Capitalist Eric

Truth is treason in an empire of lies.

Why does GOLD matter? What about SILVER?

with 11 comments

From my last blog post, I pointed out that gold-backing is something that is necessary for a solid currency, especially a worlds’ reserve currency.  We- the USA- lost the right to have the dollar as the reserve currency, as soon as President Richard Nixon took that away, in 1971.  Since then, the slow and inexorable inflation creep has eroded our dollar to near-worthlessness, and taken us over the cliff into abject bankruptcy.

Some brilliant mind made the following comment:

“Gold has no more value than paper dollars.  The only value is in production, the basics, which are food, shelter, and then safety.”

Clearly, the writer of this confuses fiat-money and gold as being exactly the same.  Fiat money, by the way, is money backed by…  nothing, except the faith that it will be redeemable at some point for its’ printed value.  The question that obviously needs addressed is, is gold exactly the same as fiat-money?

Money has to have certain qualities to make it useful and generally accepted AS money.  Well, let’s go down the list of what money is, and compare gold against fiat-money (dollars, Euros or any other currency you can think of),  and the commenter’s ideas about “production…  food, shelter and then safety.” 

1.  First of all, money must be durable, and it must be a storable form of wealth.  If you stash it away for future use, it should be able to be used in the future, for whatever you wanted to spend it on.   For gold and silver (and all other precious metals), this is easy.  Printed fiat-currency, easy.  Production capacity and Maslow’s Hierarchy of Needs (basic physical requirements)?  No, of course not.

2.  Next, money must be easily divisible.  Physical metals can be easily divided, as can fiat-money.  Production and basic physical needs are not divisible, and thus we check them off the list.

3.  Money must be easily transportable.  If your money consisted of boulders (bigger ones meant more value), how would you get them to the market to buy anything?  So here again, precious metals and fiat currencies do very well, while production and physical needs are again out of the picture.  (Indeed, I think we can dispense with the nonsense about production and physical needs.)

4.  Finally, money must impossible to counterfeit.  That is, it can’t be easily duplicated or created, either digitally or physically.  HERE is where precious metals get their luster; each ounce of gold or silver out of the ground takes a lot of work, and there is no way to magically create new gold reserves for a country on a whim.  Fiat currencies, on the other hand, can literally be printed on a whim.  But the corrupt bankster Federal Reserve Chairman Ben Bernanke is digitally inflating the money supply to the tune of $85 Billion per month, just to keep the stock market from imploding, as well as keeping the TBTF banks alive.  The economic situation now is such that as soon as Bernanke stops this, the house of cards that is our economy- what little that remains- will collapse.

As you can see, there is a BIG difference between gold and other precious metals, and fiat currencies.  Gold and silver are REAL money.  Paper currencies which cannot be directly exchanged for a designated amount of precious metals are FAKE money.

This all sounds well and good, but let’s use a real-world example, shall we?  In 1920, the price of the average house was $8,094.  An ounce of gold at that time was $20.68.  So, doing a little math, it took 391.4 ounces of gold to buy the average house.

Going by February 2013 prices, the average price of a house was $152,000, and the price of gold was ~$1370 per ounce.  Doing the same math, it takes 110 ounces of gold to buy a house…

So what this shows is that the $1 bill that you had in 1920 is now worth…  5.3 cents.  The Fed has literally printed away 94.675% of the value of the dollar, since 1920.

Yet, the price of the house- in ounces of gold- has actually gone down!  Had your father or grandfather stored away those 391 ounces of gold, you’d be able to buy the average house, and still have $385,518 worth of gold left over!!!

THIS is why gold, silver and other precious metals matter.  They are a store of wealth, that the government cannot invisibly tax via the printing presses (or digital currency creation).  Precious metals are the ONLY means of storing wealth, where the control is exclusively yours.  As the example with the house shows, precious metals preserve your purchasing power, regardless of what currencies are in play, no matter where you are in the world.

I’m sure Bernanke would love to have a way to magically spin straw into gold, and save the bankster system, but despite our seemingly enlightened society, we’ve yet to figure out a way to defy the laws of physics.  Understand, the Federal Reserve was specifically created to entice Americans to believe that fiat-money was real money, and that gold was not.  But their scam has lasted only 100 years, versus 5000 years of history.

