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Gold vs. Money Supply - Vaulted
Source: vaulted.com
Article summary:
1. J.P. Morgan's quote "Gold is money. Everything else is credit" is truer today than ever before, as all major currencies are now fiat money backed only by a government promise or debt.
2. Gold has maintained its purchasing power for thousands of years, and since the creation of the Federal Reserve in 1912, the U.S. dollar has lost nearly 98% of its purchasing power while gold has multiplied a hundredfold.
3. The gold price tracks money supply growth, and the gold/M2 ratio tells investors how overpriced or underpriced gold is compared to M2 money supply - when the ratio is low, gold is undervalued and when it's high, gold is overvalued.
Article analysis:
The article provides an overview of the relationship between gold and money supply, with a focus on the U.S., and makes several claims about their correlation over time. It cites historical evidence from Babylonian and Roman times to support its argument that gold maintains its purchasing power over long periods of time, as well as more recent data from the last 50 years to demonstrate that increases in M2 money supply have led to increases in the price of gold.
The article appears to be reliable overall; however there are some potential biases worth noting. For example, it does not explore any counterarguments or present both sides equally; instead it focuses solely on making a case for investing in gold as a store of value due to its ability to maintain its purchasing power over time despite increases in M2 money supply growth. Additionally, it does not mention any potential risks associated with investing in gold such as market volatility or liquidity issues which could affect returns on investment.
In conclusion, this article provides an informative overview of the relationship between gold and money supply but should be read with caution due to potential biases and omissions regarding possible risks associated with investing in gold which could affect returns on investment.