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Money is not always the same as currency. Money is something which generally retains its value over time and in most cases, can be traded for something else of value. Currency is simply legal money. But there is another way of looking at currency. I prefer to look at it like a commodity.

Gold is a commodity. Its value is determined by how much there is, and how much people want to have. It isn’t something you can create with current technology. In fact, it would take a Supernova to create gold – so I would assume an equivalent amount of energy would have to be used if it ever were to be manufactured artificially.

For all effective purposes then, the quantity of gold depends solely on how much can be produced by mining. And that quantity isn’t nearly enough today – to satisfy demand. Hence, gold prices rise.

(There isn’t even enough paper money around – but that seems to have much LESS of a demand – else gold prices would be dropping.)

Coming back to currency however, if we think of it as a commodity – its supply is limitless. Fiat currency is created with a stroke of a pen (or, rather – the punch of a key on a computer.) We can create as much of it as we want. Although it might seem to be a great idea to have a commodity which is so easy to create – we have to realise that currency DOES NOT automatically carry VALUE. The value of a currency depends on how much of it is in circulation – or rather, how little of it is compared to its demand. We have no way of increasing value ITSELF as “value” is an intangible.

George Soros claims that gold is in a “bubble” – that is – it is priced more than it’s worth. The truth is however, that it is the currency (the legal money) which is on its way down. While the economy may be in a “depression” the Fed is STILL trying to inflate it by printing more currency. And THAT will lead eventually to INFLATION – or, what I call – a CURRENCY BUBBLE!


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