FPC Blog



Are Gold and Silver Real Money? Former Federal Reserve Chairman Bernanke answers no.  And so do America’s youth.  Both clueless.

The youth, who pay with credit cards, not with cash, think money is digital. Consequently a bitcoin is worth many times the value of a gold coin despite the fact that a bitcoin’s value is nebulous and can decline thousands of dollars in a day.

And, apparently, gold and silver are not money for people worried about inflation that is
allegedly so serious that the Federal Reserve is engineering a recession and pension
fund and Big Bank wipeout to stop.

With inflation high and financial investments paying so little, why haven’t people sought
to protect their purchasing power by going into gold and silver?  Gold and silver prices
have fallen while inflation has risen. This is nonsensical.

Part of the answer is that the US dollar is high despite high inflation. This normally nonsensical relationship is because the UK pound, euro, and yen are adversely impacted by economy shutdowns due to Covid lockdowns and energy shortages created by Washington’s Russian sanctions, and these countries are experiencing their own inflations from the Covid lockdowns that reduced supply and cut them off from global deliveries.  Supply reductions can result in higher prices just as effectively as
excessive consumer demand.

Another part of the answer is that the supply of gold and silver in the futures market can be increased by printing uncovered contracts and, thereby can be increased in supply like fiat paper money.  The prices of gold and silver are in fact set in futures markets, not in the physical market where gold and silver are purchased.  The futures market in gold and silver permits “naked shorts.”  This means that unlike the stock market, where the person shorting the market has to have the actual stock to sell, which is usually borrowed, gold and silver can be sold short without the seller owning any gold or silver.

What this means is that gold and silver that trade in future markets can be created by printing contracts that are not covered by gold and silver, and today gold and silver can be increased in supply by printing contracts in the futures market where price is determined just as fiat paper money can be printed.

The printing of contracts and then dumping them into the futures market suddenly increases the supply of paper gold.  A sudden increase in shorts in the futures market drives down the gold price.  The Fed & the Big Banks have used naked shorting to prevent rising gold and silver prices that would show the true depreciation in the dollar’s value.

I believe that eventually this way of holding down the price of gold and silver will be overwhelmed by flight from excessively printed paper currencies.

My conclusion: I believe gold and silver are the ONLY REAL MONEY out there.

As J.P. Morgan stated in his testimony before Congress in 1912 “Gold is money. Everything else is credit.”