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The monetary logic for gold and silver

The monetary logic for gold and silver

A considered reflection of current events leads to only one conclusion, and that is accelerating inflation of the dollar’s money supply is firmly on the path to destroying the dollar’s purchasing power — completely.

This article looks at the theoretical and empirical evidence from previous fiat money collapses in order to impart the knowledge necessary for individuals to seek early protection from an annihilation of fiat currencies. It assesses the likely speed of the collapse of fiat money and debates the future of money in a post-fiat world, in which the likely successors are metallic money — gold and silver— and some would say cryptocurrencies.

Early action to lessen the impact of a failure of the fiat regime requires an understanding of the role of money in order to decide what will be the future money when fiat dies. Will we be pricing goods and services in gold or a cryptocurrency? Will gold be priced in bitcoin or bitcoin priced in gold? And if bitcoin is priced in gold, will its function of a store of value still exist?

Introduction

This week saw the news that a vaccine had been found to combat the coronavirus. At least it offers the prospect of humanity ridding itself of the virus in due course, but it will not be enough to rescue the global economy from its deeper problems. Monetary inflation is therefore far from running its course.

The reaction in financial markets to the vaccine news was contradictory: equity markets rallied strongly ignoring rapidly deteriorating fundamentals, and gold slumped on a minor recovery in the dollar’s trade weighted index. Rather than blindly accepting the reasons for outcomes put forward by the financial press we must accept that during these inflationary times that markets are not functioning efficiently.

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