I thank Blythe, for her enormous support for this rally in attempting to suppress the price of bullion through paper shorts and derivatives.
But I should also thank Benny, for blowing a big wet monetary kiss to the financiers and Wall Street today, and giving an extra lift to the metals.
By the way, Benny was technically very correct when he told Ron Paul that 'gold is not money.' As defined by currency, or legal tender laws, it is not. But he did say that gold is an asset, and in fact he is correct on this as well.
When one uses gold or silver to conduct a transaction these days, typically one converts the bullion into the local currency first and THEN makes the exchange. If gold and silver were money, there would be no conversion and no profit or loss realized on that conversion. Money is a denominator, a way of keeping score in a transfer of wealth, the oft heard 'medium of exchange.'
So I think some of my fellow metals people are jumping overboard on this one. When they say gold and silver are money, what they are really saying is that they have been and should be money again. If they were really money now as they were under the metals standards, the discussion would be moot. But they are correct in the broader historic definition. Indeed, gold and silver are the ONLY money in the more universal sense, across the sweep of history. Take your paper dollars to some time in the past, and I will take gold and silver, and we will see who obtains the greater value.
And as usual some of the blogs are going the Daily News and Drudge Report route with their headlines, posturing sensationalism for clicks. I thought Ron Paul could have asked much more penetrating questions of Ben. This is just a distraction. There are serious problems at hand.
The US is not prepared for a gold standard now any more than it is ready for austerity. Think of an accident victim in a hospital that needs to change their ways, but not by entering an Iron Man competition on release. The economy is out of balance, and fraud and excess still pervades the financial system. Austerity is a prescription for a heart attack. And stimulus is just a cosmetic, although in the right form it could help to get the patient back on its feet through infrastructure investment of the right sorts.
Gold and silver are not money, in the sense of currency or legal tender, at this time almost anywhere in the world. This is the purview of governments to declare. However, as a store of value, as a superior asset class, it is clear that they are among the best.
Gold and silver have been money, in various places and times throughout recorded human history. But they are not so now. They may yet be so again. And so the central banks still maintain their gold, although note that few of them hold silver. It is a traditional remnant at this time. Most do not exchange their gold in settlement of debts.
But as we saw today, the metals were a definite safe haven and reacted sharply to the reassurances of further dollar devaluation to come in order to resolve the collapsed credit bubble.
