Rising Gold Prices will help the Economy
It is a common myth that says a rising gold price
would be followed by economic doom, misery, hard times, and perhaps a
Nothing could be further from the truth. Rising gold and silver prices helps the economy, as I will prove.
The reason this myth is created in the media is to
scare people away from investing in gold and silver. The myth creates a
sense of guilt among those who own gold, and among those who are
thinking about buying gold. It wrongly claims, "You will be to blame
for harming the economy, if you buy gold and the gold price goes up."
It whispers the socialist lie, "If we all remain in the dollar,
everything will be OK."
The amazing thing about this media-myth is how many
gold investors are scared out of their minds of the thought of gold
rising past $3000/oz. as they fear it will bring on the prophesied
economic doom, with riots, joblessness, homelessness, and widespread
Here is the reality from history. In 1933 U.S.
farmers were dumping milk and destroying their crops because prices
were artificially kept so low that they were losing money. Why were
prices too low? Because gold was fixed at $20/oz.! And thus, other
commodities were also priced too low! It would cost farmers money to
bring their produce to market; therefore, they stopped doing so. The
farmers were smart enough to realize and act on the axiom, "Do not
engage in uneconomical activity."
I wish the silver miners today would be so smart. In
other words, if you are not making a profit by mining and selling
silver, stop bringing silver to market!
In my opinion Franklin D. Roosevelt was one of the
worst presidents in our nation's history. He did more to befriend the
big banks, and hurt the interests of the common man, and destroy
economic freedom than perhaps any other president. Under FDR we got the
dreaded Ponzi-scheme called Social Security. He created bigger
government, social handouts, price controls, pulled the nation into
World War II, and did everything needed to lead to the totalitarian
government we have today.
But there was one thing he did that I think that had
positive benefits. He revalued the gold price upwards from $20/oz. to
$35/oz. Most gold commentators will say this was theft, a default, and
the worst thing he did. But FDR did not create the theft that was
originally created when excess paper money was created in the first
place. The money-creation was the theft. FDR issued the decree that
said that this excessively created paper money should not be valued as
highly as it claimed it should be. That was the good thing FDR did,
since he helped to reveal the fraud inherent in the dollar.
Unfortunately, this re-valuation in the price was accompanied by the
proclamation that made it illegal to own gold domestically. Yet, it
still helped things for FDR to reveal the fraud of the dollar.
This created a boom in all commodity prices, and
helped the farmers out tremendously, and helped the economy. Finally,
it would be economic to produce food again. The rising gold price
helped the economy.
If anything, the gold price did not rise high enough.
Move forward to the 1970's and 1980's. The years of
Ronald Reagan, 1980 to 1988 were prosperous years. Society embraced
morality more strongly than in the swinging 70's. Disco was out, and
polo shirts were in. Reagan got re-elected in 1984 by asking the simple
question, "Are you better off now than you were four years ago?"
Prosperity followed after the gold price rose to $850 in 1980. It was
not chaos, not doom, not poverty everywhere you looked. It was a boom
time. The after effect of the rise in the gold price was prosperity.
So, as if the facts from history are not enough,
let's look at the logical, rational reasons why higher precious metal
prices will help the economy. It's very simple.
Barter is inefficient. You cannot efficiently trade
cookies for a TV set, and you cannot efficiently trade a car for
crayons, you cannot efficiently trade chickens for clothes. I hope I'm
not boring you to tears, but do you get the concept? You cannot have an
efficient economy without real money. You need a medium of exchange
that is easily divisible, portable, valuable, and does not spoil or go
out of style.
Gold and silver are what you need, for the reason
that they make trade easier and more efficient, or economical. Gold and
silver thus save time and energy, and are extremely useful.
Furthermore, a gold or silver coin cannot be
tracked, does not need to be kept in a bank, does not need to pay
interest, and therefore, cannot be taxed on every transaction.
Therefore, gold and silver are very efficient for trading, far more
efficient and useful than paper money.
(The reason that gold and silver do not need to pay
interest is that there is a constant deflation when gold and silver are
used as money. They grow ever more valuable over time as production
grows more efficient and prosperity increase when gold and silver are
used as money. This fact utterly refutes the "time value" of money that
states that money today is more useful than money tomorrow, which is a
lie used to justify charging interest on a loan. A no-interest gold
loan, when gold is used as money, is generally repaid with gold and
silver that is more valuable than before!)
In contrast to the usefulness of gold and silver as
money: If I'm paid in paper money, drawn from a bank, the other party
feels a compulsive need to report to the government how much he paid
me, in order to keep his paper trail of transactions open for the
government to follow. Thus, each transaction is looked at by the
government, and is taxed at every step. This taxation harms and
discourages economic activity from taking place, and thus is not an
efficient process at all, and reduces trade and the exchange of
dollars, and hurts the economy.
Furthermore, as paper money always suffers from
inflation or hyperinflation, there is a lack of incentive to save and
invest, which also hurts future production, and hurts the economy.
Next, the excessive creation of paper money and
overvaluation of that paper money creates economic mis-allocations of
capital, and dislocations of economic activity. Jobs are lost as
workers overseas produce more for less. People over-invest in housing
due to the easy money available for home loans.
