The Gold Standard?

[PhilipDT]

There many differences, including the portability of gold and the fact that gold requires no maintenance/upkeep and it is not charged property taxes.

Yes I'm aware of the differences between a gold bar and a condo. You can't sleep in a gold bar either.

I was alluding to perception that property, whose history of being a "stable" store of wealth outstrips gold's own, was recently the focus of a speculative bubble that caused quite a good deal of people in the US to loose everything they owned.

 

[PhilipDT]

,....

Damn it! I hate not being able to edit. Itchy post finger causing problems again.

I was alluding to fact that property, whose history of being a "stable" store of wealth outstrips gold's own, was recently the focus of a speculative bubble that caused quite a good deal of people in the US to loose everything they owned.

 

[willwright]

What is the solution?

Solution to what? All I hear on this thread is unfounded conjecture and conspiracy theories. Returning to something that has long been discarded (for good reason) will do nothing to solve our problems today. List me a few people who actually know what they are talking about. I'll bet you can't name any who aren't just crackpots like Ron Paul or self serving people just out trying to make a fast buck selling something.

 

[redrum]

Berkshire Hathaway has never paid a dividend.

sure, i really don't know which stock(s) paid the dividend. you can reference the below article however to see that together with his dividend payments, his adjusted gross income added up to over $62 million in 2010 and that his effective federal income tax rate was only 11%.

"Buffett pays himself a salary of just $100,000 a year, most of his income comes from investments—long term capital gains and dividends–taxed at a special top rate of 15%."

Warren Buffett's Effective Federal Income Tax Rate Was Just 11%
http://www.forbes.com/sites/janetno...effective-federal-income-tax-rate-is-just-11/

Warren Buffet has proposed a higher tax rate for individuals such as himself. I believe they are referring to it as the "Buffet Rule" or something like that.

sure, as i said, this is completely disingenuous on its face as he does not pay a proportional rate of tax when compared to his income. he is a crony capitalist and an obama insider. see the above forbes article.

At any point in history there have been people who predict the end of the financial system. If we get to that point you cannot eat gold. Your neighbor will not trade you his potato for your gold. He will eat his potato.

i don't understand why you keep going with this end of world scenario. not all people who invest in precious metals believe this view. i have never advocated this. if there is a breakdown then yes, the only items of value will be food, water, ammo, guns and seeds.

The dollar is king. Ecuador, Zimbabwe, El Salvador, Russia, Argentina. The fact that the US can issue debt in the middle of an economic crisis and pay essential 0% interest speaks for itself. China keeps on accepting them in exchange for widgets...

yes, for now. again, in my previous post i explain that it is only a matter of time mathematically speaking. there really is no emotion involved in this. the US will ultimately experience the same austerity that greece is facing right now or a hyper inflationary scenario.

china and other countries have been making concerted efforts to conduct trade, create partnerships and slowly move out of the dollar.

China, S Korea and Japan set to begin free trade talks
http://www.bbc.co.uk/news/business-18055033

China, Japan Bypass U.S. Dollar in Pivotal Trade Agreement
http://www.financialsense.com/node/7223

Gold for Oil: India and Iran Ditch Dollar – Report
http://www.forexcrunch.com/gold-for-oil-india-and-iran-ditch-dollar-report/

The demise of the dollar
http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

UN wants new global currency to replace dollar
http://www.telegraph.co.uk/finance/...ts-new-global-currency-to-replace-dollar.html

What will you do with that gold you are holding to preserve your wealth? How will you determine its value?

it's value is determined the same way any currency is determined when compared against another. it is a zero sum game. gold does not so much rise as the dollar declines. again, gold cannot be debased at the same rate as a fiat currency because you cannot create large amounts of it out of thin air. all it needs to do is stand relatively still as the dollar continues to be debased.

I will give $10,000 to the first five people who thank my post if in 30 years from today's date gold has had a higher rate of return over the S&P 500 over those 30 years. You can take it in US dollars or it's current rate in Argentinian pesos or gold or potatos.

again, not sure why you feel the need to create these unrealistic scenarios. nobody is saying to hold gold for 30 years. as i said there is a time for everything. now is the time for gold. this may not be the case in 5 years from now. that's all any of this is, a shell game. you move your purchasing power from one asset to another, hoping to stay ahead of the curve. at some point, it will be time to sell gold and move into something else.