Dollars, euros, yuan or yen, it doesn’t matter…  unless they are backed by precious metals- and can be redeemed for a specific amount of those metals at any time- they are doomed to failure.

Governments will always strive to have their currency by the worlds’ reserve currency, because it gives them a huge amount of financial power over all others.  But they will abuse it, overprint, lapse into bankruptcy and financial collapse.  This is the nature of governments, and the Laws of Economics deal heavy punishment to those who abuse such power.  WE are now about to be on the receiving end of the payback…  and the ONLY way to protect what purchasing power you have…  is to convert it to precious metals, as fast as you can.

So my advice, tonight, is to do exactly that; buy silver or gold wherever you can- at dealers (if they have any inventory), Craigslist, whatever…  but convert all the cash you can, because time is running out…  and when the dollar collapses, it won’t take long until you can’t buy it, at any price.

Written by capitalisteric

May 15, 2013 at 7:02 am

Posted in Uncategorized

11 Responses

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  1. […] View full post on capitalisteric […]

  2. […] Why does GOLD matter? What about SILVER? […]

  3. Hmmm, based on the four requirements listed for “Money,” I’m betting on guns and ammunition. Guns are my “large capital” investments, and ammo is for my smaller capital activities. They certainly meet all the criteria, AND have the added benefit of actually being able to put food on the table without my needing anybody else.
    And I’m pretty certain that the value of my guns and ammunition won’t suffer from nearly the swings in the market that metals or currency values do.

    Green Eyed Jinn

    May 20, 2013 at 1:18 pm

    • The three weapons of survival are secured land, seed and livestock for food/resources and a way to defend it or take it. Depending on your disposition or dispossession, the problem with all currencies is you have to be able to trade it from a position of strength. In times of shortages or rationing FEMA has already sequestered the work and authority to take over the entire distribution network. If you are encumbered with family then your priorities will be divided if not almost certainly there will be a division or implementation of separating human resources by gender. Which would be an all too familiar historic strategy, but the ground work has already been done to normalize municipal actions to do this through the domestic courts. So the effective legal mechanisms are most certainly being fine tuned for the big one if it arrives. The issue of money whatever form it takes is what is it worth ?, those with paper scrip or certificates denoting the same can have a wheel barrow full of them and the strength of the barter is simple. How much is a loaf of bread and a gallon of potable water worth ? Similarly with coinage, you can have all that you can stash and to many who know the value of forever currencies it will always be an investment not a bartering instrument. I can be assured that if on the first day your gold coin is not an equitable exchange for a loaf of bread, in a week or so you will exchange ten of them for one loaf.

      More importantly can you keep it. ? If it is made illegal by statute or criminal penalties as it is will be for weapons and ammo. All these things are instruments of power and that is not on the agenda.

      As for currencies the forever currency is and always will be gold it has the qualities as described to validate it’s status, it is not easily destroyed nor is it easily forged. The dollar has two facets at the current time, one is as the world reserve and the other which we deal with is the domestic currency. The shift from gold was masterful, if as I understand the concept. The very quality of golds inertness was leveraged to the new black gold which led to the exploding fractional system. In simple terms for example I swap my one ounce of gold for ten barrels of oil. While gold is a stored value and validated as such, oil has no such properties, it can be many products but unlike gold those products create additional revenue streams. In the simple example, we can leverage the gold and with the profits from the ten barrels buy back the one ounce of gold, a good game to play with if you think about it. But my point is if you follow my meandering train of thought that while gold is inert, oil is not it is the very substance of modern commerce and has infinite value depending on how it is used, who controls it and more importantly we can possibly understand that the reserve currency needs no gold to back it. The federal reserve needs only to secure and keep its reserve status by controlling oil and regulating it wherever it may be found.

      For most people Sadam of Iraq was a very bad guy, but so are a few others that the US does not bother with even if they claim to have nukes. The problem the US had with Sadam was he threatened to go into rubles or Renminbi’s. Definitely not something you would do if you have control of large oil reserves, similarly with the potential of influencing large sectors of populations other than mainstream denominational or incorporated consumers.

