Fallacies – 1. Paper Gold is just like Paper Anything [FOFOA]


This is the first in a new series I’ll be returning to occasionally. I have recently come across a number of fallacies relating to the subject matter of this blog and my plan is to compile them and then correct them one at a time.

1. Paper Gold is just like Paper Anything

This first fallacy aims to undermine a good deal of what Another and FOA wrote about by claiming that the paper gold market has the same effect on gold as any paper market has on its underlying commodity. This fallacy claims that the same arguments made for an explosive revaluation of physical gold could be made for anything else, therefore they must be wrong.

Commenter “ForLiberty” put it this way:

“This whole ‘paper gold is holding the price down’ argument makes zero sense to me. It is just a logical nonsense. All paper trades have two parties – bidup and biddown. A paper gold trade could have never taken place if nobody wanted to short it. This is how all markets work. There are paper tomatoes sold too. Is there a conspiracy there too?”

ForLiberty was apparently paraphrasing Martin Armstrong who wrote something remarkably similar:

“They argue that today gold is really paper gold, and the market have multiplied that many times. They argue that the real gold is only about 5 billion ounces. They then argue that the paper gold depresses the price of gold and this is why it is not where it should be right now. All this sound nice, however, you can make the same argument about anything traded today from wheat to stocks and bonds given the derivative markets. Some see conspiracy behind everything.”

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