Do Gold Bullion have the same Value as Money?

Is gold money? Technically, no, in that gold does not circulate as a medium of exchange. But, as trust in the paper dollar continues to erode, and the incompetence of the governing class to manage the economy becomes more evident by the day, there is growing interest in and support of making the dollar as good as gold.

A gold standard works because the US government, rather than the Chairman of the Federal Reserve, stands behind a promise that is explicit – a dollar is worth a fixed weight of gold. This promise can be verified every minute of the day by observing the current rate of exchange between the dollar and gold, and, under a classical gold standard, by exchanging currency at a national bank for gold coins of a fixed weight and purity.

In addition, a gold standard provides a transparent set of practices to keep the promise. A rise in the price of gold signals too many dollars, triggering quantitative tightening. A fall in the price of gold signals too few dollars, triggering quantitative easing. Since these Fed actions are made daily and at the margin, such adjustments are not disruptive, but produce stability and trust.

Finally, a gold standard produces trust in the dollar because gold has the unique characteristic of maintaining its buying power over time. For example, if today’s dollar were worth 1/35th of an ounce of gold, as it was under the post World War II Bretton Woods system, a barrel of oil today would cost less than $3 a barrel, just as it did in the 1950s and 1960s.

As the pace of inflation increases, gold may be the new currency of the world. 

More information can be found online at http://www.goldbullionadvisors.com