Gold Standard

I didn't say a currency had to have an intrinsic value, but it has to have a value. That value can be derived from something as simple as it being the only acceptable method for paying property taxes and income taxes, but there has to be some sort of value in order for people to accept something as currency. That's why I added it to your list.

 

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That's really funny -- and appropriate! :thumb:

 

It's coming sooner than you think. I think this is clear what the world's central banks really think of gold. Remember don't do as they say, do as they do. Remember Zimbawbe has already been through hyperinflation and seen its fiat currency completely collapse.

Posted Today


RBZ urges gold-backed Zim dollar

 

I guess it takes all kinds of opinions. Everyone seems to know the future for sure...except me I guess.

I am very certain ,that even in the 2016 he mentions , I will prefer a USD to a gold backed Zim. IMO.

Jim

 

A currency has to be acceptable as a medium of exchange. That doesn't give it a value in itself. In the, money is an accounting artifact - it is a shorthand means of saying what things are worth, that allows for easy comparisons and calculations.

Like the Spanish discovered in the 16th Century, even money with a supposed intrinsic value, like gold, is really not worth anything if there is nothing available to buy with it.

 

Whatever is used as money has to have some sort of value [not necessarily intrinsic value] to be accepted as a medium of exchange. And you are correct that no medium of exchange can substitute from a busted economy with no production.

 

I'm 24, and I know I don't have all the answers here. Infact, most of you probably could beat me to a pulp when it comes to speaking on currency, politics, and similar arenas. However, I will say this: We, as a country, need start manufacturing again, getting people jobs, and then work on our damned currency. Once people have jobs and this country starts pumping it's pistons again, we will have something to sell/trade to other countries to minimize our debt. Then, and only then I think, we can start to get back on the gold standard. It will take the eco-freaks to realize that not EVERYTHING can be regulated and that some comprimise needs to be made. It will take the greedy corporations to think more about their home turf than the extra buck that can be made giving china our jobs.

Sorry, but that is my rant.

 

Industrial base is a concern, but not too much since our "industrial base" is more technology and entertainment nowadays.

What really scares me is our spending. You want to get really scared? Read about the fall of the western Roman Empire. What you had happening was increased military spending, yes. What really killed the empire was their social spending. "Bread and circuses" to keep the population happy drained the empire of funds, and because Romans started more and more refusing to work because they had free money, and refusing to serve in the military, domestic production declined along with tax revenues, and foreign soldiers had to be brought in. When the taxes started dropping, tax rates went up across the board. The poor paid no taxes, the rich literally hired mercenaries to keep tax collectors away, (read modern tax lawyers), and the middle class was taxed so heavily they literally vanished as a class. At the end of the western Roman Empire, you had rich non-tax paying patricians, hordes of unwilling to work poor in the cities, and barren, unplowed land everywhere since the middle class farmers had been taxed out of existence. The Germans and Huns came in, not because of their overwhelming strength, but because the Romans had collapsed from within.

That is the lesson from history that scares the heck out of me.

Chris

Edit: Btw, the Romans had a gold standard too. If you tie your currency to gold, and not rein in spending, all it leads to is accelerated appropriation of gold from citizens. To me, it is always about spending and the negative social consequences of welfare. The source of the currency is irrelevant if the government insists on spending too much of it, and taking it from the middle class that is the backbone of society.

 

It's worse than you think. I have read [but have not personally checked] that the government statistics include fast food restaurants under the manufacturing category now.

 

Hmm. The Spanish had no problem destroying several civilizations with loss of lots of blood and money to cart this worthless item back to Europe by the ship load. Western civilization was able to takeover most of the world because of the advanced understanding of the role of currency in enabling advanced society.

 

Intrinsic value? Why do people believe gold has more intrinsic value than paper? Paper has uses...gold just sits there. Therefore to say gold has intrinsic value is kind of a misnomer.
Guy

 

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Gold stands as a protector of property rights. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." -Alan Greenspan

"The gold standard acted as a silent watchdog to prevent 'unlimited public spending.' Our finances will never be brought in order until Congress is compelled to do so. Making our money redeemable in gold will create this compulsion. When you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the the rare prize known as human liberty. Also, when you find that Lenin declared and demonstrated that a sure way to overturn the existing social order and bring about communism was by printing press paper money, then again you are impressed with the possibility of a relationship between a gold-backed money and human freedom." -Howard Buffett

