imotion s14

Well just to update.. gold has reached all time highs against the dollar and practically every currency. Dollar index below 80..

S14DB

Platinum is even higher and climbing faster. Maybe we should go to that?

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kingkilburn

It shows both how poor the dollar is even when propped of with other currencies and how strong gold is.

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kingkilburn

There isn't enough of it to use as currency. It could possibly be used along with gold but I'm not sure how well that would work. Something to look into though.

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axiomatik

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago? It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

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kingkilburn

Thanks for READING the thread and CONTRIBUTING something new.

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axiomatik

I have READ the thread and CONTRIBUTED....several months ago. My points still stand.

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kingkilburn

Or do they?

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imotion s14

lol.



By carrying a $20 dollar certificate that will be redeemable for the fixed quantity of gold. How do you think they did it in the past? You thought that people actually carried physical gold on their persons?

Yes, if you bought 1 troy oz of gold in 2000 and you were to sell that 1 troy oz at today's valuation then yes your purchasing power has increased by $1055 dollars. That's what happens when you have monetary policy that uses monetary inflation as a tool to solve economic problems. There is nothing magical about it.

The price fluctuates against fiat because of the very nature of fiat currency. A commodity doesn't fluctuate much against other commodities. The historical charts bear this out. It's true today as it was in the past. That's why gold kept near 1:1 ratio with oil.

chitownguy

What's to keep someone from using their gold certificates and then selling their physical gold before it is to be redeemed, all under a false name?

Besides there is not enough gold to distribute to over 300 million Americans, physically or not.

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imotion s14

You don't redeem gold certs from private individuals. Typically to redeem the cert you would take it to a bank and they would give you gold. Gold certs were issued by banks based on their gold reserve.

and why would you want to distribute gold to everyone, physically or not? Do you understand what a gold standard is?

Man I swear...

aznpoopy

i don't know if this is a troll post or what? absolutely.

if we all bought gold in 2000, and if we all sold our gold right now, then yes, we'd all "magically" have almost 6 times as many dollars we did in 2000. that magic is called "investing."

inflation between 2000 and 2010 was 27%. if we held a set amount of dollars in a box somewhere, those dollars would now "magically" have 3/4 times the amount of value they had ten years ago. where did it all go? those dollars the US government printed in the interim sucked the value right out of the box, your wallets and your bank accounts. i don't know about you, but i'd rather have 6x instead of 3/4x.

similarly, if we held a set amount of gold as currency from 2000 to 2010 (and ignored the effect that would have on demand for gold and all that), then yes, in this very instant we'd have roughly six times the buying power we did ten years ago with the same amount of gold, due to artificially inflated demand for gold, (actually not quite 6x, based on the peg of 2000 and 2010 dollars to gold).

why? that magic is simply the power of demand. that's also why you should fear the death of the dollar as the reserve currency of the world. having the dollar as reserve currency "artificially" drives up international demand for the dollar, giving it more buying power it would otherwise have. high demand things are worth more of other types of things. simple enough.

alright. i don't see how this is an argument against gold? money is also a commodity. the value of the currency also fluctuates with the market (hi, i'm forex, etc.). it has even less inherent value because the US government pretty much pulls it out of thin air all the time.

that doesn't mean gold can't bubble or crash. economic instability drives demand for gold up. if $237 in 2000 is worth $300 in 2010, you'd expect a steady priced commodity bought for $237 in 2000 to be worth $300 in 2010. but instead, gold is worth what, like $1300. however, that doesn't mean much from 2000-2010. at a minimum, you should be able to conclude quite easily that gold from 2000-2010 is clearly a superior store of wealth compared to dollar (and probably all fiat currencies). it probably would have been even without the artificial demand caused by the economic shitstorm. look at any super long term chart for value of gold; it's pretty obvious.

that doesn't necessarily mean it's a good buy or a bad buy. in short term, it depends on the circumstances of the moment what you think is going to happen. in long term, its a hedge for people who already have alot of money. not people with mortgages and expenses. i wish i bought in 2008. my friend told me it was going to jump up, and i didn't believe him. I think it was at $750 or so at that point. he bought in. he held, i told him it was going to drop, and he should sell. he told me to stfu. he said it was going to crest $1000. i think he sold at $1100/oz or so on something like 50oz. 50 x $350 sick ROI. he held it less than two years. i didn't believe them. now it's at fucking $1300, lol. almost double its value in less than 3 years, and i missed out on all of it. good thing i'm not an investor.

