The correct definition of money is something that functions as a store of value and a medium of exchange. Salt was used as money in Ancient Rome. In Roman society, cattle was used as money. Some North American Native tribes used shells as money. During World War II, cigarettes were used as money. So money can be many different mediums of exchange and a store of value. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money. According to Doug Casey of Casey Research, gold is the one true money. Over centuries, gold has weathered all sorts of storms, fought off all the pretenders, and continues to hold its value.
Aristotle defined five reasons why gold is money in the 4th century BCE. Those five reasons are as valid today as they were then. The Rogue Investor in 2011 wrote a great article on this very topic.
Gold is Durable
Durable means being able to withstand wear, pressure, or damage. Paper money can burn. Put a paperclip on your paper money and check it after a while and hope the rust didn’t ruin your bills through humidity. Gold coins were real circulated money before 1933. The Liberty, St. Gaudens, and the Indian were 10% copper and 90% gold. The coins were made this way so they wouldn’t chip or ding easily in your pocket. Gold is durable, and real money should be durable.
Gold is Consistent
Consistent by definition means acting or done in the same way over time, especially so as to be fair or accurate. Consistent means unchanging in nature, standard, or effect over time. Since 1971, The US has doubled its debt every eight years. Gold has doubled in value every seven years. As our paper government money is debased and devalued over time, gold holds our purchasing power. A $20 gold coin in 1930 could buy a man a nice suit. That same $20 gold coin today can still buy a man a nice suit. Gold is consistent, and real money should be consistent.
Gold is Convenient
Convenient means involving little trouble or effort. Good money packs a lot of value into a small backpack or shoe box and is highly transportable. A $100,000 worth of gold can fit into a backpack when it’s time to get out of Dodge. An elderly person can carry a good amount of gold without the use of a pallet or a forklift. Gold has always been easily convertible into any currency. Gold is convenient, and real money should be convenient.
Gold is Intrinsically Valuable
The intrinsic value of something is said to be the value that that thing has “in itself,” or “for its own sake,” or “as such,” or “in its own right.” Good money is something many people want or can use. Gold has had value always anywhere in the world. Gold acts as a medium of exchange in any country at any time. Gold is required for certain scientific and manufacturing processes that are unique to it so it has a real value that no other element can replace. Since ancient civilization, from the Egyptians to the Inca, gold has held a special place of actual and symbolic value for humanity. Gold is intrinsically valuable, and real money should have intrinsic value.
Gold is Divisible
Divisible means being convertible into larger and smaller pieces without losing their value, to fit a transaction of any size. Gold is commonly found in bars of 1g, 5g, 10g, 20g, 1oz, 10oz, and kilo sizes. Gold coins today are available in 1/10oz, ¼oz, ½oz, and 1oz increments from many government mints. Pre-33 coins were minted in $5, $10, and $20 face values. Sheets and bars of gold are minted in perforated squares that can be broken off without ruining the product. Gold worked as real money in inflationary periods in Weimar Germany, Argentina, Latin America in 1994, and Zimbabwe. Gold is divisible, and real money should be divisible without losing its value.
| Gold | Silver | Fiat Money | Livestock | Business | Oil | REIT | Oil ETF | S&P 500 ETF | |
|---|---|---|---|---|---|---|---|---|---|
| Durable | Yes | Yes | Yes | No | Yes & No | Yes & No | Yes | Yes | Yes |
| Portable | Yes | Yes | Yes | Yes & No | No | No | Yes & No | Yes & No | Yes & No |
| Divisible | Yes | Yes | Yes | No | Yes | Yes | Yes | Yes | Yes |
| Intrinsic Value | Yes | Yes | No | Yes | Yes | Yes | Yes | Yes | Yes |
“Printed out of thin air” is a common phrase heard today. Gold can’t be printed out of thin air. The demand and supply of physical gold matters. More paper money was printed last year globally than all of the gold ever mined from this Earth in history. The paper money supply was increased by 20% in 2020 with the stroke of a computer key. Tens of trillions of newly printed fiat currency is on its way over the next few years. Deficit spending has set records over the past few years and no end is in sight. No end in sight until it is triggered at any time by any unknown debt instrument or unforeseen event. Our dollar is guaranteed to buy less in the future. If we consider a debt crisis, another pandemic, a stock market popping, and even more fake monopoly money, our dollar could buy a lot less in the future. Your nest egg and your safety net can’t afford a 50% or 75% loss in buying power because our bankers and politicians can’t quit the helicopter money kool-aid cocktails. The joy ride is exhilarating and fun until it is over. Protect your cash hoard, your savings, your IRA, your old 401(k), and your hard work over the past few decades by moving some of those paper assets into real money. Gold has been real money for thousands of years. Today it’s more important than ever to learn from the past. Your financial survival depends on it. Gold used to be money 3000 years ago, and gold is still the only form of real money today.
