Wednesday, May 2, 2012

When The Global Fiat Money System Crashes

Fiat money systems have always failed. Always. This is the first time in history that the whole world has been on a fiat money system. The failure this time will be spectacular.

So let's discuss what this means for silver and gold.

Importantly, silver and gold will still be money. They always have been.

However, many still ask questions and seek to dither about the role of silver and gold.

Is silver a monetary metal or just a commodity used in industrial production? The debate has always been a heated one, but if we look at history as a whole, we can come to some interesting conclusions about gold and silver as money and hence what is likely to occur when the global financial system resets.

Silver and gold have been a monetary metals in most cultures throughout history. It is unlikely that the return to a true fiat money system from 1971 will unseat their roles as money. Just look at the way international transactions have been settled throughout history. Largely, settlements between empires and states are settled through gold swaps, and transactions between the ordinary people within states is settled with silver.

Silver is commonly known as the 'poor mans gold'. Meaning that not many can afford even one tenth of an ounce of gold, let alone that amount being too large too trade goods and services with. However, one ounce of silver is much more affordable and easily tradable.

But silver is obviously an industrial metal as well. An important note here, is the U.S. Geological Society recently stated that silver could become the first element on the periodic table to become extinct. In fact, right now there is less than one billion of above ground ounces of silver globally, worth around $31 billion. So just on a supply fundamental, the price of silver must go up. This without the watering down effect of money printing. The same with gold, although probably more critical as gold production likely peaked a few years ago.

So gold and silver are primarily money. There are many other facts to conclude this, not least the attributes that gold and silver hold as described at the bottom of this blog page.

When the system does eventually go the way of the dinasaur, I don't think it will be that difficult for most people to see the value of precious metals as money. I think, deep down, everyone knows their true instrinsic value. What do you think?

We call all sorts of products 'gold' this and 'silver' that to give them an extra credibility. A sign of great quality. We have gold and silver medals at the olympics to recognise our elite athletes. Gold and silver simply just 'are' the only representation of quality and true lasting wealth. As much as the fiat money central bank kings want to try, they simply cannot change these facts. They can go on as many cross-country school propaganda tours as they like, but they will still not shift the innate value reckoning the human mind has for gold and silver.

There are only two ways for us to react to this. We simply wait too long and lose our wealth when the system goes belly-up or react now and put a portion of our saved wealth in precious metals. Already there are indications, that if you valued gold based on the US dollar money supply it could be around $8000 and ounce, conservatively.

Act now (start with the links below) or later, simple really.

Gold in New Zealand dollars: $2040.38 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $38.01 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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