Earth Calling Gold Bugs! Earth Calling Gold Bugs!

Earth calling gold bugs! Come in, gold bugs. 

Can you hear me now?

Every so often one of the gold bugs tells us how important it is to invest in gold. If that person is in an expansive and informative mood, he’ll go on to say that our currency should be backed by gold. That would solve all the nation’s problems is the claim. 

No doubt this point of view comes from watching or reading the pitch from too many gold salesmen. Historically, they say, gold has always been used as a currency. They don’t realize that historically, this nation was on a gold standard and still we had booms followed by busts.  

I try to tell them that gold itself is merely a commodity. True wealth comes from the sea or the soil. A nation’s true wealth is measured by the productivity of its people. I’m not an Authority Figure, so my words get dismissed. 

But hey! If Glenn Beck is telling you to buy gold, that should be a red flag!

MaryK [my wonderful wife] is re-reading James Michener’s book, Caribbean. She and I understand about gold, and knows that I’ve gotten involved in gold-related discussions often in the past. So when she found this in the book, the two paragraphs below, she copied it down for me to send on to you. Gold is a hot topic for some people all the time. There’s always the chance that I’ll catch some of the gold bugs in a calm and reflective mood and they will learn something from history. What follows is James’ writing: 

“Erroneously the king [Philip of Spain, 1665] and his advisors believed that the prosperity of a nation rested in its control of bullion; the more gold and silver the galleons brought to Sevilla, the richer the nation would be. This philosophy overlooked one timeless truth: the wealth of a nation derives from the hard work of its citizens at home, the farmers, the leather workers, the carpenters, the shipbuilders and the weavers at their looms; they create the usable goods which measure whether a nation is prospering or not.”

“In Spain in these critical years, when its entire future hung in the balance, her galleons continued to bring in untold wealth while her artisans and shopkeepers languished. Up the Channel, English ships brought little or no gold, but did bring the produce of the new lands and took back to them the surplus goods produced by England’s shrewd and industrious citizens. Year by year Spain imported only bullion while the English exported and imported the goods by which men and nations live, and although that year English watchers must have envied the enormous fortune which Don Alfonso delivered to Madrid, had they been all-wise they would have realized that their small trading ships were bringing to England the more important treasure.” Michener, James. Caribbean. New York: Random House (1989) p. 178.

Did you catch that, gold bugs? It’s the productivity of the populace that makes the people wealthy.

When the gold bugs get wound up and really going good with their rhetoric, they almost always describe our paper money as “fiat” currency. Fiat money is any money declared by the government to be legal tender. Really and truly, ALL money is “fiat” money, because legal tender is whatever the king says it is. There is no intrinsic value to that piece of paper with a dead president’s picture on it, but it will work just fine as a unit of exchange. Why?

Because you can use it to pay your taxes. As long as the federal government will accept that piece of paper as payment of taxes, the piece of paper will have some value. When the government refuses to accept it as payment, it’s only good for toilet paper or lining the bird cage. Look up Tally Sticks on line and you will see that the king of England once accepted them as money. So, money, all money, is fiat currency. Money is whatever the king says it is. 

When the government starts accepting Plymouth hub caps as payment for taxes, you can bet your sweet bippy that the banks will let you deposit them. And they will give you a deposit receipt that you can take to the tax office or the grocery store and use as a unit of exchange. 

Gold is not wealth. If you washed ashore on a deserted island, and the only thing you could find was a chest of pirate treasure, would you be rich? What then would a cell phone be worth to you? 

Now, something else for the gold bugs to ponder. I heard from a roundabout source that the Patriot Act has a provision where they can confiscate all the gold, just as they did when FDR was president. I have not read the Patriot Act, and I’m not going to look for the part that says they can do that. I’m not a gold bug, so it doesn’t affect me. But all you bugs out there who have that stuff as a ‘store of value’, y’all need to check it out and see if this is true. My source is normally reliable; a person who makes it his business to know these things. 

If they confiscate all your gold, it will be illegal to own gold. They will probably pay you for it when you turn it in, just as they did in FDR’s day. Then as soon as they had it all, they raised the price of it. So you’ll turn in your gold and get, you guessed it, a fiat currency in return.

That ounce of gold you think is worth $1400 today won’t even buy you a Plymouth hub cap if it becomes illegal to possess it. 

Dragon