BBQ:

First. There are no stupid questions. Only stupid answers!

Gold, silver, platinum, rhodium, diamonds, and other so called "hard assets", retain their value and in fact appreciate when all "fiat" mediums of exchange become of decreasing value due to over population expressed through the "monetary printing press". There is a finite amount of precious commodities in the world but an unlimited amount paper and ink. Anytime a central government utilizes its ability to overpopulate its currency with no intrinsic value to back it up, then the currency becomes debased and worth less.

As an example, what is a good loaf of bread worth? Lets say that loaf of bread is sold for $2.00 on average. That same loaf of bread was 30 years ago worth about 35 cents. That same loaf of bread is worth about 1 gram of gold today, the same thirty years ago and the same in Roman times. Eventually as one inflates away the value of any "non backed" currency as was done in Weimar Germany between WW1 and WW2, it literally reaches the point that a loaf of bread might cost 50 million Deutschmarks. That quantity of D Marks might have to be carried in a bushel basket. And literally, if a person in Wiemar Germany dropped the basket full of D Marks, they retrieved the basket and let the D Marks go. The basket was of greater value than all of the D Marks it could hold.

Today the United States has due to monetary inflation about 9 trillion dollars more in circulation than it did one year ago. At that time, we had 500 billion dollars in circulation. Today we have 9.5 trillion. Has the productivity of the country gone up by 26 times. No, we are producing less by far than we did a year ago. So, what value is there to account for the 26 fold increase in the money supply? More hard assets such as gold, silver, diamonds, copper, etc. in Fort Knox? No, we just have a lot more pretty little pieces of paper backed by nothing! The problem with a fiat money system is that there is no incentive to control the supply of money. But in reality, everyime you print another dollar, you proportionately diminish the value of all existing dollars. However, it is not in the interest of Ben Bernanke or any other Federal official to admit to such. Such would not support the "illusion".

This is what gives hard assets value. There will likely at some point be a re-linkage of gold and silver to the monetary supply so as to give paper money some credibility again as both nations and people lose confidence in the value of currencies. The betting is that it will be done at a value of a lot more than 1 troy oz of gold being worth$ 850.00. Actually, to fully monetize the US to gold would require gold to be valued at something like $40,000 per troy ounce. Hope this explanation makes sense to you.

Brian