The Gold Standard?

[Towncryr]

That is exactly my point. Stocks, bonds, and real estate do provide streams of income. Stocks beat gold over time. INCLUDING the recent gold bubble.

http://www.stocks-for-beginners.com/gold-market-price.html

Taking out the recent rise due to increased investor speculation and you will see that gold does horribly. Why is it when prices have been going higher and higher that people say it is time to buy? If you want to buy buy in the early 80s or 90s not now after you start to see the "buy gold" infomercials.

Other assets DO keep up with inflation and mostly surpass is. If the price of food inflates 5%/year you better believe that McDonald's prices will increase likewise, with their sales and profits following. Any business' sales revenue (accept for technology companies) will go up as the cost of things goes up.

Why is gold an inherently good store of value? You are counting on others to be willing to trade it with you. If society collapses the man with food and guns will survive. Try and eat gold.

Warren Buffet is not your typical investor but he is the most successful investor of our lifetime. He says gold is not a good investment and you would disagree with him. If he is such a great investor you can invest right along with him. A share is ~$80 and management expenses are nil.

May I suggest that you go back and put some 'objectivity' in your claims?

First, your statement about stocks outperforming gold over the long term are simply erroneous and very misleading. Have you, or did you source, use the Federal Reserve's OWN inflation calculator (Minn branch website). As the 2012 dollar is worth only 2% of the 1913 dollar you are comparing apples and oranges. There has, NEVER IN RECORDED HISTORY, been ANY fiat currency last over 100 years. Gold has retained it's value (purchasing power is really what we're talking about here not just numbers) since Rome! Do some research w/OUT your 'rose colored glasses.'

As for a 'bubble' (do you quote everything the talking heads on TV say?) and the other comment about gold being in a 'textbook case' of a 'bubble.' Perhaps you should consult another textbook? A "bubble" is created when the masses MOVE INTO IT! I.E., the "housing bubble", the "dot com" bubble, etc. Less than 2% of the people in the U.S. own gold. The large Institutional investors have not moved into gold......yet. But they will as this situation worsens, as it does by the day now. The Univ of Texas Endowment Fund, two years ago, purchased 1 BILLION dollars worth of gold for their fund:
http://seekingalpha.com/article/264230-university-of-texas-s-gold-buy-is-a-game-changer
Here
http://www.silverdoctors.com/university-of-texas-endowment-fund-takes-delivery-of-1-billion-in-gold/
Here
http://thegoldwatcher.blogspot.com.ar/2011/04/university-of-texas-endowment-now-holds.html
Here
Gold represents 5 percent of UTIMCO’s portfolio. “The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have access monetary and fiscal stimulus,” Zimmerman said.
http://www.dennistubbergen.com/index.php/archives/1051

Also, here is another newsworthy article for this discussion:

Northwestern Mutual Makes First Gold Buy in 152 Years
June 1 (Bloomberg) -- Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said.

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aByZIkH6PwkI

Hummm, the CEO of the 3rd largest Life Insurance Company IN THE U.S. buys gold FOR THE FIRST TIME IN THEIR 152 HISTORY! Repeat, THE THIRD LARGEST INSURANCE COMPANY IN THE UNITED STATES BUY 400 MILLION IN GOLD. THE FIRST TIME IN THE 152 YEAR HISTORY OF THE COMPANY?

I am sure that doesn't sink into you Keynesian thinkers (? - oxymoron) but you 'might' want to ponder on why you think you know more than these types of folks and not about some guy like Buffet who gains from "gaming" the system, at least while it is functioning..... They don't want you to be in gold BECAUSE IT RUINS THE FUNNY FIAT CURRENCY SCAM!

Remember these two:
"If you continue to think what you always thought you'll continue to get what you always got."

and

"The mind is like a parachute. It ONLY works when it is OPEN!"

Want to see this little "paper money scam" you are so enamored with in reality?
http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html
Yea man, STAY in that paper!!!

