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The Implication of Currency Dilution

by Jeff Nielson, Silver Gold Bull:

In our daily lives, we learn that there are many immutable principles of cause-and-effect. Drop an object from your hand and it will fall down, not up. Throw a rock at a pane of glass and it will break. Put an ice cube in the sun and it will melt.

So too it is with the cause-and-effect known as dilution. Whether we are an adult buying watered-down booze from a bar, or a child buying a watered-down beverage from a lemonade stand; we immediately comprehend that diluting the product has reduced its value – and thus we refuse to pay the same price for it.

Similarly, should a jeweler attempt to tell us that (less pure) 10-karat gold is worth as much as (more pure) 24-karat gold, we would simply scoff at such nonsense and walk away. And as I have noted several times in prior commentaries, even the dim-bulbs in the mainstream media can grasp the concept that if a company prints up a lot of shares (and thus dilutes shareholder equity) that the value of its shares must decline.

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3 comments to The Implication of Currency Dilution

  • Ed_B

    I absolutely agree that whenever something of value is diluted, it becomes of lesser value than it was prior to dilution. The Fed and the US Treasury get away with this scam because their plans are long in term and relentless. US dollars have been and continue to be printed in near limitless amounts. This is creating significant inflation, just not as much in the US as it is in the countries that sell to us. Keep stacking, Brothers and Sisters. This may well be the only time in our lives when we can trade fiat paper for metals of true value at such low rates.

  • AndyB

    We will never see these sales prices for PMs again in our lifetimes; buy now while you still can. The discount window is closing fast.

    • Glitter1

      There may/will come a time when you will not be able to buy/get physical Gold or Silver at any price. When the Real SHTF, those with Large Resources, Deep Pockets and connections will lock you out.Back in the early 2000′s Izzy Freidman, told Ted Butler there will come a time when the Mint will stop making Silver Eagles because the price will be too high to obtain the metal.

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