By: Hubert Moolman
-- Posted 21 November, 2011
We are at the edge of a major economic crisis. Our monetary system is the underlying cause of this major crisis. The massive debt bubble created by our monetary system is about to burst. The demonetization of gold and silver, has over the years diverted value from these metals, to all paper assets (such as bonds) linked to the debt-based monetary system.
The process of the devaluation of gold and silver, started by the demonetization of gold and silver, is about to reverse at a greater speed than ever before. This is similar to what happened during the late 70s, when the gold and silver price increased significantly. However, what happened in the 70’s was just a prelude to this coming rally. The 70’s was the end of a cycle, this is likely the end of a major cycle; an end of an era of the debt-based monetary system (dishonest money).
This era of dishonest money, has filled the economic world with many promises that will never be fulfilled. There will be a massive flight out of paper promises, into the ideal safe haven assets that would offer protection.
The type of assets that people will flee to depends on the extent to which the assets offer protection against the specific crisis. For example, if people are extremely thirsty, then most would likely go for water, instead of milk or soft drinks. They would therefore rank water higher than soft drinks or milk. The reason that they would go for water is due to its superior properties, for countering the thirst crisis.
In a similar manner, people will run to the assets that have the ideal properties to counter risks and issues brought about by this economic crisis. Most people in the hard-money camp will agree that gold is the asset that people will flee to in this economic crisis, but for some reason, there are those (sometimes respected analysts) that believe that silver is not that safe-haven asset.
I believe that people will (and are) running to gold, not because gold was ordained by some divine providence or something, but: because it has those specific properties to offer protection against the crisis – properties given by God. It follows naturally that whatever assets have similar properties, will be similarly in big demand, as a safe- haven.
What are the properties of gold that offers so much protection against this crisis?
Simplified, it is important to understand that the true nature of this crisis is monetary; therefore, assets that possess monetary properties will be the premier assets. The issue here is not whether gold, silver or other assets are money or not. It is whether they have monetary properties, because that is what people will be after.
Good money should be effective as a store of value, a medium of exchange as well as a unit of account. In order for money to be effective in the above it has to have the following properties:
· divisible- should be divisible in smaller units
· portable – able to carry it around therefore a high value should be able to be contained in a small space and weight
· homogenous – one unit should be the same as any another unit
· durable – should not be able to be easily destroyed or eroded
· Valuable – should have intrinsic value, normally because it is desirable. Should not be able to be created or discovered without reasonable effort. Normally a commodity itself.
Gold has all the above properties. It is almost a perfect fit. How about silver? Is it not also a perfect fit? In fact, silver is a perfect fit as much as gold is; there is not much to choose between the two. Gold and silver are the two assets that best fit the above properties; therefore both will be the assets in most demand. If someone tries to convince otherwise (that silver will not offer protection like gold), he has to show how silver does not fit the properties that will offer protection against this crisis (the above listed properties).
Personally, I prefer silver over gold. Mainly because: silver offers better value as a result of it being one of the most undervalued assets today, It is less likely to be confiscated (at least for a while), it is more accessible for now due to its lower price. However, I recommend both... Finish reading>>
