Friday, March 25, 2011

Someone asked, silver or gold?

Someone asked the following: Gold or silver...please weigh in with your preference and rationale...

Here's my brief response (brief is hard for me sometimes!!)

Everyone seems to think this is simply an American debate since we are currently the reserve currency. It is true the MOST central banks don't own silver but how do we know that for sure?

After 5 years China came out and announced that they had much more gold than anyone had imagined.

We now know that BOTH the Chinese and Indian governments have announced that they are going to be purchasing SILVER and gold as reserve assets. Score 2 for silver.

We KNOW that the Koran demands that SILVER and gold be money. Certain Muslim countries are already minting silver and gold coins. Score 1 for each.

In a FREE MARKET governments cannot tell people what money is. And regardless of what governments dictate, people will still do what they are going to do. Silver sales and Silver Eagles sales are breaking records so what are people choosing to do?

A dollar according to the Constitution is silver. Score 1.

Another thing I never hear anyone speak of is you don't need silver held by governments for it to be money. A government could simply produce silver certificate legal tender (and gold) that you can only get by exchanging silver for them. You do not legalize the exchange of silver and gold bullion. Voila, the gov restores their silver and gold supply and life goes on. Creditors and bond holders get burned, the wise saver goes on a spending spree.

It doesn't really have to be that difficult. The central banks of the world are simply taking advantage of the fact that so many people have faith in and are using fiat.

One more point for silver: there will be less and less of it every year. Not true for gold. Even if gold is the only money you will one day be able to "sell" silver for more fiat than gold will provide. So really the discussion is about value and wealth at that point.

Own them both!!!

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