"I Can’t Afford Gold"

There’s no question that owning gold may presently be a luxury that many can not afford. But silver is certainly within the reach of the vast majority. However, a carefully orchestrated aversion to honest money has been inculcated in our minds and this has made fraudulent money acceptable. Tyrants can not control gold and silver in the hands of the people but they can, and do, manipulate paper money to their own advantage.

The anti-gold attitude is resulting in wrong assumptions about the problems it allegedly causes. Even though the “I can’t afford gold” comment may be true for many people, the underlying attitude that gold is not beneficial to society is utterly false. Let’s listen in on a conversation between a financial Paper Corps (PC) and a Gold Nugget (GN).

PC We poor slaves simply can’t afford to buy gold – it’s way too expensive.

GN Do you have enough money to buy bread?

PC Of course! We aren’t starving to death – yet.

GN What do you use to buy the bread?

PC The FRNs that we receive for the work we do.

GN Why do you accept these fraudulent pieces of paper that lose their purchasing power?

PC Because the government forces us to.

GN FORCES YOU TO! Do you mean there’s no choice?

PC Good heavens! What rock did you crawl out from under? Are you so far out of it that you don’t know that FRNs have a note on them that says they are LEGAL TENDER?

GN Yeah, I know that, but what does it mean?

PC If our employer offers us these FRNs for our work, we have to accept them.

GN What if you refuse?

PC Then the employer wouldn’t have to give us anything – that’s what “Legal Tender” means. What did you think it meant – voluntary?

GN I admit that my experience with fraudulent paper money is somewhat limited because I try to stay away from it as much as possible.

PC I still don’t see what all this has to do with gold being too expensive.

GN We’ll come back to that subject in just a minute. Does it take most of the FRNs you earn to pay the bills?

PC You sure got that right. As a matter of fact, sometimes it takes more than I earn and I have to go in debt.

GN Is your income keeping up with the rising cost of living?

PC It never has – it just keeps getting worse.

GN I wonder why it happens that way?

PC I thought you knew that the Federal Reserve Banks just create new money by book-keeping entries. When it is spent into circulation it competes with the already existing money supply but no new commodities are created to back up the new money at the time of creation. In other words, demand has increased but supply hasn’t and this drives prices up. Of course prices must rise before my employer has the additional money to raise my wages. Thus wages must always lag behind prices, in general. Of course there are a few exceptions where salaries rise faster than prices – government employees for example. They are not dependent on competitive market operations, they only depend on organized force and if you check their salary schedules you will find that they are higher than those in private enterprise. Here’s some statistics from “The Washington Times” that might interest you:

“Private-industry employers spent an average of $27.42 per hour worked for total employee compensation in December, while total compensation costs for state and local government workers averaged $39.60 per hour.

“The average government wage and salary per hour of $26.11 was 35 percent higher than the average wage and salary of $19.41 per hour in the private sector. But the percentage difference in benefits was much higher. Benefits for state and local workers averaged $13.49 per hour, nearly 70 percent higher than the $8 per hour in benefits paid by private businesses.”

GN Ok, Ok, Let’s summarize the situation to this point and then see if we can find the real reason you can’t afford gold :

First, you have to accept FRNs in payment for your work; you have no choice.

Second, since these FRNs represent the fruits of your labor you naturally want to get something, bread, in return.

Third, the government keeps driving prices up by printing more of these FRNs. But your salary lags behind the rising prices so you have the choice of a declining standard of living or going into debt, which is a lien against future production and aggravates your predicament.

Fourth, after spending all your money on the cost of living you can’t afford to buy gold.

PC That’s true but what does that have to do with gold being too expensive?

GN Gold is not too expensive but you are discouraged from buying it because you can’t do anything with it after your purchase. You can not use it to buy bread, clothing, or provide for any of your other needs BECAUSE SUCH TRANSACTIONS HAVE BEEN PRE-EMPTED BY LEGAL TENDER LAWS WHICH MANDATE THAT FRAUDULENT MONEY SHALL CIRCULATE AS PURCHASING MEDIA (notice that I did not say “medium of exchange” – because it isn’t, but that’s another issue which we can discuss at some future time). Since gold can not be used as purchasing media and you can not afford to leave the fruits of your labor sitting idle, it becomes a luxury you can not afford. But that’s not the fault of gold. It’s the result of allowing government to use paper, which they can create, instead of gold, which they can not create.