      Andren Essen

      May 24, 2013 at 12:48 am

      • A key aspect of gold is that it’s fungible, and while gold can’t be utilized as a direct consummable (such as to make jewelry or circuitry) it is recognized by most as a store of wealth. Oil, by its nature, cannot be a very good store of wealth. It has storage and fungibility issues.

        You’re correct that the U.S.A. has been attacking those countries that want to quit using the dollar as a medium of exchange, but this is a tactical approach that is doomed to fail, as it has throughout history.

        We are faced with “tough times,” for certain.


        May 24, 2013 at 4:20 pm

  4. Your analysis is tight, logical and flawed. Gold hording can easily be declared illegal, gold transactions can be monitored and the gold collected. In Illinois, for example, all gold sales must be reported to the State. As any gun owner can tell you, registration leads to confiscation. There is no mechanism to hoard value that I’m aware of that cannot be co-opted by the state. Even raising chickens for eggs is regulated. Any static source of value may be identified, isolated and confiscated. Paper money may be scrapped in favor of electronic money, which will destroy the pesky “black market” problem, as there will be no way to conduct any type of transaction without a paper trail. If you cannot barter with gold for goods or services, publicly, without state sanctions, you might as well collect rocks. The only source of value is personal productivity.

    Sarah Miller

    May 26, 2013 at 5:27 am

    • Governments tighten their grip as they become ever more desperate (and oh, boy, is Illinois desperate, eh?). But are such measures effective? One need only look at gun-crime statistics in Chicago to know that such measures are not. Such is also the case for attempting to monitor precious-metals transactions.

      While it is difficult to hide your raising of chickens and collecting eggs, it’s certainly not impossible, but there are measures that must be taken, to make sure you avoid unwanted attention from government drones… difficult, but not impossible. Going back to the purchase of precious metals, I would suggest bartering/sales websites like Craigslist. Going across the border to neighboring states to purchase PMs is relatively simple, and absent risk or undue attention… It’s paperless, as well, so you can acquire all that you want invisibly. I would imagine the Illinois bureaucrats really don’t like that idea, but there’s nothing they can do about it.

      On a wider level, the government has already taken measures to try to monitor PM transactions by requiring dealers to fill out certain documents, yet this hasn’t stopped the… anonymous transactions by those who wish to avoid unwanted attention by the Feds (for whatever reason).

      As an aside, storing (or “hoarding,” as you call it) wealth, is an entirely practical thing, as silver (and especially) gold carry a large amount of stored value, while being relatively easy to store/hide/conceal from those who might get… ideas. You can’t steal what you can’t find, right?

      Finally, while the 1933 outlawing of gold went through, it was mainly due to the public having blind faith that the government was acting in the interests of the country at large. Nowadays, however, people are not so naive, and I am quite certain that few will be willing to comply with a similar measure, now. And, as the we continue to spiral down the toilet (national economy), the faith in the dollar will continue to collapse, and the end will not be pretty… those who have stored wealth in something that the government can neither counterfeit nor steal (due to undocumented transactions) will represent even more value, as time goes on… and there will be others willing to trade for recognizeable stored wealth.

      I understand why you would think that “personal productivity” is the only source of value… but that really depends… What IS your personal productivity in? Are you a cubical-dwelling office worker? A blacksmith or gunsmith? Are you a doctor or a cable-repair person? Bank teller or engineering manager? If I needed a pair of shoes repaired, you could by *any* of those things, yet have no source of value for me. The “personal productivity” idea only works as long as you can barter with someone else who needs exactly what you have to offer, and they have something you need. In such situations, you and the other person would both go away empty-handed… unless you have a medium of exchange that is easily recognized, accepted and able to be stored for future use…

      [And this is another key problem with personal productivity as a source of value; can you *store* your productivity? If you’re a gunsmith, a blacksmith or seamstress, the answer is “probably.” If you’re a farmer on a chicken-ranch, a doctor or an engineer, the answers become far more uncertain…]

      Going back to having a medium of exchange… When your needs and the needs of the person you’re bargaining with are divergent, you must have money of some form, to allow the transaction to proceed. Precious metals are the *ultimate* form of money…

      This, of course, iswhy the government is so VERY interested in trying to monitor where all the real money is… but that’s another blog for another day.

