October 31, 2011 – Is gold bullion worth any less today because the Japanese devalued the yen? Of course not. The drop in price is only a hint of things to come in the battle of the century: gold bullion vs. fiat money.

“Gold is not a financial asset to be compared with dot-com stocks or Miami condos and it is not a commodity like pork bellies or crude oil,” says fund manager Paul Brodsky. “It is the ultimate currency for the truly sophisticated wealth holder in a time of substantial unreserved credit promotion.”

In Resource World Nick Barisheff makes the argument for $10,000 gold and cites a critical difference between the way gold bullion is viewed in the eastern and western worlds. In the west we are focused on trading gold like any other asset, fixing its price in currencies. In the east, however, gold is still traded as money.

When you think of currencies in terms of gold, and not the other way around, three things become abundantly clear:

• Global currencies are losing purchasing power
• Money creation is extremely inflationary
• Irreversible trends will continue to cause gold to rise

To illustrate the currencies’ loss of purchasing power Barisheff compares the ounces of gold bullion it would take to make three common purchases in 1971 and 2011.

A compact car cost 66 oz. of gold in 1971 and only 8 in 2011. For the average Canadian house the figures are 703 oz. and 199 oz. respectively and the DJIA 25 oz. and 6.5 oz.

There is no mystery in currencies’ loss of purchasing power: money supplies are expanding a far greater rate than gold supplies. MZM, one of the best indicators of money supply, has increased nearly 900% over the last three decades while gold production has increased the supply by an average of only 3% per year.

While the government persists in glossing over the inflationary effects of money creation with its version of the CPI, John Williams of ShadowStats still uses the original basket of goods that governments used prior to the early 1990s. By that measure the CPI is at 12%.

Of the irreversible trends “the most prominent are central bank buying, Chinese and Indian buying, the movement away from the US dollar, peak gold and under-investment in gold by pension funds,” Barisheff says.

Compared to gold’s millennia as reigning champ, fiat money is a flyweight upstart that doesn’t stand a chance in the ring. Gold bullion will rise to $10,000 simply because that is what it will take to put global wealth back on solid ground.

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Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org