by Jeff Nielson, Bullion Bulls Canada:
Informed readers will be well-acquainted with the fact that gold and silver are “monetary metals”, since this property of precious metals is widely reported. Where readers will have far less clarity is in terms of what this actually means, since it is rarely (if ever) explained.
Referring to gold and silver as monetary metals means far more than the simple fact that gold and silver are “money”. Indeed, it implies more than the fact that gold and silver are (both) Good Money. What makes gold and silver monetary metals is the fact that they represent the perfect standard and/or metric to reflect changes in our monetary system. It is this property of reflecting such changes that makes gold and silver monetary metals.
More explanation is required to make this apparent. The key attribute which makes gold and silver both ideal money and monetary metals is the stable, slowly growing rate of supply. To be more specific, over the centuries the rate of growth of the supply of gold and silver has roughly mirrored our rate of population growth. Why is this significant?
Once upon a time, when economics was a valid field of study instead of a cesspool of propaganda, it was understood that there was a Natural Rate of growth which existed in our economies (and the world around us). That rate-of-growth equals the rate at which our populations grow. As with most of the valid principles of economics, the concept of a Natural Rate of growth is a function of equal parts basic arithmetic and common sense.
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