JK said (August 23, 2011):

What people don't seem to understand is that the "gold fever" is deeply ingrained into our genetic structure on purpose. Read and study history and "mythology"- actually history in another form by allegory.

LONG ago, "the gods" showed up on Terra and commanded men to supply them with this metal, our ancestors mined it for them and supplied the odd lot "pretty virgin" or two as well, but mainly gold. Silver was secondary.

That is still with us today, look at the ancient texts, including the Bible- we are well and truly programmed little slave/robots.

Rick said (August 22, 2011):

The main issue with the Contrarian article is there's no comparison to any alternative. Gold is not perfect money, by any means, but there are few alternatives for saving or investment right now. The primary 'safe' alternative is fiat currency, which shares all the problems he lists with gold, along with many additional problems, the most important of which is that the owners of the printing press can take your savings with a print run--and are doing so as you read this. I repeat: gold is not perfect money, but it's still better than fiat.

As an investment, gold is quite often terrible. However, when one's country is at war, when one's country is running gargantuan debts, when one's country is debasing the currency on a massive scale, when 'safe' investments offer negligible rates of return (far below official, much less actual, inflation), when stock and bond credit ratings are so completely bogus that they hold horrific indeterminate risks...then gold makes sense for a prudent or cautious investor.

Marcos said (August 22, 2011):

There is a difference between saying that gold should be the base currency and saying that gold is a good reserve of value.
In periods of crisis, people will always look for media of exchange. In prisons, it used to be cigarettes (now it is drugs). It could be a potato in a concentration camp. It could be salt in Roman times, or pepper in Medieval Europe.

Of course we are not talking about gold as a substitute of food. Food will always be more important, but once there is enough, it becomes a bad exchange medium. But then, if Mad Max times come, a gun will be more important than food.

Anyway, gold will always be the first thing people will look for as money, just because of tradition and the ease of portability. One doesn't change 4000 years of habit in a day. Gold will rise in troubled times, will surpass its natural level when panic hits (speculation) and will fall later to a more stable level. But it will never be worth zero. Personally, I won't buy once it hits $2500.

On the other hand, gold hardly can be used as the only currency in normal times. There isn't enough of it. The problem is not fiat money, the problem is credit artificially created on fiat money. Governments should be forbidden from making debts, with exception of natural disasters. Banks should be regulated in order to never pass a certain leverage on loans. If fiat money reflected the real wealth in society, if it were used a lubricant for economic transactions, regulated by a responsible national bank, we wouldn't have the problems we have now. Unfortunately, the Federal reserve and investment banks create ghost money from excess of highly leveraged credit. Germany is probably the nation that hates credit the most and they are the most prosper country in the world right now.

Our problem is not a technical one, we have a problem of ethics and deceitfulness.

Dick said (August 22, 2011):

We need to purge the pejorative uses of "fiat," "paper money" and
"central banking," all of which are central to a legitimate
economic system. This Austrian school stuff is imperial propaganda brought out to create a counter-movement to the New Deal (read Kim Fein's book "Invisible Hands" or try some von Mises for yourself to see how stupid and crazy it is once you get past the rhetoric).

The fact that Ron Paul is a nice guy and hates war doesn't make him a good economist.

Gold-bugs think gold's relatively fixed quantity is a positive
quality. In fact, it's detrimental. If you want a commodity, use
something whose production corresponds to the needs of the
population, so the supply of money can expand and contract more organically. If I were president, I'd use grain, fuels and
industrial metals, and tie various production standards to the
reserves to kill GMO grain and foreign commodity dumping. You could also go with a pure paper money, and just use indicators like production, employment, etc. to set your interest rates, money supply and funding priorities.

We have a choice – should "the market" (S&P, JP Morgan, etc.)
determine what is creditworthy? Or can we establish a government that determines creditworthiness based on the needs of the people?