As for your "gold bubble"
Without accounting for the above issues, the intrinsic worth of gold comes to about $9000/ounce (total money supply of about $45 trillion/5 billion ounces of gold). So gold remains hugely undervalued and it's certain that market participants will increasingly shift their holdings from paper currency onto real money in the years ahead.
http://www.industrialeconomist.com/apr09-gold.htm
BTW, at the bottom is "Lord" Greenspan comments BEFORE he stated doing the things that 'allowed' him to be "knighted" by Queenie.....

"We're ALL where we are because of choices we've made." The ones you make in these areas could dictate how you live the rest of your natural life.

BTW, when J.P. Morgan was questioned by the Senate Banking Committee and asked about gold. His response? "Gold is money, that's all."

TC

 

[redrum]

so this article just came out today, which highlights the movement of the emerging markets away from dependency on the dollar and western credit markets. china is slowly, without much media attention, taking the necessary steps to ensure that it will be the world's dominant power of the future, crisis or no crisis.

China's Central Bank Willing To Share $3 Trillion
http://www.forbes.com/sites/kenrapoza/2012/06/20/chinas-central-bank-willing-to-share-3-trillion/

 

[Matt84]

Thanks for every reply and counter reply.

I'd like to hear in positive terms
what are the merits of a fiat currency,
why was it adopted,
and, please, without any chip at least on my shoulder, I'd like to know how come the time frame in which it was adopted in the United States coincides precisely with the time the country transformed itself into a new Rome.

Is it a coincidence that the Franc is at least partially backed by gold, and that this was the only country in Western Europe immune to European integration (sovereign in 1941 and not part of the EU today) ?

Is a FIAT currency necessary for, if not growth, at least for drastic territorial expansion? I wont even consider at this point whether this could or not be morally objectionable, I simply see it as the only possible explanation in absence of a real postive defense for a FIAT currency.

All I hear from the FIAT people is "gold is worse", not FIAT currency is better because ...

 

[nicoenarg]

All I hear from the FIAT people is "gold is worse", not FIAT currency is better because ...

You haven't really heard ACTUAL arguments why gold is better either. You've heard either perceived arguments or conspiracy theories.

 

[nicoenarg]

Is it a coincidence that the Franc is at least partially backed by gold, and that this was the only country in Western Europe immune to European integration (sovereign in 1941 and not part of the EU today) ?

Just a tiny correction, the Swiss Franc WAS partially backed by gold (40%) until 2000.

That's a little piece of history many choose to forget.

 

[ElQueso]

The thing about money, whether it's fiat or gold (or oil), is the quantity that is in existence, and who controls that quantity.

Fiat money is currently issued in most nations via the government borrowing the money into existence from organizations other than the government. This incurs a debt to pay back the money.

Another method, as noted below somewhere, the title something like Gold and the Wizard of Oz (a very good read, BTW), is that the government itself issue the money, as is its sovereign right, without borrowing, or borrowing from itself.

In either of the two above scenarios, it is fiat money, and it is controlled by essentially borrowing or not to increase the money supply available. In the latter scenario, the government will not pay interest on the money issued. In either scenario, the amount of money available vs production of goods and such (the value of the economy) controls the relative value of that currency to other currencies.

The Wizard of Oz book makes mention of the fact that one of the best ways to control the amount of money is to use gold, or other easily portable precious items. It also makes note of the fact that only rich people and governments have the gold usually.

The writer used the example of Rome before and after Julius Caesar. The Senate had issued some cheaper "fiat" coins before Caesar came to power, I believe it was based on copper and bronze? Brass? They made it legal to pay taxes with the coins. Supposedly it sparked a boom of construction, houses, public works, etc. Rome prospered.

Caesar came to power and issued gold coins again. The fiat coins were taken out of circulation. Rome depressed.

Seems to me out of those three options, the fiat money controlled by the government is the best method. However, I am a new student of economics. I am a Libertarian by way of agreeing with most of the things they have to say. I've recently begun to study Austrian economics more closely to make sure that it makes sense.

