The Gold Market Versus Paper Money Posted by James Randolph on April 17, 2012
Most investors even nominally involved in the gold market have a basis of understanding of fiat currency, or paper money. Though it happens to be the currency of mainstream exchange in the United States, there are significant problems with the US dollar both domestically and internationally. The dollar is largely regarded as the de facto exchange currency for the world, because when sovereign currencies have failed in the past 100 years the dollar has always been a back up for international trade and finance.
Now, however, we as a global monetary culture are facing an entirely new problem. There is financial instability in the house of the dollar itself. No one is sure how to respond to the problem. BRIC countries, including Brazil, Russia, India, and China have responded by forming a so-called “basket” of currency with which they can do business. The Brazilian Real is a very strong currency in their trade. There has been a lot of talk for the past ten years about the Chinese Yuan.
Still, these currencies and alliances cannot possibly replace the dollar. We’re talking about a currency that is so strong 75 percent of dollars are actually held and kept outside of the US. The actual paper currency market, those dollars that we handle, use, and exchange at storefront on a daily basis, is infinitesimally small.
One of the reasons the gold market is so strong and will continue to be so strong into the future is the rapid and manic printing of money that has been occurring as a part of the US financial policy in the past four years. Ben Bernanke’s administration at the Federal Reserve is a continuation of Alan Greenspan’s low interest rate policy. Couple that with Bernanke’s solution of printing money, and you have a real fiscal crisis on your hands.
The only currency that will survive this kind of mistreatment is gold. It has been said for many years now and stood up to the worst kind of bashing because it is true. Gold is a safe-haven precious metal asset in a world of burning money. The gold market is the best place to invest and insure safety for you and yours now and far into the future.