Gold is not money

Most people falsely believe that money is physical and limited. This false belief is one reason why societies separate into rich and poor. Rich people and their toadies starve people of money by claiming that “money is scarce.” The claim is false, but the starvation is real.

The delusion that money is physical and limited has many variants, one of which is the false belief that  only gold is “real” money, and that fiat money is not “real.”

In reality, only fiat money is “real money.” Physical gold is not money, and never has been, nor ever will be, since actual money is not physical. Actual money involves mental units of account (such as dollars or euros) that can be represented by written or printed numbers.

Gold can be traded (bartered) for money, or for goods or services, but gold cannot be “spent” like money. Gold and crude oil are commodities denominated in currencies such as dollars. Gold is presently trading for 1,240 U.S. dollars per ounce, while crude oil is trading at about 50 dollars per barrel.

If there were no currencies, then there would be no monetary value to oil or gold (or to anything else). However most people falsely believe that the reverse is true — i.e. that gold is what gives “value” to money. Again, this is part of the false belief that “real” money is scarce; a false belief that keeps billions of people enslaved.

“Gold traders” want you to think that only gold is “real money,” even though “gold traders” usually do not trade gold.  Instead, they trade “gold certificates,” which are mere numbers in a private database. If you buy a “gold certificate” from a “gold exchange,” and you ask for physical gold, you will not get any, since they do not have any. All they can do is offer to cash out your “gold certificate,” which is simply an account in their private database. The monetary value of your account is not physical.

Traders of “gold certificates” are constantly devising new scams to convince people to invest in “gold exchanges.” One of their scams is to falsely claim that gold is the only “real” money.

Gold hucksters are now claiming that on 22 May 2017 Arizona Gov. Doug Ducey signed a bill into law (HB2014) that makes gold into money in Arizona.

Nonsense of course.

HB2014 simply ends state taxation on capital gains derived from the trading of precious metals. For example, if you buy gold at 1,000 dollars per ounce, and you sell it for 1,500 dollars per ounce, the 500 dollars difference is considered capital gains. Arizona will no longer tax state residents on that 500 dollar gain. That is, Arizona residents no longer have to list this kind of capital gain on their state income tax forms.

The bill was introduced by Republican Mark Finchem who claims that taxing exchanges of “legal tender like gold coins” is a tax on money.

This is more nonsense. Gold coins are not legal tender. I’ll bet that Finchem is a gold huckster. If so, then he pushed for removing the tax in order to boost his “gold exchange.”

Former presidential candidate Ron Paul has commented on this AZ bill, saying,

“Every supporter of free markets should cheer Arizona’s passage of HB 2014. There is no more justification for forcing individuals to use government-created money than there is for forcing individuals to drive government manufactured cars. In fact, as the Federal Reserve’s 114 years of failure shows, giving monopoly control over our money supply to a secretive central bank is the most dangerous form of government intervention.”

Except that gold is not money, and never gas been. If I have a gold coin whose face value is one dollar, then the coin represents one dollar, and can be used or traded as a dollar, but technically the physical coin is not a dollar, since a dollar is not physical. The coin is simply a token, as is a dollar bill. In the United States, the monetary units of account are not gold, or coins, or currency notes, but dollars and cents. A ten-dollar bill represents ten dollars. It is a credit for ten dollars, but the currency bill itself is not ten dollars. It is just a piece of paper.

Again, this is not mere sophistry. The mass refusal to understand that money is not physical is one reason why we have global inequality. Because most people falsely believe that money is physical, rich people and their puppet politicians can falsely claim that “money is scarce,” and there is “no money” for social programs that help average people.  

Incidentally, notice Ron Paul’s self-contradiction. He condemns “government-created money,” but he also condemns the Fed as a “secretive central bank” that has “monopoly control over our money supply.”

So who creates money, the government or the Fed? (The correct answer is both.)

More nonsense from Ron Paul…

“By allowing the people of Arizona to use an alternative to Federal Reserve-created fiat currency, HB 2014 will help the people of Arizona survive the next Federal Reserve-created recessions. Passage of this bill will also help make Arizona more attractive to the growing number of people seeking alternatives to fiat money in order to protect themselves, their families, and their business from the effects of Federal Reserve policy. Thus, this bill will help attract new investments and jobs to Arizona.”

Either Ron Paul is a moron, or a gold huckster, or he was paid by gold hucksters to say this. U.S. federal law says that the U.S. currency is dollars and cents, not gold or gold coins. If gold was an “alternative currency,” then I could use gold to buy groceries. But I cannot. I can trade gold for groceries at agreed-to-dollars per ounce, but I cannot “spend” gold.

And note how Ron Paul falsely thinks that all dollars are created by the Fed.

Regarding recessions, these can be caused by austerity (i.e. the government putting insufficient money into the economy) or else they occur when private debt loads become too big to pay off. The first type of recession is caused by politicians. The second type is part of the “business cycle,” and can be triggered by the Fed if interest rates rise too far too fast.

One person says that, “Gold holds its value better than anything else on the planet.” Nonsense. The monetary value of gold depends on fluctuating gold markets, which are denominated in dollars, euros, etc. Monetary equivalents can rise and fall rapidly. As much better investment is Treasury securities. That is why various investors of all kinds have collectively deposited 20 trillion dollars in Fed savings accounts (the so-called “national debt”).

By the way, if gold is not money, then why did President F.D. Roosevelt sign Executive Order 6102 on 5 April 1933, which banned any individual or corporation from holding more than five ounces of gold?

The stated reason was that hard times had caused a “hoarding” of gold, stalling economic growth and making the depression worse.

This was a lie.

The actual reason was twofold.

First, in 1933 the USA was still on the “gold standard.” This was always a farce, since the U.S. government could always create money out of thin air, regardless of what gold happened to be trading for. Politicians mentioned the “gold standard” so they could pretend that federal money was scarce. Politicians ignored the “gold standard” when they wanted to create money for things like wars. Executive Order 6102 helped to buttress the “gold standard” pretense.

Second, U.S. dollars were not accepted globally in 1933. The world was marching toward a Second World War, and the U.S. government wanted the ability to obtain imports on an emergency basis. If foreigners in 1933 would not accept dollars for their imports, they might accept gold in trade, denominated in British pounds.

After World War Two, the US dollar was accepted worldwide, and by 1964 the U.S. government started to relax its restrictions on the owning and trading of gold. By 1975 all restrictions were removed.

Getting back to Arizona, the Zero Hedge blog says this…

Rep. Mark Finchem (R-Tucson) introduced House Bill 2014 on Jan. 9. The legislation defines legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.” “Specie” means coins having precious metal content. In effect, passage of the bill treats gold and silver specie as money.


First, U.S. government laws designate dollars (not gold) as legal tender. Second, “specie” means “coined money,” which originally meant creating money by stamping coins. Later “coining” meant creating money, period. Precious metal content was irrelevant to this, and remains so. Article 1 Section 8 of the U.S. Constitution says the Congress shall have power to “coin money, and regulate the value thereof.” The Constitution says nothing at all about what kind of metal the coins must be made of.

To repeat, all these errors are products of the false belief that money is physical, and therefore scarce, and that the only “real money” is gold.

As I noted above, the Arizona bill simply ends taxation of capital gains that are derived from the trading of precious metals.

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