 Dear Money & Crisis Reader,
I’m sure by now many of you are wondering what is happening with gold. After all, it is clear that inflation has appeared in the financial system. That’s pretty disturbing. What’s even more disturbing is that the Fed is intentionally turning a “blind eye” to it, which means it’s only going to get worse. And yet gold, which is widely considered to be an inflation hedge, hasn’t been doing much of anything. 
What’s going on here? The True Nature of Gold It’s true that gold is an inflation hedge. However, for large financial institutions, gold is NOT “money,” it’s just another risk asset that trades based on what Treasuries are doing. Remember, modern financial theory dictates that lending money to the U.S. government via U.S. sovereign debt (called “Treasuries”) is the only truly “risk free” investment in the world. In this light, the yields on Treasuries are considered the “risk free” rate of return for the financial system: Every other asset class, including gold, trades based on what these yields are doing. Now, there are two different types of Treasuries: - Regular Treasuries, which trade based on economic growth, inflation and other items.
- Treasuries that are specifically designed to trade based on inflation, called Treasury Inflation-Protected Securities or TIPS.
As I mentioned before, the yield on normal Treasuries is considered the “risk-free” rate of return for the financial system. However, this doesn’t represent the REAL rate of return, or true cost of money. | 
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