The Printing Press: Always Good for Gold in the End

The comments below are an edited and abridged synopsis of an article by Lobo Tiggre

The price of gold or silver at any particular time is of almost no importance to anyone who accumulates bullion for long-term wealth preservation. An ounce of gold or silver is an ounce of gold or silver, whatever’s going on in the world.

The Printing Press: Always Good for Gold in the End | BullionBuzz | Nick's Top Six
Uncut sheet of printed 100 dollar notes

For thousands of years, gold has been the best means of holding wealth to liquidate in case of need or opportunity, or to pass forward to the next generation. The advent of paper money—and now cryptocurrencies—doesn’t change this.

What’s happening to competing forms of money—inflation or deflation of the various currencies—is a direct and powerful driver. Wars, pandemics and other crises can affect gold prices, but the fear trade tends to be temporary.

Creating money doesn’t necessarily mean higher prices, but since the advent of paper money and the fractional reserve banking system, the effect of increasing the money supply can be magnified or minimized by changes in the velocity of money.

Some say that printing money has nothing to do with inflation. The fact that the US dollar serves as the world’s reserve currency, they argue, makes it immune to high inflation. This is silly, if not deceitful.

So here we are in another economic crisis, with the advocates of government profligacy calling for more spending without restraint. We’re told we can print lots of money and nothing bad will happen; we’re told we must, or the consequences will be dire. A decade of lower-than-expected inflation in the developed world proves that it’s safe.

But this is wrong because there’s a lower limit to the velocity of money. It can’t be reduced to zero without destroying all credit and putting the economy on a cash basis, and there’s no limit to how much money can be printed. If you print enough of it, there will be price inflation.

Central bankers don’t have it under control. They see the global economy as having gone beyond the point of no return. No form of currency has ever survived debasement by the state once restraint is lost. It’s arrogant (ignorant?) for modern advocates of money-printing to imagine they’re smart enough to pull it off.

There is the irresistible, instant gratification of money-printing for politicians and wannabe social engineers. There is also the distortion of incentives and destruction of value resulting from the delayed effect of that same money-printing.

This makes it all the more likely that the powers-that-be will go too far. By the time they realize they’ve printed too much, it will be too late. And that’s why the printing press always wins in the end.

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