Gold and silver are often disparaged as "useless" or "barbarous relics" by investors and economists. But as Mike Maharrey explains in this episode of the Money Metals' Midweek Memo, gold and silver are real money.
In this show, Mike argues that a return to sound money would help reign in out-of-control government spending and the constant currency depreciation we're experiencing, and he offers some strategies to move in that direction.
Mike opens the show with a trip down memory lane, recalling the Coca-Cola ad campaign featuring the slogan, "It's the Real Thing."
This sets up the primary thrust of this week's show: when it comes to money, gold and silver are the real thing.
Mike kicks off by pointing out that "modern financial systems spurn gold. Governments prefer fiat money that they can easily manipulate for their own purposes."
Primarily, they need the ability to create more money without limits in order to feed their appetite for spending. I talked last week about how Fed money printing enables the federal government’s excessive borrowing and spending.
Mike demonstrates this problem by highlighting two bond auctions held by the U.S. Treasury earlier in the week. The results reveal a big problem facing the federal government and underscore the rot in the current fiat money system. He also mentions how Jerome Powell recently acknowledged that U.S. government borrowing and spending is unsustainable, but he seems oblivious to the fact that he's part of the problem.
Mike then explains the prevailing attitude in the mainstream world of investing and economics -- gold and silver are useless. Of course, this is a ridiculous assertion
He then pivots into the thrust of the discussion, saying, "At its core, gold is money, and it has been for thousands of years."
In the course of the discussion, Mike defines money and explains how gold and silver possess all of the characteristics of sound money outlined by Aristotle.
He goes on to contrast sound money with fiat money, arguing that gold and silver are superior in every way.
So why do we have fiat?
Because the government monopolized money and then convinced everybody that fiat is fine.
We would be much better off with a sound money system. But how do we get there? Mike argues that we can't count on the federal government to fix the federal government, but there are efforts at the state level to create currency competition and make a way for sound money.
Mike explains three state-level efforts happening today.
- States officially declaring gold and silver legal tender within their jurisdictions
- Repealing taxes on gold and silver
- Authorizing state-run bullion depositories
Mike emphasized that these political efforts are only part of the equation.
What it comes down to is human action.
States passing laws encouraging the use of gold and silver as money means nothing if individuals continue to support the government fiat regime by using government fiat money - whether paper or digital.
People’s willingness to use government fiat is what got us into this position to begin with.
Instead, it will take people and businesses willing to use and accept forms of money that are not created and controlled by the government.
Ideally, money would evolve within a free market based on consumer choice outside of government control.
Mike wraps up the show explaining how you can have sound money today!
Articles and Links Mentioned in the Show
Zimbabwe Floats the Idea of Putting Its Currency on a Gold Standard
About the Author:
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