      Thanks for the reply and feedback. 🙂


      May 26, 2013 at 6:17 am

      • Data from the Census Bureau, as of and up to December 2012 reveals the net export of gold as a dollar figure of $2.5 billion, which equates to roughly 50 tonnes. An analysis over the last 15 years indicates an export total of just over @5.5 k tonnes (5,500(rounded numbers for ease of understanding)). During the same period, production capacity from the internal domestic and industrial market extracted just about @7.5k Tonnes (7,500) including recyclables. Market saturation fulfilling demand for the same period was reported as @ 6.5k tonnes (6,500). These figures are problematic since they reveal an export deficit over the same period that amounts to 7500 – 6500 = 1000 (+ 4500). Therefore we ask the question where did we obtain the deficient 4500 tonnes of gold from ?. If the fed claims 8300 tonnes in reserves over the same period , what was the deficient source fulfilled by to satisfy export numbers. ? So in the conundrum of missing factors and official sources, someone owns it or someone is leasing it regardless of the composition of the agreement. If true the liabilities of the bullion authorities has to be astronomical, especially under the doctrine of too big to fail. Which indirectly means the liability will be laid at the doorstep of US flesh and blood.
        It further indicates the silent and continued drive to extract all unsecured gold from weak sources at less than equitable terms , not including the age old technique of ‘shaving’ by reducing a few K’s out of the domestic jewelry market as the new acceptable gold composition.
        GLD as a commodity is tracking its respective paper brother such as ETF’s, but it appears to be a one way action of sucking market liquidity from all the bit players, while starting to indicate that as a commodity gold will be only for large players not munchkins or those who provide a good living for brokers. Munchkins will not have access to gold, which also means indirectly it would be basically beyond the means of small players to do anything with gold even to purchase it, at any price. Golds sister, Silver too will follow the same fate.
        We can see this if you observe the claimed inventory of 1300 tonnes in gold in January of 13 and then take out your dipstick for April and take a reading . If the theory holds up the missing @250 tonnes went where ?
        Gold as an investment will always gravitate to the gold fingers of the world, it is their gig. Whether gold is in paper or physical, the concept follows the annals of Ayn Randians great end product schema. People in the ETF market will only be getting checks not the opportunity to own the real stuff. That will as some have advocated be a good reason to get into Gold and Silver. The physical market for Gold and silver will become the benchmark for price with actual ownership setting the standard. Based on consumer behavior and shock tests the local authorities should have no trouble confiscating whatever valued resources from local populations due to the mindset instilled in them. Based on previous or older histories the only Gold that would not be extractable will be that which has been buried with it’s location only available to the one who buried it.
        In simple terms once market trust falters, the only thing that matters is owning value for value. That also means physical access to your gold for validation. Paper certificates will make good toilet paper in such circumstances and owning the real stuff a desirable goal. However in the land of the free and the brave, it is already illegal to own without licensure large hoards without declaring it and a zip code for the handover point.

        Andren Essen

        May 26, 2013 at 4:21 pm

    • Apologies, I never read your response and therefore defer to your blurb as a good summary as oppose to my long winded attempt. However I do throw caution in subjecting the the argument to productivity, more especially with most labor markets entering the W2 or human resource value. Federally notionalism per captive capita as opposed to the mindest that assumes value based on credit rating or work value as an individual is a case of thinking beyond the box. A few states apart from IL have the dubious distinction of higher value welfare states All of them subject to some pretty social heavy shake and bake policies for determinant social outcomes. with federal scrip as the incentive. In addition to a boatload of value added state only endorsed services. What I am finding is individually during ones own lifespan yes indeed you can basically make a lot of scrip, but you cannot avow inheritance or anything meaningful. Most of it appears to be earmarked for destination in to state or federal coffers. There are many agencies, highly subsidized social tools and policies that would indicate the outcome is pretty much solid. At grass roots social levels there is no effective response to defeat it.

