Gold Ownership

The idea of ending private gold ownership seemed ridiculous when this article was written just six (6) months ago...less so today.

https://markets.businessinsider.com...virus-recovery-crispin-odey-2020-5-1029220541

"In seeking to achieve inflation that averages 2 percent over time, we are not tying ourselves to a particular mathematical formula that defines the average. Thus, our approach could be viewed as a flexible form of average inflation targeting. Our decisions about appropriate monetary policy will continue to reflect a broad array of considerations and will not be dictated by any formula. Of course, if excessive inflationary pressures were to build or inflation expectations were to ratchet above levels consistent with our goal, we would not hesitate to act."
...Federal Reserve Chairman, Jay Powell

https://www.federalreserve.gov/newsevents/speech/powell20200827a.htm

 

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Not going to happen

 

I tend to agree, but if markets loose confidence in the Dollar, all bets are off and changes could be swift.

 

That's when .gov will switch to some form of blockchain digital currency to undermine cash and the redistribution of wealth.

 

Markets not going to lose confidence in it.

 

Can't happen today in an age of the internet vs. 1933 when you waited for the afternoon edition of the paper or listened on radio.

 

The neighbor said bury it in the garden like grandmother used to do.

 

Well, duh. The neighbor knows exactly where your garden is. And when you leave for vacation.

 

My "theory" is that fiat currencies are backed by a country's ability to project power and influence events. As long as the U.S. remains strong, the Dollar will remain strong. The corollary being equally true.

 

That is a major part of it. As long as the military is strong the currency is as well, we've seen that through history. One thing the dollar also has going for it besides being the world reserve currency is that most economies in the world depend on it. Being the biggest importer of essentially every if you destroy that demand they go down too

 

Folks, a RESERVE CURRENCY like the U.S. dollar is a function of many things but chief among them are:

• Private property rights respected
• Rule of law established
• Large, liquid financial markets

So many people predicting the end of the dollar fail to take those into account.

Here's what I mean. Forget the first 2 items, which are a major problem with Communist China or other authoratarian countries. If you don't have large, liquid financial markets than you are USELESS to institutional investors and/or central banks.

If you need to move $5 billion or $20 billion for a short period of time, there are very few financial markets which can handle that kind of inflow. U.S. Treasuries and U.S. Mortgage Backed Securities (MBS) are two that are big enough.

Most of these other countries trade maybe 1-10% of U.S. markets in terms of daily volume.

 

It could be a gradual change, too...

https://www.cnbc.com/2020/09/04/chi...-reserve-currency-by-2030-morgan-stanley.html

 

There is no way that the government could or will put us back on the Gold Standard. There is not enough it of it in the world to back a currency unless it is artificially priced at $10 million an ounce or something equally foolish.

The government would also have a hard time to confiscating it. If you think that you have seen an uprising so far, just see what would happen if there were another gold surrender order.

The government has sold gold to private individuals and companies for years in the form of Gold Eagle bullion and commemorative coins. Reversing that policy by taking the gold back would be very difficult.

I don't know what is going to happen if the government continues to create money at the present rate. So far massive increases in the stock markets have been the most visible result. Let's hope the money supply growth slows and the economy is able to grow to cover it.

 

Yes one day it will fail as will everything. Who cares what happens 1000 years from now or 500 years or 200 years we have little to no control over it. The only actual human threat is civil war, not the feds doing something not a commercial on radio/tv not a gold seller pumping sales

The dollar isn't going anywhere for a long time

 

Agreed. Trade dominance establishes the Reserve Currency...and China is quickly gaining on the United States in trade. It may take a decade or two, but we seem to seem to have returned to that trajectory.

 

A bit more color: many times, in my previous job (a few spots removed ), I had to invest over the weekend for a large corporate client. The client was a PITA and used to wait until the last second -- the 3 PM EST Fed Wire deadline -- to let me know if they needed the money liquid or invest it. Used to drive me nuts, they were in California so to them they thought it was like making a 12 PM decision.

We're talking close to $1 billion or so, so the interest gained or lost (this was 20 years ago) over the weekend was a few hundred thousand dollars. Not chump change !

Anyway....I remember one time they literally gave me the "Go ahead, invest it" order at like 2:58 PM or thereabouts. I had 2 minutes to get the trade done. By the time I called my trader/broker, we literally had seconds. So even though we invested in agencies and MBS (large, liquid vehicles), we STILL moved the U.S. Treasury market (the guy selling me bonds was hedging by buying other stuff).

My broker friend commented that investing $1 billion so close to the end of the day actually moved the market for U.S. Treasuries and Agency/MBS. A few basis points, not alot, but usually you need trades of $10 or $20 billion to move the markets that much.

You can't do that kind of trade in Europe or in China/Asia. Central Banks, Sovereign Wealth Funds (SWFs), large institutions (mutual funds, pensions) and even billionaire investors or family offices and hedge funds....need liquidity.

Only the U.S. financial markets -- and Great Britain, to an extent -- have that liquidity.

 

Gold standard ties the hands of the Fed (and Treasury)....can't have it. You lose control of monetary policy (see, EU the last 10+ years ).

 

Still have to disagree. I believe modern history shows economic strength comes first, then military. The reason we were so strong in WWII was we had built up our economy. Were we afraid of China back in Mao's time? No, they were a backward nation.

I would say as long as our ECONOMY is strong, that is the attraction to the USD. Look at the Swiss. Currency very much in demand with basically no military. The EU's military is not impressive, yet the Euro is stronger than the USD. If military prowess led to monetary strength, why was the Soviet Union so weak? Why did the West German currency strengthen post WWII but the East German not? East Germany had a stronger military.

To quote some politician I do not recall who said it, "its the economy, stupid". Btw, do not mean to call anyone names, that was the quote.

 

Good points. I guess it's a Chicken vs. Egg issue. Military projects influence and influence creates trade. China didn't have influence until we gave it to them.

 

It was the massive production ability and military might. The jobs were military