PC Alright! Alright! I understand the cause of my plight but it seems to me that the price of gold is still too high.

GN That’s because your eyes are full of dollar signs instead of commodity ratios that provide a true picture of an honest medium of exchange – gold.

PC COMMODITY RATIO’S! What on earth are you talking about?

GN Gold is a commodity and so is a car so let’s examine the change in the gold-to-car ratio between these two commodities for the period of 1937 to 2010.

In 1937, a Ford middle class four door sedan car cost $900. I remember when a neighbor bought one and we boys gathered around to ogle the shiny new palace on wheels. At that time the price of gold was $35 per ounce – unfortunately it was illegal for U.S. citizens (but not foreigners) to own. In other words, the car cost the equivalent of 25.7 ounces of gold. Today the same class of Ford four door sedan cost $23,000. At today’s gold prices it would take 20.91 ounces of gold to buy the same class car. In other words, the purchasing power of gold has gained 23% while the purchasing power of FRNs has lost 96%. It’s true that part of that 23% gain in purchasing power is due to speculation, but then we have to ask ourselves why this speculation is taking place. The reason is that people who understand money also understand that the value of the dollar is headed for the dustbin of history and they are simply trying to protect themselves. Unfortunately there is also a lot of manipulation by central banks – the International Monetary Fund (IMF) has recently been dumping their hoard to suppress prices.

It will undoubtedly be objected that today’s car has many improvements over the 1937 model.

That’s true but it’s also true that there has been tremendous improvements in production efficiency. The amount of human labor required to produce today’s cars is considerably less than it was in 1937 due to automation of the production process. This increase in efficiency is the result of competition and invention which result from a private property system of production – which is in the process of being destroyed. If the money supply had not been dramatically increased, we would still be paying $900 for today’s more sophisticated cars. Essentially, that is what has happened anyway if you look at the ratio of gold to car – in other words 20.91 ounces of gold per car.

Thus we see that gold has simply retained its purchasing power while the FRNs have lost 96%. This loss in paper purchasing power is NOT THE FAULT OF GOLD – it’s the fault of government intervention in an area where government has no right to intervene.

PC But that still doesn’t change the fact that I can’t afford to buy gold.

GN Perhaps you should consider silver instead. Silver is the poor man’s gold and percentage-wise it will outperform gold in the near term. I’m sure you could cut back a little on some of your “mad-money” spending and afford a little silver. But that’s a decision that only you can make.

If you want to go down the tubes with paper money that’s your prerogative, but don’t go down blaming gold for your demise. It isn’t that gold is too expensive, it’s that FRNs are too worthless.

Incidently I thought you might like to know that the average ratio of silver to gold has been 16 ounces of silver per ounce of gold for hundreds of years. At today’s prices, the ratio is 64.71 ounces of silver per ounce of gold. In other words the manipulators have things way out of kilter and silver is a bargain basement buy compared to gold. In other words, silver will have to go from the present $17 to $64.71 to get back to the historic sixteen to one ratio. Of course if gold dropped to $272, that would also bring the ratio back to sixteen to one, but that’s very, very, unlikely. A word to the wise.

PC I think I know what you are saying but I’m still not sure I can afford to have the fruits of my labor sitting around idle.

GN That could change if people understood the fundamental principles well enough to pressure their legislators to pass H0622 which would make it legal for willing buyers and sellers to exchange gold and silver.

When hyperinflation really gets moving, a lot of people are going to be looking for a way to save their economic hides. Then gold and silver will look very attractive. If we make it legal now, honest money will be available when people need it most. As a matter of fact, it might bring your economic corpse back to life. Don’t get me wrong, we are not trying to play God, we are simply trying to resuscitate those who are buried under a mountain of paper money and are gasping for the fresh air of freedom.

PC Some people claim that the rich have all the gold, where would I get some.

GN Gold and silver are available from most local coin shops and the rich do not own all the gold and silver. That’s simply a scare tactic to keep you using paper. Furthermore, if H0622 passes, specie will be available from an exchange.

PC Do you think we could discuss that “medium of exchange” issue sometime in the future?

GN I don’t know. We’ll have to wait and see if we get our heads chopped off when this hits the monitor screens. If we want to survive, we had better shut this down. Bye.


- By Bill Denman, Idaho Sound Money Task Force