Fallacies against Gold

[LegendKiller]

I love this bashing of "fractional reserve banking" as the cause of all evils. Yet, somehow, all of these people forget that securitization isn't funded by deposits. They also forget that the worst offenders of mortgages were largely non deposit taking investment banks and other entities such as Countrywide. Reserve banking had no bearing on Lehman, Bear Stearns, Merrill Lynch, Morgan Stanley or Goldman Sachs. Further, it had no bearing on MBS, CDOs, synthetic CDOs and SIVs, all operated outside of FRB.

The fallacy is on your logic, FRB is the only logical banking as 100% reserves is inefficient and nonsensical. These days all that would happen is that rates on the deposits would effectively go to 0% (worse than now) and deposits would shift even more towards money market accounts which are outside of FRB.

Gold standard = lulz.

 

[BansheeX]

Gold is a type of fiat currency, you're just not particularly intelligent enough to understand manufactured scarcity vs. true scarcity.

Modern definitions of "fiat" disagree and the difference needs to be appreciated between commodity money and fiat money. Everyone works for commodities, not everyone works for fiat notes. One doesn't require coercion to be initially accepted, the other does. If a commodity is declared legal tender, then the government is merely validating what people are using or would be using; it doesn't make it fiat, only currency.

 

[LegendKiller]

Modern definitions of "fiat" disagree and the difference needs to be appreciated between commodity currency and fiat currency. Everyone works for commodities, not everyone works for fiat notes. One doesn't require coercion to be initially accepted, the other does. If a commodity is declared legal tender, then the government is merely validating what people are using or would be using; it doesn't make it fiat.

Gold and Silver have no intrinsic value and are really only worth what somebody else will pay for them, just the same as original pieces of art or rare first-print books. That they are a commodity only makes all of pieces the same but does not distinguish itself from the fact that it really produces nothing on its own and has no practical uses, thus, it's really not even worth the atoms it is made out of. That is one of the most pure definition of a "fiat" currency. It is nothing more than a transactional medium.

Just because humanity still sticks to the delusion of a worthless shiny rock doesn't mean that it's any better than paper. If anything, its worse since it cannot adjust with society.

What's even more laughable is that people still stick to this so-called "physical" metal when a huge portion of its current value is locked in paper currencies known as futures contracts. These are 8:1+ levered instruments that inflate 8 times the demand that $1 creates, all from signing a piece of paper saying you'll post collateral or will take delivery upon expiry.

Your so-called metal has been debauched far worse than the USD, all because John Paulson wants the lulz at seeing the sheep scrabbling for a few pieces of chickenfeed.

 

[sMiLeYz]

That's what prompted the gold standard. When the federal reserve dollar is destroyed the same, that's what will prompt it again. Grow a brain.

Real convincing argument right there, brah. When the dollar fails... lolololol

You also measure feces in micrograms, doesn't mean it should be a currency.

The dollar has been a spectacularly successful currency. So successful, it's the world reserve currency, every modern country has adopted a fiat system and Fractional Reserve banking system.

Stick to masturbating over Ron Paul speeches on youtube, kid.

 

[Darwin333]

Here's the link:
https://www.facebook.com/notes/greg...he-gold-standard-by-gregg-hil/174671762589047

Let me start off by saying the gold standard was never done the right way. As for the 3rd quote, it's wrong, because inflation is not low.



The 2nd word should read "neoconservative". It's already clear that the anti-goldite doesn't know what true conservatism is.

Its advocates do not advocate for a return to the roaring twenties, where fractional reserve banking and a central bank existed as well as government having the power to print gold certificates.

The gold standard failed in the late 19th century because fractional rseerve banking existed, and was subsidized by many states. Fractional reserve banking artificially extends credit, so people were buying too much on credit, which were the problems. If Fractional reserve banking hadn't existed and hadn't been subsidized by many states, then the free silver movement would never have gained momentum.

The above quote is so full of blatant, complete inaccuracies that it doesn't need addressing.

The person quoted apparently has too much faith in the government (which lies to us time and again), and apparently, will believe whatever government tells them. Also, it's opposite of currency traders' interests to make inquiries about the gold supply.
In addition to all that, the pound was once the world reserve currency, but due to UK having policies like the U.S. does, it lost that status, and the pound also immediately lost 90% of its value after losing world reserve currency status. Just because a currency is currently the world's reserve currency doesn't mean that.

