According to analysis of a Gold Field Minerals Services (GFMS) release, gold purchases in India are up to 300 tons this year, more than double the gold purchased in India this time last year. India is the world’s largest consumer of gold, using 600 to 700 tons a year. However, Indian production of gold is only about two tons a year, which means India pulls a lot of gold off the world market.

Also bullish for gold, according to a resourceinvestor.com article, “there are 34.2 million ounces left in forwards, loans and options, with a negative mark-to-market of $8 billion” still left to be unwound. GFMS said that the net gold de-hedging in the second half of 2007 will be between 1.5 million and 2.5 million ounces globally. Newmont Mining, the world’s second largest producer, is one of the major players in the on-going de-hedging. Annual gold production is about 80 million ounces. See GFMS release for a detailed report on de-hedging.

For years, gold producers were delighted, even bragged, about being short gold. Now they are closing out their short positions, a move that puts upward pressure on the price of gold.

In another resourceinvestor.com article, Gene Arensberg, in his biweekly Got Gold Report, paints a really bullish picture for gold. One observation:

Fundamentally gold remains on very solid ground. Want some examples? Well, the Chinese have a love affair with yellow gold. A little less than two billion Chinese can legally own gold again and can even buy it through their government-sponsored banks. They may not buy much per capita, but there are a bunch of “per capitas� in China. That’s probably going to end up being demand on steroids in the not-too-distant future.

Arensberg makes other interesting points about the gold market. His Got Gold Report looks at many aspects of the gold market and is excellent reading for investors who want to be closely attuned to the gold and silver markets.

Meanwhile, Gary North has written a piece on the Fed. For persons trying to grasp the idea of central banking, it is a good read. I noted my thoughts on Gary North’s qualifications to write about the Fed and money in my August 24 post. In today’s economy, it is nearly impossible to invest successfully without understanding the functions of the Fed. As North sees the Fed, it is an “immoral hazard.” Murray Rothbard called the Fed a counterfeiting machine. When you understand the workings of the Fed, you know why Rothbard was so critical of the Fed and central banking.

Finally (I couldn’t pass up this one.), lewrockwell.com has posted a 1959 National Review article about “funny money,” as a visitor to the Chase Manhattan Bank Museum of Moneys of the World in New York Rockefeller Center describes the exhibits. This is a humorous and an enlightening piece on money.

“Understanding money is the key to restoring a sound economy,” wrote Congressman Ron Paul in Mises and Austrian Economics, his personal view on the great economist and the theories of Austrian economics that Mises helped formulate. Likewise, understanding money is the key to being able to withstand the chaos of currency debasement and inflation.

It seems odd that one would state that “understanding money is the key.” After all, doesn’t everyone know what money is? Actually, no.

Those who sat through college Econ. 101 may remember that money is a medium of exchange, a store of value, and unit of value used to measure relative worth of goods and services. But, I can almost guarantee, that the average person does not know why gold and silver are the ultimate forms of money. Wikipedia, the free online encyclopedia, while discussing why dollars are poor money, provides little insight into the importance of basing a monetary system on hard assets.

The best writings on money and the importance that gold and silver play in sound monetary systems are by students of the Austrian School of economic theory, many of which are affiliated with the Ludwig von Mises Institute, Auburn, Alabama. Visitors at the Institute’s website will find a plethora of publications about money and economics, so many that their heads will spin trying to figure out which to choose.

Luckily, Bob Murphy, a holder of a Ph.D. in Economics from New York University and an Adjunct Faculty Member at the Institute, just wrote an excellent piece for lewrockwell.com about money and the Federal Reserve System. (You really can’t get away from discussing the Fed when discussing today’s money.) In his piece, Murphy lists some of the excellent books on money and economics, with links to sources where they can be purchased.

Murphy’s piece is well worth the time it takes to read. Further, read a few of the books recommended, and you’re on your way to becoming educated about money. Then, you, too, will know why “understanding money” is the key, not only to a sound economy but also to avoiding losing “the fruits of your labors” to currency debasement and inflation. At CMIGS, we like to think we do our little part by explaining why gold bullion coins are the best investments for the times.

Gary North posted an excellent treatise on money and central banking on lewrockwell.com. It’s an important read because it furthers knowledge about money and central banking, subjects that most college graduates know little about because the topics have not been taught in most American universities for decades, perhaps now nearly a century. If you do not understand money, how can you use it wisely?

Although North calls for “greater transparency” at our central bank, the Fed, I don’t doubt that if asked he would call for its abolition, as has presidential candidate Ron Paul. Insomuch as doing away with the Fed would require a much greater knowledge of money and how central banks corrupt monetary systems, North has done us all a favor by sharing his knowledge with us.

As for Ron Paul’s statements calling for doing away with the Fed, they have fallen on deaf ears for most Americans because they have no understanding of money and central banking. Actually, most people hearing Paul’s statements laugh, for they have been indoctrinated into believing that the Federal Reserve System is as much as part of our country as the Constitution. Nothing could be further from the truth. The Constitution’s framers knew well the dangers of central banks and fiat money monopolies.

If you study money and the Fed, and you will have an epiphany: the Fed is not only not needed, it is a cancer. Start with North’s article, and then order a copy of the late Murray Rothbard’s The Case Against the Fed. And while you’re ordering, get a copy of Rothbard’s What Has Government Done to Our Money?, which now includes Rothbard’s The Case for a 100% Gold Dollar.

All are short books, and I promise anyone who buys and reads them will have greater knowledge of money, our monetary system and the Fed than 99% of today’s college graduates.

Many people eschew any opportunity to understand money and economics, thinking them arcane subjects or even impossible to grasp. Luckily, we have a number of economists who write in a manner that makes money and economics understandable. Hans Sennholz is one of them.

Hans Sennholz was Professor of Economics and Chairman of the Department of Economics at Grove City College, Grove City, PA for thirty-six years, 1956-92. The professor wrote many best-selling books and monographs during his tenure at Grove City College and today remains active in the business world, serving as an advisor to the Central Fund of Canada.

He also continues to write about money and economics, and has penned an essay titled Money is Flooding the World Markets. With money flooding the world markets, price inflation is inevitable. Gold and silver investors should be interested in the professor’s essay.