While gold trades as a currency (or “medium of exchange”) and also is a “store of value,” and even a “unit of account” for some, very little is actually consumed. Economically speaking, gold trades as money, even in our modern world. Gold is a luxury good with many industrial applications, but insignificant industrial consumption due to its high price per gram (about $30/gram right now). Its major market as a luxury good is Indian women's jewelry, but to these women the gold is their money, or insurance, if their mate leaves, dies, or is disabled so the metal is not consumed – it can be easily recovered. ( Photo) (2)
To make my case that gold is money, what seems to be little known is that the gold market is also quite large – the LBMA in 2008 traded about $80 billion USD per trading DAY per the data collected by the IFSL 2009 Bullion Markets Report p3/8 – which I took the time to verify to be correct from its original sources – or $20.3 Trillion in turnover in 2008 and 254 LBMA trading days. However, the IFSL makes a significant note that this volume is quite likely three-to-five times larger since much of the transactions are increasingly netted out and cleared without appearing in the statistics. Please compare this to the 2008 GDP of the United States at $15 Trillion and understand the rough estimate that 75% of the world's trade in gold (and half of the world's silver) is traded via the LBMA.
Silver, on the other hand, serves as both an industrial metal and a “store of value” for silver investors. As we learned here, both silver and gold are precious metals since there is very little aboveground stock. All of the gold stock in the world would fit into a cube 20.5 meters to a side. Due to high amounts of industrial usage, the silver stock is even smaller, less than 14.5 meters to a side.
However, as seen below, the silver market size at $10 billion is minuscule – just a tiny fraction of a percent – compared to the gold market. What is really mind-blowing is that the LBMA traded the entire annual mine production of silver every 6 days, while the annual mine production of gold was traded every 4-5 days, despite the fact that silver is priced as if it were a commodity similar to wheat, corn, or copper. You see, the aboveground stock of gold valued at about $4100 billion is equivalent to roughly 5.2 billion troy ounces of gold, but the annual mine production is only 0.087 billion. The aboveground stock of silver valued at $10 billion is estimated at roughly 1.0 billion troy ounces of silver and the annual mine production of silver is about 0.671 billion. (IFSL report, pages 5-8/8)
So the annual “stocks-to-flow” ratio of gold is 60, meaning that there is the equivalent of ~60 years of production aboveground for every year of production. In contrast, for silver the ratio is about 1.5, which is much closer to typical commodities which all lie around one year of production in aboveground stocks for every year of production. Gold is not just another commodity; mankind will never achieve perfection in all things, but nature's “metal of the sun” is as close to perfect money as mankind is going to get. Modern-day gold mines are lucky to exceed 1 gram of gold from each metric ton (2,205 pounds) ground and processed. If you never have, try holding a one troy ounce (31.1 gram) gold coin in your hand. It's 2.5 times denser than steel and took a lot of effort and risk to mine.
So, the equivalent of the entire aboveground stock of gold is exchanged every 269 trading days while the equivalent of the entire aboveground stock of silver is exchanged every 9 trading days at the LBMA.
Finally, if that did not convince you, please check forex.com. See XAG and XAU? That's our trusty friends, silver and gold. Both are internationally recognized currencies as Michael Stoddard writes in “The Silver Phoenix is Rising Again.”
I interpret the all of the preceding information to mean that gold has never stopped being used as both a money and a currency, even in the last 38 years of floating fiat exchange rates. Silver is money as well, but is not traded in high enough volumes, in dollar terms since the price per ounce is too low, to be considered a currency. Jason Hommel reinforces my point in his recent speech “Why Silver is Money.”
Folks, this “stocks-to-flow” fact is well understood, but remains unstated, by the financial elite, most notably Obama's chief economic advisor and modern-day John Law, Lawrence Summers. If the world population widely understands the above and begin to both acquire the physical metal and clamor for the restoration of gold and silver as honest money, governments and central bankers could very well lose what is amounting to a stranglehold over the global economy. The world would realize that central banks are not needed whatsoever.
“Financial crisis”? Screw that, this is an all-out Gold War. Go GATA!!
For the Republic,
Jake Towne, the Champion of the Constitution
Per the Constitution of the United States, Congress and all states are forbidden to “make any Thing but gold and silver Coin a Tender in Payment of Debts.”
