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Alasdair Macleod: Why gold is always money
By Alasdair Macleod
GoldMoney, Toronto
Thursday, May 4, 2023
That America faces a severe banking crisis has become plain to see, but the authorities' response less so. Almost certainly the crisis has much further to go in America, spreading to other jurisdictions. We can only hope that central banks will protect all depositors, but that is far from certain in this early stage.
These febrile conditions are made infinitely more difficult by the contraction of bank credit. The cyclical nature of bank credit means that the shortage of credit will intensify, driving up borrowing costs even in the face of a recession. Interest rates are no longer under the control of central banks, though market participants have yet to realise it.
... Dispatch continues below ...
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It has important implications for the valuation of credit. In order to understand the consequences, this article draws out the legal and practical distinctions between money, defined as gold and silver but principally gold, and credit in the form of banknotes and bank deposits.
The value of credit is a matter of the confidence in it. You may think that your dollars, euros, or pounds are money, but you would be wrong. They are credit. The cost of being wrong will not be just to see your bank deposits threatened systemically, but potentially the entire currency system undermined by loss of faith in it.
To properly understand these dangers, this article defines and describes the differences between credit and money. It is credit which is threatened with collapse. Only true money, which very few Westerners possess will survive. ...
... For the remainder of the analysis:
https://www.goldmoney.com/research/why-gold-is-always-money?gmrefcode=gata
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