66 Greenspan article supports gold standard

[momeNt]

A material object that can be eaten has intrinsic value. In a completely unpredictable world would you rather $1900 in gold or spend that money instead on cans of food?No, but I know it to be so much like I know a tree falling on my head hurts. Actually, I think I've read that the US has a fairly small amount of gold (huge, but relative to its wealth it's not big). I'm sure you could google "gold reserves by country" and you'd see that the US doesn't really have very much compared to its actual productive capacity.Staying in line with this thread if the US's fiat money is a poor indication of its wealth its fiat-based debt is also a poor indication.

You make good points. Gold's intrinsic value is next to nothing if you take away the fact that thousands of years of bartering arrived at gold to be the de-facto money. But money isn't actually real only the commodities are real.

Gold would be completely interchangeable with any other similar metal like copper or silver, so it's intrinsic value as an industrial commodity would be much closer to copper than anything else, since silver people also view as a money of sorts.

As for the wealth of the USA without looking at it through a fiat based currency perspective, it would be pretty similar because we continually import more than we export, but if a gold standard were to be implemented, or at least responsible monetary policy, it would change pretty quickly because of deflation making our exports priced more attractively, and inflation of other countries with a net export model would be too expensive to keep doing business with.

 

[JEDIYoda]

I'm just pointing out the hypocrisy.

Not enough gold? The devaluation of the dollar will compensate for lack of gold on hand.

I think the Fed has this all planned out for the next two years.

Steady devaluation of the dollar to export our debt to other countries.

yawn.......pulls up a lawn chair and a cold brewsky!!!

 

[First]

First of all you switched the topic from comparing gold vs the USD as a store of wealth to then gold vs stocks as a store of wealth.

No actually, you did, I never once mentioned the relative strength of the dollar vs. gold, which is a completely irrelevant line of conversation.

Perhaps that means you conceded that gold performs better than the dollar as a store of wealth. After all the dollar has lost about 98% of its purchasing power since the federal reserve.

Actually no, what's ironic is that $1000 of 1850 dollar bills are worth more at auction than $1000 in gold bullion. That's listed in the same Siegel book, in case you're confused.

As for comparing stocks to gold. As you can see it's been a pretty wild ride. The run from 1982-2000 absolutely crushed gold I will agree, but it's correcting remarkably quick wouldn't you say?

Not really. Gold was (nominall) $850/ounce at its peak in 1980, which is $2,395 adjusted for inflation. Today it's $1,850. That's the definition of a shit investment. See below:

You'll have to explain what you think this chart means. Dow has far, far out-paced gold.

 

[momeNt]

Actually no, what's ironic is that $1000 of 1850 dollar bills are worth more at auction than $1000 in gold bullion. That's listed in the same Siegel book, in case you're confused.

Mind-blowing, did the person actually cite that as to why storing your wealth in USD cash is better than gold? Hard to believe. A dollar was like a weeks worth of work in 1850. Today a dollar might not even get you a coke in a vending machine. Please tell me he didn't actually use that as an example.

Quote:
Originally Posted by momeNt

You'll have to explain what you think this chart means. Dow has far, far out-paced gold.

Maybe you should explain it to me since you think I'm wrong. If you want to compare stocks to gold, compare how many ounces it would take to buy the DJIA. The peak was ~42 oz of gold to buy the DJIA meaning DJIA was very strong compared to gold. The lows have been at around one ounce (1980). If you held nothing but gold from 1982 to 2000, you got creamed, and if you were writing a book about stocks in the long term, you'd be rich and famous. If someone picked up that book in 2000, read it, and found a bunch of gold, sold it to buy stocks, you'd be really furious at the author. Because you just paid 42 ounces to buy DJIA stocks, and someone 10 years later only had to pay 10 ounces.

No advice is eternal. It's obvious that if you played the bull runs in stocks and waited out the bear markets in gold, you'd be a lot richer than if you were long 100% one way or the other. And it would be pretty hard for a non-dilutable metal asset like gold to outpace a huge credit inflated bull run like we had in 1982-2000, you can't print gold.

