Why is GOLD money?
Throughout history, few people perceived gold as an investment or as a
speculation. It was money, cash in its most basic form, a medium of
exchange and a store of value. People did not accumulate gold because
it could make them wealthy but because it was a convenient, liquid way
to keep the wealth they had.
For thousands of years, and billions and billions of transactions,
by millions and millions of men, many different commodities
have been used as money; stones, salt, cattle, seashells, feathers,
and even cigarettes. But wherever gold was available, it tended
to displace other commodities. As with all successful money,
gold never needed to be decreed "legal tender" by the government;
it was recognized as the most desirable money by common consent
because of its unique properties.
Aristotle was the first to describe the properties required of money:
1) It is durable. It won't evaporate, mildew, rust, crumble, break or rot.
Gold, more than any other solid element is chemically inert. This is why
food, oil, or artwork cannot be used as money.
2) It is divisible. One ounce of gold (bullion, coin or dust) is worth
exactly 1/100 of one hundred ounces. When a diamond is split, its
value may be destroyed. You can't make change for an acre of land.
3) It is convenient. Gold allows its owner to physically carry the wealth
of a lifetime with him. Real estate stays where it is. An equivalent value
of copper, lead, silver, zinc and most other metals is too heavy to carry.
4) It has intrinsic value. Gold is one of the 92 natural elements (AU)
and has some unique properties. Of all the metals, it is the most
malleable, it can be hammered into sheets 5 millionth's of an inch
thick; the most ductile, a single ounce can be drawn into a wire 35
miles long; and the least reactive, it can withstand indefinite
immersion in seawater, does not tarnish in air, and can endure almost
any acid. Next to silver, it's the most conductive of heat and
electricity and the most reflective of light.
One trait overlooked by Aristotle, only because he lived before the
creation of paper and banking:
*5) It cannot be created by government. Unlike currency, gold does
not lose value because of the folly of government. On the contrary, it gains
value because of government mismanagement.
With the world awash in dollars and dollar denominated debt; and the
current ill-conceived "flight to quality" to nothing more than the
unbacked liability of a bankrupt government, a dollar panic, at some
point is inevitable.
And at that time, few people will perceive gold as an investment or as a
speculation. It will be money, cash in its most basic form, a medium of
exchange and a store of value. People will not accumulate gold because
it can make them wealthy but because it will be a convenient, liquid way
to keep the wealth they have.
What has been, will be. |
