“Gold is not an investment. It is money,” says James Turk

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James Turk of the GoldMoney Foundation speaks about currency devaluation and the rising gold price. He also explains why gold should be considered money and not an investment. “When you’re looking at gold, it goes into the bottom part of your portfolio, the liquidity part of your portfolio. And when you’re evaluating whether you want to own gold, you evaluate it against other currencies of the world, other monies of the world,” he said.

Source: GoldMoney (via YouTube), June 5, 2011.

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5 comments to “Gold is not an investment. It is money,” says James Turk

  • [...] more here: “Gold is not an investment. It is money,” says James Turk … This entry was posted in Uncategorized and tagged also-explains, and-not, bottom, goes-into, [...]

  • Gold is not money. Money is that technological innovation that lowers the transaction cost of exchange absolutely. This definition encompasses the inclusion of complex derivative instruments. Gold is cumbersome in exchange and dose not reduce transaction costs; if anything it increases transaction cots unless the currency, as store of value, is depreciating so fast that the exchange currency loses value during the time of transacting itself or when held in inventory for near immediate transactions. Money has two demands 1) Store of value and 2) transactions demand . Gold only fulfills one demand; the of store of value. Currency is a bad store of value in general in a global sense over long time periods and gold has no value as an instrument that reduces transaction cost of exchange. If you understand transaction costs, then you will understand why gold is not money. It is a horrible element of contractual structure to facilitate a contracted exchange of goods and services transaction. That is why gold was coined but that did not solve its inherent technological problems of lowering the transaction cost of exchange. Thus, currency was born and followed by book entry net settlement technology. Gold as money just doesn’t fit any explanation that satisfies any economic monetary theory other than “store of value” and of little difference than holding wheat of live cattle. Ref: Read Freedman on The Optimal Quantity of Money and Chueng on Transaction Costs.

  • Marvelous

    I am surprised no one else has commented. Interesting idea on transaction costs. Here are a few more things to consider. These are not my words, but Doug Casey’s.

    The proper definition of money is as something that functions as a store of value and a medium of exchange. Government fiat currencies can, and currently do, function as money. But they are far from ideal. What, then, are the characteristics of a good money? Aristotle listed them in the 4th century BCE. A good money must be all of the following:

    •Durable: A good money shouldn’t fall apart in your pocket nor evaporate when you aren’t looking. It should be indestructible. This is why we don’t use fruit for money.

    •Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size. This is why we don’t use things like porcelain for money – half a Ming vase isn’t worth much.

    •Consistent: A good money is something that always looks the same, so that it’s easy to recognize, each piece identical to the next. This is why we don’t use things like oil paintings for money; each painting, even by the same artist, of the same size and composed of the same materials is unique.

    •Convenient: A good money packs a lot of value into a small package and is highly portable. This is why we don’t use water for money, as essential as it is – just imagine how much you’d have to deliver to pay for a new house, not to mention all the problems you’d have with the escrow.

    •Intrinsically valuable: A good money is something many people want or can use. This is critical to money functioning as a means of exchange; even if I’m not a jeweler, I know that someone, somewhere wants gold and will take it in exchange for something else of value to me. This is why we don’t – or shouldn’t – use things like scraps of paper for money, no matter how impressive the inscriptions upon them might be.

    Gold is uniquely well qualified for use as money. No other substance meets those five characteristics so well. Gold’s main use, contrary to the belief of some, isn’t in jewelry or dentistry – although those uses are important. Its main use has almost always been as money. But gold’s ancillary uses are growing in importance, because, given its physical characteristics, it’s a high-tech metal. It’s the most resistant to chemical reaction, the most ductile and the most malleable of all the elements, and it’s an exceptional electrical conductor.

    There are lots of other advantages to gold as money. It’s by far the most private kind of money; gold coins, unlike paper currency, don’t even carry serial numbers. That makes it truly untraceable. At current prices, it’s more portable than cash, even in the form of $100 bills. It doesn’t retain traces of drugs, as does currency, which makes it less liable to arbitrary confiscation. Although efforts have been made to counterfeit gold bars, with tungsten filler and such, it’s much easier to authenticate than currency.

    And it’s becoming increasingly apparent to all the world that paper currencies are nothing but floating abstractions; they will not hold value. At $1,500 per ounce, paradoxically, gold is now far more useful as money than it was at $35 – and becoming more useful than $100 bills. That will be even truer as it goes to $5,000 in terms of today’s dollars.

  • Kip Walker… an excellent factoid on gold not being money, but you are wrong about one minor point. Wheat stored can be ravaged by insects or fire, and cattle get sick and die. Gold is easily stored and does not corrupt. I am a farmer and invest in physically held gold after I sell my cattle and wheat. I take my profits in gold, usually buying around spot price from sources as humble as pawn shops or from individuals who are willing to sell near spot. I have had allot of success in these transactions. Again, your disortation was correct, i.e. Gold is not money. Thank You Sir for a well written and mostly correct Comment. Best Regards to you.

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