 

[First]

Mind-blowing, did the person actually cite that as to why storing your wealth in USD cash is better than gold? Hard to believe. A dollar was like a weeks worth of work in 1850. Today a dollar might not even get you a coke in a vending machine. Please tell me he didn't actually use that as an example.

I simply noted for you the fact that U.S. dollar bills from the mid 19th century sell for more at auction than a similar amount of gold priced in U.S. dollars. That's ironic, is all. In any case, it isn't at all relevant that a dollar has declined by 90% since 100 years ago because all that matters to investors is the ROI on those original dollars compounded over several decades, and in those scenarios gold gets absolutely thrashed. The issue here is that gold has no real utility. I'll go ahead and quote the richest man in the world: "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." - Warren Buffett.

Maybe you should explain it to me since you think I'm wrong. If you want to compare stocks to gold, compare how many ounces it would take to buy the DJIA. The peak was ~42 oz of gold to buy the DJIA meaning DJIA was very strong compared to gold. The lows have been at around one ounce (1980). If you held nothing but gold from 1982 to 2000, you got creamed, and if you were writing a book about stocks in the long term, you'd be rich and famous. If someone picked up that book in 2000, read it, and found a bunch of gold, sold it to buy stocks, you'd be really furious at the author. Because you just paid 42 ounces to buy DJIA stocks, and someone 10 years later only had to pay 10 ounces.

Your chart says nothing about actual returns from Dow investments over the last 80 years. Two chief things the chart omits (I can only presume since it offers no other detailed information):

1) Compound interest.
2) Dividend reinvestment.

Which are two monumentally large omissions. Those drive equity growth, and they're why gold can't compete with stocks. Hell, gold can't compete with bonds.

No advice is eternal. It's obvious that if you played the bull runs in stocks and waited out the bear markets in gold, you'd be a lot richer than if you were long 100% one way or the other. And it would be pretty hard for a non-dilutable metal asset like gold to outpace a huge credit inflated bull run like we had in 1982-2000, you can't print gold.

No actually, over ANY 30 year period since 1802 (including the Great Depression), stocks have yielded over 6% compounded annually. If you just buy and hold stocks you'll be far better off than any conceivable scenario where you buy and hold just gold. In the long term, that is. In the short term anything is possible, so you could easily look at, say, the 90's stock bubble as comparable to the current gold bubble.

 

[momeNt]

I simply noted for you the fact that U.S. dollar bills from the mid 19th century sell for more at auction than a similar amount of gold priced in U.S. dollars. That's ironic, is all. In any case, it isn't at all relevant that a dollar has declined by 90% since 100 years ago because all that matters to investors is the ROI on those original dollars compounded over several decades, and in those scenarios gold gets absolutely thrashed. The issue here is that gold has no real utility. I'll go ahead and quote the richest man in the world: "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." - Warren Buffett.



Your chart says nothing about actual returns from Dow investments over the last 80 years. Two chief things the chart omits (I can only presume since it offers no other detailed information):

1) Compound interest.
2) Dividend reinvestment.

Which are two monumentally large omissions. Those drive equity growth, and they're why gold can't compete with stocks. Hell, gold can't compete with bonds.



No actually, over ANY 30 year period since 1802 (including the Great Depression), stocks have yielded over 6% compounded annually. If you just buy and hold stocks you'll be far better off than any conceivable scenario where you buy and hold just gold. In the long term, that is. In the short term anything is possible, so you could easily look at, say, the 90's stock bubble as comparable to the current gold bubble.

Jeez, my bad for getting roped into an argument about stocks versus gold as an investment when we are talking about a gold fucking standard. I post a chart of gold / USD and suddenly it becomes an investment portfolio discussion.

How do you go from the chart i posted of gold vs USD to say that gold is the worst long term store of value when compared to bonds or stocks, its a completely different discussion entirely.

I only went and posted the DJIA in ounces of gold to show that it isn't the worst store of wealth in history....

as for compound interest and dividend reinvestment, the only applicable one would be dividend reinvestment, stock prices which is what the DJIA shows wouldn't account for that. Compound interest isn't applicable to the discussion.

