Oh, no, Ben, no, you really blew it...

[Bitek]

Gold is an element with an atomic mass of 197 and has certain useful metallurgic properties.
Otherwise it has no more intrinsic value than saffron, beads, or pubic hairs from a tick. It has only whatever value humans assign to it.


Ron Paul has some interesting and refreshing skepticism to GOP orthodoxy, but when he gets on this gold kick he sounds like a fking idiot (like today.)

He should just make the argument straightforward and say he favors a contractionary monetary policy, and we just have that debate of why its a stupid fking idea in our current situation.

 

[BigDH01]

Right, there is fiat USD and legal tender laws and capital gains laws that prevent gold and silver from circulating in everyday transactions.

I can hold gold and I can buy things with gold, only as long as that gold can be traded into dollars. I recently read about a libertarian fair in the Northeast where gold was the currency. You went in and traded your cash for specks of laminated gold which you could use to buy things at the fair. Point being, those things sold at the fair were still priced in dollars and then their gold value determined. The sellers actually cared about trading that gold back for dollars because at the end of the day they have mortgages and taxes to pay.

If the USD was defined as a certain amount of oz's of gold as it was in the past or if we had no USD then you could see people pricing in things such as gold or silver.

You could, but that assumes no USD. There is a USD and I owe debts in USD. Owning gold for me is worthless if I can't convert it to USD. It's no different than saying "If I were 7 ft tall I could be a basketball player" or "If people were perfect, anarcho-Capitalism could work." Sure, but that's not reality.

And if there was no USD, things could be priced in any myriad of ways. Some commodity currencies have already been mentioned in this thread.

 

[matt0611]

I can hold gold and I can buy things with gold, only as long as that gold can be traded into dollars. I recently read about a libertarian fair in the Northeast where gold was the currency. You went in and traded your cash for specks of laminated gold which you could use to buy things at the fair. Point being, those things sold at the fair were still priced in dollars and then their gold value determined. The sellers actually cared about trading that gold back for dollars because at the end of the day they have mortgages and taxes to pay.



You could, but that assumes no USD. There is a USD and I owe debts in USD. Owning gold for me is worthless if I can't convert it to USD. It's no different than saying "If I were 7 ft tall I could be a basketball player" or "If people were perfect, anarcho-Capitalism could work." Sure, but that's not reality.

And if there was no USD, things could be priced in any myriad of ways. Some commodity currencies have already been mentioned in this thread.

Right, I mean, theres nothing really in your post that I disagree with. The government is preventing gold from being used in everyday transactions with its laws. If it wasn't doing this, its extremely likely gold would circulate as money.

 

[GaiaHunter]

The reason most people don't accept gold is because they actually demand fiat in whichever local currency their government uses.

That's right, because they can't use USD to pay their bank or government without first converting them to their local currency.

Yes, if I go to a foreign country, just as in my own, I have to trade gold into a local currency or pay an equivalent amount of gold. In other words, gold only has value in as much as people are willing to trade it for something they can actually use to pay taxes and debts.

I can take nearly any of those products to the local pawn shop and sell them to get currency that I can actually use to buy things, just like gold. And just like gold, they have to be converted to the local currency before I can actually buy things with them.

The exception being gold is a store of value wildly accepted and with a set value. A xbox, a tv, a guitar, aren't reliable stores of money. What if the TV isn't working? Does it have any value? Can you store a TV for 15 years and then retrieve with similar value?

Additionally gold is divisible - what if what you want to buy is only worth 1/4 of an xbox?

 

[BigDH01]

The demand for USD came from the fact that when it became reserve currency it was backed by gold. Then the USD still had value because the US economy was the biggest exporter and the biggest saver. These the US is the biggest debtor and so the value of the USD is decreasing which means the demand is diminishing just as the supply increases.

I demand the USD because I need it to pay my debts and taxes. That fact that it buys ~.7 Euros or a really small (don't feel like typing many decimals) is rather inconsequential for me. At the end of the day, my greatest concern is the sheriff not kicking me out of my home and the government not throwing me in jail.

This is a better argument than what your argument eventually boils down to... I demand gold because you demand gold. It's much cleaner if you imagine an entity out their with a monopoly of force able to tax you a currency it creates with the backing of a central bank that makes banks lend in a currency you also create. This is pretty much how the current monetary system actually works (and also why the government basically has to perpetually run a deficit, you can tax people money you've created without first spending it).

 

[Bitek]

I can hold gold and I can buy things with gold, only as long as that gold can be traded into dollars. I recently read about a libertarian fair in the Northeast where gold was the currency. You went in and traded your cash for specks of laminated gold which you could use to buy things at the fair. Point being, those things sold at the fair were still priced in dollars and then their gold value determined. The sellers actually cared about trading that gold back for dollars because at the end of the day they have mortgages and taxes to pay.

lol. And hippies trade in quaaludes and beans. At least those can get you laid and feed you dinner.

