Gold & Silver Revaluation! Be Skeptical!

Key Concepts

• Gresham's Law: Bad money drives out good money – people hoard the valuable (good) money and circulate the less valuable (bad) money.
• Fiat Currency: Government-issued currency not backed by a physical commodity like gold or silver.
• Medium of Exchange: An item accepted as payment for goods and services.
• Store of Value: An asset that maintains its purchasing power over time.
• Premiums (in precious metals): The amount added to the spot price of gold or silver to cover minting, distribution, and dealer costs.
• Cost Averaging: A strategy of buying a fixed dollar amount of an asset at regular intervals, regardless of price.
• Fractional Gold: Gold coins or bars that are less than a full troy ounce.
• Goldbacks: Paper notes backed by physical gold, typically in smaller denominations.

The Failure of Gold as Money: A Rebuttal

This video addresses a recent critique of gold and silver as viable forms of money, presented by a financial analyst on X (formerly Twitter). The analyst argued that gold and silver have “failed as money” and are merely collectibles, citing a lack of widespread acceptance in everyday transactions. The video systematically refutes this claim, arguing that gold and silver have succeeded as money and remain the best forms of money available.

Gresham’s Law and the Preference for Fiat

The core argument centers on Gresham’s Law, which explains why fiat currency dominates as a medium of exchange. The speaker explains that people naturally prefer to spend the less valuable currency (fiat) and save the more valuable one (gold and silver). The increasing preference of central banks to hold gold reserves is presented as direct evidence of this law in action, demonstrating that gold and silver are, in fact, better forms of money than fiat.

Characteristics of Money & Comparison to Bitcoin

The video outlines the key characteristics of money: durability, portability, divisibility, uniform composition, limited supply, wide acceptance, stability of value, and resistance to counterfeiting. Gold and silver are asserted to fulfill all these criteria, while the US dollar fails on several counts (unlimited supply, lack of stability, susceptibility to counterfeiting).

Bitcoin is briefly addressed. While acknowledging its price appreciation and growing adoption, the speaker argues it lacks the historical track record necessary to be considered a true form of money. Bitcoin also falls short on wide acceptance and stability.

Widespread Adoption & Central Bank Activity

Despite the lack of direct use at retailers like Walmart, the speaker emphasizes the widespread adoption of gold, noting that approximately 100 countries hold physical gold reserves compared to only about 10 holding Bitcoin. Recent data is highlighted: 29 countries purchased gold in 2023 alone, while central bank Bitcoin adoption remains limited. This reinforces the argument for gold’s established role in the global financial system.

The Declining Purchasing Power of the Dollar & Rising Value of Precious Metals

A significant portion of the video focuses on demonstrating the long-term preservation of purchasing power offered by gold and silver. Several examples are provided:

• iPhone: The price of an iPhone has fallen 77% when measured in gold and 70% when measured in silver since 2007, despite a 60% increase in US dollar price.
• Housing: Home prices have declined 53% when measured in gold (2007-2023) and are even cheaper than in 2011 when measured in silver.
• BMW 3 Series: The price of a BMW 3 Series has decreased 89% when measured in gold and 75% when measured in silver since 1976.
• Toyota Corolla: The price of a Toyota Corolla has decreased 90% when measured in gold and 50% when measured in silver since 1968.

These examples illustrate that while dollar prices for goods increase over time, their cost in terms of gold and silver decreases, highlighting the metals’ ability to maintain and even grow purchasing power. The speaker stresses that this isn’t about metals maintaining purchasing power, but increasing it.

The Flaws of Revaluation & Gresham’s Law Revisited

The speaker argues against the idea of re-pegging gold to a fiat currency, citing historical precedent. Attempts to fix the price of gold inevitably fail within 37 years (less than a human lifespan) as governments devalue their currencies. This reinforces the importance of allowing gold and silver to float freely, determined by market forces. Gresham’s Law is again invoked to explain why people hoard gold and silver rather than spend them, even if legally mandated as tender. Recent laws in Florida and other states making gold and silver legal tender are dismissed as having little practical impact.

Gold Stacking Strategies: Fractional vs. Whole Ounces

The video addresses a viewer question regarding the best way to cost average into gold on a modest budget. The speaker cautions against products designed to exploit those with limited funds, specifically Goldbacks. Goldbacks, containing 1/10th of an ounce of gold, carry a 72% premium over traditional 1/10th ounce American Gold Eagle coins, and smaller denominations can have premiums approaching 100% above spot price.

The speaker recommends fractional gold (quarter ounce coins) as a more sensible option. A two-year cost averaging example is presented:

• Quarter Ounce Strategy: Buying a quarter ounce of gold every 3 months for two years cost approximately $6,400 for two full ounces.
• Saving for Full Ounces: Saving up to buy two full ounces at once cost over $7,000.

This demonstrates that consistent, fractional purchases can be cheaper than waiting to save for full ounces, even considering premiums.

Conclusion

The video concludes by reaffirming the enduring value of gold and silver as superior forms of money. The speaker emphasizes their historical track record, scarcity, and ability to preserve and grow purchasing power. The message is clear: gold and silver are not merely collectibles, but essential components of a sound financial strategy, particularly in an era of fiat currency devaluation. The speaker wishes viewers a Merry Christmas and encourages continued engagement with the channel.

Quote: “Gold and silver prove themselves to be the best forms of money with a history that is simply unbeatable.” – The speaker, summarizing the core argument.