TheWolf

There are several points in this discussion that are well founded and several that are pure speculation.

There are several things to point out that no one has addressed in this issue. While the populace struggles throughout the history of this nation with national banks, currently there is zero chance for this nation to goto the gold standard.

It is important to understand the structure of our monetary policy. The "Federal Reserve" is a privately owned corporation. IT IS NOT PART OF THE GOV'T! It is a privately traded company with many of the main share holders, some of the richest families in the world who intend to get richer. The gov't does not control it's own currency. It sold it. I should also point out that the founding fathers thought a national bank would be detrimental. Andrew Jackson struggled with national banks again later. Merchants wanted the borrowing power, banks crushed the common person though.

The Fed is bound by law to "promote policies for economic growth" but there is no lash to enforce that rule. There are zero auditing powers on the fed. Congress, the president, etc can not see what the books are like on our own currency. They must believe the statements given quarterly. Currently the fed is printing money like it's going out of style to purchase treasuries from the gov't to finance their own debt. It costs them about 4 cents to print $100. Currently they are buying $100 for .0004% of face value. It's using inflationary practices to fight out of control debt spending. Essentially utilizing your credit cards to pay your credit cards even after the card companies lowered your rate to 2%. Keep in mind we don't actually make a minimum payment. We struggle to just make the interest payment. No real progress towards the balance is ever made or has ever been made in 70 years.

If we were on the gold standard, it keeps prices stable but prevents a "global" economy. If you look at the american worker this "global economy" was supposed to be a good thing providing cheaper imports. Unfortunately that resulted in all their jobs being exported as well. A slight ooops. To put america back on the gold standard, it would almost have to pay off the national debt. That or to counter act the massive debt and the lack of gold reserves, you would need to devalue the dollar by 90%. There's just THAT MUCH DEBT!. Americans would be beyond broke but have incredible price stability.

I believe that if the gov't sat down and "came clean" they'd realize that it's almost impossible for them to dig themselves out of the hole. You would need about a 10% tax hike with a 25% decrease in spending. With that, in 20-30 years, we'd pay it off. Any policy that doesn't involve tax hikes and cuts in spending is a hand job. That or go through a period of hyperinflation to render the dollar meaningless along with the debt. When you stare at the debt clock and it says your families share is 100k, well they've got to tax 100k out of you and get it.

If we are going to make predictions, obama's economic "dream team" is going to suggest a minor 3-5% VAT tax which will "fix the budget". This will now become the "goto" tax for money and be at 10-12% in 10 years after it's passed for various reasons. The only way to fix this mess is to strangle the tax dollars coming in and make them pay out less and save their way to financial freedom. Tossing more money at them will not fix the problem.

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Eye on the Prize

ranger240

its ok, dont feel bad that people who havent read books on the interwar period or gold specie flow or any history book on how the gold std DIDNT work disagree with you. they dont get it, they'll never be in a position of power to change back to it, you're arguing french pronunciation to someone who only speaks english, and they speak it poorly.



can one of you pro-gold std people read Globalizing Capital by eichengreen

or here... let me google him for you

globalizing capital eichengreen - Google Scholar




killburn and company, do some research, learn something and then get back to the party...


this article looks juicy

Global imbalances and the lessons of Bretton Woods - Cairn.info

DONE

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kingkilburn

Don't let the door hit you . . .


It is great to see others agreeing with me here on Zilvia. It really felt like I was getting jumped by ignorance incarnate. I mean I don't mind if people do disagree with me but at least be informed on the topic and don't just throw fallacies and ad hominem arguments out there.

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ranger240

please click the link in my post and learn something

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axiomatik

Thanks for CONTRIBUTING something new.

It was a semi-joking response to kingkilburn's earlier post:

Where he mis-used the terminology. Gold would not be the currency, it would only serve as a backing for the currency, and be redeemable. There is no reason why any durable material could not be used to back a currency. If the currency was backed by platinum, and you choose to redeem it, you would get some piece of metal that is 0.xxxx% platinum. There is certainly enough platinum in the world to back a currency with, it's just a matter of setting the exchange rate. All modern currencies are really fiat currencies, so the government can announce that $xxx is now pegged to xxx grams of platinum.