It would cause massive deflation, but there could always be bankruptcy legislation passed to protect average or light debtors.

The market should control the value of gold, and only 3% of the gold in the Continental US has been mined. Oil is consumed, gold is not; once gold is mined and out of the exporting country, the market can more easily control the price of it than oil. Also, gold is found all over the earth, unlike oil. If a gold mining country gets to be like the OPEC, then they will quickly be outcompeted.

The problem is solved by writing a constitution that prohibits:
fractional reserve banking, or at least does not allow governments to subsidize it in any way.
the government from creating money.
the government from chartering a monopoly on the money supply
legal tender for private debts.
the government from accepting anything other than gold.
altering or abolishing any of the above provisions without unanimous consent of the legislature or member states.

Not true. People can use platinum or diamonds if there is not enough gold. It also depends upon how much you can buy with 1/6 of an ounce of gold.

Which can be good for everyone, as people need to save more.

That's because the government arbitrarily changed the value of it.


The person quoted is making the same fallacious arguments again and again.

Deficit spending is never necessary, so the tax increases were not necessary. The reason we got into the mess we were in was because credit was not only overextended, but the governemt subsidized via having a central bank.


I agree with that, which is why we need to reinstate the Articles of Confederation with some modifications, particualarly giving monetary decisions to the individual and taking it away from governments, both state and federal.


All of that is a fallacy.

How could anyone agree with the anti-gold author I quoted and refuted?
Also, is there anything I should've added to prove my point that gold works perfectly fine?
​

You should have added the huge and unstable price fluctuations in gold while we were on the gold standard.

Hell, use the last few years and you have a massive swing in the purchasing power of gold versus any other currency. Shall I post the definition of "stable" for you because gold ain't it.

Lastly, having your currency mostly controlled by people/entities/countries outside of your own borders is an absurdly bad idea. For proof I offer up Da Beers and the diamond market. There is a really good reason that the British tried to bribe our politicians into adopting the gold standard shortly after the Revolutionary war and it wasn't kindness.

 

[Darwin333]

Not quite. You apparently didn't read the arguments and my refutation to them as to why the gold standard didn't work before.

Here it is again, since you missed it the first time:
The problem is solved by writing a constitution that prohibits:
fractional reserve banking, or at least does not allow governments to subsidize it in any way.
the government from creating money or money substitutes.
the government from chartering a monopoly on the money supply
legal tender for private debts.
the government from accepting anything other than gold.
altering or abolishing any of the above provisions without unanimous consent of the legislature or member states.

None of those limitations have been placed on governments when gold was used with money. Instead, the governments had unlimited power to coin money, to issue and accept money substitutes, they had the power to borrow, they had the power to create legal tender, they had the power to subsidize fractional reserve banking. Until a government requires unanimous consent of its legislature or unanimous consent of its member states to do those things, gold as money will never work.

And when the government goes into debt, which regardless of your current stance it must do from time to time (think WWII) other countries and/or entities can easily manipulate the value of what you repay that debt with. That is a really really bad idea. We are better off using corn as currency because we make a fuckton of it.

As I said in my previous post, you need look no further than the diamond market for proof.

 

[Anarchist420]

And when the government goes into debt, which regardless of your current stance it must do from time to time (think WWII) other countries and/or entities can easily manipulate the value of what you repay that debt with. That is a really really bad idea. We are better off using corn as currency because we make a fuckton of it.

As I said in my previous post, you need look no further than the diamond market for proof.

If the country's charter limits the government from engaging in unnecessary warfare (like WWII) and requires unanimity of the legislature or of the member states to change that, then borrowing is never necessary.

Also, even if WWII had been necessary, it still could've been funded purely by taxation, had FDR not been in bed with the MIC (he was the father of the MIC, after all) and had he managed fiscal policy better (making the top marginal rate 94% is never a good idea if the goal is to raise revenue in addition to the bad idea of spending too much on it).