 

[Matt84]

Solution to what? All I hear on this thread is unfounded conjecture and conspiracy theories. Returning to something that has long been discarded (for good reason) will do nothing to solve our problems today. List me a few people who actually know what they are talking about. I'll bet you can't name any who aren't just crackpots like Ron Paul or self serving people just out trying to make a fast buck selling something.

I also ask solution to what, but I also want to try and understand monetary policy. I'm not selling gold and I'm nor marketing it (I'm not even buying for myself, but that's besides the point). I also cringed when I read 'photograph with Lord Rotschild' (I have pictures of myself with Senor Rotschild, a herb-smoking old time hippy who lives in El Bolson, so?) as if that were evidence of 'conspiracy'.
In any case, I'd like to ask now more humbly,

1) Why did we move away from gold?

2) Is it because it seems, instinctively, that a fiat currency allows for more growth?

3) What is FIAT money backed by?

4) Isn't there a difference between oil which is consumed, and gold which is traded, melted, but never consumed?

and btw @All that talk about not being able to sleep inside a gold bar, or eat it like a potato. Well what can you use paper money for? It's not even double ply!

 

[PhilipDT]

sure, as i said, this is completely disingenuous on its face as he does not pay a proportional rate of tax when compared to his income. he is a crony capitalist and an obama insider. see the above forbes article.

There is are a lot of good reasons for a lower Capital Gains tax rate, there are a few good reasons not to have one. But it isn't a scam, it isn't crony capitalism and I think it seems pretty clear that Buffett is more than willing to contribute his share.

it's value is determined the same way any currency is determined when compared against another. it is a zero sum game. gold does not so much rise as the dollar declines. again, gold cannot be debased at the same rate as a fiat currency because you cannot create large amounts of it out of thin air. all it needs to do is stand relatively still as the dollar continues to be debased.

This is what the whole thread was originally about: Gold's value HAS already been created out of thin air. As such it could be debased far more rapidly, and violently than growing the money supply could ever debase the dollar.

 

[redrum]

There is are a lot of good reasons for a lower Capital Gains tax rate, there are a few good reasons not to have one. But it isn't a scam, it isn't crony capitalism and I think it seems pretty clear that Buffett is more than willing to contribute his share.

ok well, we'll have to just agree to disagree on this one as we seem to have differing opinions on the man and his motives. i see him as one way, you see him as another.

This is what the whole thread was originally about: Gold's value HAS already been created out of thin air. As such it could be debased far more rapidly, and violently than growing the money supply could ever debase the dollar.

i don't follow you at all on this one. how has its value been created out of thin air and how could it be debased far more rapidly than paper money? it's not physically possible to create gold at the same rate as paper.

example: let's say i hold one gold coin that is presently worth $1000. i also hold $1000 in cash. 1 year from now the gold coin is worth $1500 and the $1000 in cash buys 10% less at the grocery store than it did a year before. i have lost purchasing power by just holding cash whereas with gold i have actually gained. this is exactly the same scenario that has been occurring for the past 12 years as gold has increased in value each consecutive year.

think about it, why was the gold standard removed in the first place, because it got in the way of governments and banks being able to print money. being able to print and also being the first to spend the newly created money gives you the most purchasing power as the money supply has not yet been debased and thus still buys the same amount of products.

i should state that i could really care less about gold and silver one way or another. i only recognize them at this moment in time as true stores of value because of the current global economic situation.

 

[el_expatriado]

Gold is a good long-term store of value. Much better than any fiat currency, of course. It is not a good long-term investment, though. It can be put to no productive use. The day that we can make loans in grams of gold, and get repaid back those same grams, it would be much more attractive to store wealth in gold and buy gold "bonds" with it. But since gold is deflationary, I think it would be very difficult to get a debtor to take on a gold loan. I wouldn't want to take one.

