Would you rather hold one thousand dollars...or two ounces of gold?

It is a little like asking if we would rather have one old woman dressed for Sunday services or two young ones stark naked. Ask us something harder.

What happened yesterday? The price of gold jumped another $7.
It is headed for $500. We may have to move up our buying target.

Why is the price of gold so important? Because gold is the ultimate competitor to the dollar. A vote for gold is a vote against the dollar, against paper money...and paper assets. It's a way of saying, "Yes, we know Bernanke, Bush, Greenspan, Trichet and Goldman Sachs have everything under control, but we thought it might be a good idea to have some REAL money, just in case."

Gold is a remarkable thing. It is found in the earth's crust like lead or coal and sits on the periodic table. It can be mined, but it cannot be manufactured. It can be polished, but it cannot be enhanced. It can be wrought and worked, but it cannot be manipulated like paper money. It can be flattened into a sheet thinner than paper, but it yields to neither political pressure nor financial desperation.

For thousands of years, gold has been a measure of wealth and a way to keep it. Protecting your wealth was simple: you bought gold and hid it (Invading armies often routinely tortured their victims to get them to tell them where the gold was hidden.).

At last night's dinner party, we sat next to a woman who is writing a book about Napoleon Bonaparte.

"Bonaparte hated debt," she said. "And he hated paper money. He had seen what it had done to France during the Revolution. He insisted on an honest currency based on gold coins."

Why gold coins? Because gold is nature's money. Central bankers can't create it at will. They have to buy it like everyone else. This naturally limits the "money supply," generally keeping it in line with the economy itself.

Bonaparte's financial system helped make France one of the world's most prosperous countries. The evidence is all around us. Everywhere you go in France you see the buildings put in the 19th century - handsome edifices, solidly built. Most of Paris itself is a product of the same 19th century prosperity.

But the world turns. By the beginning of the 20th century, it had been a long time since people had suffered inflation. So, along came economists saying to no longer worry about it. In they'd be better off if prices rose a little bit. It would "stimulate" the economy. It would help give people jobs. These same economists offered to "manage" their nations' monies in order to produce the improvements they promised. Henceforth, no one needed to be crucified on a cross of gold, they explained.

Reluctantly, by fits and starts...the world's money and gold were unhitched. On August 15, 1971, the last link was cut. Since then, we have been enjoying an experiment - a world of "managed" currencies. As far as anyone can tell, it is a success. The world's most prolific currency - the dollar - is still accepted everywhere as though it were real money. Lenders have trillions of dollars worth of credits, and hold them as though they will be still be valuable next year...even 10 years into the future. Merchants do not laugh when you take a dollar out of your pocket. You can use the dollar to pay your bills. Dollars you left in your desk drawer last year are worth almost as much a year later.

Is this really a new era, dear reader? After all these thousands of years, has mankind really learned how to control paper money?

We will watch see. We will see. We will hold gold tight and enjoy the show.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.