I'll look into the diamond market as you suggested, and you probably have a point as diamonds do vary wildly in price, like oil, but that's not a good argument against them as currency, as diamonds are usually only used once; they aren't constantly traded and are less likely to fall back into the hands of Da Beers if they were to be used as money. In addition to that, if diamonds were money, other things would be too. I'm in favor of competing currencies for private debts. Governments should only accept raw gold though.

 

[Darwin333]

If the country's charter limits the government from engaging in unnecessary warfare (like WWII) and requires unanimity of the legislature or of the member states to change that, then borrowing is never necessary.

Also, even if WWII had been necessary, it still could've been funded purely by taxation, had FDR not been in bed with the MIC (he was the father of the MIC, after all) and had he managed fiscal policy better (making the top marginal rate 94% is never a good idea if the goal is to raise revenue in addition to the bad idea of spending too much on it).

I'll look into the diamond market as you suggested,

You are advocating using commodities as our currency and you aren't aware of how manipulated the diamond market is?

and you probably have a point as diamonds do vary wildly in price, like oil,

Not so much and not for the reason you think.

but that's not a good argument against them as currency, as diamonds are usually only used once; they aren't constantly traded and are less likely to fall back into the hands of Da Beers if they were to be used as money.

Ok, let me give you the quick version to save you anymore embarrassment because you just lost your argument.

Diamonds are not nearly as rare as you have been led to believe. That means they aren't nearly as valuable as what they currently sell for. How can this possibly be you ask? It is because a single company literally controls the entire global market. Sure a few diamonds get put on the market that didn't go through Da Beers hands but the vast majority of all diamonds mined go through the hands of Da Beers. They artificially limit the supply to make them seem rare and much more valuable then they really are. If they so desired they could tank the diamond market tomorrow or they could create an artificial shortage single handedly. I encourage you to read up on it in depth so that you can understand what a single company can do to a commodity and then consider how smart it would be to base our currency on something like that.

In addition to that, if diamonds were money, other things would be too. I'm in favor of competing currencies for private debts. Governments should only accept raw gold though.

If diamonds were money you would have taken the power to inflate/deflate our money from the Fed and given it to a single private company that does not operate under US law and the US government has zero control or influence over. Da Beers would quite literally decide what your money is worth at any given point in time and could easily destroy our economy overnight.

Now if a market such as diamonds can be controlled (and we are talking every single aspect of that market) by not a group of countries or even a single country but by a single company what makes you think the other commodity markets could not be controlled in a similar way? It is simple, they can be if that commodity is mostly produced outside of our borders. Like I said, you would have traded the Fed for other companies/entities who may or may not like us but definitely won't have any of our interests in mind. Why would you want to do that?

And regardless of what you might think, government debt is quite necessary at times but lets pretend you are right. Lets talk about private debt which is also quite necessary and very healthy if used right. Lets say you purchased a house 10 years ago for 750 ounces of gold that you borrowed. 10 years ago that house would have been worth roughly $225,000 as the price of gold was roughly $300/ounce. Lets say you have already paid off 1/3 of the loan so you now owe 500 ounces. Today you would owe the equivalent of $750,000 without accounting for any interest at all. The dollar has not devalued nearly that much in that time so you would have effectively paid down 1/3 of the debt while still owing 300% more than you initially borrowed (again, not including interest at all).

The price of gold fluctuates much more than the value of the dollar does and I just proved it. Why in the hell would any reasonable person want that? Your employer must pay you less gold every year due to the rising value relative to other goods yet your debt does not decrease in relation with that rise in value. You would be wild and truly fucked along with every other person that borrowed money in a good way for things like purchasing a home.

That is the system you are advocating? No thanks.

 

[ShawnD1]

Also, even if WWII had been necessary, it still could've been funded purely by taxation, had FDR not been in bed with the MIC (he was the father of the MIC, after all) and had he managed fiscal policy better (making the top marginal rate 94% is never a good idea if the goal is to raise revenue in addition to the bad idea of spending too much on it).

WW2 was the most expensive thing the world has ever seen. To pay for it without debt would mean jacking taxes up to 100% (people working without getting paid)

 

[Craig234]

Gold and Silver have no intrinsic value and are really only worth what somebody else will pay for them, just the same as original pieces of art or rare first-print books. That they are a commodity only makes all of pieces the same but does not distinguish itself from the fact that it really produces nothing on its own and has no practical uses, thus, it's really not even worth the atoms it is made out of. That is one of the most pure definition of a "fiat" currency. It is nothing more than a transactional medium.

