<p>Please not political- purely economic- can those with an understanding tell me which system is better and for who and why.</p>
<p>Thanks</p>
<p>Criminals hold a lot of gold. What would call their gold-linked paper … Mob Bucks?</p>
<p>this will put miners and speculators out of work. Not a good thing to be anti free enterprise.</p>
<p>We have not had a gold backed currency since 1934. A gold backed currency means that the money supply is tied to the supply of gold. If a large amount of gold is discovered and produced, this leads to inflation. More common is the reverse - as the economy grows there is more demand for money, but with a (more or less) fixed supply of gold this causes deflation. Deflation is very bad for people who owe money, while it is good for those who lend money. As William Jennings Bryan said in his famous speech: “You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.”</p>
<p>Fiat money is not an unmixed blessing. The supply of money is under the control of the government - in the case of the U.S. the Federal Reserve Board. If they control the supply of money wisely, there will be neither inflation nor deflation. Through a combination of wisdom and good luck, the rate of inflation over the past 20 years in the U.S. (measured by the CPI) has averaged about 2.5%.</p>
<p>And I thought that real property was the real storehouse of wealth. :(</p>
<p>“I’m sorry Mr. President. We can’t fly Air Force one to Denver this week because problems at the gold refining plant in Leadsville reduced the amount of new cash we could issue. We’ve booked you on Greyhound instead.”</p>
<p>The reason why the vast majority of both liberal and conservative economists alike oppose the gold standard is that it takes away much of the government’s flexibility to respond to emergencies or other ups and downs in the economy. Having this flexibility means that governments, if they are wise, can respond to soften the blow of recessions and accelerate recoveries. Being tied to to gold ensures that every bump in the economy will be felt nice and hard.</p>
<p>PS: Don’t fall in love with this thread. It may not last long. Despite announcements the contrary in the first post, economic threads have a way of almost always becoming highly political. People often just can’t resist plugging their own highly-partisan economic stance or theory of where the blame lies.</p>
<p>Perhaps fixing the price of Gold, will allow young people to acquire gold wedding rings-rings that binds them and rule them in the land of Gondor. :+</p>
<p>Logic tells us that there is not enough gold and too much fickle faith. </p>
<p>If people really understood the worlds money system they would be horrified. It relies on the popular acceptance of blue smoke and mirrors. But without it, local and world economies would cease to exist. </p>
<p>Fiat money is the demonstrative example of the delusional human nature.</p>
<p>Of course there’s enough gold - you just have to peg it at the right amount. That could be $50,000 an ounce or $1 million an ounce or $300 an ounce.</p>
<p>If the government wants flexibility, then can just devalue by increasing the conversion rate.</p>
<p>The US can get away with near infinite money creation because it is the reserve currency and because many other countries want to export stuff to us for our paper.</p>
<p>Gold imposes restraint. Politicians want freedom. Unfortunately, the human condition wants too much of a good thing and then it creates imbalances and winners and losers.</p>
<p>“Of course there’s enough gold - you just have to peg it at the right amount.”</p>
<p>Kind of like fiat currency?</p>
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<p>Gold would still be gold. But you could do anything that you want with currency. Gold is money. Dollars are currency. The difference is that the currency would be backed by money.</p>
<p>^ BCE - It happens that I agree with you. The problem remains that having currency “tied to gold” only works if currency can be exchanged for gold. Without that provision, holders of currency are basically trusting governments to adhere to the unprovable … i.e., that the amount of currency printed is proportional to the amount of gold held in reserve.</p>
<p>Of course if I’m a politician, I’d be saying that U.S. Currency is already “tied to gold.” Just take $1,567 down to your local gold retailer and you can walk out with a shiny one-ounce bar of gold. “See, they’re tied! One ounce, fifteen hundred dollars!”</p>
<p>As dadx3 points out, deflation is a real danger should the price of gold becomes fixed.</p>
<p>All money, whether physical gold, paper currency, coins, or electronic account records, is money only because other people you trade with will accept it as money.</p>
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+1 </p>
<p>If gold is your “money” then gold becomes just another “fiat currency.” Its value becomes what others will give you for it as currency, not its value as a metal. That’s what makes me wonder about the thinking of gold bugs - do they plan to eat their gold come the (financial) apocalypse some of them confidently predict?</p>
<p>Tying the value of currency to any physical object - be it gold, seashells, tulip bulbs or whatever simply ties the economy to something that can be increased, decreased, and manipulated by various means. Why is that a good idea? What if the medieval alchemists had actually found a way to turn lead to gold? :)</p>
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<p>Why do we need moneycenter banks to suppress the price then?</p>
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<p>Deflation does provide for market corrections though.</p>
<p>In our current mode, deflation isn’t an option and central bankers
will do all that they can to defeat it while making it look like there
isn’t much deflation. With fiat currencies, we work to encourage
speculation (in small businesses, financial and just plain things).
