This guy doesn't like precious metals.

Fair enough sir. Just a few last thoughts. You say paper money is good as long as it is backed by metal so you do not object to paper. I also think that paper should be backed by metal (all of them), as well as every other resource.

Of course I see paper and gold as serving the same purpose, to represent wealth...one just happens to be an element that has historically been seen as being ideal for this purpose. I see gold more as a commodity to be bought and sold and to be factored in with all the other commodities to calculate a fair worth for that paper while I think you want to see gold as a buffer for what you think will be a stabilizing affect because of all the reasons you state above. Gold holds the wealth and value and the paper draws from the gold (simplified but correct me is I am off base).

I believe there isn't a need to include gold in the process save as just another commodity that brings value according to its realistically assessed worth. As I see them as serving the roughly the same purpose, I do not see the need to have them both simply because one has certain physical characteristics, is harder to acquire, or is more work intensive. Nor do I think a system based on it will be any more stable or beneficial. as the money can be printed out of thin air, so too can greater value be placed on the gold that money is based on and I don't think any system of this sort is immune to manipulation and abuse. Whatever is your primary medium of wealth, that wealth simply needs to be realistically assessed or, in either system, there will be trouble.

I've enjoyed the conversation, thanks

 

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The correlation to silver is as arbitrary as printing out of thin air. There is no innate correlation that a dollar is worth an ounce of silver or that 20 paper dollars are worth an ounce of gold. You can dillute the value of the paper just as easily against the PM as not correlating it at all. Bam were back on the PM standard. $1000 bills are silver certs for 1 ounce of silver. Is that really any different?

 

trillions of dollars can be brought into existence from nothing, greatly devaluing the dollar. The same thing can not be said about gold, maybe 1-2% of the total gold in existence is mined every year and increasing that substantially is extremely unlikely. Which makes it an extremely stable currency that holds its value well.

 

Make it a $50 bill and then it would change a lot, in order for the government to print more money they'd have to keep silver in reserve, and there is only so much silver out there, so their spending would be kept in check.

 

Lol you do realize gold has been money for thousand of years right? People have valued it whether there was a government or not......

A market ALWAYS exists as long as their are people living on this planet who are willing to trade goods

 

Yes it would change if you tied that fifty to an ounce of silver. Then our economy would go through shocks caused by the silver market for no reason. Tie it to only fifty worth of silver, then its a worthless exercise.

 

Yes, I do understand gold has been used as money, at least as far back as the Lydians...and before that it was valued as a decorative item for those with the real wealth, the land, its resources and the people...but there is no money without an issuing authority thus here must be such a thing as government (or some authority) and a market for money to exist and markets are seldom unregulated by these authorities that have existed long before the first gold coin was minted. To these men other resources were all important and gold was a luxury reserved for themselves. Since golds only practical purpose for most of human history is as money... It is just a relatively worthless metal without an authority to back it in the role of currency and a market that assesses its value and accepts it as currency.

Like a lot of things, what was accepted by the ancients isn't always the best way and things are re-evaluated and change. I certainly wouldn't want a doctor to operate on me using medical standards from ancient Lydia so why can't their monetary policy not be questioned? Today, gold is not accepted as payment and is not used directly to purchase anything. It must be bought with the currency backed by the authority and it can be sold to gain that currency...like any other commodity. The only difference is that, unlike most commodities its value is not assessed on its real value but also a higher perceived value. As Inflexion said, without that higher perceived value, people would still want gold but it would probably be valued much lower.

 

I think gold is becoming accepted as money again in some places. Here's an article about how a lot of countries are getting paid in gold for oil. This is just an example of what is happening. I agree that not many small transactions are happening in precious metals, but I'll bet a few are.

http://adask.wordpress.com/2012/01/24/iran-to-sell-crude-oil-for-gold/

 

Hi Tinpot,
Its safe to say gold has never been widely held.
In the modern day few people own gold and the majority of those people own it in the form of jewelry etc.
I would be willing to wager that less then 25% of Americans are aware of the spot price for gold.
Sure they understand its rare but they dont have a general understanding of its general value.
As such a true market does not exist. CONTRACT FAILURE would occur and has occured in the absence of government.

 

There's a guy who offers to give away a gold coin if they can guess the price of gold.
http://www.youtube.com/watch?v=WAaVK5AkZzI

He still has the coin.

 

I'm shocked that some people are arguing that gold and silver are not money, but I accept a difference of opinion. The reality is, gold has a high value in every country in the world, and is being accumulated by central banks. Notice that the central banks are not accumulating seashells, ink, pencils, fedora hats or other items that can be regarded as finite. There is obviously something that objectively differentiates gold, even if what is decreed in societies as money is somewhat arbitrary.

Silver happens to be more affordable for the masses, and as I argued before has had its value suppressed by powerful institutions. It has similar properties to gold, though.

Sure, most people do not use gold for commerce, but then again they will follow what institutions tell them to do, even if it will damage them in the long run. Also, gold is now too expensive for most of the world to use as a medium of exchange.

 

I would say close to none.

Which people are doing so other than governments when handy or countries that resort to doing so due to embargoes ( right or wrong~political discussion, not allowed) or the decrease of the value of their paper money against other countries' paper money so badly they can't exchange? Many countries and states have pounded the media saying they are.will take the lead in doing so and the large multinational banks and brokerage houses ( not just the US) are licking their chops waiting. IMO.

 

I'll bet one could use silver in a flea market. Especially with people who know its value.

 

"Propaganda" for all its negative connotations, merely means some type of media intended to influence opinion. I'll leave it to you whether the article is a piece trying to influence the opinions of the readers, or merely stating those of its author.

The article is definitely one-sided though, but he does have a point. Precious metals are a good, stable, long term store of wealth but aren't noted for their long term growth potential.

I think the author's views on "chasing the herd" are downright silly though; chasing the herd is not always a bad thing as long as you don't do it too late (what's the alternative, stay behind and get eaten? If that's not extending the metaphor too much lol...). Sometimes the herd is running in a good direction and following is a perfectly prudent thing to do. Adopting a hipster attitude to investing, where you decide to avoid doing the things the majority of investors are doing for no other reason than the majority is doing it, doesn't sound like a sound strategy to me. If the majority is wrong, by all means avoid doing what they're doing. But just because the "herd" is adopting a given strategy doesn't automatically make it wrong.

 

I like to know what the herd is doing, so I can do something different. As soon as I hear "you can't go wrong with silver" I'm selling. I heard that about real estate and I knew it was over. Right now almost nobody knows about it, so we're still safe.

 

Well as soon as it reaches the point where everyone is doing something, that's when you know the growth potential is over or nearly so. Perhaps the phrase I should go with isn't "chasing the herd" lol... but moving with the herd isn't necessarily a bad thing. Sometimes the majority of investors are doing something for good reason. The majority's not always right, but they aren't always wrong either; that's all I'm trying to say.

 

weak sauce arguments, the government doesn't set the price of gold, the people buying and selling it do. There is no reason to believe gold would become worthless if the government collapsed, in fact history says much the opposite.

Sure probably not everyone would accept gold as payment, so what? Many certainly would and without a doubt there would still be a market for it.

 

How it the perceived value not the real value? No one is artificially setting the price of gold, the government does not set the price. Your argument for it having a higher perceived value than true value is complete hogwash.

 

So let me get this straight. The governments can coordinate with central banks to manipulate interest rates, affecting securities worth billions if not trillions of dollars, yet they cannot or do not manipulate the price of silver, which is a canary in the coal mine for a troubled currency? Please explain your rationale.

 

That video just shows how important gold is as money to the common person lol...