If you prefer a more market based transition, then there isn't enough gold in the world either. There is over $8 Trillion US dollars currently in the world. How is the US governement going to buy enough gold to back that many dollars? And, once the government starts buying gold, then the price of gold starts to skyrocket.

That has nothing to do with inflationary monetary policy. All that tells you is that gold is a commodity with volatile pricing. If you bought 1 troy oz in 1995 at the then current price of ~$550 and then sold it in 2001 at the then market price of ~$325, you would have lost $225. And yet, both periods experienced similar inflation. The difference is what the stock market was doing. Gold is an openly traded commodity considered by traders as a safe haven. When the stock market is tanking and they want to store their money in a safe place to ride out the storm, they put their money it into commodities. That is why the prices of all commodities started shooting up in 2005, as the stock market was starting to show signs of cooling off and the Fed was raising interest rates, so traders poured billions upon billions into commodities. This is also why oil hit $150/bbl back in early 2008, as it was also a commodity that traders were stashing money into.



See my comments above. Commodities don't fluctuate that much relative to each other because they are all the same class of investment. Compare the prices of commodities versus the S&P 500, and you will see that commodity prices rise when the S&P goes flat or starts to drop, and then commodity prices drop again once the stock market picks back up again.

Yeah, I was joking around there.

You would only have 6x if the US Dollar remained a fiat currency and you invested a bunch of that fiat currency into gold. If the dollar was pegged to gold, you would not have any more money than before.

Not exactly. If the US Dollar was pegged to gold, then the value of the dollar floats with the value of gold. Assuming the US went to a gold standard, and the rest of the world didn't, then our buying power relative to those currencies would fluctuate with the price of gold. However, it would have no effect on transactions within the US. If you wanted to buy something made in Europe, and gold was worth 6x as many Euros as before, than, yes, you would have 6x the buying power. But if you wanted to go to Quiznos and buy a sub, that sandwich isn't going to cost 75 cents all of a sudden, because the wages they pay are in gold-backed dollars, and the lettuce they buy from california farmers is in gold-backed dollars.

The much larger factor driving down the value of the dollar versus other currencies is the huge trade imbalances the US maintains. When we import $40 Billion dollars more than we export every month we are constantly expanding the supply of US dollars outside of the US. That drives down the value of the US dollar versus the currencies of net exporters such as Japan and the Euro-zone.



Both are commodities. However, one is much more liquid than the other. Gold is a commodity that is really only traded by a very tiny percent of the population. If you invest in gold, there isn't much you can do with it besides sell it to another gold trader for whatever the current price is. US Dollars are a little more flexible.

Gold prices are really all over the place historically. It is really only since 2000 that it has reliably increased. It is an option for investment, but I wouldn't necessarily consider it a safe bet for long term investment, only short term.



Compare that to the S&P 500 for the past 50 years.

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axiomatik

Forgot to multi-quote this one.....

This is not true. The Federal Reserve is a branch of the government. It was created by an act of congress, and it is subject to the laws of congress. It is, however, a semi-independent entity by design, much like the Supreme Court. The chairman and the board memebers are nominated by the president and confirmed by congress. It is not a corporation, there are no shareholders. Board members are appointed and control the Federal Reserves policies, with the aim of promoting long-term growth. They are independent from the Executive Branch to prevent it from being unduly influenced by president.

The Federal Reserve is buying government treasuries as a tool to increase the money supply, not for the sole purpose of funding a buying spree. It is attempting to increase the money supply in order to increase economic activity and prevent deflation. It very carefully determines how much money to release so that it doesn't spur too much inflation, and it hasn't. Inflation has remained quite low.


The government would not have to pay off it's entire debt to go on a gold standard, but if the dollar were to be backed 100% by gold, it would have to acquire enough gold to back the $8.6 trillion dollars currently floating around the global markets. And, according to wikipedia, only an estimate $4 trillion or so worth of gold has ever been mined. It could get around this by arbitrarily setting the price of gold, as it was prior to 1971, but the shock this would inflict on the economy would be staggering.

Yes, it will take some time to pay off the national debt, but it wouldn't really be terribly hard. The problem is politics get in the way of almost all progress towards reducing the debt. A period of extended economic growth like in the 90's would have the largest effect on improving the deficit situation.

