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Around the campfire: Finite gold and infinite paper

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I’ve always been fascinated by the concept of infinity.

Clients often say to me that, because the purchasing power of gold is generally going up, it feels like they are buying things for free. One of them once told me “I only spend my gold when it has gone up.” Almost like the gift that keeps on giving.

Gold is certainly incredibly malleable. A single ounce of gold can be stretched out until it’s 50 miles long, like the stream of ribbons out of a magician’s top hat.

Only today the magicians are governments and the illusions they are creating are happening in front of your eyes.

What is infinity? A simple definition tells us that infinity is something boundless or endless. The supply of gold is definitely not infinite. But the supply of paper money can be. After all, governments can print more banknotes whenever they want to.

Gold today is like an infinity mirror, which gives the illusion of an infinitely long tunnel. It’s a trick of the eye, of course. The tunnel is not infinite but only seems so.

Like an infinity mirror, the price of gold is merely reflecting back the seemingly infinite supply of money being pumped into the system by central banks. So far, governments around the world have pumped some $10 trillion into the world’s money supply.

That defies comprehension. Only a short time ago we were all wondering if we could finally kiss goodbye to the austerity – the lack of government spending – that had hung around after the 2008 financial crash. And now, apparently from no-where, governments have found the means of putting $10 trillion out there. It’s like there is an infinite supply of paper money. And of course there is – if governments decree it.

Personally, I don’t monitor the price of gold. I buy it and spend it at every opportunity.

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