Money is Not an Invention. It's Just the Most Liquid Commodity

Diamonds are not an invention either. They're just the hardest commodity. (And Agustin Carstens is swiping your jackfruit.)

Welcome to Part V in this ongoing Cole Metals Group series on busting myths about gold and silver. To review, the five myths we have busted so far are these:

1. The myth of going off the gold standard.

2. The myth that central bank digital currencies will enslave all of humanity forever.

3. The myth that some other currency will replace the dollar in the End Game.

4. The myth of silver demonetization.

5. The myth that gold and silver are even investments at all in the first place.

Today, let's go into myth #6. That is, the myth of the dichotomy between barter and monetary exchange. Alternatively, you could call it the myth of money as an invention or tool to facilitate trade. Here we go.

The Jackfruit Tree

I often describe hyperinflation in terms of a fruit tree in someone's backyard. Let's say it's a jackfruit tree, just because jackfruit is a ridiculously enormous fruit that grows like crazy weird spiky boils right out of the branches and even the trunk, so you'll probably remember the analogy better.

Let's say your sneaky neighbor wakes up at 3am every morning to swipe a jackfruit from your tree. Chances are, you won't notice. You'll keep tending the tree, watering it, fertilizing it, pruning it, and maybe even singing to it if you're a bit funky and you just read an article in a hippieish nature-themed magazine about how trees like classical music or something. For all I know, they do.

That's what your thieving neighbor wants. He wants you not to notice his theft so that you keep tending the tree so he can keep stealing and living off your work. Let's say your neighbor then invites his buddy over for dinner. Let's say his buddy has a prodigious appetite, like, say, the central banker of central bankers, head of the Bank of International Settlements Agustin Carstens.

Objects in picture are larger than they appear.

To prepare for dinner, your neighbor wakes up at 3am and steals two jackfruits this time. One for him, and one for Carstens. The next morning, you go outside to tend to your tree, and you may notice in the back of your mind that something is missing, but you don't really make a big deal out of it. You keep tending the tree.

Then let's say your neighbor is preparing a big feast, and invites every central banker in the world for an unhinged jackfruit-themed party full of debauchery and odd rituals. I'll let your imagination run wild here, but the point is, he's going to need a ton of jackfruit. So at 3am, in order to feed all his buddies, he sneaks into your yard and pilfers 90% of the jackfruit bursting out of your tree.

Well, now you notice, especially after all the racket and unsettlingly disturbing noises emanating from his house last night, not to mention all the jackfruit rinds piling up in his garbage bin.

So what do you do? You call the police but they don't care. You try to sue him but he bought all the courts. You call Uncle Joe to help but he can't hear you and Kamala's giving him a sponge bath. So you have no choice but to pick every jackfruit on your tree and chop it down in disgust.

That's hyperinflation.

Before we get to the point of cutting down the entire tree in disgust though, there is an intermediate stage. That is, when you start to notice that your fruit is being stolen, and you simply stop investing in the tree. You don't cut it down yet, but you no longer try to maximize its yield. That's where we are now.

Doom Spending, and Degrees of Liquidity

A phenomenon called "doom spending" is now taking hold among the younger generation. That's when the young ones no longer see saving as a rational goal. It's nihilistic, but it also makes sense. Prices in dollar terms are rising so fast now that Millenials and GenZ'ers can't keep up. They have given up hope of ever owning a home or raising a family. They have stopped tending the jackfruit tree, and instead are spending what little savings they have (what few jackfruits are left on the tree) on hollow luxury consumer goods like designer lambskin tote bags. Bloomberg:

With traditional milestones — like homeownership and a life with kids — so far out of reach, denying herself “little luxuries” wasn’t going to make a difference. And if anything, the lambskin tote with a 24-carat chain made her feel better.

Typically, when people are on shaky ground economically, they pull back on spending. But, increasingly, younger generations are doing the opposite, figuring their financial futures are doomed no matter what. Higher student debt loads, an increased cost of living and shifts in the labor market have made it more difficult to achieve financial goals, like buying a house or saving for retirement.

As such, about 27% of Americans admit to “doom spending” to cope with concerns about the economy and foreign affairs, according to Credit Karma, a personal finance company. And the rates are even higher among Millennials and Gen Z, at 43% and 35% respectively.

Here's where we get the artificial dichotomy between barter and money. Ludwig von Mises described hyperinflation as the "flight to real goods". It begins with giving up on the idea of saving in currency terms, and instead dumping that currency for something real, like a designer lambskin tote bag. But when you think about it, how different is that from stacking gold and silver? Qualitatively, in strict economics terms, it's really the same thing.

Whether gold and silver, or a luxury consumer item that depreciates fast, it's a flight to real goods in either case. So what, then, is the difference between responsible stacking and splurging on superficial thrills? In reality, it's only one of degree of liquidity. A luxury bag will retain some value in trade in the End Game, more than a Treasury note or a mortgage-backed security for sure. But it is much less liquid than gold or silver, because very few people want a luxury tote bag, it can't be easily transformed into anything else, and its quality diminishes with age. Also, the world could suddenly decide for one reason or another that designer brand names are dumb. That makes the bag very illiquid. Its price will change radically in terms of other goods on every exchange. Therefore, it is not a good money.

But exchange your currency for gold and silver, and you acquire the most liquid of commodities, which is what money literally is. It's a commodity that happens to change price in terms of other things the least over time. In that sense, there really is no difference between barter and monetary exchange. When you trade one thing for another thing, that's barter. Well gold and silver are also things. The only difference is the degree of liquidity.

Money is not an Invention, Nor is it a Tool

Continuing down this chain of logic, nobody invented money. Nobody wrote an academic paper on ending barter in favor of a new thing called money and submitted that paper to a peer-reviewed journal. Money is not a tool nor an invention in that sense. What happened was people started worked together and trading things for other things instead of killing each other, figuring it was a better way of living, which it is.

They started to notice that gold and silver worked better than other commodities did for exchanging, so they just kept doing it. Money happened organically. It's not like a phone that somebody had to consciously engineer for a specific purpose. The most liquid commodity always existed, just as the strongest acid or the hardest material always existed without anyone inventing it.

Nobody really thought about the why factor until much later, and when they started thinking about the why, they radically overthought it and started imagining they could "invent" an even better money. From that point, the monetary Tower of Babel started to grow.

Doom Spenders are Just Less Efficient Stackers

Now that we know that barter and money are really part of the same exchange continuum differing only in the degree of liquidity, we can see the phenomenon of doom spending in a much more positive light. The end of the dollar and the inflationary system as we have known it will require everyone, all of humanity, to work together on dumping the dollar for real assets, what Mises called the flight to real goods.

The wisest among us, those of us who understood from the beginning that our libertine and profligate central banking neighbor was stealing our jackfruit this whole time, we began dumping the dollar for the most liquid commodity long ago, knowing in advance that gold and silver will be the easiest commodities to trade for anything else we need once the tree is bare and we have no more jackfruit. The latecomers, those of us who are only just now starting to notice the systemic theft of their jackfruit but they don't know who's doing it, they have only now started to act on dumping their dollar savings.

The luxury tote bags they are buying are decidedly less liquid and will not be nearly as easy to trade for whatever they need in the End Game, but at least now, with the jackfruit tree almost completely bare, they have finally woken up and are starting to dump their dollar savings for real goods, just like the stackers have been doing for years.

Very soon, the stackers and the Millenial and GenZ doom spenders, along with anyone else with even a single dollar to their name, will join forces, uproot the tree entirely, and end the central banker party next door feasting on the jackfruits of our labor.

I look forward to replanting with you. May God bring it along speedily in our days.