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kingkilburn

When we used the gold standard there was enough gold that if every one cashed in their gold certificates every one got what they were owed.

It's funny that in the pictures you posted the two spikes in price are also the two lowest points in the value of the dollar. Coincidence?



THE reason the value of the dollar is tanking is because they are printing BILLIONS of dollars every year. They are making money where there was non before. Every dollar printed devalues the rest.

I didn't bump the thread.

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axiomatik

So, in other words, you just want people in here who agree with you. Anyone who disagrees with you and provides logical arguments and evidence to back their claims should leave?

In 1971 when we officially went off the gold standard, there was only $650 Billion US dollars globally circulating. Today there is $8.5 TRILLION. There is not enough gold in the entire world to back that many dollars at 100%.

How are you determining the value of the dollar? Versus gold? Because mathematically speaking, a spike in the price of gold would obviously mean a drop in value of the dollar versus gold. Versus the yen? Versus the Euro? Versus the Rupee? Versus a barrel of oil? Versus a bushel of wheat?

There is no single set "value of the dollar".

Again, how are you valuing the dollar? Here's a graph of the Yen versus the Dollar, it looks like today's exchange rate isn't much different than in 1995.



If you look at a graph of the dollar versus the Euro, the dollar is now stronger than it was back in late 2007 when 1 EUR = $1.55 (roughly). Currently it's at ~$1.35 and as recently as this past June 1 EUR was only worth $1.20. (I can't find a good static graph of the dollar versus the euro, everything I found in my quick search is either outdated or a dynamic graph)

Here is a graph of the price of gold versus 6 other currencies. As you can see, the price of gold is way up across the board.




Neither did I.

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kingkilburn

Correct /Sarcasm



That is due totally to them mass printing more money. Go ask Zimbabwe how that worked out for them. You are correct, there isn't enough. I would scrap the green back entirely.



Given that the US Dollar is the primary reserve currency of the world it isn't hard to gauge the value of the dollar. It also is not difficult to gauge the value of gold. What is misleading is using the dollar to prove how unstable gold is when in reality the correlation is the opposite and readily apparent.


China forces the Yen up and down to maintain the exchange rate and balance of trade.

I don't see what you are trying to prove/disprove with this statement.

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axiomatik

You are arguing that because the Fed is increasing the money supply, the 'value' of the dollar is plummeting, and that this wouldn't happen if we were on the Gold Standard. However, this summer the dollar was stronger versus the euro than it had ever been since 2005.

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kingkilburn

The Euro also fell pretty hard with all the financial troubles going on over there. It costs a lot to literally buy out the debt of a country, even if it's a small one.

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Walperstyle

best foolproof investment is food commodities. (and owning some of your own farmland and contract it out to neighbor farmers)

reason 1) world expands, more people = more need for food = less land to grow it on
reason 2) in worst case senereo where money is worth $0, so is every 'precious metal', and those with food will always provide for family, and have the ability to trade for other goods and services at face value.
reason 3) food is the no1 necessity for every living being... 2nd comes shelter.

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kingkilburn

Even in a barter system precious metals still hold value.

How do you think gold and silver became valuable in the first place?

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axiomatik

So your implication is that what has happened to the US economy over the past 40 years can somehow be described by an economic crisis in Zimbabwe?

And yet you don't provide any evidence to back your claims, just vague assertions that the value of the dollar is plummeting. Does a loaf of bread suddenly cost $50? That is Zimbabwe-style inflation. Beyond that, I showed graphs of the price of gold versus 6 major currencies, and every one of those graphs show that the price of gold has been climbing for the past 5 years. Not because the value of the dollar is 'plunging', but because the economic uncertainty driven by first the oil bubble and then the global recession has caused many people to invest in gold as a safe haven. Once economic recovery begins in earnest, gold prices will start dropping relative to all global currencies.


It does. China holds large sums of dollars and yen to keep it's currency undervalued to promote it export industry. Japan is also hurting from it's over-valued currency because the Japanese economy is so export-driven as well.

Bank of Japan Moves to Buy More Assets

Japan is working on driving down the value of the yen.

Like gold, the yen is considered a safe haven. The global recession has driven the value of the yen up (Japanese is suffering from deflation), and it is killing Japan's export manufacturers.

more on deflation:

NY Times: Deflation

Deflation discourages economic activity. Why buy today when prices will be cheaper tomorrow? Decreases in consumption result in decreases in economic activity which results in higher unemployment, and lower prices as demand for customers increases.

