Gold Money – Since starting this APM Precious Metals Blog last year I have uncovered an oddity – the task of writing about simple things in simple terms is not simple. Maybe this is because we make it unnecessarily that way. After all, when Yogi Berra described a restaurant as being “so crowded no one goes there anymore” we joke about it, but we get the idea – rather clearly. Now that the literacy standard for this Post has been set, let me try to explain the difference between paper money and gold money in a manner that is easy to understand.
It strikes me that paper money can be described in simple terms as a promise made. The promise is basically this – at any point in the future you will be able to get something you need or want for it. After all, in and of itself, it has no value. It is merely a piece of paper with ink on it. In actuality a blank piece of paper would have more value because it could be used to make a grocery list or something of this sort. We do not think about it this way because we have always been able to use paper money in exchange for something we need or want. But nevertheless it is the promise that gives it value, not the paper dollar itself, for in reality the ink on the paper destroys the value of the paper in much the same way that a grocery list makes the paper it is written on useless for any other purpose.
The Value of Gold Precedes It’s Use as Gold Money
Now lets compare paper money with gold and gold money. First, lets address the question – why talk about gold money?, who cares? Well, unless one thinks history has absolutely no meaning, the simple fact is that since the beginning of so called “complex” or “modern” society some 5000 years ago (basically when our ancestors settled down from the hunting and gathering era), gold money has been the most common form of money. So, in terms of a promise, what is gold money? I think we can look at gold money as a promise kept in the sense that the value of gold precedes its use as gold money. Why is this so? Well, first of all gold is one of the rarest substances on earth. And it takes a lot of effort to find it, mine it and make it. Each step of the manufacturing process takes a lot of time and adds value to the production of the final product. If you do not think this is so, why does 14 carat gold jewelry have value? Much more value than carnival jewelry of the same design? Clearly it is the gold content that makes 14 carat jewelry so desirable and valuable. In this sense, gold money is a 24 carat form of jewelry. Gold money is the purest form of gold in the world. It is not a future promise of something. Gold money actually already is something. And what it is, has served as money 90% of the time over the past 5000 years.
Every other form of money – without exception, most notably paper with ink images, has had a very short life span. This current paper money era will not be the one exception. If you think otherwise, look at the chart above. A promise of something tangible in the future is not the same as something tangible now. All it takes is a lack of trust in the confidence of paper money to make it worthless. And that’s merely a state of mind. The state of mind that gives trust to paper money can change suddenly and rapidly. And this will happen. Only the timing is uncertain.
Think of Gold Money as a Higher Form of Gold Jewelry
If you are still uncertain about owning gold money in the form of pure physical gold bullion think of it as buying a much higher grade of gold jewelry. Why would you buy 10, 12 or 14 carat gold jewelry but have concern about owning gold money in the form of 24 carat pure gold coins and bars? If it is the gold content of jewelry that gives gold jewelry its value wouldn’t an item that is 100% gold rather than 30-50% gold be more valuable and reassuring to own?
The best time to buy gold money in the form of pure gold bullion coins and bars is when the masses still believe in the future promise of intrinsically valueless paper money. That state of mind can and will change. It is just a matter of time. If you have not yet diversified some of your paper assets into physical gold bullion gold money, call APM and we will help you get started. No customer is too small or too large and no question is bad unless it goes unasked. We look forward to helping you convert some of your paper assets into gold money.
Ron Miller, President and Founder – Atlantic Precious Metals LLC
Phone: 1-800-APM-GUIDE 1-800-276-4843