This guy must have had a crystal ball...
“The Federal Reserve Bank is eager to enter into a relationship with the Bank for International Settlements. The conclusion is impossible to escape that the State and Treasury Departments are willing to pool the banking system of Europe and America, setting up a world financial power independent of and above the Government of the United States. The United States under present conditions will be transformed from the most active of manufacturing nations into a consuming and importing nation with a balance of trade against it.”
- Rep. Louis McFadden - Chairman of the House Committee on
Banking and Currency quoted in the New York Times (June 1930)

“In a small Swiss city sits an international organization so obscure and secretive, control of the institution, the Bank for International Settlements, lies with some of the world's most powerful and least visible men: The heads of 32 central banks, officials able to shift billions of dollars and alter the course of economies at the stroke of a pen.”
- Keith Bradsher of the New York Times, August 5, 1995

I don't know that the gold standard is the answer, but the Fed Reserve is draining us.

 

Sorry, double post.

 

Maybe people believe this because, for example, the USA holds over 5000 tons of it in a specially built fortress in the middle of an Army base protected by 1000s of soldiers. They do this because of its worth as a monetary asset to the Unites States people. Paper on the other and is everywhere. Therefore, using your logic, gold must have > intrinsic value than paper.

BTW, if you were referring to currency, it's actually made of linen.

 

This might help you understand.

http://geology.com/minerals/gold/uses-of-gold.shtml

 

I guess what I was asking, is what makes gold have intrinsic value above other things with obvious value? I understand the world's governments hold it in reserve. But why? Is that all that makes it valuable? It's not rare by any stretch of the imagination. It has very little use other than as wealth, which isn't backed by anything. I'm not arguing it's value, as thats obvious, I just want to know why it has value above any other metal. To my eye, it looks like the diamond industry and DeBeers, where value was based on control, not supply and demand, and we all learned diamonds are as rare as dirt in the process, damaging value and sales world-wide. Therefore, gold value, like fiat money, is based solely on faith.
Guy

 

There are a variety of factors. For many of the uses in the link, gold has no close substitute that performs at the same level. It costs more to produce an ounce of gold than a sheet of paper. It is highly preferred as jewelry compared to, say, zinc or iron. It doesn't rust or corrode. I think you are way underestimating gold as a means to store wealth. History has demonstrated that there are few really good ways to do this [and fewer all the time]. In the end, the price is set by supply and demand. The total cost to explore, find, raise capital for infrustructure, mine, and refine gold is significant -- probably on the order of $1000+ per ounce [it is very energy intensive] and probably won't sell below the cost of production for long under almost any circumstances. If the folks who own gold could not see any value premium to, say, copper or aluminium then they would dump it for much less. If folks looking for a metal investment didn't think gold was superior in any way to, say, steel then they would just have a few tons delivered and kept in their garage. But gold is inert, dense, soft, relatively rare, a good conductor of electricity, beautiful, can be drawn into thin wire or hammered into incredibly thin sheets. It's a very special material and therefore commands a premium price that makes it a good store of value.

I find it amusing that some threads at CoinTalk claim that there is very little gold in the world, so it is not suitable as money. Others claim there is so much gold in the world, it isn't rare enough to be valuable.

In the end, it boils down to comfort. If you believe you understand and like gold, you may want to own it. If you don't understand or like it, or think it is overpriced, it is probably not a suitable holding.

 

So entire decades, (read late 80's-early 00's), don't count for gold's ability to sell for less than cost of production? I am just saying recent experience to me has shown that all PM has an ability to go very long times selling below what you consider a hard threshold Cloud.

 

If I bought a $400 $5 Liberty gold coin and the gold standard occurred, will the value of the gold coin go higher? What about silver? I tried to find a straight answer on threads and couldnt find it.

 

You've hit upon the dirty little secret goldbugs hope people won't learn - gold is only intrinsically valuable because (some) people think it is.

You can't eat gold, you can't do anything useful with gold (a few specialized electronic applications notwithstanding). What you can do with gold is show off - it's hard to find, it's shiny, it doesn't rust, it's malleable and easy to craft into impressive-looking gewgaws.

If a future generation looks upon gold as tacky and wasteful, then its so-called intrinsic value will disappear. Because in the end it's not land, it's not food, it's not homes, factories or stores, it's just yellow stuff.

Basing a modern economy on yellow stuff is far less sensible than goldbugs will ever admit. It's pretty, but so are bubble-headed beauty contest winners, and you wouldn't want to base the economy on them, either.