I sometimes think Libertarians want to go too far. An example is getting rid of the Federal Reserve Bank. At first I thought, "but don't we need a central bank to kind of provide a centerline for the market?" Thinking like a Keynsian.

I've recently read a number of books by Austrian or Libertarian economists that show me that it is the worst thing we can have. Messing with the interest rates, by a private organization, which although chartered by the government, is not elected, not governed directly by the government, and controls at least indirectly the amount of currency available by controlling the cost to borrow that currency into existence.

The very act of setting the interest rates tends to also distort that market as investments that are perhaps borderline and would not normally be made due to cost benefit ratio now are taken on because the money's cheapness makes a lot of difference. At some point some market becomes concentrated on (like .com or housing, for example) and a bubble develops, outstripping sustainable demand. Resources get allocated away or are in conflict from other markets.

It also discourages savings-backed loans (i.e., covered by assets from depositors) and encourages borrowing from nothing, or covered by smaller and smaller fractions of assets.

Seems to me if the government issues enough currency to cover the value of the economy plus a bit for growth, and doesn't control interest rates to develop distortions in the market, fiat currency is a good way to go to keep things on a stable growth curve.

If it's borrowed into existence with the debt that is paid on top plus a cartel is used to adjust interest rates to make money cheaper (or more expensive, contracting the amount of money available), you are going to get bubbles and recessions. The more you try to play with the interest rates, pump money into bailouts, etc, the longer you are keeping the market from adjusting itself to where it should be.

A book by Tom Woods I'm currently reading uses an analogy about market distortions and bailouts that I found interesting.

A restaurant owner in a city has a decent business at one location. The city he's in ends up hosting the Olympics and traffic at his restaurant doubles. The owner takes out a loan to open up a new location, but he isn't taking into account that the new traffic he's getting is due to tourism from the Olympics. When the Olympics go away, his traffic goes back down to pre-Olympic times and he has almost no business in the second location and can't afford to pay the rent and the loan payments.

Should he be bailed out to keep both restaurants open? No, it doesn't make any sense. He needs to close the second location, take the hit on defaulting on the loan due to poor entrepreneurial skills and the money that would go to bail him out should be allocated to another enterprise that has a better chance of succeeding.

 

[Raymond]

You haven't really heard ACTUAL arguments why gold is better either. You've heard either perceived arguments or conspiracy theories.

I have found the arguments for gold very convincing . Your arguments as displayed towards Tom from Corrientes and others on this board is to demean and treat with comtempt any others who have a more better understanding of issues than yourself.

 

[nicoenarg]

I have found the arguments for gold very convincing . Your arguments as displayed towards Tom from Corrientes and others on this board is to demean and treat with comtempt any others who have a more better understanding of issues than yourself.

Lol. Raymond, I haven't actually taken either an opinion for or against the gold standard but I guess you are still bitter from another thread to be able to see that.

Like I told you in another thread, you really never have anything worthy to add.

And since I've had enough of your circus, you're going on the ignore list. You can go cry on Tom's shoulder now if you want.

Chau.

 

[redrum]

You haven't really heard ACTUAL arguments why gold is better either. You've heard either perceived arguments or conspiracy theories.

i wish people would stop using the term "conspiracy theories". it's a way to automatically discount somebody's opinion right off the bat without even stopping to remotely consider the information they are presenting.

i don't understand how you can also say that no arguments have been made for why a tangible backed asset is better. it's so that governments and banksters can stop stealing from the people by printing money out of thin air.

gold is not the perfect solution. it is an attempt to force governments to live within their means by tying the quantity of money to something physical. surely, the world economy would not be in the situation it is today if we did not have rampant money printing.

and that is not a conspiracy theory.

 

[Crema Americana]

For those interested, here's a brief history of money in the US and how we got off the gold standard.
http://www.youtube.com/watch?v=kM7rITeNW6U