 

[GaiaHunter]

Gold is an element with an atomic mass of 197 and has certain useful metallurgic properties.
Otherwise it has no more intrinsic value than saffron, beads, or pubic hairs from a tick. It has only whatever value humans assign to it.

And where does fiat money differ from it? People keep talking about the value of gold as if paper money had any intrinsic value. It is backed by faith. And if people faith on a currency falls so does the value of the currency.

The only difference is that the governments control the supply.

But gold supply is determined by the fixed amount that exists on the planet.

It could be something else, but gold just happens to have several qualities that makes it a perfect candidate to be money.

Finally gold has been used as money for thousands of years. Fiat currency backed only by faith has been used for 40 years and we are on the verge of a crisis without precedents.

 

[Trianon]

This is pretty much how the current monetary system actually works (and also why the government basically has to perpetually run a deficit, you can tax people money you've created without first spending it).

Well, there you said it yourself, "current monetary system", which does no negate possibility of other monetary systems, where money is not so prone to be inflated and debased...

 

[BigDH01]

The exception being gold is a store of value wildly accepted and with a set value. A xbox, a tv, a guitar, aren't reliable stores of money. What if the TV isn't working? Does it have any value? Can you store a TV for 15 years and then retrieve with similar value?

So it's an asset. That doesn't make it a currency. I can store value in many different ways, but you only addressed those assets which typically depreciate. However, gold doesn't always appreciate and not even those assets you mentioned always depreciate. There are some vintage guitars out there I'd sure like to own. Doesn't make them money, however.

Additionally gold is divisible - what if what you want to buy is only worth 1/4 of an xbox?

So the quality of divisibility is what makes something a currency? In any case, I could simply buy four of those things or have the owner owe me 3/4 the value of an xbox which could be redeemed at a later date. It's stupid, I know, but I'm not actually suggesting that xboxes be used as a currency, just as I wouldn't gold. In gold's case, there'd have to be pretty much constant and quick revaluing of its value as demand for currency far outstrips the supply of gold.

 

[BigDH01]

Well, there you said it yourself, "current monetary system", which does no negate possibility of other monetary systems, where money is not so prone to be inflated and debased...

1) It's not as if gold as a currency is not without it's own set of massive problems that people seem to gloss over.

2) Even old civilizations had to debase their gold currency, usually by reducing the amount of gold in their coins (or the equivalent). Otherwise, you are constantly fighting a contracting monetary base.

 

[Trianon]

Gold is an element with an atomic mass of 197 and has certain useful metallurgic properties.
Otherwise it has no more intrinsic value than saffron, beads, or pubic hairs from a tick. It has only whatever value humans assign to it.


Ron Paul has some interesting and refreshing skepticism to GOP orthodoxy, but when he gets on this gold kick he sounds like a fking idiot (like today.)

He should just make the argument straightforward and say he favors a contractionary monetary policy, and we just have that debate of why its a stupid fking idea in our current situation.

Well, maybe you should do more research before making statements like that. Gold and silver are WIDELY used in pretty much anything envolving modern technologies like chemical industry and electronics, sometimes in quantities low enough that would not justify recycling. Massive use of it has only been running for about 40 years, so unless humanity gives it up modern tech in next 10 years, finite resource will become more valuable.

 

[matt0611]

So it's an asset. That doesn't make it a currency. I can store value in many different ways, but you only addressed those assets which typically depreciate. However, gold doesn't always appreciate and not even those assets you mentioned always depreciate. There are some vintage guitars out there I'd sure like to own. Doesn't make them money, however.



So the quality of divisibility is what makes something a currency? In any case, I could simply buy four of those things or have the owner owe me 3/4 the value of an xbox which could be redeemed at a later date. It's stupid, I know, but I'm not actually suggesting that xboxes be used as a currency, just as I wouldn't gold. In gold's case, there'd have to be pretty much constant and quick revaluing of its value as demand for currency far outstrips the supply of gold.

Huh? This part makes no sense at all. If gold was circulating as money why would you be "re-valuing" it anymore than you re-value USD today? The demand for currency outstrips the supply? I don't even follow that line of reasoning.

 

[GaiaHunter]

I demand the USD because I need it to pay my debts and taxes. That fact that it buys ~.7 Euros or a really small (don't feel like typing many decimals) is rather inconsequential for me. At the end of the day, my greatest concern is the sheriff not kicking me out of my home and the government not throwing me in jail.

