from Armstrong Economics:
Some people totally confuse gold and money. During the Great Depression, we were on a gold standard. During a decline, ALL assets will decline against whatever is money, just as money declines during a boom. You need to separate MONEY from gold or you will never understand how the economy functions and you will buy gold when you should be selling. If you do not get this one right, forget it. You are not ready to invest.
If bronze or cattle were money, they would have risen against gold. It is MONEY vs. ASSETS — not gold. Today, gold is a commodity and it is tracking the commodity group as it is tracking silver. Gold moved opposite of silver between 1929 and 1932 only because it was then MONEY. So if you think a crash means that gold will rise, you are in for a very rude awakening.
You are doomed if you cling to the idea that gold will rise simply because stocks decline. Gold was DEVALUED in 1934 since gold was MONEY. What it could purchase for $20.67 then cost $35. The government confiscated gold and moved to a TWO-TIER monetary system with gold used exclusively for international settlements, not domestic.
Gold rose in purchasing power between 1929 and 1932 simply because it was MONEY at that time. The gold promoters do not understand that gold is no longer money, and therefore it will not rise in purchasing power in the event of a crash. The promoters do not talk about the event where government confiscated gold. They focus on the fact that gold rose in value from $20.67 to $35 without explaining that everything rose between 1934 and 1937, and then fell with the crash of 1937 when MONEY rose in value. Devalue whatever is MONEY and all assets rise, be it real estate, stocks, or commodities. This is what took place even during the German hyperinflation. It is ASSETS against MONEY, regardless of what it might be at that moment in time.
Today, gold will decline with commodities against MONEY, and then it will rise when people lose confidence in government after realizing that there is a Sovereign Debt Crisis. You better get this one right. Inflation soared during the OPEC crisis, but we ended up with cost-push inflation rather than demand; gold declined from 1974 into 1976 by about 50% and MONEY rose in purchasing power. All the classic nonsense from fiat to the end of the dollar was banter as gold fell 50%. If we look at how gold has performed when it is not MONEY, we can start to sort out the bullshit from reality.
Please follow SGT Report on Twitter & help share the message.