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Gold bullion prices hold against Wall Street volatility.

October 14, 2011 – While the stock market keeps up with its crazy swings the price of gold bullion remains comparatively steady. It as if their roles have been reversed.

On the other hand, it could be no more than a sign of what is to come – the free market moving in for a coup.

In a free market goods are produced according to diminishing returns, up to the point where marginal revenue equals marginal cost. Since Nixon removed all support for the dollar the government has been free to produce as many dollars as it desired at virtually zero cost. But in a free market equilibrium would be reached when the revenue from those dollars, in other words their worth, is also zero.

The problem with paper money is that printing more of it than can be justified by real growth in physical wealth – the GDP – can lead only to its devaluation. The same is true of credit without the backing of physical assets. But credit expansion works wonders for a government/central bank monopoly.

Expanding credit creates the illusion of growing wealth while disguising the erosion of the foundation of that wealth. Even in hard times further borrowing is rationalized as being an investment in the future. In truth, however, it can only destroy what little wealth remains.

Despite the never ending efforts of Wall Street and its wholly owned subsidiary, the Fed, gold bullion follows a different drummer – the free market. Today the free market is also exerting its influence over fiat money around the globe, slowly but inexorably moving to balance its worth with its cost.

It is a force as fundamental and irresistible as the tides. It is what makes gold bullion real and permanent money and fiat currency illusory and short-lived.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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