Why is Silver Priced at its Price and Gold at its Price

The Fed and Treasury and business media have engaged in a multi-year campaign to convince people that low interest rates are better than high rates, and zero rates are preferable over everything. But this is wrong unless you happen to be one of the elite few who can borrow from the Fed at their posted rate to participate in the carry trade. Lower interest rates destroy capital by making it unproductive. High rates don't cause inflation, they prevent it. Interest rates are the price of money, and the Fed is engaged in good old fashion price fixing in one of the most important prices in the economy with all of the bad side-effects you might expect from price fixing. I don't think this is as well understood or remembered by the current generation of investors as it was in, say, the 1970's or prior. That was one reason why Paul Volker discontinued the Fed policy of setting interest rates, and let them float instead to let the market set the price of money. And, as we all know from history, it worked.

 

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