question and the answer is always, the gold.

So how is it that we have been duped to believing that printed paper, backed only by the faith we have in our governments, has any value whatsoever? Especially in these times when Reserve Banks are trying to 'save' our financial system by printing more, thereby debasing the value of the already nearly valueless. This is why we had a confidence crisis in foiat money in October 2008. Trillions were being withdrawn form the system in hours. If the people lose confidence in the monetary system, then they will all want their money back. And you know what? It ain't there...just ask your Bank.

I hold the gold and know it has no liability attached. It's mine and it has been recognised as money for 5000 years. I sure will not swap it for bits of paper anytime soon.


Gold in New Zealand dollars: $2042.56 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $37.59 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)
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AFE is the gold bullion custodial provider of choice for the sophisticated investor,
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1 comment:

  1. Very well said. Gold is always the real money. It has the true value.

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    ReplyDelete