Monday, May 25, 2015
Golden Misconceptions: WHY MONEY MUST BE A STORE OF VALUE
How to negotiate the mess of misconceptions and false correlations swirling around the gold market and the economy in general.
1) Hyperinflation is good for/ necessary for positive gold returns. This is stupid. In hyperinflation you don't need and can hardly use gold. A can of edible peas is worth millions. A loaf of fresh bread is worth billions. Sure, gold goes up too but in this environment, who needs gold?
2) Deflation is bad for Gold. Again, stupid. Real deflation occurs during periods of such monetary instability that economies become paralyzed. Nobody buys anything except absolute necessities. So asset prices collapse. The instability during these periods typically lead to a strong rise in Gold prices.
Because gold is a measure of Economic and Monetary Instability.
Say it fifty times slowly. That's all gold is.
3) Gold is not money anymore. Since Aritstotle the Athenian defined money in 300 BCE there has never any confusion as to the nature of money, until 1970 when Nixon closed the gold window. Everyone everywhere understood that money is a unit of account and a medium of exchange and a STORE OF VALUE.
Why a store of Value? Because it is precisely this quality the gives the PRIVATE CITIZEN a modicum of power over their own finances. Without this quality, Money simply becomes the means for the State to enslave its citizenry. To Aristotle, as to all Athenians, as the Inventors of Democracy, the Sovereign Power of the Private Citizen was the most important quality to be respected in forming all aspects of the State. Especially that of State Issued Money.
To Aristotle and all Athenians, the State was simply a collection of Private Citizens. There is no way around this fact. There is no way to have Democracy - the form of State Government that gives its power (KRATOS) to the Private Citizen (DEMOS) without giving the Private Citizen control of his own Money. For the Private Citizen to cotrol his money Money must be a Constant Store of Value over Time.
Now pundits everywhere are tripping over themselves to redefine money. Unfortunately every definition that neglects the quality of a STORE OF VALUE neglects the fundemental idea that money must give the Private Citizen power over his or her own finances. The Power to Invest or not as they see fit. The Power to invest or not Where they see fit. The power to Distributed their Own Wealth as they see fit.
If money has/is no store of value then the Value can and will be manipulated to the benefit of the State over the Private Citizen, until the State has total control over the Private Citizen.
There is no way around this for the legions of apologists for State Controlled Money. Even those who are the biggest self-styled critics of State Controlled Money.
And it is this Store of Value function of Gold that continues to make it an attractive form of money world wide even as the State and its legions of apologists seek to controvert this time tested fact.
So, as the State seeks increasing control over its Money even as that Money becomes less and less functional as a Store Of Value over Time, those forms of Money that do have this Store of Value - like Gold - will become increasingly valuable to all Private Citizens who seek to retain Power over their own Assets.
Will this put Private Citizens at odds with their own Governments?
Sure, it might,. But as the State moves towards Totalitarian goals, many Private Citizens will find themselves at odds with government anyway.
Choose your poison.