TheLonger Term Implications of Basel III (January 2013) - Gold's Triumphant Return?

Gold and silver eagles have face value. We may not agree that value is accurate, or that they are functioning as the most ideal money, but the government says they are money, and the dictionary agrees. Again, they are not the best currency, but currency and money are two different things.

 

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Gold and silver eagles are not a medium of exchange or unit of account. They are collector coins and bullion, not circulating money. The face value makes them more attractive than silver rounds and permits them to be sold across national borders without paying certain taxes. But it doesn't make them money.

 

The real reason they have a face value is because of collectors. The US government tried to make bullion before, in its arts medals, and sales were simply horrendous. Surprisingly, coin collectors like to collect coins, not medals. Putting a face value that will ensure a coin will NEVER circulate is a trick nations have used to sell their non-coin items to coin collectors for premiums for a very long time. Look up the entire NCLT industry.

 

"Money" to me is your medium of exchange. What do you get paid in? What is your saving accounts listed in? What is the "thing" stores will accept in payment for your purchases? In the US all of those answers are the USD. Its the only payment legally obligated to settle any debts.

Today, the USD can take many forms, from currency to coins to electronic payments. However, if a car costs $20,000, how many ounces of gold does that car cost? To answer that you FIRST have to see how many DOLLARS an ounce of gold is worth at this very second. In that example it PROVES the USD is the only "money" in the US, as it is the "scorecard" in which everything is compared to.

How would your definition of "money" differ?

 

Btw, this is a gross twisting of what Mr. Greenspan was talking about. He was talking about M1, M2, etc. He was NOT talking about the definition of money, only measurements of money in an economic system.

I find your representation of these comments very misleading.

 

Gold and silver as metals are both a medium of exchange and a unit of account irrespective of the eagles.

 

I don't know of any restaurants, retail, utility or government entity that readily accepts gold or silver in lieu of US dollars as a form of payment. I have never had any bank, brokerage, savings, IRA or 401k account that used ounces of gold or silver as their unit of account. No matter how many times you repeat the talismanic words, they just don't materialize in reality.

 

Unit of Account as per http://en.wikipedia.org/wiki/Money#Unit_of_account

Medium of Exchange as per http://en.wikipedia.org/wiki/Medium_of_exchange

Fiat currency has neither intrinsic value nor stable purchasing power, and yet it is considered money even though I would argue it is not based on these definitions. Fungibility, durability, portability, and divisibility are the 4 requirements of a unit of account + store of value. Only metals meet these, and thus only metals are money.

 

No one claimed Eagles are primarily a "circulating medium" (although they may now or later, for all I know, 'in certain circles' etc.) So that's a straw-man argument. Shame on you! lol I know, I know: you cannot help yourself.

Do you know any restaurants or retail entities that accept debit/credit cards? Those ARE "mediums of exchange" and "units of account" right?

Americans have long been accustomed/deluded to believe Credit is Money, and that "Money" is sound. Lies, lies, lies! So when/how did'plastic' (coded magnetic strips) become the MONEY most often used in retail? Sure: credit (and synthetic instruments, like the e-zeros in your 401k) is another 'form of Money' ... until that pretext fails/disappears utterly. And then what? Real money (Gold and Silver) returns... "High-Ho, Silver!" Same old story, every time.

I've seen/know Gold/Silver coins circulate as money (like USD$) in nearly every country (dozens) I've visited - especially the fmr soviet Union region. Sometimes PMs are traded in the banks; sometimes changed on the street. Even here in the USA. Wanna hotdog? http://www.gilliesconeyisland.com/

 

Debit/Credit cards are merely another instrument in which to transmit USD's. Using them changes nothing. If/when they transmit ounces of silver or gold instead of USD's then I will agree ounces of silver or gold are money. The transaction of either physically handing over ounces of PM versus electronically handing them over is meaningless.

In fact, IF PM ever became money and accepted at Walmart, this would probably be how it happens. If your bill came to 11.324 ounces of silver, the easiest way to perform this transaction is electronically.

 

Money and currency are two different things. I don't know how else to say it.

 

I feel the need to repost this since this debate really has no reason to continue if this information is read before posting.

Unit of Account as per http://en.wikipedia.org/wiki/Money#Unit_of_account

Medium of Exchange as per http://en.wikipedia.org/wiki/Medium_of_exchange

Fiat currency has neither intrinsic value nor stable purchasing power, and yet it is considered money even though I would argue it is not based on these definitions. Fungibility, durability, portability, and divisibility are the 4 requirements of a unit of account + store of value. Only metals meet these, and thus only metals are money.

