The Monetary Metals mission is to Unlock the Productivity of Gold™. To understand what this means, and to see why this is important, let’s consider what’s wrong with the world today, and where a Yield on Gold, Paid in Gold® might lead.
The dollar ill-serves everyone who uses it. It is a lousy store of value. Indeed, the central bank charged with managing it has a policy of debasement at two percent per annum. So people lose their savings, like water slowly leaking down the drain.
The dollar is also a poor unit of account. The single most important question faced by every business is: Are we creating or destroying wealth? Accountants try to answer this question. However, the books are only as good as the unit of account on which they are based. If it’s elastic, then a wealth-destroying enterprise can appear profitable. Chronic bad capital allocation decisions cause recurring boom and bust cycles in our economy.
Finally, the dollar does not pay enough interest to those who depend on it, such as retirees. Without sufficient yield, they are forced to consume their life savings. For the first time in centuries, the older generation will leave less to the next. Pension funds, insurance companies, and annuities are undermined by the trend toward zero and negative interest rates.
They are forced to turn to speculation, for lack of opportunity to earn a yield. However, betting on the price action is no substitute for interest. In speculation, people fork over their wealth to someone in exchange for an asset. The reason they do this is the hope that someone else will fork over even more wealth, when the price rises.
While everyone loves a bull market, endlessly rising asset prices in a falling-interest environment is a process of capital consumption. Normally, you must produce something before you can consume. But bull markets seemingly give everyone the power to consume, while producing nothing. What they are consuming is the capital base that makes our advanced, modern civilization possible.
So if the dollar is defective, what keeps people using it? The common belief is that a collective act of faith keeps the dollar going, and once the mirage is dispelled, the dollar will collapse. That might make a good movie plot, but it’s not accurate.
Perverse incentives prop up the dollar.
The falling interest rate—now in its fourth decade—entices businesses, governments, and individuals to borrow. At each new, lower rate more are lured by the siren song to come join the ranks of the debtors.
But it’s a trap.
The dollar is an I.O.U. It’s basically a slice of the government’s debt. This is a problem because when you pay a debt using an I.O.U., the debt does not go out of existence. It is merely shifted. The regime of the irredeemable dollar contains no way to extinguish a debt.
This means that the total debt must grow by at least the amount of accrued interest. The interest cannot be paid off, so it is added to the growing total.
More practically, debtors are put into a gladiatorial arena, fighting each other to get the dollars they need to service their debts. This competition heats up as the interest rate falls. The result is that debtors are increasingly squeezed. The value of the dollar rises, as they relentlessly bid it up to avoid insolvency and loss of their businesses and homes.
This applies not only domestically, but also internationally. Debtors in every country in the world—including sovereign governments—owe dollars. Their problem is even more severe than domestic American debtors. They have income denominated in their local currency. So their income is going down, while their dollar-denominated debt is going up.
So long as debtors struggle to raise dollar revenue to make their interest payments, the dollar is assured a strong future. These debtors keep outdoing themselves to offer more goods, services, and labor in exchange for the dollars they need to stay solvent.
There is nothing wrong—and much that is good—with borrowing to expand production and bring new products to market. A loan is a win-win deal, providing the entrepreneur with capital and the lender with income on his money. There is nothing wrong—and much that is good—with banking. Banks facilitate lending, making it easier to borrow for entrepreneurs and easier and safer to lend for savers.
The fault lies with the irredeemable paper currency that has displaced gold in our monetary system. No one benefits from unstable interest rates (other than traders and dealers), nor from unstable currency exchange rates.
Monetary Metals’ vision is to make it profitable for savers and businesses to use gold.
By offering Gold Financing, Simplified™ to businesses who use the metal, Monetary Metals begins the process of weaning the market from its dollar and debt addictions.
By matching these businesses with investors who have gold, Monetary Metals offers a Yield on Gold, Paid in Gold®.
Our vision is for people to earn interest on gold. When people can earn interest on money that is not debased by Federal Reserve policy, the relentless march toward speculation and therefore chronic bubbles is reversed.
Interest causes a paradigm shift. Whereas people now think of the value of their gold in terms of its dollar price, interest on gold encourages us to think in terms of how much gold we have. It is not about a rise in the price of gold, but a gain in the amount of gold.
Monetary Metals aims to offer new incentives, to help the world rediscover the use of gold as money, starting with finance and investment.
Monetary Metals is the Gold Yield Marketplace™.