Money vs Currency. Which has more value?

The requirement for money to have value is that it must have a secured value of purchasing power over a long period of time. On the other hand, gold and silver was proven over thousand of years to be the ultimate store of value.

Gold can only be created when a star explodes, known as the supernova. And stays around forever. This property alone makes gold the most perfect form of money.

People were amazed that after 5000 years; pyramids are still standing strong. But what’s more amazing is that the currency that the people that built that were using; that currency, that gold and silver that they were using in trade on a daily basis, is still around today.

It may have been melted down and re-fined and it’s in a coin or a bar or in some piece of jewelry. But its still with us today and it still stores values.

Gold is the ultimate money because there is nothing else in the same leagues. It is divisible; we can’t print gold. It’s permanent. It’s a store of value, a unit of account. It’s got everything you want out of money, but it does not go away and it can’t be increased. That is why gold is the exquisite money of all. What more can you ask out of a money?

Governments don’t like gold because they can get away with the fiat currencies, and they’ll do everything they can to discredit it as an asset class. According to Milton Friedman:

Inflation – the proper definition of inflation is an expansion of the currency supply.

Deflation – contraction of the currency supply. 

If you increase the supply of the currency, in time, prices will rise. And if you contract the currency supply, eventually process will fall.

Let’s imagine a pool of water resembling the currency and a sponge above the pool, representing the prices. If you expand the size of the pool (the currencies), the sponge in water (prices) have to rise to suck up the excess currency.

This is a problem because government never stop printing more currency and adding currency to the circulation. Therefore, prices keep on going up. Not because the stuff you’re trying to buy is changing. The real estate doesn’t change. What has changed is the currency purchases less and less. Not the prices going up and up.

For example, the value of RM100 a decade ago does not have the same purchasing power as RM100 nowadays. And that is what it meant by inflation.

One of the biggest make-believe stories is called Quantitative Easing which sounds complex but its really just smoke and mirrors tern for currency creation. QE started with the banking bailouts back in 2009. This currency was created out of thin air and then given to the banks who paid themselves record bonuses in reward for crashing the world company.

This is a global phenomenon, nut all you have to remember for now is that whether it’s QE bailouts, or stimulus programs, these are all just voodoo, hocus pocus terms for increased currency creation.  

During the second round of the quantitative easing, global food prices went up to 60 percent and this created a humanitarian disaster for the two billion people on earth who live on less than two dollars a day.

So quantitative easing was the spark that ignited the Arab Spring. So when you create money, you get some sort of inflation. It just depends on where the inflation goes.

When you have a runaway inflation, it’s punishing the very people who are most productive in the society. The doctors, teachers, social workers, in other words the people that produce more than they consume and save the difference.

The problem is that those productive people, the savers, save in their national currency – like Malaysia, they save in Ringgits. Hundreds and thousands of saving in their bank accounts but unfortunately the national currency is just a fiat piece of paper at this point.

So, when it is destroyed through runaway inflation, that Ringgits you saved for tens or twenty years you were hoping to retire on doesn’t exist. And the things that you were going to buy with it and provide for others, your families and loved ones, doesn’t exist either. Now, what are you going to do?