Martians Are Wrong About Gold

A Martian gazing down from his red perch — Mr. Warren Buffett once razzed — would marvel that Earthlings dig gold from the ground… merely to re-entomb it in vaults.

That is, the business is senseless. It is pointless. It is juiceless.

At first blush, our space man is justly puzzled. Why indeed would humans shovel up hunks of metal merely to lock them away, idle?

Yet the Martian — and the Nebraskan — jump past a fundamental truth of human nature.

Men act with purpose. They do not squander their time, energies or resources on senseless, pointless and juiceless pursuits.

The question then arises:

Why would men expend time, energies and resources to haul up gold… and risk their lives deep in dangerous mines to seize it… if they lacked compelling reasons?

Indeed: Why do men — to this day — toil extravagantly to wrest gold metal from stingy earth?

The Gold Standard of Money

Perhaps men continue plucking up gold for this reason:

Thousands of years of history demonstrate that gold is worth plucking up.

Gold is perhaps the ideal money if you will forgive the expression — the gold standard of money.

Money must be rare. Rocks cannot be money — for example.

Simply consider the quantity of rocks lodged within the skull of a single United States senator.

Multiply it by 100 skulls and you have a near infinity of rocks.

Multiply it by all the skulls in Washington and you have your infinity.

This vast abundance discredits rocks as a form of money.

Nor can sand meet the monetary standard — and for the identical reason.

Yet there must be enough money to “go around.”

Gold is rare, it is true. Yet its quantity is adequate for its purposes.

Gold is likewise durable. Gold mined thousands of years ago lives yet, fresh as a sprig, no wrinkles, no sags.

And unlike gems or diamonds, gold is divisible. It can be fashioned into bars or coins as needs require.

Meantime, money must be a store of value. Well friends, gold has maintained its value across centuries, across millenia.

Hence it meets money’s strict conditions.

“No Central Banks [Provide] That Kind of Price Stability”

Explains author Edward Griffin in The Creature from Jekyll Island:

In ancient Rome, the cost of a finely made toga, belt and pair of sandals was one ounce of gold. That is almost exactly the same cost today, 2,000 years later, for a hand-crafted suit, belt, and a pair of dress shoes at Barneys in New York.

There are no central banks or other human institutions which could even come close to providing that kind of price stability.

Can paper money approach this flatlining stability? Consider the dollar of the United States…

This debased currency has shed some 98% of its value since the Federal Reserve’s 1913 demon birth.

The greatest plummets came after 1971 — when Old Nixon scissored the dollar’s last chain link to gold.

One 2024 dollar purchases under 15% of the 1971 dollar. That is, the 1971 dollar did the duty of seven-plus 2024 dollars.

Is this monetary stability?

If this is monetary stability then schizophrenia is psychiatric stability.

Sound Money Is Honest Money

We stand in defense of gold because it is sound money. Sound money is honest money.

And sound money equals sound government. It chains government down in impossible fetters.

Explains the titanic “Austrian” economist, Ludwig von Mises:

It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments.

Ideologically it belongs in the same class with political constitutions and bills of rights. [The] postulate of sound money was first brought up as a response to the princely practice of debasing the coinage.

Label what you will the money of the United States. You cannot label it “sound.”

And we trust its issuer no more than we would trust a dog with our dinner.

The thing is less money than an instrument of credit. That is, an instrument of debt.

Before the 20th century, debt was a cultural taboo — a scarlet “D” emblazoned upon the bosom.

Credit for households was virtually unknown. And only the poorest households resorted to debt-financed consumption.

But along came the 20th century with its wars… its world-improvers… and its cranks.

Gold was in their way.

“Gold Has the Public Spirit of a Cat”

Gold proceeds at its own leisurely pace. The greater good is beyond its care. The milk of human kindness? You will not find it in gold.

Gold — instead — embodies the civic spirit of a cat.

Meantime, gold turns from the roar of cannons. “You go over there,” gold tells its fiat counterpart.

“I’ll stay here.”

As wrote our co-founders Bill Bonner and Addison Wiggin in Empire of Debt:

The trouble with gold is that it turns its back on world improvers, empire builders and do-gooders. The nice thing about gold is that it is so unresponsive. It neither laughs nor applauds.

That is precisely why gold could not endure…

Debt-Based Money Is Ideal for Public Service

Only a debt-backed system of paper money could finance the great wars, the social improvements and the fevered dreams of the 20th century.

This money is ideal for public service.

It is civic-minded. It has a heart. It follows orders.

Whatever war, whatever boondoggle, whatever swindle it is ordered to stand behind… it will stand behind.

Fiat money willingly sacrifices its value for the greater good.

Gold, meantime, is jealous of its value. It guards its virtue.

Thus we speak our piece for gold.

Multiple millennia of history attest to its enduring value. Those same millennia attest to the unenduring value of paper monies.

They have all ended in history’s hellbox.

As the United States dollar one day will…

The Daily Reckoning