With less speculation you have less volatility in booms and busts.
The way we’re going right now, we have to exponentially increase
currency to avoid deflation. Fortunately, most of the world depends on
this game so that it mostly works. But there are a lot of losers in
this game and a few gross winners.</p>
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<p>I don’t see too much in the way of dollar build jewelry these days.</p>
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<p>Paper currency can be fairly easily manipulated as we’ve seen the last
ten years. Electronic records could be wiped out completely, and are
even more easily manipulated or stolen. Coins and gold are also
manipulated but it’s generally harder to manipulate than paper dollars
and electronic funds.</p>
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<p>I mentioned to a coworker that I picked up some platinum last year as
it was cheaper than gold. He told me that he would have liked to pick
up more metal but instead he bought another gun and more canned food.</p>
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<p>I believe that we can already convert platinum to gold. Platinum
is currently $200 an ounce cheaper than gold. Do you see a lot of
conversion?</p>
<p>If we had politicians and central banks that were concerned with
preserving their currencies as a stable store of value, then we
wouldn’t need things like gold, silver, platinum, copper an nickel to
use as money. But politicians are people and people are fallible.
Which is easier to trust? A politician, central banker or a lump of
metal? Or barrel of oil? Or bushel of wheat?</p>
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<p>Of course, as soon as you store your money (gold or otherwise) in a bank, it becomes a paper or electronic account, and the bank’s act of lending some of it to someone else changes the money supply in the economy.</p>
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<p>Conversion of elements into other elements typically requires something expensive, like a nuclear reactor or a particle accelerator. The exception would be elements or isotopes of elements that are already highly radioactive, but that means that they don’t store value as well as stable elements or isotopes of elements. (Note: radioactive isotopes of platinum naturally decay into iridium or osmium, not gold.)</p>
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<p>A lump of metal is not inherently trustworthy – that is why governments of countries using gold (or silver etc.) money minted it into standardized shaped and marked objects called coins, so that people could readily recognize a given amount of the stuff without weighing it, testing it for impurities, checking if it is “fool’s gold”, etc… Of course, that did not completely solve the problem, in that there were counterfeiters, or devaluations by governments (in which the people had previously trusted to standardize the money).</p>
<p>“A lump of metal is not inherently trustworthy …”</p>
<p>Not even if it’s overseen by a “trusted private authority” like Jon Corzine and his band of merry hedge fund executives?</p>
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<p>Really? If I put my coins in a safety deposit box, the bank is going
to lend it out?</p>
<p>Of course you can always store your gold in other forms and in other
places. I have some on one of my fingers right now.</p>
<p>There are varying degrees of separation among forms of paper gold and
they are subject to varying degrees of seizure, theft, and the leasing
out of your gold. If you are that worried about it, don’t hold it in
a depositary receipt form where it can be leased out.</p>
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<p>“The synthesis of noble metals enjoyed brief popularity in the 20th
century when physicists were able to convert platinum atoms into gold
atoms via a nuclear reaction. However, the new gold atoms, being
unstable isotopes, lasted for under five seconds before they broke
apart. More recently, reports of table-top element transmutation—by
means of electrolysis or sonic cavitation—were the pivot of the cold
fusion controversy of 1989. None of those claims have yet been
reliably duplicated.”</p>
<p>– Wikipedia</p>
<p>I guess that answers the original question.</p>
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<p>I can go to my local coin shop and buy and sell a variety of non-coin
forms of gold, silver and platinum. None of these non-coin forms are
certified by any government.</p>
<p>I can also trade 100 oz silver bars pretty easily. These aren’t
certified by any government. Most gold and silver traded in the US
isn’t in the form of coins.</p>
<p>I trade this stuff. You clearly don’t.</p>
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<p>That wasn’t a lump of metal. That was a lump of paper promising a lump
of metal.</p>
<p>Interesting the JPM is in the middle of a metals mess again.</p>
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The “value” of gold to the extent that it exceeds its industrial utility is based purely on the “greater fool” factor. It’s no more “real” than the value of tulip bulbs in Holland or wampum in New England in the 17th century. </p>
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If a significant part of the wealth of the world were left to gather dust in boxes we’d soon be “enjoying” a medieval economy. Fortunately, the number of gold bugs in the world isn’t great enough to do significant damage to anyone but themselves. It’s just a harmless hobby, like collecting stamps or baseball cards.</p>