So let's stop the derailing and keep the discussion on Greenspan's endorsement of a gold standard in 1966. Unless you are suggesting some sort of currency that is backed by publicly traded companies as opposed to gold or fiat currency backed by the full faith and credit of the USA government, stocks have absolutely no bearing in the discussion.

 

[sarsipias1234]

We've been successfully off the gold standard for many, many decades. Get used to the idea that gold is a long-gone past-time fit only for ancient countries and economies.

You call 16 Trillion dollars of debt successfull?????


Gold has risen 80 times in value during the same period.

 

[sarsipias1234]

A material object that can be eaten has intrinsic value. In a completely unpredictable world would you rather $1900 in gold or spend that money instead on cans of food?No, but I know it to be so much like I know a tree falling on my head hurts. Actually, I think I've read that the US has a fairly small amount of gold (huge, but relative to its wealth it's not big). I'm sure you could google "gold reserves by country" and you'd see that the US doesn't really have very much compared to its actual productive capacity.Staying in line with this thread if the US's fiat money is a poor indication of its wealth its fiat-based debt is also a poor indication.

No, food still has no intrinsic value. Nothing material has any intrinsic value.

Only people give value to food by requiring food to live.

Intrinsic definition : belonging to the essential nature or constitution of a thing

All things are assigned value collectively by people.

What if the full devaluation of the dollar is yet to be reflected in the $1900 an ounce price?

If the dollar is devalued to the point of gold rises to $50,000 an ounce there would be 13 Trillion dollars of "believed" worth of gold in U.S. reserves.

The only real value in America is American's ability to work together in unison to create the synergy needed to grow wealth collectively.

 

[LegendKiller]

You call 16 Trillion dollars of debt successfull?????

99.999% devaluation of the dollar since the creation of the Fed!

Gold has risen 80 times in value during the same period.

What's the asset side of the 16TR?

Who cares about a 99% devaluation - we've been over this already.

So what? Gold's in a risk bubble, not an inflationary one.

 

[Doppel]

$1920 down to $1755 in a few days. I hope people who've been long this since well under a thousand are not going to try and get too greedy and hold on after the bubble bursts (maybe it's started, maybe not, but it is a bubble).

 

[blackangst1]

Per latest numbers...

Total wealth in the US 54.2 Trillion. Total value of all the gold ever mined in history (that we know of) 8.7 Trillion.

A gold standard nowadays isnt possible. At all.

 

[BansheeX]

blackangst1, that is the argument of a simpleton. If gold became currency again, it would immediately jump in dollar value (or the dollar would fall in gold value, however you want to view it) to the extent that it matched global wealth.

And for First: this is not an argument as to whether gold is an investment that yields returns on productive output. It isn't, it is merely a superior trade facilitator and storage of value than paper with an issuer. There is no reason why average stock price should be suffering massive generational drops, otherwise you'd have more than dividends to rely on. There is far too much money printing going on, and the dow/gold ratio circus chart proves it.

And I'm not big on conspiracy theories, but based on his older articles, Alan Greenspan is not the dummy he made himself out to be as fed chairman. He probably engineered the whole damn thing to prove his point and probably feels justified in doing so.

edit: thx, wrong person

 

[momeNt]

blackangst1, that is the argument of a simpleton. If gold became currency again, it would immediately jump in dollar value (or the dollar would fall in gold value, however you want to view it) to the extent that it matched global wealth.

And for First: this is not an argument as to whether gold is an investment that yields returns on productive output. It isn't, it is merely a superior trade facilitator and storage of value than paper with an issuer. There is no reason why average stock price should be suffering massive generational drops, otherwise you'd have more than dividends to rely on. There is far too much money printing going on, and the dow/gold ratio circus chart proves it.

Fixed that for you.

 

[MooseNSquirrel]

You are trying to pigeonhole the argument moment.

This isnt about gold versus a single dollar, its about the value over an extended period of that dollar. Currencies almost always lose their value over the long term thanks to inflation. As First tried to point out, you have to compare an investment in 1850 dollars versus gold, not an actual 1850 dollar as represented today. THis borders on a semantic argument.

 

[momeNt]

You are trying to pigeonhole the argument moment.

This isnt about gold versus a single dollar, its about the value over an extended period of that dollar. Currencies almost always lose their value over the long term thanks to inflation. As First tried to point out, you have to compare an investment in 1850 dollars versus gold, not an actual 1850 dollar as represented today. THis borders on a semantic argument.

The Greenspan article specifically mentions how inflation attacks savings, and in the absence of a gold standard, it will always remain that way. I began my discussion on this topic talking specifically about the article.

The discussion shouldn't have veered towards investments at all. Unless I suppose you are saying that losing savings wealth through inflation is nil because there is always the stock market to provide inflation protection. But that isn't really what the article is talking about, it is talking about money and monetary policy.

 

[LegendKiller]

The Greenspan article specifically mentions how inflation attacks savings, and in the absence of a gold standard, it will always remain that way. I began my discussion on this topic talking specifically about the article.

The discussion shouldn't have veered towards investments at all. Unless I suppose you are saying that losing savings wealth through inflation is nil because there is always the stock market to provide inflation protection. But that isn't really what the article is talking about, it is talking about money and monetary policy.

In what forms are those savings and, overall, do the savings take into account inflation?

Greenspan was very naive about the world in 66.

 

[matt0611]

Per latest numbers...

Total wealth in the US 54.2 Trillion. Total value of all the gold ever mined in history (that we know of) 8.7 Trillion.

A gold standard nowadays isnt possible. At all.

Huh? You can't be serious...

The gold would act as the media of exchange, it has nothing to do with the "amount of wealth" in a society. Basically any amount of gold would be able to work. (as long as it wasn't too crazy small that we would have to trade atoms of it).

We are not more wealthy because they print up more dollars. If they kept the supply of dollars constant this would *not* stop us from getting wealthier. Our economy could work just fine with a money supply of a million dollars, a billion dollars, a trillion dollars etc It doesn't matter, prices will adjust accordingly.

At the current money supply,if they backed all of the US monetary base with the gold at fort knox it comes out to be something like $5000 / oz. Completely possible.

And to those who say gold doesn't have any "intrinsic value", no shit. *nothing* has intrinsic value, all value is subjective.

And I don't know why this thread has derailed to talking about gold as an "investment". This article was about gold as a money. Why the hell are you people comparing gold against stocks? Gold is money, so why are you comparing it the returns of equities? It should be compared against the dollar.

 

[sarsipias1234]

The Greenspan article specifically mentions how inflation attacks savings, and in the absence of a gold standard, it will always remain that way. I began my discussion on this topic talking specifically about the article.

The discussion shouldn't have veered towards investments at all. Unless I suppose you are saying that losing savings wealth through inflation is nil because there is always the stock market to provide inflation protection. But that isn't really what the article is talking about, it is talking about money and monetary policy.

The stock market provides inflation protection for relatively few people.

This is because most wealth is controlled by very few people.

Source: William Domhoff
If we break the data down further we will find that 93 percent of all financial wealth is controlled by the top 10 percent of the country.

That means only 10 percent of the people take 93% of the benefits of the stock market.

Leaving 7% for the remaining 90%.

Think about the situation. You cannot make money off the stock market without money to buy the stocks. 90% of Americans only have 7% of the wealth to invest in the stock market. This is why a lot of Americans do not invest in the stock market because they are too busy just trying to meet their needs.

 

[Doppel]

The stock market provides inflation protection for relatively few people.

This is because most wealth is controlled by very few people.

Source: William Domhoff
If we break the data down further we will find that 93 percent of all financial wealth is controlled by the top 10 percent of the country.

That means only 10 percent of the people take 93% of the benefits of the stock market.

Leaving 7% for the remaining 90%.

Think about the situation. You cannot make money off the stock market without money to buy the stocks. 90% of Americans only have 7% of the wealth to invest in the stock market. This is why a lot of Americans do not invest in the stock market because they are too busy just trying to meet their needs.

Regardless of what money is kept in those small percentage of people at the top will always control it, gold will not equalize anything.

