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Energy Is Money and Energy Is Changing

NEW YORK (TheStreet) -- Some people think gold is money.

But gold is, at best, only a way to represent money. It's not very useful, in and of itself. It makes great jewelry, and it makes a good conductor, but it's just a shorthand for value.

The real reason people call gold money is because it's rare. It doesn't depreciate like other forms of money can, like paper, or whatever the Federal Reserve insists is money.

Money, at its heart, is a store of value. Grain silos were the first vaults. Control over grain meant control over life and death. When the ancients learned salt was necessary to life, that became money. The word salary is derived from salt.

Trouble is, grain is no longer rare. Neither is salt. Despite widespread drought there is plenty of grain, if we can just get it to where it's needed, to keep the whole world fed. Grain, as a store of value, has depreciated.

I went to college in Texas, at Rice University, in the mid-1970s. The story was told then of a room in the Rice Hotel where the city's oil elite played poker in the mid-1950s. When one of those old boys got thirsty he would say, "Lyndon, pour me a drink." And Lyndon Johnson would.

Oil is money. When the "Nixon Shock" of 1971 removed gold as the backing of our money, it was really putting us on an oil standard. Oil in the ground, gas in the ground, coal in the ground, potential energy is money.

Proven reserves have been the measure of wealth from that day to this. You have to spend money to make money. Our economy depends on burning oil, gas and coal, but what that has meant for a generation is that the value of whatever remaining wealth exists has gone up.

This is why oil prices remain so high. For those who have it, money has been steadily appreciating. Incredible Charts says that since the current recovery started in 2009 the price ratio between oil and gold has been fairly steady, at around 15 barrels/ounce.

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