Precious Metals

From the beginning of recorded history, humanity has used all sorts of things as money. Salt, shells, beats, livestock - all had their day. But over time metals, particularly gold and silver, have emerged as the most widely used forms of money. This is not an accident. Precious metals have all the qualities that make money valuable and useful: scarcity, desirability, uniformity, durability, and malleability.

Even if people didn't want the metal as money, it still had value based on its other uses and relative scarcity.

In contrast, paper money has value only as long as enough people agree to take it in exchange for goods and services. But that makes its value completely subjective. Since it can be produced at will, and has no intrinsic value itself, the paper can become worthless if enough people lose faith in it.

— Peter Schiff; How an Economy Grows and Why It Crashes

If the size or the name of the money-unit makes little economic difference; neither does the shape of the monetary metal. Since the commodity is the money, it follows that the entire stock of the metal, so long as it is available to man, constitutes the world’s stock of money. It makes no real difference what shape any of the metal is at any time. If iron is the money, then all the iron is money, whether it is in the form of bars, chunks, or embodied in specialized machinery. Gold has been traded as money in the raw form of nuggets, as gold dust in sacks, and even as jewelry. It should not be surprising that gold, or other moneys, can be traded in many forms, since their important feature is their weight.

— Murray Rothbard; What Has Government Done to Our Money?

It should be clear that the exchange rate and the purchasing powers of the units of the two metals will always tend to be proportional. If prices of goods are fifteen times as much in silver as they are in gold, then the exchange rate will tend to be set at 15:1. If not, it will pay to exchange from one to the other until parity is reached. Thus, if prices are fifteen times as much in terms of silver as gold while silver/gold is 20:1, people will rush to sell their goods for gold, buy silver, and then rebuy the goods with silver, reaping a handsome gain in the process. This will quickly restore the “purchasing power parity” of the exchange rate; as gold gets cheaper in terms of silver, silver prices of goods go up, and gold prices of goods go down.

— Murray Rothbard; What Has Government Done to Our Money?

Today, gold and silver remain the commodities that are internationally accepted as money. This is the lesson I learned in Vietnam: Paper money was national, but gold was international, accepted as money, even behind enemy lines.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

As in any bubble, the crooks and con men of gold and silver are already out in droves, running ads on television, online, and in print. Once again, the little pigs who did not prepare for the crisis will have their hard-earned money taken away with the sweet reassuring words of the smooth-talking, silver-tongued, big bad wolf. As with all investments, you need to be educated about gold and silver before you invest in them.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Kim and I do not count gold and silver as cashflow assets since they do not put money in our pockets. Rather, we hold gold and silver much like a person would keep money in a savings account. Gold and silver are liquid, and when politicians are printing more and more money, gold and silver have a better chance of retaining their purchasing power.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich