Paper money is just that -- a piece of paper. it has no natural value. Historically, governments backed up money by showing that they had enough gold to cover the value of the money that they printed. Think of the paper money as an "IOU" from the government. You accept their credit because you know they have gold, so they can pay you, if you want to call in your IOU. That was called the "gold standard". Countries held stockpiles of gold to cover the value of all money in circulation i.e. gold reserves.
The problem was that there's a limited amount of gold in the world. This limited the amount of money that can be in circulation. Also, if someone's gold was destroyed i.e. got sunk in a ship or something, all of a sudden their money became worthless.
During the great depression, money was scarce and people were literally starving to death. Some people felt that this was because rich industrial business owners in the cities were hoarding money, instead of allowing it to be circulated and used by poorer people. Some people had an idea to shift to the "silver standard" instead i.e. all paper money is backed up by equal amount of silver (instead of gold). There's way more silver in the world, which would mean more money could be in circulation. Governments could just print more money and that would solve the poverty problem .
They also believed that former farmers moving to the city was part of the problem --- people were working in factories for money,instead of staying on farms where they raised produce and traded it for what they needed.
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In the Wizard of Oz, the silver slippers represent the silver standard - the magic device that saves everything. Dorothy represents the farmer, who sets off on a pointless quest to the city, when really what she should be doing is using her silver slippers (silver standard) to help her get back to the farm. The wicked witches represent the rich businessmen tormenting the poor people. The smart scarecrow also represents the farmer. The crying tin (industry) man represents the sad person working in the factories. And the cowardly lion represents the author himself -- who was too "cowardly" to openly state and argue his political position
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Neferitiri's description is good except that the Cowardly Lion is William Jennings Bryan
Follow the "Yellow Brick Road". The money trail leads you to who is ultimately in control -- The Wizard or the Fed. The US existed for 150 years without the Federal Reserve. Some say the Federal Reserve Act that created the Fed in 1913 was unconstitutional, and that the Federal Reserve is a private company run by wealthy individuals, no more connected to the gov't than Federal Express (the delivery company), yet they control interest rates (nobody was ever supposed to do that either), money supply, etc., on and on down the yellow brick road. Up until 1913, Americans kept all of their earnings, yet we still had schools, colleges, roads, vast railroads, streets, subways, the Army, Navy and Marine Corps (who managed to win 8 wars).
He who controls the money supply of a nation controls the nation.
James A. Garfield
Gold and silver are strongly correlated, but where gold is 35% off its highs, silver is 65% off its 2011 highs. If you think of gold as a "safe" investment (traditional thinking), this current deline in gold and silver says otherwise.
Lately, in the past couple of years, the stock market has been up, and precious metals have been down, showing a negative correlation between stocks and gold.
In the past, this negative correlation has corrected sharply. Either the stock market has to go lower or gold has to go higher (if history means anything). So here is a market indicator using the gold relationship. It makes more sense that the stock market will go lower rather than gold rising sharply, especially with the US Dollar making new highs every week.
If you want to bet on the rise in prices of precious metals, gold outperforms silver (the gold/silver relationship rises) during periods of market distress. But silver is so oversold, silver may outperorm to the upside in this situation. So everything is very confusing right now.
i don't understand the concept of the gold and silver issue. as well as the allegory with the wizard of oz.. thank you!
