by Gary Christenson, Deviant Investor:
Guest Post from Graham Reinders, an intelligent man with vast experience. (slightly edited)
What Do We Want From Gold?
- Roosevelt proved that gold was a political/financial tool, and its value is politically governed.
- Nixon proved two things: that the “Gold Standard” was nothing more than an arbitrary political tool, and indeed he made gold “legally” not money anymore. To make it illegal is an easy step if necessary. Gold is now such a small fraction of the economy I do not think it matters except as an underground currency.
Our generation grew up with Bretton Woods and after 1971, were indoctrinated with the myth that gold had monetary value, we still believe gold’s monetary value is real and place it in the realm of a God, so nobody dares disprove or denigrate it.
Our generation inherited this mindset about the Bretton Woods monetary value of gold yet it lasted less than 30 years. Weirdly, we still revere it as money, when it has been in monetary-failure for more than 40 years.
Let’s be intellectually serious here. All the gold ever mined on the planet is still with us. We cannot eat it and it has marginal industrial value. By all definitions it is “physically’ worthless. In our 5000 year recorded history of gold we have seen it take on many roles. Yes, it has been money. Yes, it did start banking. Yes, banks did store and use it as collateral for money creation. Yes, it was a coinage, but silver was better.
The true reality of gold, through all of history, is that its only real value has been “cultural and religious.” God and the Catholic Church loved gold. Historically Indian and Chinese cultures have been culturally intertwined with gold. Gold to them is worth “more than money.”
Money Does Not Have To Be Gold:
Charles The First who had no gold, put Tally Sticks (notched tree branches) into the English culture as money and they lasted some 600 years. As we know, conch shells, and salt and a multitude of things have been culturally blessed as “money”. On an historical time scale gold would probably fill the smallest niche as being money. Silver did much better.
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