February 19, 2012

Gold is money..NOT!

Across the internet we often are confronted with the following sentence: "Gold is money".
This is brought up as a reason for people to buy gold. There are numerous of people seriously thinking our next monetary system will use gold (and silver) as some kind of money.
Because these commodities today aren't used as money there should be a big, big price advantage for the clever guy to step in and buy these commodities.
As I also believe there are once in a lifetime opportunities here, it's not because of this money reason. This post should try to clarify the current situation. How do people come to this thought of gold is money?
Will it eventually make things functioning better than they are today, and is it even possible to happen?

For me to come to an answer at these questions I think it's important to define what is meant by the term "money". Ludwig von Mises describes it this way: Money is a medium of exchange. This is a view from the Austrian School. My take on this is a little different, but  instead of making this subject even more difficult let's stick to this definition. The next time I use the word money I hope we can agree on the fact that we mean the medium of exchange.

February 7, 2012

Gold-Silver Ratio

For more than a month now I've been able to succeed in not mentioning the S-word. But, al things come to an end. I'm talking about the gold-silver ratio.
Obviously there's still a great misconception relating to this ratio, so here's my challenge to make it as clear as possible.
To achieve my goal I'm not going to throw facts at you why gold is any different than silver. This hell of a job already has been done by FOFOA in this post. It couldn't be explained any better, so please read it if you haven't already done it before.
My purpose is to show that any comparison between these two precious metals is as logical as an eleven-city race in June.

In order to get a good result I would like to create an other comparison (or ratio if you like). Although I know it might seem strange on the first sight, I hope I can proof it isn't so strange at all.
So here is my own ratio.....the paint-pencils ratio.
This ratio simply shows us the amount of paint in the world related to the amount of pencils. Personally I think it's fair to put a ratio on this as they both are used by artists in various ways. It can show us whether the paint is expensive, or the pencils are compared to each other.