In God We Trust

Will you be paying with gold or silver?

It is all about trust. Mayhaps some folks trust in God or the US dollar
bill, but I don't. For trust to exist, a person needs to know just what
the other party will do for any given event. This demands intimate
knowledge of the other party's ethos and motivations.
The gold standard of excellence, good as gold, gold star, ... the list
goes on. Why? Just why does this equating value and gold have in common
and why does it persist?

Gold is a pretty rock. It is soft, heavy, durable, doesn't corrode and
scarce. It can be used to make pretty dodads that last for centuries.
All of these properties makes it ideal as a medium of exchange. It
functioned as money. Granted, you can't eat it. But I'll bet you a new
shiny Krugerand that someone will trade me a sack of grain for gold.
Gold has a downside; scarcity. This results in a high valuation. That
Krugerand has a valuation today of $1150.90. Then to purchase it, you will
have to pay a premium to cover profits and fabrication costs. So what
happens when I go to buy that sack of grain? Do we cut a chunk off ala
"pieces of eight" concept?

Our only practical option is a bimetallic currency or more metals. In the
past it was gold, silver and copper.

Silver has several uses as well as copper. Both lack one or more of gold's
properties, but as a lower value metal this is acceptable. Today's silver
price is $18.50 per troy ounce and copper is roughly $0.18 an ounce.
Neither silver or copper is recycled in minute quantities. It costs more
to recycle than the value of the metal. Larger quantities are actively
recycled.

As an example of this valuation versus recycling, it was only a few years
ago that computers were thrown out. The metals value was just too low to
pay the cost of recycling. Nowadays, computers and other electronic items
are a valuable resource. The gold value went up and although the quantity
of gold in a computer dropped, enough still exists for a recycling
industry to earn a profit.

The financial talking heads will point out that gold, silver and copper
are poor investment vehicles. They are right. An ounce of gold purchased
in 1920 is still worth exactly 1 ounce of gold. The day to day prices will
fluctuate depending upon demand, but each must be converted into currency
to gain a profit or loss.

Gold and silver do maintain purchasing power. An ounce of gold, exchanged
for dollars will buy about the same quantity and type of goods as it would
in 1890. Silver lost some of its purchasing power, but this is due to
speculation by the Hunt brothers and the changeover to digital
photography. The Hunt brothers' attempt to corner the silver market left a
bad taste in investors mouth and pocketbook.

In severe economic turmoil, gold and silver retain purchasing power. If
our dollar continues to be devalued, gold and silver will return to be the
medium of exchange. For poor folks and small transactions, silver coins
will be the preferred currency.

Another argument for silver is its source. Most silver is a byproduct of
copper, zinc and lead refining. In an economic downturn, these metals will
be in far less demand. Hence less mining. Less mining results in less
silver production.
-----------------------------
I am not a financial advisor. I don't advise anyone on anything. Go do
whatever you do. I don't care. If I can ever get a few bucks ahead, I
might buy silver. Until then, I buy knowledge in the form of used books.
When the economy tanks, the jack-of-all trades never starves.

If you hire me, remember that I take only gold or silver coins. I wonder
if that is the reason I'm not employed.