I bet a bottle of champagne that prices will decline by 50% over 5-6 years. I made the bet with a couple who got out of the SD housing market a couple years ago and has been renting since. Now the wife is tired of renting, and I think he’s going to cave and buy her a house when they move to San Francisco this summer.

I take umbrage with the statement that gold and or silver are the only real money. When you get right down to it money is merely an idea. Nothing is really money if no one will accept it, and the mere fact that most but not all societies have historically based their currencies on the relative scarcity of gold does not make it real money, anything more than the round cut stones used for money in polynesian cultures. Anything can be money as long as people will accept it in trade for goods and services.

The proof of this is the fact that paper money has not been needed to be backed by gold to hold up as an exchange medium. What I will grant you is this. If there is a systemic shock to our economy people will want to know that their money is worth something and will only trade for things that they know are scarce and desirable. Then gold becomes money. If I can’t walk into Trader Joes and get a bottle of 2 buck chuck half a gallon of milk and a loaf of bread with it, it ain’t money. If I can it is.

Josh

Money serves several purposes. The purpoase that we are most familiar with is money as a medium of exchange. I exchange my labor for the US dollar because the grocery store isn’t interested in my skills as a computer programmer. Paper money, sea shells, wampum, tobacco, cattle – all of these forms of ‘money’ fulfill the purpose of being a medium of exchange and all of these have been used as ‘money’ at some point in human history.

The main aspect of ‘money’ that paper dollars do not fulfill is to be a store of value. That means when I have extra ‘money’ I want to put it away for a rainy day and I want that ‘money’ to have the same purchasing power in the future as it does today.

In 1913 the Federal Reserve was founded and the US dollar has been declining in value since. Today, the US dollar is worth about 3 cents compared to its purchasing power in 1913. This monetary debasement is a hidden tax on the citizens of any country that uses fiat currency and allows that currency to be debased.

Politicians use monetary debasement to finance their welfare schemes (ie, buy votes) and to finance their foreign wars. If they tried to finance these activities via taxes (their only other way of raising money), the citizens would revolt and then the politicians’ games would be over. Since most people won’t learn how the monetary system works (and this info has been intentionally removed from the education systems of western society), monetary debasement is easy to pull off without the citizens taking offense. They even brainwash the population to think that 2 or 3% inflation is necessary and even good!

2 or 3% inflation for 93 years has reduced the value of the US dollar by 97%. It won’t be too much longer before the final 3 cents worth of value is gone.

It is only when monetary debasement becomes extreme that the price of gold begins to rise. And that is where we are today.

Yesterday, the 23rd of March, 2006 was the last time the Federal Reserve is going to publish the M-3 monetary aggregrate numbers or the repurchase agreement numbers. Why is the US Federal Reserve the only central bank in the world that is choosing to hide this critical aspect of its banking system?

Please educate yourself on the monetary system in the US. Start by reading “Creature from Jekyll Island.”

Silver and gold have been used as money for at least 5000 years. I am humble enough to believe that my ancestors probably figured out the best form of money during those 5000 years – ie, if sea shells or wampum or fiat paper was a better form of money than silver and gold we wouldn’t be having this discussion.

Your second point is even more nebulous, money as a store of wealth. Yikes that is one of the great debates of history. Since its really hard to define wealth is, we all see different things as wealth. It is even more derivative to claim something is an effective store of wealth.

I understand some of the historical context of why you would make that statement, but I don’t agree with it. Money, wealth, value, these are all concepts which have tended to vary throughout history. I will end my contributions to this thread by saying this.

Past performance is not an indicator of future results. How we view concepts such as money and wealth are relative to the lives we lead. Unless the context of those lives is changed dramatically our conceptualization will not change dramatically. One generations asset is anothers liability.

Josh