Part 2 is now finished on silver backwardation and yet another new concern on the ETF SLV “Silver Backwardation Bout Ends as SLV Fails to Announce its New Custodian (PART 2/2)“
The Money Matrix series was recently updated with two articles on credit economics and OTC “dark” derivatives if you are interested “The Money Matrix on “Credetary” Inflation and Deflation (PART 9/15)“ “The Money Matrix – Bring Light to Dark Derivatives! (PART 11/15)”
PS I realize I have a strong stance on the subject but please offer any rebuttals or feel free to ask any questions. I suppose another conclusion is that since gold trades around a quarter-quadrillion dollars every day, if you have saved money, depending on your circumstances it may be extremely foolish to not at least have some gold.
April 13 Update – Off topic, but please read this if you like, it is a handout and flyer for this Wednesday “Thank You for Paying Your “Voluntary” Income Tax! Love, The IRS”
[Reach the Author Here!] www.CampaignForLiberty.com www.EndTheFED.us (Below is mine, photos linked above, graphs created by me from the same data the IFSL used. Feel free to use the below anywhere to promote Honest Money!)
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.
Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.
Tu ne cede malis sed contra audentior ito. Do not give in to evil but proceed ever more boldly against it.
As a disclaimer of sorts, I am a supporter of owning physical gold, physical silver, www.gata.org and www.goldmoney.com. Any investment or financial views expressed in the article are mine and mine alone, so make your own financial decisions by educating yourself. All I am doing is sharing my views to help you decide, even if its just to become aware that you do have a decision to make. These articles reflect the my opinion and are by no means a guarantee of future economic conditions. My articles are provided for INFORMATIONAL PURPOSES ONLY and are actually NOT MEANT to provide investment advice to anyone. You can even say its a charitable but naive act, given the historical tendency of the US government to oppress and steal.
Other Related Articles by the Author
The Money Matrix – Who Owns the FED (PART 7/15)
Part I: “The End for the Dollar and all Fiat Currencies (1/5)“ Part II: “The Next Bubble to Pop! (2/4)“ Part III: “On Gold and Market Manipulation (3/5)“ Part IV: “The Significance of Gold Backwardation Explained (4/5)“ Part V: “More on Gold and Silver Backwardation and Manipulation (5/5)“ The “We Didn't Learn Much from the Great Depression” Miniseries
- The “Great Slump” of 2008 (PART 1/2)
- Bernanke's Great Lie – The “Gold Standard” and the Great Depression (PART 2/2)
Gold and Silver Investigation Source List
The People's Money – a Facebook group that I assist with news postings.
A Quick History of Gold
GO GATA! The premise of the Gold Anti-Trust Action Committee that the world gold market is artificially suppressed by central banks in order to make their currencies look stronger. 25 minute intro Part (1) (2) (3)
www.GoldMoney.com – GoldMoney is an international gold and silver warehouse with insured vaults in London and Zurich. Ability to hold and pay interest on six major fiat currencies, issue payments in goldgrams, silver ounces, etc. Think of them as an alternative way to diversify where and how your physical metal is stored, but I urge you to be wary and thoroughly investigate this and ANY method where someone else holds your metal for you before investing. The best is always physical possession (or pay for storage at a Brinks-type depository) although you should always be creative with your storage locations
The World Gold Council – A wealth of information on central bank holding, gold derivatives, supply and demand statistics and more. Free login required.
Rothbard, Murray N. “What has the Government Done with Our Money?” (1990) A 50-page document that describes Austrian economics. Rothbard has written a host of other great sources as well, like the 1994 work “The Case Against the Fed.”
www.jsmineset.com Expert Jim Sinclair shares his thoughts on gold investing, financial markets, and trading. For free!
www.DollarCollapse.com This site's main use is as a newsfeed for dollar, gold, and housing market current events. They explain their dollar collapse theory here, which I partly agree with.
www.SilverSeek.com I particularly enjoy reading the columns of Theodore Butler and Jason Hommel
www.GoldSeek.com The sister site of SilverSeek. The Mogambu Guru's (aka Richard Daughty) column has tunnel vision but hilarious and educational..
www.professorfekete.com A seriously pro-gold scholar.
www.lemetropolecafe.com Offers timely gold market advice and a daily “Midas” column. Try the 2-week free trial.
Paul, Ron. “Pillars of Prosperity.” (2008) A 400+ page compilation of Dr. Paul's writings. After reading these, one realizes that Dr. Paul did very little recent work in putting together his best-selling “The Revolution” as most of this book was written 20+ years ago.
Millar, Peter. “The Relevance and Importance of Gold in the World Monetary System.” (2006). Self-explanatory title. Understanding Graph 2 on page 3 is key.
Greenspan, Alan. “Gold and Economic Freedom.” (1966) Interesting work from the Maestro prior to his conversion to inflationary Keynesian theory.Tweet
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