 

Credit is Money? o.k., that's an admission at least. But isn't that a contradiction in terms - how can credit be money too? LOL And there's the Slippery Slope...

Also: I cannot use Euros (cash) at any retail entities near me. And my Euro-denominated debit card "transmits" Euros, not USD correct? "Money" is a pure abstraction apparently.

fwiw here's you're "agreement", medoraman (there are other non-US examples you might look for: viz., eGold) :
http://www.youtube.com/watch?v=_qTBZS_Fmok
http://upma.org/items/index/259/3

 

I don't consider wikipedia to be a reliable source of information. The US dollar as now constituted is fungible, durable, portable and divisible. It doesn't have a stable purchasing power but neither does gold. But the US dollar is the unit of account for transactions in the US while gold is not. So I believe my statement that gold and silver can be money, but are not money, is confirmed.

 

Well, my response would be the real USD is US bonds. Currency and coinage are simply US bonds bearing zero interest, so they are horrible long term stores of value. However, a bond is better since you do get interest and are redeemable for FRN.

As to stability, are you claiming US bonds or FRN's are MORE volatile on a yearly basis than PM is? Would we like a chart showing yearly stability over the past 35 years? I choose 35 since it was illegal to own gold before then in the US, so a chart would tell us nothing.

Sorry, a bunch of Wiki links are not changing my mind. I think most people define "money" as what you get paid in, and what you can buy goods and services in. So now you are saying "money" has absolutely nothing to do with what we use day to day to buy things? If so, I think your definition of "money" has jumped the shark. The only thing a court will count as you settling your debt is not "money"? The only thing the US government will accept as payment is not "money" but something else? The only thing you legally demand from your employer is not money, but some kind of "token of exchange" according to Wikipedia?

Not picking on you, but sounds like a bunch of ivory tower twisting of common sense words. MONEY is what I can feed my family with. Its what listed in my bank account, and without which I cannot pay my bills. Yes, I can SELL my PM and get more MONEY, or I can BUY PM and trade MONEY for PM, but until the gas station accepts my 3 ASE's for a tank of gas on my pickup, I cannot consider PM "money" as there is literally nothing outside the coin collecting world I can buy with it.

Just my opinion.

Chris

 

Well, I am not "admitting" anything. I use my credit card since it does not allow bank access to my account, but pay it off every month. I do not USE credit, so you are twisting my words. If others overspend and have to borrow money, that has NOTHING to do with your example. Your argument is the slippery slope.

You using a Euro card to purchase dollar denominated items simply means you are foolishly accepting the bad exchange rate charge of your debit card. That is your fault. I get the better rate and convert dollars into Euros and place them into a European account. It may SEEM seamless to you, but your action is creating two transactions, one a bad exchange rate THEN payment of dollars.

I stand behind my statement that electronic transfer of USD does not change the underlying fact that USD is money, it just changes hands differently than handing them $100 bills.

 

Many of the global digital currencies are eGold - these types of e-gold currencies might be our future, in fact, surviving the debased Dollar. But someone who whines "I don't want to look at websites that refute my ignorant opinion!" still won't get it. To that I can only say GROW UP:
http://gdcaonline.org/?target=ratingtable&businesstypeid=1

I've never seen a discussion of any such firms (benefits/drawbacks) - and I'm not recommending any. But you cannot blindly claim "They don't exist!" They DO. You're wrong.
http://www.pecunix.com/
http://www.libertyreserve.com/en/exchangers

 

Gold has a fairly stable purchasing power, however the dollar doesn't, that is why you see large fluctuations in the gold price. You are using dollars to buy that gold, it is the value of the dollar that is moving not the gold. That is why gold has been going up steadily for the last 12 years, the dollar is being devalued.

If the price of gold was fluctuating based on its own principles it would not go up for 12 years in a row. For example when mining increased by a large percentage that would be cause for it to lose value, yet it has still gone up despite indicators that it should go down.

 

True, something representing .00000000001% of world trade IS IMPORTANT. I forgot that economics rule.

You forgot jade, iron bracelets, and shrunken heads as well. All of them were important "money" items in the past, and may still be. I wonder if there is a "www.e-money-shrunkenhead.com" on the web.............

Seriously, I think we can all tone it down a notch, (starting with myself). I promise to try to be more civil.

 

You are right PM is not money currently (in most cases, some do use it as money however (iran/turkey, some individuals, among others most certainly), but it could once again return to being money as it has been in the past.

U.S. bonds are a pretty terrible investment currently, who in there right mind would loan a government with 16 trillion dollars debt there money for a measly return of 1.7% or so yearly on a 10 year note? Clearly the market is manipulated beyond comprehension.