There are two primary topics of argument when it comes to gold these days: gold as an investment and gold as the basis for currency.
I have considered these issues and can see merit in the arguments made by supporters. However, at the core of both arguments you will always find the
argument that “gold is always worth something” or that gold has intrinsic value. This is a fallacy that everyone needs to recognize. To understand
this, we have to go back to the beginning and understand how we came to the point of equating gold and money.
The gold specie standard was not designed, but rather arose out of a general acceptance that gold was useful as a universal currency. When
commodities compete for the role of money, the one that over time loses the least value, takes on the role. The use of gold as money dates back
thousands of years and the first known gold coins were minted in the kingdom of Lydia in Asia Minor around 610 BC.
At the time when gold was first coined as money, gold had no intrinsic value. It was not a practical metal to use for tools or weaponry. In essence,
gold was a useless metal. It was however pretty. Those in power and with ample resources have excess to waste on things they like, no matter how
impractical or useless (much like today’s elite.)
At this time, if someone wanted or needed something, they traded a good or service. However, carrying around 10 goats and 30 chickens if you need to
go to the market was a challenge. Additionally, debating whether 10 goats equaled 5 cows or 7 was another difficulty of the barter system. People
realized the need for something recognized among all the people to represent the item of trade.
When the idea of making a coin came up, they had to decide on what metal to make it from. Do they make it from a hard metal, one that would rust or
degrade over time, or whose metal would be better used in an ax or hoe? Or use a metal that is soft, won’t deteriorate and has no practical use?
Thus the gold coin was born. So what was its place in society? Well, much like today, it comes down to control by the elite.
As stated, the only “intrinsic value” gold had at the time, was for ornamentation or jewelry to the most powerful. Society makes a currency out of
gold. Who has the most currency? The elite. The society work away at daily life, but ultimately, the majority of the money gets filtered up into the
coffers of the kings.
Flash forward two and a half centuries and gold finally starts to have some
intrinsic value. As we enter the age where electricity and
electronic devices take advantage of the elemental nature of metals, gold can serve some purpose, although at a societal level, still small.
Metals are a resource. At any given time, a country or individual can discover a source of metal or as technology advances, derive the metal from
other elements. Science and alchemy grow closer together each day. So why would it be a good idea, to peg a paper currency to a resource that can be
manipulated or undermined by another country, corporation or mad scientist?
Why are there people who support the idea of a gold backed currency? Well, to put it simply, fear. I was one of them. I supported the idea for a short
while. I didn’t like the idea that there was nothing real about our currency (US dollars.) That, combined with the fact that the government removed
the gold standard from the dollar made me highly suspicious. In the end, it wasn’t really that I was so bothered by the lack of a tangible backing
of the dollar, it was that the dollar itself was getting weaker. “Exactly!” you say, “Because it isn’t backed by something like gold!” No.
It is weaker because of faulty manipulation by the Federal Reserve, foreign nations and to a lesser extent, counterfeiters. Would supporters be
calling for a return to the gold standard if the dollar was rock solid and the future looked bright? No.
The problems with the fiat dollar need to be fixed at the system level, not as a concept. It doesn’t matter if we have a gold standard or not, the
acceptance of a paper currency all comes down to faith that the person taking it will be able to get something in return later on.
We hear the term SHTF all the time. In such a situation, many claim you will need gold or silver because paper money will be useless. Not necessarily
true. And this is where I discuss the investment aspect of Gold.
***NOTICE*** I am not a financial advisor. Any information or suggestions related to investing are my own opinion and I am not responsible for
anyone’s fiscal behavior or actions.
The use of any currency, fiat or metal coinage, in a SHTF situation presumes that society will remain somewhat intact or will recover. To that extent,
having all, most or even half of ones investments in gold or silver is foolish.
In a SHTF situation, practical tools and resources will be the currency. If society does start to recover, tools and resources will get an individual
ahead far more than any precious metal. Once society starts to stabilize, the elite will then be in a position to indulge in impractical things like
gold for jewelry, and then having a small amount may be useful. Chances are that in such a recovery, the practical nature of fold for electronics will
be negligible if existing at all.
My personal philosophy on precious metals investing is, never more than 20% of a portfolio should be devoted to such things, and always in tangible
form, never certificates.
However, one shouldn’t even be considering this aspect, until the true necessities of immediate survival are covered. This would include enough cash
savings to live on for at least 6 months, a life insurance policy, a 30 day supply of food and water, and some basic survival items. Once you have all
of these, investing in retirement, stocks or commodities is not an issue.
The market for gold is artificial because of fear. A fear, although somewhat justified, that is orchestrated by the elite, who benefit the most from
the whole ordeal and cannot lose.
So gold is a worthy investment, but more important to the elite. Silver would be a common mans precious metal, because it has more practical uses. As
for a basis for currency, now more than ever, it would be a bad if not catastrophic decision. However, if we don’t fix the systemic issues with the
Federal Reserve, we may just face such a catastrophic end.
edit on 14-2-2012 by Wolf321 because: (no reason given)