      Andren Essen

      May 26, 2013 at 6:50 pm

  5. From the book The money GPS a summary

    David Quintieri, author of “The Money GPS,” is so worried about the unfolding economic calamity he wrote a book about how to survive it. Quintieri says, “There is no other way out but a collapse . . . the collapse isn’t coming, we’ve already begun.” One sure sign the collapse is in full swing, Quintieri contends, “There’s no semblance of a free market what-so-ever, that’s completely gone. The numbers you see on TV and newspapers are completely fraudulent.”

    So, what do you need to do to prepare? Quintieri says, “When the collapse happens, those holding real assets are going to be the ones with all the wealth.”

    Don’t expect cash in the bank to help you either, Quintieri predicts, “They’re going to go money printing all the way. But it doesn’t go to the people, it goes to the banks. And whatever money’s left behind, they’re going to do a bail-in with it.” Join Greg Hunter as he goes One-on-One with David Quintieri, author of “The Money GPS.”

    For those who enjoy the patriot act do understand that US corporations including municipal do not have to be patriotic they can invest pension and liquidity funds in slave labor in Bangledesh or a new Chevy plant in Mexico or Guatemala, it is the profit return that counts not where it is that is problematic. Unless you are a US citizen, then that money you have earned is privileged and subject to what they determine is good for you. See ., they or the big money players just have to understand the money rules of paying the master to play whikle making sure the beneficiary is always the state and indirectly the federal government. You also need to pay the master to play on his territory which is also dangerous if you do not pay your dues for abusing his citizens. Remember Al Capone, allegedly responsible for killing many citizens, but the Fed did not write him up for even 2nd degree manslaughter or bootlegging. No they simply stated that he should have paid taxes on it, and because he kept books, they used those books to calculate the loss. That was more important to the fed, see the problem ? On who runs who.

    USA PATRIOT Act. section, 311, authorizes the US government to blacklist any foreign bank, and for the target bank the world at large still relies heavily on the US financial system for international trade and banking EOD settlement. So any bank who does not play and is cut off from it, the result for that bank is a done deal. No transactions that can be verified.

    The biggest issue is what this may mean for Bitcoin and I have seen many view it as a future currency both as an investment and a good method of conducting business. The government views it as a threat to it’s stability and price controls because it certainly does not seem to have a huge flashing warning in even small print indicating that the government is out there targeting digital currencies and may at any time figure out a way to eliminate it.

    The latest news regarding the Liberty Reserve fed take down, was a very easy fed target due to the centralized blueprint for the Liberty exchange and like all centralized processes you only need to cut off the blood supply to the head and it is done. The rest of the body cannot accept orders anymore and becomess non functional. The liberty Reserve’s foolish notion that it could rely on a single platform was a big mistake. Now with it’s sequestration, the fed has all the accounts and holders including distribution pathways for that service provider. No one, no matter the account holder or innocence has a chance to unfreeze their assets and those that do will probably be subject to some Guantanamo techniques for pursuasion, with nary a public interest for being a bad person. .

    Bitcoin, on the other hand, is decentralized for now. Account and transaction data is distributed across the entire user base. There are millions of bitcoin players throughout the world, so it’s a bit of a worm for the government to excise. They are more likely to crack it by simply filtering network traffic for it’s simple but specific crytographic contents and arrest the transaction midpoint through any of the major filtering points and flag them as either a virus or for redirection to a safe house or repository somewhere in the federal reserves system. The current strategy of going after Mt. Gox as a major bitcoin exchange on US or federal turf was only to be expected. The fed wants the peoples choices limited only to trading on federal terms and have the money swindled out of them by those who are approved to swindle citizens for snake oil.

    The Liberty Reserve case exemplifies a serious problem with theoretical free trade and how far there is a willingness for many to subscribe to fed first and patriotism, with full ignorance of the fact that under the newer publicly approved money laws. The fed is legally willing to go after any threat it can by virtue of those laws as a terroristic or constitutional rights type of transaction. Even citing absurd anti-terrorism legislation, to exceed their jurisdiction and take down their target.

    Andren Essen

    May 29, 2013 at 6:21 pm

  6. […] I’d mentioned before, money is not just an exchangeable commodity for commerce.  “Good” money also has […]

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