Monday, January 5, 2009

Gold - Money or Currency?

(A lot of people ask)

Gold is money.

The simple reason is that it cannot be printed. Gold production requires effort and consumes resources.

Gold does possess some of the common characteristics of a currency: reasonable convenience and global recognition in trade, if not at the retail level.

Over time, gold has been remarkably consistent in value (not to be confused with price). From Ancient Rome to markets around the world today, an ounce of gold historically trades for a fine suit, shoes and belt.

Gold's consistent value is why a currency backing standard is critical to maintain a fair and stable currency, instead of a currency intended to transfer citizen wealth to central banks (see The Currency Scam).

Central bankers despise a metal backed currency (gold, and even more so, silver), because it makes their intentional inflation/deflation schemes more difficult. Mainstream economists mistakenly call such willful currency manipulation "the business cycle".

Central banks exist to buy your money with printed paper (inflation), or to seize your money through default (deflation) as previously inflated debt notes suddenly become insufficiently backed by withering collateral prices and falling wages.

That said, gold, like all money, will rise in price during inflation and fall in price during deflation. Contrary to this price action, gold generally falls in value (trades for less) as it rises in price, and it rises in value (trades for more) as it falls in price. Why? Because gold tends to fall out of favor when paper becomes popular, and vice versa. That is why gold is a relatively poor inflation hedge; paper assets inflate more and deflate more.

Expect gold prices to decline over the long term. Short term declines should be substantial, into the $600 range as gold price deflation has some catching up to do.


  1. Nice blog FDR...I will frequent it and book mark it


  2. Great blog and forecasting we understood it may be wrong but the vision is appreciated.

  3. Keep up the good work FDRAOA.


  4. Awesome blog!!!

    Thanks for everything you share with us.

  5. Great Blog FDR!!!!Being forewarned is being forearmed!!!!Looking forward to wonderful insights from you.

  6. FDR - glad to see your blog site.

    Your views on MW were always appreciated; I look forward to reading more of your insight here.

    Tell us what you thought of China.

  7. FDR, Welcome back, hope you had a nice holiday. I've always appreciated your comments, and I'm sure your new blog will be just a new improvement of the same.


  8. Hello FDR. I'm exited to read your new blog and have bookmarked it. Your MW posts convinced me to get out of the stock market in Nov. of 07. Thank you so much for your insights.

  9. FDR I truly appreciate the fact that you care about the community and that you try to teach us how the financial world works in reality. I also appreciate that you are trying to eradicate the financial ignorance from which most of us suffer. I consider myself young at 26, with a degree in Acounting from a University in South Texas. Since I am pursuing financial independence (though challenging during this time) I would like for you to share the sources of informaion that gave you all this vast knowledge about the markets and your financial literacy. I would like to read, practice, and think the way professional traders do. Like you said, not the ones in suits sitting in front of a desk charging fees, but the ones that are financially independent and are able to produce their own income.


  10. Hello FDR. Did you really go to China, or were you putting this together!!! Great blog. I have always read your MW back catalogue, and as Nomorebailouts, have learned from your comments over the past 18 months.

    I would recommend anyone watch the whole of the World at War series, narrated by Laurence Olivier. Not only is it an excellently put together World War 2 documentary, showing the horrors of warfare, but it demonstrates the global reach of calamity, and how only two generations ago, just two, our families were killing others just so that they would not be killed themselves. And they did it twice.

    The series falls short on its analysis in that it is partisan. It is classic them against us. But any understanding of international banking, especially post 1913, will show that there are non partisan ways of looking at what happened, beyond the plucky Yanks and Brits versus the vicious German Hun and barbaric Japs. The 1930's was not marked by prosperity but by global depression. The question of how poor and bankrupt regime's came to acquire the extremely enormous amount of resources that Japan and Germany (relatively resource poor) secured was not addressed. The same people who funded the enemy, funded us, and that is the central banks.

    I believe that good triumphed over evil in 1945, but the World at War series does show how close we came to losing on so many fronts; a lost letter here, timely snow storms etc etc. But the money changers had bankrolled each side. They cared not for our freedoms, just backing the right horse. They created the regime exactly so they could provoke war, and thus have a great reason to lend loads of money that was never theirs, and then to charge interest on it. Governments could have done this themselves, and issued their own money, but those that suggest that don't get too far. So they backed and created both sides.

    Follow the Money.

    I do hope we can get out of a depression by doing something different this time. I see us reaching a polarizing political point where central banks will be seen as communism through the back door, and that they will have to consider to be abolished. The first thing to do is to exercise our freedoms that exist, and talk a lot about abolition, and get it at the very least as something to be discussed and analyzed.

    Abolish central banks. Perpetual Debt is slavery. Ask any slave. The slave owes the slave owner his labor, perpetually. They were rarely beaten, and indeed had guaranteed employment. If they behaved, they had a reasonable, but third class life. But they were owned, from the very moment they were born up until they died, and it is that which made them slaves. The slave owed the slave owner all his labor. Devoid of financial freedom, they had no other choice but to capitulate their private freedoms. They were owned. Perpetual debt is therefore slavery, and without having any generational recollection of what horrors that can bring, we have yet to see that.

    Why can't a democratic government issue it's own currency without the use of private banks who want a percentage and only have a printing press to offer? Anyone, anyone, Bewler, Bewler. Why doesn't the bailout involve the central banks agreeing to stop charging interest on money and wealth which was never theirs but ours, through taxation.

    In bailing out GM, will $27 billion go to the workers and production or to pay off their debt. If it is to pay debts, then the central bankers have just written themselves a check for $27 billion of your money.

    Financial freedom is everything. Without it, we are just slaves. This is not to belittle the horrors of slavery, but to point in the direction of how we could become if we let the central banks govern our nations through inflation and then deflation. Devoid of financial freedom, our personal freedoms can now be bought. In 1939, the First World War was called "the war to end all wars", and they believed that was true. It is not that they were complacent, but just that they were like you and me are today.

    Mr Obama, like Mr Bush before him is already spending our money we have yet to earn. Like Communism but with nicer suits and big smile.

    Great Blog FDR.

  11. I always enjoyed and learned much from your MW posts. Your blog is very interesting as well. I will be sure to bookmark it.


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