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Good Money vs. Bad Money, nothing that we don't already know, but still worth the read


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Apr 2, 2010
from G. Edward Griffin
2019 August 16

Good Money vs. Bad Money

Since writing The Creature from Jekyll Island, A Second Look at the Federal Reserve, I have done a lot of thinking about and lecturing on the difference between good money and bad money. It’s a huge topic, but the difference is quite simple. Good money is something that is so stable in purchasing power over a long period of time that it can be used to measure the value of everything else. It’s like a yardstick. Because its length never changes, it can be used to measure things with different lengths.

Throughout 5.000 years of history, the only yardsticks that have well served the purpose of measuring monetary value are gold and silver. There are reasons for that, such as the fact that these metals last forever, can be analyzed for purity, can be divided and recombined, and have other qualities of convenience, but the primary reason is that, in a free society, the value of gold and silver is not determined by political decree or bank policy. It is determined by the free-market forces of supply and demand.

Because of that, it’s value always is in proportion to the human effort required to produce the gold or silver being used as money compared to the effort required to produce those things the money can buy. Because of this human-effort component on both sides of every transaction, it acts like a balanced scale. The value of one ounce of gold or silver on one side always remains in a stable relationship to the value of goods and services on the other side that can be purchased by that one ounce. That’s because both sides of the scale require the same amount of human effort to produce.

The consequence of this is that gold and silver maintain their purchasing power over time without state intervention. The fact that this value cannot be stolen by inflation is the primary reason I consider gold and silver to be ‘good’ money.
The US dollar used to be good money when it was backed by gold and silver but, since 1971, it has been backed by government IOUs, which merely are promises to repay trillions of dollars in debt with money that, first, must be taken from taxpayers. Promises to repay, especially if someone else has to make the payment, require zero human effort, and so politicians can create as many promises as they wish with the stroke of a pen or the click of a computer keyboard.
The result of this practice is that the money supply, based on these IOUs, expands at a rate faster than the expansion of goods and services and, since there is no human effort to balance the equation, the purchasing power of the US dollar has steadily declined. Since 1913, when the Federal Reserve was created, more than 97% of the dollar’s purchasing power has been stolen from those who earned those dollars. 97% in their lifetime! That’s about as good a definition of ‘bad’ money as you are likely to find. Owning ‘good’ money – gold and silver – is history’s only proven hedge against bad money.
So the question is; how do you do it? What’s the best way to acquire gold and silver?

The answer to that question depends mostly on your situation. How aggressive do you want to be? Do you have existing dollar-based investments you want to convert? Do you want rare coins or bullion coins – or bars? Do you already have a reliable source at competitive prices? How do you plan to protect your precious metals from theft or confiscation?

Those questions cannot be answered without knowing your personal situation, but I can tell you about an interesting wholesale-buying club that should be of interest to everyone. This club delivers gold and silver coins at truly wholesale prices. It specializes in rare and collectible specimens but offers bullion coins as well. Purchases are scheduled monthly, they require no research or market analysis on your part, quality coins are delivered by mail at amazingly low prices, and, if you make referrals, you are rewarded in gold or silver coins. That’s it in a nutshell! The club is called 7K Metals, and you can learn about it here.
The rest is a sales pitch