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IPFS News Link • Gold and Silver

Gold Is Natural Money -- Fiat Is Fake

•, by Michael Maharrey

Aristotle listed four characteristics of sound money: it must be durable, portable, divisible, and have intrinsic value. Gold possesses all of these characteristics, which is why gold has served as money for thousands of years.

As Goldmoney founder James Turk put it in an article published by the Mises Wire:

Every natural element with which the earth has been endowed has a usefulness—a purpose. If we listen to gold, its message is loud and clear—gold is money. To serve as natural money is gold's highest purpose."

Modern financial systems spurn gold. Governments need central banks to create money (inflation) and manipulate interest rates (the cost of money) to prop up their borrowing and spending. The kind of spending and accompanying budget deficits we see in the US wouldn't be possible if the Federal Reserve was not keeping interest rates lower than they otherwise would and monetizing the debt through QE.

But even as governments devalue their fiat currencies, gold maintains its purchasing power over time. Consider this: an ounce of gold buys the same amount of oil as it did 70 years ago.

As Turk put it, "Gold preserves purchasing power, which is one of the key requisites of money. As illustrated by the above chart, it is an outcome that no national currency can match."

Sound money also enables sound economic calculation. As Turk explains, this is only possible "using a consistent, unchanging unit of account to measure prices over time."

Gold serves this role perfectly because it is the only element in the known universe that is eternal and not subject to decay or degradation. A gram of gold today is identical to a gram of gold mined by the Romans."

One important characteristic of sound money is that its stock remains relatively constant. Somewhat surprisingly, Turk asserts, "Gold is not valuable because it is rare."