Gold & Silver as Money

 

So what is money? One definition is a payment for goods and services and repayment of debts. Many businesses within the U.S. and around the world accept the U.S. dollar for payment. The U.S. dollar is also the world’s reserve currency. However, another definition is a store of value which can be accumulated and used later. But what gives money its value?

Truly this answer depends on the public trust and reliance in the government. Society must be willing to accept a fiat currency (one backed by the government guarantees and not a commodity like gold) in exchange for goods and services. One must believe the government will keep the value of the currency by limiting supply. But what happens when the government prints excessive currency such as in Quantitative Easing 1 and 2 (QE1 and QE2)? QE1 (printing of dollars) temporarily saved the financial systems and QE2 saved the government debt structure. All indications suggest a continuation of the quantitative easing practice. To do otherwise would collapse the financial systems in the U.S and affect the world’s financial markets. The cycle of printing more fiat currency simply delays and deepens the resulting consequences.

Historically, fiat currencies fail. Throughout time, creating money out of thin air ultimately collapses. It always has and always will. Continued printing of currency produces a corrupt system. One cannot print money out of nothing without consequences. Fiat currency, in reality, represents debt. Every time the government prints a fiat dollar bill, it devalues existing dollars. It causes inflation and ultimately hyperinflation. The vicious circle finally ends in the demise of the fiat currency system. As the government overproduces fiat currency, it becomes worth less and less.

Ultimately, gold and silver provide a store of value. Gold and silver are emerging as money once again.