are gold and silver money?

Recently Ben Bernanke testified in front of Congress that "Gold was not Money". I know that there are a number of members of CoinTalk that agree with old Ben, that Gold is just a pretty metal that is overvalued and will soon crash -- and that Silver is massively overvalued and should fall back to $4 to $8 an ounce very soon.

I am curious how all of you Gold and Silver "bears" out there reconcile your position with the massive money printing that has been going on since 2008?

Below is the Adjusted Monetary Base as tracked by the Federal Reserve Bank of St. Louis


You can clearly see that since late 2008, the money supply in the U.S. has skyrocketed. In other words, the Federal Reserve has printed up nearly $2.5 TRILLION in new money out of nothing. Throughout its history, the U.S. government has never abused its money printing power like it is doing now.

When I see the price of Gold and Silver rocket higher, to me it's just a reflection of MORE and MORE dollars chasing a fixed amount of gold and silver. You cannot print up more gold and silver. This is why I always talk about Gold and Silver as "hard money" that keeps it's value and doesn't get chewed up by inflation.



I mean don't get me wrong here. Can Gold and Silver drop? Yes they can, on a temporary basis.

However, my opinion is the Fed has been desperately trying every trick in the book to keep Gold and Silver from running. Why? Because rocketing gold and silver prices call attention to their uncontrolled money printing and inflationary pressure. And the Fed wants to keep this under wraps. The latest trick by the Fed was with all the margin requirement raises that has forced liquidations in the gold and silver markets, especially silver. However isnt it interesting that even with all that ... Silver is STILL floating between $35 and $40 an ounce? Even at $36 an ounce, that's a 400% (or 4x) increase in the price of silver since 2008 when it was trading at $9. And a nearly 300% increase in the price of gold.



This idea of "hard money" really hit home with me when I realized that back in 1964, it took 2 silver dimes (about 20 cents) to buy a gallon of gasoline.



Today, a silver dime is worth $2.77 and a gallon of gas is in the $3.80 range. So, using current market prices, it takes about 1.5 silver dimes to buy that same gallon of gasoline. Therefore, by 1964 hard-money standards, gasoline is cheaper today than it was in 1964. You just need to buy it with REAL (silver) dimes, like we used to have in this country.

However if you wanted to buy a gallon of gas today with our fiat currency (2011 dimes) that have no backing of anything hard (the govt can just print or mint as much as they want) -- It takes 38 dimes!

So .... 1.5 Dimes (dated 1964) = 38 Dimes (dated 2011)

How telling is that?



So those of you that say, there is no inflation, there is no dollar devaluation. It's time to open your eyes. For those waiting for a crash in gold and silver, don't hold your breath, that won't happen until countries and governments around the world adopt hard money policies, where you can't just turn on the printing presses and print money to solve financial problems.

Can gold and silver have a big drop in price in the future? Yes, there are all kinds of ways to manipulate markets. The U.S. could be forced to start selling it's gold in Fort Knox (who knows), and that could force prices down (temporarily). I mean, face it, the U.S. is basically bankrupt with 14.2 trillion dollars in debt and another 50 to 60 trillion dollars in unfunded liabilities so selling its assets might be the next course of action.

Fun times ahead.

 

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"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Gold stands as a protector of property rights. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the hidden confiscation of wealth. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." -Alan Greenspan

 

I don't get the point. Hasn't gold always been considered a store of wealth?

 

Ben Bernanke doesnt think so

 

Ben Bernake may be a prime example of the "Peter Principle"

 

Dimes for gas, dimes for gas.

Silver, gold and petroleum products have gone up disproportionately to most other tangible goods.

The value of the dollar (in terms of tangible goods as a whole) has fallen considerably.

If you price (say) a basket of groceries in dollars, you'll see that it's gotten somewhat more expensive in the last year. If you price it in gold or silver, you'll see that it's gotten a lot cheaper.

I recognize that the dollar is a moving target, but gold and silver are, too. I'd even go further and say that the dollar's movement is less volatile and more predictable -- less volatile than gold, and certainly less volatile than silver.

Now, the overall trends in value (dollar down, gold and silver up) are pretty darn clear. But I can't see how people can say "gold and silver are money" when they don't even track each other​ reliably.

 

I guess the simple answer to your question is: yes.
Gold, as a store of value, is money.
The dollar (and all fiat money), as a medium for payment for goods and services, is also money.

 

There is a gas station in organ that is selling gas for 20 cents woth 2 silver dimes read an article on it this week

 

I agree with Ben that gold is not money. "Money" is the recognized legal tender for transfer of goods and services. It is a "poor" storage of value (I also do not trust the Fed any further than I could toss them).

I can withdraw $1666 from my checking account and go to the grocery store and buy food. I can fill-up my tank full with gas. I can take my wife out for a nice dinner. I can buy ammo. I can buy Morgan dollars. But I can't to that with an ounce of gold.

