June 2, 2011

Gold Is Money And Nothing Else

As J.P. Morgan famously said to Congress in 1913, "gold is money and nothing else." Morgan meant that gold was unmatched in its effectiveness as a store of value and medium of exchange.

Given that his namesake bank started accepting physical gold bullion this past February as counterparty collateral, why should the trend of a widespread return to gold be considered only a remote possibility? On the contrary, it should be expected - if for no other reason than every other currency is fundamentally dismal.

Markets are powerful things, and require a reliable medium of exchange. The call for sound money is not just philosophical; it is derived from the market itself. Throughout human history, merchants have always turned to pure gold and silver over every pretender. This is not the first experiment in a paper money system, nor is it the first widespread debasement of money. In fact, the lessons of history were impressed upon our well-read Founding Fathers to the point that they included the following clear language in the Constitution: "No state shall... make any Thing but gold and silver Coin a Tender in Payment of Debts."

While it has always been possible that another fiat currency would rise up to take the dollar's place, and thereby keep this irrational experiment in valueless money going awhile longer, the particular circumstances that abound today make it seem less and less likely to me. Instead, I'm seeing signs that the world is moving back to gold at a breakneck speed.

This is a return to normal and has many positive implications for the global economy. It's certainly a trend we can all welcome, and profit from.

Tickers: PowerShares DB US Dollar Index Bullish (NYSE:UUP), PowerShares DB US Dollar Index Bearish (NYSE:UDN), IShares Silver ETF (SLV), SPDR Gold ETF (GLD), Hecla Mining (HL), Newmont Mining (NEM), Barrick Gold (ABX), Goldcorp (GG), Yamana Gold (AUY), Kinross Gold (KGC), Anglo Gold (AU), Gold Fields Limited (ADR) (GFI), Royal Gold, Inc. (RGLD), Coeur d'Alene Mines Corporation (CDE)

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.

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