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Gold and Silver as Monetary Metals

by Jeff Nielson, Bullion Bulls Canada:

Informed readers will be well-acquainted with the fact that gold and silver are “monetary metals”, since this property of precious metals is widely reported. Where readers will have far less clarity is in terms of what this actually means, since it is rarely (if ever) explained.

Referring to gold and silver as monetary metals means far more than the simple fact that gold and silver are “money”. Indeed, it implies more than the fact that gold and silver are (both) Good Money. What makes gold and silver monetary metals is the fact that they represent the perfect standard and/or metric to reflect changes in our monetary system. It is this property of reflecting such changes that makes gold and silver monetary metals.

More explanation is required to make this apparent. The key attribute which makes gold and silver both ideal money and monetary metals is the stable, slowly growing rate of supply. To be more specific, over the centuries the rate of growth of the supply of gold and silver has roughly mirrored our rate of population growth. Why is this significant?

Once upon a time, when economics was a valid field of study instead of a cesspool of propaganda, it was understood that there was a Natural Rate of growth which existed in our economies (and the world around us). That rate-of-growth equals the rate at which our populations grow. As with most of the valid principles of economics, the concept of a Natural Rate of growth is a function of equal parts basic arithmetic and common sense.

As a population grows, the incremental increase in the number of people generates an incremental increase in demand for goods and services. Parallel to this, the increasing population provides an increasing supply of labour, to do the work necessary to generate such growth. It is this supply/demand dynamic which makes economic growth which equals the rate of population growth sustainable. Most readers will struggle to understand the concept of “sustainability”, since they never see this concept discussed in the propaganda of the mainstream media, and they never see this concept discussed in the pseudo-analysis of the charlatan economists.

sus-tain-able (adj.)

– able to be maintained at a certain level

What do we have (what did we have) in our own economies? We have had unsustainable growth, decade after decade of unsustainable growth. And after all those decades of unsustainable growth, we now have no growth, at all. Instead, we have corrupt regimes across the Western world pretending that their economies are growing.

This has been explained, in detail, in previous commentaries. Faking economic growth is one of the easiest forms of statistical fraud. All that it requires is one ingredient: falsifying the rate of inflation. Any/all legitimate readings of economic growth must be fully deflated by the prevailing rate of inflation. The failure to do so means that the supposed “growth” is being padded (to a greater or lesser degree) through the unreported increase in prices.

Our governments are not merely serial liars when it comes to their so-called “inflation statistics” they are extreme liars: producing propaganda which understates the rate of inflation to an utterly absurd degree. Thus, their “GDP” statistics are equally absurd overstatements of actual economic growth. The over-leveraged economies of the West can’t grow, not until all the systemic bad debt and systemic malinvestment is purged from these crippled economies.

Anyone who understands basic arithmetic will understand (in theoretical terms) that it is impossible to generate long-term growth above a “sustainable rate”. Anyone looking closely at the empirical evidence will see that this theoretical premise has now been proven. Our economies have borrowed from the future (at our children’s expense) for far too long. Now it is time to pay the Piper.

Many readers will fail to see the connection between the supply of gold (and silver) matching the Natural Rate of growth, and the status of gold and silver as monetary metals. The connection between these two concepts is also rooted in common sense and basic arithmetic. Because the supply of gold mirrors the Natural Rate of growth (and the rate of population growth) the supply of gold is non-inflationary.

In relative terms, the supply of gold remains nearly constant with respect to our population, i.e. the number of ounces of gold per person is a relatively constant number. Readers with a correct understanding of the definition of “inflation” will immediately recognize the validity of this principle. Indeed the charlatans and propagandists often attempt to borrow (and pervert) this principle with their own pseudo-analysis.

They will claim that the rate of growth in the supply of U.S. dollars is “non-inflationary”, because after they have performed their assorted statistical frauds, they will claim that the rate-of-growth of the U.S. money supply supposedly mirrors the rate of growth of the U.S. economy. This outrageous lie can be rebutted with one picture: the Bernanke Helicopter Drop.

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