Just because humanity still sticks to the delusion of a worthless shiny rock doesn't mean that it's any better than paper. If anything, its worse since it cannot adjust with society.

What's even more laughable is that people still stick to this so-called "physical" metal when a huge portion of its current value is locked in paper currencies known as futures contracts. These are 8:1+ levered instruments that inflate 8 times the demand that $1 creates, all from signing a piece of paper saying you'll post collateral or will take delivery upon expiry.

Your so-called metal has been debauched far worse than the USD, all because John Paulson wants the lulz at seeing the sheep scrabbling for a few pieces of chickenfeed.

The question is how to make money on this situation. I've been saying gold is a huge bubble for many years and would have lost a ton trying to time its long overdue crash.

Saying correctly something is a bubble doesn't make it clear how to profit from the fact it is - who knows how long it'll stay inflated. Bubbles make people rich in the short term.

 

[Anarchist420]

Lets say you purchased a house 10 years ago for 750 ounces of gold that you borrowed. 10 years ago that house would have been worth roughly $225,000 as the price of gold was roughly $300/ounce. Lets say you have already paid off 1/3 of the loan so you now owe 500 ounces. Today you would owe the equivalent of $750,000 without accounting for any interest at all. The dollar has not devalued nearly that much in that time so you would have effectively paid down 1/3 of the debt while still owing 300% more than you initially borrowed (again, not including interest at all). The price of gold fluctuates much more than the value of the dollar does and I just proved it. Why in the hell would any reasonable person want that? Your employer must pay you less gold every year due to the rising value relative to other goods yet your debt does not decrease in relation with that rise in value. You would be wild and truly fucked along with every other person that borrowed money in a good way for things like purchasing a home.

In the free market, people wouldn't borrow from someone who didn't adjust for deflation. I could agree to just pay 280 ounces of gold back, and the lender would still make a profit. Failing that, if there were no lenders who adjusted for deflation, then people would just save. They get paid less as gold increases in value, but what they hold onto is worth more. Prices go down on what they spend on as they earn, while the purchasing power of what they keep increases.

That is the system you are advocating?

Yes.

Diamonds are not nearly as rare as you have been led to believe. That means they aren't nearly as valuable as what they currently sell for. How can this possibly be you ask? It is because a single company literally controls the entire global market.

People are apparently willing to pay that. Da Beer's high prices wouldn't be possible if people weren't willing to pay that; that is, there is no such thing as a natural monopoly, because people with enough money will just enter the business and undercut the company charging more than what the market wants to pay. An example of that law would be in relation to standard oil. It was getting competition right before TR trust busted it.

You are advocating using commodities as our currency and you aren't aware of how manipulated the diamond market is?

Yes. Someone could come up with an alternative to diamonds with competing currencies.

 

[Anarchist420]

Da Beers is a government cartel BTW: http://mises.org/daily/4967

 

[BansheeX]

And regardless of what you might think, government debt is quite necessary at times but lets pretend you are right. Lets talk about private debt which is also quite necessary and very healthy if used right. Lets say you purchased a house 10 years ago for 750 ounces of gold that you borrowed. 10 years ago that house would have been worth roughly $225,000 as the price of gold was roughly $300/ounce. Lets say you have already paid off 1/3 of the loan so you now owe 500 ounces. Today you would owe the equivalent of $750,000 without accounting for any interest at all. The dollar has not devalued nearly that much in that time so you would have effectively paid down 1/3 of the debt while still owing 300% more than you initially borrowed (again, not including interest at all).

Whoa, whoa, whoa, your argument is inane. If you don't print globs of money and then use it to consume rather than increase productive capacity, then there is no way gold, oil, or everything else for that matter goes up so dramatically against dollars and wages. Part of why a deflationary gold environment resulted in the highest GDP growth rates we've ever had is because it prevented the government from accumulating massive liabilities at interest. There was a time when government consumption and waste was so minute that you didn't have to have two bread winners and 5 credit cards to raise kids and own a home.