 

[gingermeggs]

If the US could go back to the gold standard, would it not cause catastrophic deflation because of a major decrease in money supply? Which would lead to a global economic depression that would make what happen back in 1929 look like a mild recession.

How would money supply grow with a gold base currency? Would the US have to invade gold producing countries to obtain more gold to support a growing economy?

What is the real appeal for gold besides it being shiny?

It already did, but it was called "England" then and the place it invaded was called "the Americas", which got butt raped by europeans -greedy as they are!
They are running out of words to circumvent the word "slavery".

 

[sarsipias1234]

Regardless of what money is kept in those small percentage of people at the top will always control it, gold will not equalize anything.

"It is not our own citizens only who are to receive the bounty of our Government. More than eight millions of the stock of this bank are held by foreigners.... Is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country? ...."

"Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence .... would be more formidable and dangerous than a military power of the enemy."

"If [government] would confine itself to equal protection, and, as Heaven does its rains, shower its favor alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me, there seems to be a wide and unnecessary departure from these just principles."

-- Andrew Jackson

 

[Jhhnn]

Krugman reviews Keynes' take on gold-

http://krugman.blogs.nytimes.com/

He omits the environmental damage done by gold mining, something we still deal with here in Colorado, for example. No small amount of remediation has been and continues to be employed to prevent ongoing damage to the watershed.

 

[momeNt]

Krugman reviews Keynes' take on gold-

http://krugman.blogs.nytimes.com/

He omits the environmental damage done by gold mining, something we still deal with here in Colorado, for example. No small amount of remediation has been and continues to be employed to prevent ongoing damage to the watershed.

Shit! Bernanke should have buried the stimulus, mining spending would have easily covered the output gap, shovels could have come in the mail along with welfare checks too.

 

[MooseNSquirrel]

The Greenspan article specifically mentions how inflation attacks savings, and in the absence of a gold standard, it will always remain that way. I began my discussion on this topic talking specifically about the article.

The discussion shouldn't have veered towards investments at all. Unless I suppose you are saying that losing savings wealth through inflation is nil because there is always the stock market to provide inflation protection. But that isn't really what the article is talking about, it is talking about money and monetary policy.

Damn it, stop trying to stay on track ;p

 

[First]

Jeez, my bad for getting roped into an argument about stocks versus gold as an investment when we are talking about a gold fucking standard. I post a chart of gold / USD and suddenly it becomes an investment portfolio discussion.

How do you go from the chart i posted of gold vs USD to say that gold is the worst long term store of value when compared to bonds or stocks, its a completely different discussion entirely.

I only went and posted the DJIA in ounces of gold to show that it isn't the worst store of wealth in history....

as for compound interest and dividend reinvestment, the only applicable one would be dividend reinvestment, stock prices which is what the DJIA shows wouldn't account for that. Compound interest isn't applicable to the discussion.

So let's stop the derailing and keep the discussion on Greenspan's endorsement of a gold standard in 1966. Unless you are suggesting some sort of currency that is backed by publicly traded companies as opposed to gold or fiat currency backed by the full faith and credit of the USA government, stocks have absolutely no bearing in the discussion.

The fact that you don't see the correlation tells me you don't understand the inherent argument that dollars not keeping their value is, in fact, irrelevant. See if you can answer this; if a currency yields 6%/yr in real terms (adjusted for inflation), compounded annually, over a multi-decade period, why would anyone care if we consistency experienced moderate inflation year-by-year over those several decades? People's savings haven't been destroyed if they're yielding that 6%, so that's not it. Access to credit hasn't been destroyed, we've had an abundance of credit access for most of the last 80 years save for the disastrous consequences of the lack of credit in the 1930's. So what is the negative, quantifiable result that has occurred as a result of the devaluation of the dollar in the last 80 years? Has it destroyed real income and standards of living? Nope, both have risen considerably, even despite us being a very mature industrialized economy. Can you come up with anything?

Bottom line is that fixed exchange rates don't work, so keeping the dollar fixed to gold artificially does nothing but strain the ability of governments to expand credit and limits the ability of gov't to adjust the inequities that result when free market solutions fail. And they do fail, this is conclusive and easily verifiable.