Price fixing, (especially in the form of a low gold
price, or a manipulated low gold price), in all its forms, hurts the
economy. Price fixing is a disruption of free market capitalism. Free
market capitalism, and free market prices, create the most prosperity
for the most participants far more than any other economic system yet
invented by man.
When the price of gold is allowed to seek its
natural free market level, and when the fraud of paper money is
destroyed (and paper debts wiped out), then economic freedom and
prosperity will follow. It will be too expensive to wage needless wars,
too expensive for a massive totalitarian government, too expensive for
social programs that destroy a person's incentive to work.
When gold and silver are used as money, there will
be plenty of people available to work, needing to work, and willing to
work. There will be plenty of money (since the gold and silver would
then be valuable enough to do the work of money). There will be plenty
produced, since the economy will be free from debt, free from
over-burdensome government regulations, free from excessive taxation.
There will be plenty produced and prosperity will follow because gold
and silver are more efficient at promoting trade than the fraud of the
dollar that is over-valued and excessively-taxed.
Some people will counter with the lie that certainly
paper money is lighter, and thus more efficient. Again, not true. I
have a 1/10 oz. gold coin that is very light and small, lighter than a
stack of $1 bills. I have a 1 oz. gold coin that is lighter and more
compact than four stacks of a 100 count, $1 bills. Besides, our coins
have become dross, worthless heavy slugs.
I'd rather have a tenth oz. gold coin in my wallet
than two twenty-dollar bills. And I'd rather have an oz. of gold than
four hundreds. Who really needs to carry around more than an ounce of
gold, anyway? (Only for the large and more rare transactions.) Too
heavy? Hogwash! Society can pay for the cost to transport bottled
water, but transporting gold costs too much? Ridiculous!
Gold and silver are not too heavy to transport.
Silver alone may be relatively heavy today, given that it is so
undervalued, but when the metal is fairly valued, transportation is not
a problem. When an ounce of gold or silver is $100,000/oz., then an oz.
of gold or silver will not be "too heavy" to transport. Transportation
costs are miniscule to the extreme, and are no justification for the
fraud of paper money.
If gold and silver are good for an economy, the
parallel point is that fraud is bad for an economy. And since the
dollar is fraud, then the dollar is bad for the economy. Yes, it's that
A rising gold price means economic misery for the
Federal Reserve, for politicians, for the banks, and for the
socialists, and all whom they sponsor, such as the Universities and
mass media. A rising gold price means economic freedom and prosperity
to everyone else!
Buying gold and silver will bring prosperity not
only to you, but also to everyone else! Buying gold and silver is the
most useful and economic thing you can do to help bring a positive
change to the corruption of society that exists at all levels.
If you would like to learn more about gold and
money, please come by and visit goldismoney.com. I also write a free
weekly silver stocks report that lists over 80 different silver stocks,
and you can sign up to receive it at www.goldismoney.com.
December 2, 2003
Other essays by Jason Hommel:
25 Reasons To Support The Sound Money Bill - 08 July 2004
I'm Insanely Bullish On Silver - 19 June 2004
Silver Stock Evaluations - 22 May 2004
The Silver Bull Is Back - 04 May 2004
Late April Silver Update - 22 April 2004
Silver Juniors With Cash Flow - 04 March 2004
Major Frauds of the U.S. Monetary System - 26 February 2004
Market Perspective & Cabo Mining - 12 February 2004
Usury Enslaves - 19 January 2004
Sterling Mining - 29 December 2003
The U.S. Trade Advantage With China - 17 December 2003
Rising Gold Prices Will Help The Economy - 02 December 2003
Miners to Use Silver as Cash - 27 November 2003
Private Placements in Silver Companies - 20 November 2003
Is the Silver Market Too Small to Buy? - 13 November 2003
Inflation & Deflation During Hyperinflation - 06 November 2003
Silver Price Expectations of Silver Stock Investors - 30 October 2003
Buying & Tracking Canadian Silver Stocks - 29 October 2003
Canadian Zinc--Silver Potential - 23 October 2003
Silver Stocks--Comparative Valuations - 4 - 13 October 2003
Silver Stocks--Comparative Valuations - 3 - 06 October 2003
Silver Stocks--Comparative Valuations - 2 - 29 September 2003
Silver Stocks--Comparative Valuations - 1 - 22 September 2003
Silver and Cardero Resource - 08 February 2003
The Moral Failures of the Paper Longs - 22 January 2003
CFTC Response to Silver Problem - 14 January 2003
People Talking About $32,567/oz - 10 January 2003
Letter To Authorities of Silver Markets - 06 January 2003
Why no talk of $32,567/oz ? - 02 January 2003
Refuting Myths about Gold - 28 October 2002
Controlling Gold with Paper - 10 June 2002
Impending Gold Futures Default - 29 May 2002
Certain gold stocks are still cheap - 07 May 2002
A Few Supply and Demand Fundamentals of the Dollar and Gold - 06 May 2002
New DROOY Institutional Holdings - 21 February 2002
Hommels View of Gold - 23 March 2001
Gold Price Under Differing Scenarios - 24 June 2000