Gold is a "storage of value". So are income yielding investments: Rentable housing, bonds, stocks that pay dividends, stock that reap capital gains...

I don't have a clue as the direction of any investment (including all precious metals). I have found predicting the direction of any investment, in any short term time period, to be a futile exercise.

I do own physical gold (and some silver). I own Barrick Gold and Newmont (both produce gold and pay a cash dividend). I hope the price goes up.

 

Gold has all of the characteristics of a sound foreign currency that can be quickly converted to any currency in the world. In that sense it is both a store of value and money. Think of it as money without a country.

Regarding the OP, what you are missing is that at the same time the Fed has expanded its balance sheet, there has been a significant contraction of debt through default and repayment in others. Under a fiat currency system, the money is the debt and the debt is the money and it doesn't matter whether the money comes from the Fed or any commercial bank that can create and destroy money through their own lending actions. So nothing that you posted proves the case either way because it is an incomplete analysis. So we are facing an economic situation where prices are going up partly because of the currency and partly because there are hundreds of millions of new middle class consumers in the world now than a decade ago. This is more of a shift in the demand curve to the right rather than a monetary phenomenon. The difference is subtle but important.

 

According to dictionary.com it specifically does list gold and silver as money. I previously had the impression that they are not money because you can't walk into a store and pay for things with them (minus Utah), but I suppose that's more pertinent to 'currency' than 'money'. I think the fact that the US Constitution specifically refers to the ability to 'coin money' says it all. Gold has always been a measure of value, so I wouldn't expect other goods to track inflation as closely because the function of bread is to be eaten, not a store of wealth.

 

Real money is not what you blow at the grocery store for vittles, it is what saves your bottom when the SHTF happens. More than a few people bought themselves out of sticky situations in history - with gold. Hmm, now why did the US armed services supply fighter pilots in North Africa with old British and French gold coins?

 

To me, it's not so much that the value of gold and silver become higher, but that the buying power of the dollar has been decreasing. If I had $10,000 I could expect a certain amount of goods for that cash, but as the dollar becomes less powerful due to it being printed at ridiculous rates, it cost more dollars to purchase the same amount of goods. If they were to destroy currency that is in circulation the dollar's buying power would rise again and the price of goods including gold and silver would likely drop. I would lose "money" but expect to be able to get the same amount of goods as my initial $10,000 would have purchased since everything else drops in price too. It seems that cash reserves is just as big a gamble as precious metals are except cash is much easier to manipulate.

 

This is a friendly discussion.

But what currency is better?

The Euro is going bankrupt. They owe more than they can pay back.

The Yuan is controlled by a Communist Country.

So, what is the current safe currency? What currency is pegged to gold?

You want to open a new can of worms?

But really, does not the guy with the best strategy win? Is this not a nation that relies on enterprise from the individual?

And what part of the Constitution talks about the ability to "Coin money"? I have read the Constitution and the 27 Amendments. What exactly does "coin money" mean? :rollling:

When exactly is this SHTF going to happen? What if it does not happen?

I understand, but I would go to $100,000.

I'd suggest this:

• No debt: Own your home (and cars--never ever borrow money).
• Have at least a year's salary in cash.
• Invest the other portion properly.
• Live well below your means.

 

Love the quote. Ironic. Sounds like a young (ish) Greenspan speaking - I'm guessing from the 60's?

 

Good thread and it has been posted and roundly debated here before. It's an interesting academic exercise to make a distinction between "currency", "Money" and even "Store of value". For me, the bottom line is when fiat's are strong life is good and PM's are regarded as "old world" and even irrelevant. When fiats become heavily manipulated and people and other govt's begin losing faith, PM's become highly sought after; especially when there are no clear alternatives to park cash for very large economies.

Regards,

Bluesboy65

 

Here is the link I was perusing when I made my last post in regards to this that will show the Constitutional references.

http://news.goldseek.com/GoldSeek/1157122920.php

I was a little bit puzzled as Wikipedia does not have in existence some of the articles being referred to here, but I was able to validate at least one of the missing ones from Wikipedia at this link so that doesn't invalidate the goldseek reference.

http://press-pubs.uchicago.edu/founders/documents/a1_8_5s10.html

One excerpt from Article 1, Section 8 in particular strikes me:

In this context, the word coin has two meanings. Firstly it is synonymous with 'create', but secondly it is synonymous with 'money'. The reason I said this phrase was telling before is because back when it was written there wasn't much distinction between coins and money, because money was coins made of gold and silver.

 

I think that "coin" was purposefully used in this case because of all the problems that occurred with the printing of paper Continental Currency that became, well, "not worth a Continental".

 

I think you are drifting off track here. Coin in the context "to coin money" is being used as a verb -- literally to accept gold and silver at the US mint from citizens and to stamp it into US coinage to use as money. It doesn't mean create. There is nothing in the notes to the Constitutional Convention to suggest that anybody there believed the Federal Government could "create" money. The money creation myth only came about in the 20th century. The difference is small but important.