Gold is Just Another Token

2/15/16

Gold is a pet rock. Gold is real money. Gold is God's money. Gold is just another token. Gold is international money/currency. Gold is just an element. Gold has inherent/intrinsic value. Gold is a barbarous relic. And on and on.

I'd like to write today about "gold is just another token". On one hand, gold, like most forms of money, is a token. It is something that society as a whole agrees upon to exchange for goods and services. In this way it is no different from the dollar, a Bitcoin, a credit card swipe, electronic blips being sent, and so on. At one time, people agreed on tally sticks, cows, cowrie shells, and other things that today seem rather odd. In essence, these are no different than gold.

However, there is something very different about gold.

Gold (and you can probably lump silver in this argument too) is a token that many very different societies, throughout all time periods, throughout all geographies, have decided to be money. This is an absolutely astonishing fact, and it applies whether or not you believe that "inherent" or "intrinsic" value is a real thing. These cultures have also tended to highly value gold and silver as jewelry. More cultures throughout time and geography will have valued gold and silver as money and jewelry than say cows or cowrie shells, or paper from the government for that matter.

Note that despite iPods, 401ks, and good dental plans, that we in today's society are not much different than these cultures from the past. We also obviously value gold and silver highly just like they did. We have them in expensive jewelry, we have our central, and other, banks and companies guarding them, have huge markets that trade them, and huge industries (other than jewelry) that they are used in to make products we use everyday. So much for the "barbarous relic" argument while we're on the topic, unless we are still barbarians, that is.

I think the huge disconnect comes from the fact that we currently don't use gold or silver to pay for things. That is, to pay for things without first selling the gold or silver for your local currency. Gold and silver not viewed as international money by the lay public is a case of out of sight out of mind. I suggest to keep a gold or silver coin in your pocket or on your desk, somewhere you can be aware of everyday to not let it get out of sight and out of your mind.

I, personally, am in love with U.S. Treasuries as an investment. I love that I can plan my future expenses out and know exactly when and how much I will get paid. I like the mathematical "like clockwork!" aspect about them. With gold, there is more uncertainty in some respects. On the other hand, even though gold pays 0% interest/dividends, and I am not guaranteed I will get back the $X I invested in gold when I may need to sell it, a very strong type of certainty comes from the facts discussed above that "in the long run" it makes sense. Whether it makes sense in the short run is up for debate but the long run case is pretty much closed.