Terry, The Mellow Tigger (mellowtigger) wrote,
Terry, The Mellow Tigger

gold again

I've been calling for a move to a money supply whose quantity is limited, as a way to prevent exponential inflation of the money supply.  I've suggested returning to a gold standard, as some countries are already trying to do today.  It never occurred to me to wonder how much physical gold there was on the planet, and how much value it would represent at today's prices.

Somebody else wondered.

"If we added up all the gold ever mined on the planet, its total value would equal no more than $5 trillion at today’s prices." and "If the gold industry is tiny, then silver’s $9 billion market cap makes it a nano industry."
- http://www.zerohedge.com/article/guest-post-how-will-niagara-falls-fit-through-garden-hose

So even the attempt to move to a gold standard as a valuation of wealth will require a huge increase in the value of gold.  Sure enough, in the last few years, gold prices have skyrocketed.  It was less than $300/ounce in 2001, and today it is over $1100/ounce.  I have read one interpretation that matches my own regarding the absurdity of using an inflationary fiat money system.  It's written by a "Chief Market Strategist", whatever that is.

For the past 9 years now, students of history and common sense have been literally shouting from the rooftops that Gold was the place to be as the monetary tradewinds shifted back in 2000 and the fiat inflationary cycle began to go parabolic. While the multi-trillion dollar deficits might be a surprise to many, for those who understand how these things work, it is just a mundane repetition of history and yet another confirmation that man cannot alter the laws of economics or his own intrinsic predilection to ignore events past."
- http://news.goldseek.com/GoldSeek/1258039701.php

Even more interesting, though, is an article written on 2009 November 7 by Martin A. Armstrong (who became a millionaire at age 15).  He describes a long American history of gold incidents.

"Yet GOLD has been a misconceived store of wealth perhaps since the dawn of time. ... The invention of paper money in the West came in the United States in the colonial era because there was a shortage of coin. ... Once you understand it is the money that is the issue dictating the outcome of the entire future economically, you start to comprehend far too many people don't have a clue as to what the hell they are saying. ... What is money is the key to understanding what we are dealing with."
I agree wholeheartedly, but... in this part (all emphasis is found in the original), he seems to succumb to the same mistaken thinking that inflation (population increase, resource increase) is still necessary and that's why we should avoid a gold standard.

"MONEY is not gold.  It is the full and complete productive capacity of the people that constitute the nation.  GOLD is the free HEDGE against the mismanagement of the state.  It is NOT a hedge against inflation! ...  If we returned to the GOLD STANDARD today, then by fixing the price of GOLD, private assets must decline for if the money supply cannot grow, the value of that money will rise in proportion both to the economy and the population."
- http://www.scribd.com/doc/22417671/GOLD-5000-11-11-09

He doesn't understand that he hit the Sustainable Society nail right on the head.  Perpetual growth is NOT sustainable.  He goes on to say that the problem with fiat money is only "the integrity of the politicians".  I disagree.  I think the problem with our own fiat money system is that it's used within a framework of exponential debt creation.  We need a money supply that reflects the fundamental reality that perpetual growth is impossible.  We need to pierce this human blind spot by choosing a financial system that keeps this reality prominently in our minds.

Personal greed, which fuels the "free market economy", is in perpetual supply.  Real world wealth, however, is not.  I want people to realize that if they are confined to 10 acres of land, then if they keep having children and grandchildren then everybody gets less and less wealthy.  Perpetual growth is bad.  We have more than 10 acres to work with, but the unfortunate restrictions of reality still apply.

I repeat my call for a move to a real-world valuation of wealth.  Gold, beer, beans; I don't really care.
Tags: economy
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