Go find me one privately-financed project that increased the living standards of a nation, and I'll find you 1,000 public ones.
Hamilton and Lincoln did it with national banking. FDR did it by
strong-arming the Federal Reserve. We can do it again now, but I'm afraid as more people look for answers to these questions, our fellow "conspiracy theorists" have done more harm than good.

Derek said (August 22, 2011):

Thanks for that well-thought-out post on gold as currency being a not-so-hot idea. Here's a more in-depth analysis of the gold vs. paper, debt vs. medium of exchange, issue – one of the best articles I've read, called "Belling the Rothschild Cat":

http://www.abeldanger.net/2011/06/belling-rothschild-cat-elite-flush-with.html

JA said (August 22, 2011):

This makes me very nervous: "Let me play Devils Advocate for a moment, and shed light on the "other" side of Gold."

I realize this is an expression, but in this case, says it all.

Clay mentions nothing about the Spiritual Significance of Gold. That's where he misses the boat (probably intentionally). And, probably can't afford any either.

Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants - but debt is the money of slaves

-Norm Franz, "Money and Wealth in the New Millenium"

David said (August 22, 2011):

Finley makes some excellent points about gold (in a depression, you can't eat it or stay warm with it, no matter how much you have). But once the system has collapsed and humanity has to devise a better and more stable exchange medium from the wreckage, I would rather have gold in my hands than the equivalent amount of Continentals, Confederate dollars or Weimar Republic Deutschmarks.

Also, gold doesn't rust, tarnish, flake or fade. You can pound it as flat as a sheet of paper and it retains its resilience. You can extrude it to the fineness of a human hair and it doesn't break. It does have many qualities that have come to be prized over the course of human history. But the importance is that the owner has to have physical possession of the metal, not a promise to deliver as in a gold "stock" or "contract". The frenzied trading and run-up of the price of gold is just money laundering writ large: they do want the cash more than the gold because the trading generates fees, tax revenue and makes the currency trading world "go round". Gold will recover its value and desirability long after the federal reserve note has gone the way of all the other bankrupt currencies spawned by the greed of mankind.

Andrea said (August 22, 2011):

The same tired arguments are often used over and over by people who are not really thinking it through and saying, ‘gold has no intrinsic value; you can’t eat it, drink it...... and on and on with the same silly argument.
Well, neither can one eat or drink the paper currencies of any country.
But I can exchange a one ounce of gold and have now $1860, and tomorrow I may get $1900, and next week maybe $2000.
Because as the currencies of most of the world’s countries are being devalued, one ounce of gold costs more to buy in those countries currencies.

Yet that same one ounce of gold which I could have bought in 2001 for $250.00, is now valued at nearly $1900.
Did the one ounce of gold increase in value, or did a currency like the US dollar lose so much value in ten years time, that now the same one ounce of gold costs nearly $1600 more to buy than it than it did in 2001 when it sold for around $250 per ounce?

Gold is the ultimate money, and when a nation buys and stores gold to back its currency, it will have a respected currency where the prices of all items its people needs will remain stable.
That is as long as that country’s government is honest and does not start to print more of its currency thus diluting its value

Henrique said (August 22, 2011):

I always noticed that gold-entusiasts are symbol-minded people ( utopian leftists like Max Keiser, Austrian School worshippers who foresee an impossible "Market without State" scenario are maybe exceptions, but these are just willing dupes, useful idiots ) who love simplified solutions to complex problems ( probably that explains it's fascination over conservatives - who are for the most part religious people ). The hard truth is that gold is just a fricking stone, let's see it for what it is, and stop giving credit to fools who answer to that with a ridiculous shout: "BUT YOU CAN'T PRINT GOLD!!!" as if this was the edge of rationality and wisdom on the face of Earth.

Gold is just a stone, will never solve any economic problems we're facing today, and it's glittery and shining fascination is one of the symptoms of an infantilized public that just want to kneel before something they consider more "solid". Paper is solid processed latex as well, not an abstract idea. A "solid" nation is one that prints it's own currency according to it's needs and regulates it without foreign interference.