 

[flurec]

together with his dividend payments, his adjusted gross income added up to over $62 million in 2010 and that his effective federal income tax rate was only 11%.

....

he does not pay a proportional rate of tax when compared to his income. he is a crony capitalist and an obama insider. see the above forbes article.

......

i don't understand why you keep going with this end of world scenario. not all people who invest in precious metals believe this view.

.........

the US will ultimately experience the same austerity that greece is facing right now or a hyper inflationary scenario.

china and other countries have been making concerted efforts to conduct trade, create partnerships and slowly move out of the dollar.
....

gold does not so much rise as the dollar declines. again, gold cannot be debased at the same rate as a fiat currency because you cannot create large amounts of it out of thin air.
....


again, not sure why you feel the need to create these unrealistic scenarios. nobody is saying to hold gold for 30 years. as i said there is a time for everything. now is the time for gold.

You are right that Buffet does have dividend income outside of BK but it is from his personal holding and is a negligible part of his net worth. You can also invest in stocks and take part in his scheme. Buffet has got to be one of the least evil rich guys around. He is giving away 99% of his wealth AND trying to convince others to do the same. I would much rather him do that than cut a check to the US Treasury.

I refer to the apocalypse because it seems to be a common theme among gold bugs. Why else would gold be a worthwhile investment? If the US dollar hyper-inflates it will be a major worldwide event. There will be much greater worries than the relative value of gold.

Dollars are the most liquid, circulated and trusted currency on the planet based on its history. It has been fairly well managed relatively speaking which put it where it is. The US is also the world's biggest consumer. The US is able to payoff its debt- the debt is denominated in dollars...

Other than industrial, dental and jewelry I am completely baffled with the fascination with gold. Yes is is shiny, doesn't corrode, is malleable but why would you invest in something that produces nothing with the hope of finding a greater fool? Why gold? There is more in the ground. It is not magical.

My best shot at these-

1) Why did we move away from gold?

In a modern financial world there is no need for currency to be backed by gold. For the most part people can freely trade in any currency (excluding Argentinians of course). Gold has to be stored, traced, secured etc. If you do not trust a countries currency why would you trust their gold deposits? Argentina can't even produce an accurate inflation number. If they backed the peso with gold what kind of games would they play. Look at what happened with Hugo messing with Venezuela's gold. As long as the country will allow its taxes to be paid with its own currency that currency will have real value and be traded among the people. Try and send the IRS a brick of gold.

2) Is it because it seems, instinctively, that a fiat currency allows for more growth?

The money supply grows to match up with the products and stuff that is being made in an economy. Credit allows many things and our world would be much worse off without it. Ask any farmer or entrepreneur how they would have started their business. Limited inflation is not a bad thing. It forces companies and individuals to do things with their money as opposed to hoarding it. What if a bank had to come up with $300,000 of gold to back the mortgage they just gave you? What if every country had to accumulate more and more gold to back their currencies as their economies grow. Not gonna happen.

3) What is FIAT money backed by?

The government that issues it.

4) Isn't there a difference between oil which is consumed, and gold which is traded, melted, but never consumed?

No difference. They are both material things that are fungible. For cultural reasons gold has a "mystical" value that makes people crazy. Oil, I would argue, if taken away would affect our lives in a much more profound way than gold.

Like gold there is more in the ground. The more people are willing to pay for it the more reserves that can be profitably extracted.

 

[Matt84]

Thanks Flurec,

Interestingly, there is gold (and just about any other mineral) not just here but in any planet, whereas there's oil, as far as we know, only on Earth.

Are you saying that a fiat currency is needed to expand credit? as I put it to 'incentivate' growth?
In a very deflationary scenario (like Switzerland the last century) there would be next to no credit?

When you say that a fiat currency is backed by the government that issues it, it implies that a currency is only as strong as such government.

Goldhoarders and Productives alike,
Can we all agree-setting aside any political alignment- that the value and popularity of the US Dollar came into effect at the same time it replaced its backing from gold to military might?

The loaded question there is simply, could a non interventionist state (like Switzerland or even China) ever make its currency popular? Like the yen was at some forgotten point in history?