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axiomatik

Because it is pretty. Gold especially was revered in ancient times for it's apparent magical ability to never tarnish or rust. Not because it is useful.

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S14DB

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kingkilburn

Keynesian economics - Wikipedia, the free encyclopedia


Rather than try to poke semantic holes in my claims maybe you should learn more about what you have been trying to use to back up yours. Wikipedia is as good a place as any to start.

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axiomatik

Oh please, now you are just insulting everyone's intelligence if you think that is a valid response. I am not arguing semantics in any way shape or form. Not only that, but I am very well familiar with Keynesian economic theory. You are trotting out that link in an effort to hide the fact that you can not refute any of my arguments. You aren't providing any evidence to back up your claims. Instead, you just keep regurgitating the same claims over and over. How many times are you going to mention Zimbabwe in this thread without any evidence as to how it relates to the US economy and the Gold Standard? What the Fed is doing is nothing at all like what Zimbabwe did. Why are you trying to compare the currency of a tiny country with no real industry to the United States? The US is the largest economy in the world, the largest manufacturer in the world, and the 3rd largest exporter in the world. Zimbabwe really isn't relevant.

You keep saying that the value of the dollar is plunging, and when I ask for evidence (and provide counter-evidence), your response is basically "it just is".

You have claimed in this thread that since the US went off the gold standard, the value of gold has just kept rising. I have provided counter-evidence to that as well. Even adjusted for inflation of the dollar, the value of gold steadily declined between 1980 and ~2003. That is almost a quarter-century of declining value. The rise in value of gold is a very recent phenomenon. Not only that, but it is very similar to the run-up in the price of oil. The stock market isn't doing so hot, so people invest in gold. The price of gold goes up as a result, and other people see the price increase, so they invest in gold to get an ROI, further driving up the price of gold. Eventually, there is going to be a massive drop in the price of gold as investors start to believe that it is over-priced (and hence, future gains will be minimal) and turn back to the stock market for investment. As people cash out of gold, the price will drop.

As I have mentioned before, and which you have ignored, the real concern for the value of the dollar is not what the Fed is doing, but America's trade balance. Every year that we run a trade deficit, we increase the global supply of US dollars. The more US dollars outside of our borders, the less it will be worth relative to other currencies. Here is a fantastic graph of the US trade balance and global reserves of US dollars:



As you can see, up until 1992, the US trade imbalance wasn't too bad, and in fact was improving in the late-80's/early-90's. Since 1992, however, the US trade deficit has grown exponentially. This is due to a number of factors. First, the obvious, outsourcing of manufacturing to China and other low-cost countries. While the US is still the #1 manufacturer in the world, we are quickly exporting our manufacturing industry, especially for low-priced goods, but increasingly for high-tech, high-value industries. How many computers and related components are built in the US anymore versus Taiwan and China? How about chip fabs?

The second large factor in our trade balance is the importation of oil. The US hit peak domestic oil production in the early 1970's, and domestic production has been falling ever since.



However, our consumption has only increased. That, coupled with the rising cost of oil due to the higher demands in emergent economies such as China, India etc, is driving up our trade deficit. Crude oil is currently trading at ~$80/barrel. If we look at the last data in that graph, we imported around 10 million barrels a day in 2005. That's $800 million dollars a day, $24 billion dollars a month, and almost $300 billion dollars a year. To me, that is the biggest concern for the value of the dollar. We are spending $300 billion dollars a year to buy oil from other countries. That's $300 billion dollars of our wealth exiting the country. Every year. And that money is expanding the global supply of US dollars. That is why on the graph above, global reserves of US dollars have climbed to $7 Trillion dollars, because we keep importing more goods than we export. And that isn't going to change unless we can get our oil consumption under control.

Going onto the gold standard is not going to help us if we continue to buy $300 billion dollars of oil every year. Because if those foreign entities holding dollars choose to cash in for gold, what are we going to do? We will only have a finite amount of gold. If we try to purchase more gold on the global market, what happens if that currency is cashed in?

The gold standard would only work if our trade balance was neutral, positive some years, negative other years. But as long as we run astronomical trade deficits, the gold standard is unworkable.

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