Gold is “Real Money,” and Bill Bonner explains why. From Bonner at bonnerandpartners.com:
Many years ago, before the invention of modern money or capitalism, people still had wealth – although limited. And they still had ways of keeping track of it. The principle of “fair trade” seems to be in our DNA.
If you give something to your neighbor, you don’t expect him to hit you over the head. You expect him to give you something back. And if you give him a whole cow and he gives you half of a rabbit, some instinct tells you it isn’t “fair.”
Small communities could keep track of who owed what to whom. But as civilization evolved, a new kind of money was needed.
In a group of related people in an isolated valley, you could remember that your cousin should give you something roughly equal in value to the wild pig you gave him… and that you should offer your son or daughter to the family from which you had gotten your wife… and so on.
But as the group grew bigger, people needed a way to settle transactions without having to trust the people they were doing business with or remember who owed what to whom.
When Aristotle described “money” he had our modern money in mind – something that is not wealth but acts as a placeholder for wealth. It is information; it tells you how much real wealth you can command.
For the last 5,000 years, the best money has been gold (and to a lesser extent, silver). Gold is very useful as money. With it, you can do business with complete strangers. It can be used to stand in for almost any amount of wealth. Later, paper money – representing units of gold or silver – made commerce even easier. Without this modern money, an advanced economy wouldn’t be possible.
To continue reading: Real Money and Why You Need It Now (Part 1)