This is a better argument than what your argument eventually boils down to... I demand gold because you demand gold. It's much cleaner if you imagine an entity out their with a monopoly of force able to tax you a currency it creates with the backing of a central bank that makes banks lend in a currency you also create. This is pretty much how the current monetary system actually works (and also why the government basically has to perpetually run a deficit, you can tax people money you've created without first spending it).

Yes, in the end you use USD because the government forces you to (you are basically its slave and it might let you keep a fraction of your wages, until it decides it needs more money and designates you as a rich bastard hoarding money).

The reason people use gold is because they can indeed buy stuff with it, even if they have to trade it first for other currencies to go to shops, but they can use it avoid the government hidden taxes on your saved money due to monetary expansion/inflation.

Every time there is monetary expansion stuff you buy using a fiat currency does up in price - gas go up, food goes up, other forms of energy go up, etc. But so does gold, so if you bought a gold coin for $100 and now that coin is worth $105 bucks you can buy the same amount of gas with it while some other guy that held the $100 now puts less gas on the tank.

 

[Bitek]

And where does fiat money differ from it? People keep talking about the value of gold as if paper money had any intrinsic value. It is backed by faith. And if people faith on a currency falls so does the value of the currency.

The only difference is that the governments control the supply.

But gold supply is determined by the fixed amount that exists on the planet.

It could be something else, but gold just happens to have several qualities that makes it a perfect candidate to be money.

Finally gold has been used as money for thousands of years. Fiat currency backed only by faith has been used for 40 years and we are on the verge of a crisis without precedents.

Who is doing that? They are talking out of their ass then. Currency is built on faith and mutual agreement of value of an otherwise useless object. Gold's only additional source of value is that human animals like shiny and pretty things and gold has been good for that even it loses all other usefulness.

Otherwise, you are arguing for a contractionary money supply. What is you thesis and evidence that is a proper remedy to the current situation?

 

[Trianon]

1) It's not as if gold as a currency is not without it's own set of massive problems that people seem to gloss over.

2) Even old civilizations had to debase their gold currency, usually by reducing the amount of gold in their coins (or the equivalent). Otherwise, you are constantly fighting a contracting monetary base.

No doubt, but I would prefer that fruits of my labors would somewhat be protected with asset based money vs being at whim of "ivory tower" idiots like BB. Even former Fed Chairman Alan Greenspan got it in his early years. He wrote "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation" in his famous essay from 1967 titled "Gold and Economic Freedom". Faking gold is not as easy as it seems, and any 8-grader would be able to perform simple coinage check

 

[BigDH01]

Huh? This part makes no sense at all. If gold was circulating as money why would you be "re-valuing" it anymore than you re-value USD today? The demand for currency outstrips the supply? I don't even follow that line of reasoning.

In a deflationary environment, the valuing would go the other way. You'd be constantly creating smaller denominations. Governments with pegs usually get around this by changing the value of their peg.

 

[Bitek]

Well, maybe you should do more research before making statements like that. Gold and silver are WIDELY used in pretty much anything envolving modern technologies like chemical industry and electronics, sometimes in quantities low enough that would not justify recycling. Massive use of it has only been running for about 40 years, so unless humanity gives it up modern tech in next 10 years, finite resource will become more valuable.

In other news, people like air and water too. More blindingly obvious news at 11.

Then why don't you advocate a neodymium based currency then? It would have gained much more value in the last year than any gold coins all the goldbugs have been hoarding. Unemployment would surely be down to like 2% by now through the powers of this strange and mystical metal.

 

[matt0611]

In a deflationary environment, the valuing would go the other way. You'd be constantly creating smaller denominations. Governments with pegs usually get around this by changing the value of their peg.

OK, I see what you're talking about now. It really shouldn't be that big of a deal. The value of things change all the time. The amount of gold in circulation would also slightly increase every year to help offset the deflation. Its natural for the price of things to fall as they get cheaper to produce. Throughout the the 1800s there was a deflationary environment. 1 oz of gold bought more in 1900 than it did in 1800. I don't see this as that big of a problem as you make it out to be though.

 

[GaiaHunter]

So it's an asset. That doesn't make it a currency. I can store value in many different ways, but you only addressed those assets which typically depreciate. However, gold doesn't always appreciate and not even those assets you mentioned always depreciate. There are some vintage guitars out there I'd sure like to own. Doesn't make them money, however.

The following is the definition of money

"Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context.The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can serve as money.

Fiat money is without intrinsic use value as a physical commodity, and derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private".

Of course money can appreciate the same as fiat money - you lend 10 gold coins and they have to pay you 12.

So the quality of divisibility is what makes something a currency? In any case, I could simply buy four of those things or have the owner owe me 3/4 the value of an xbox which could be redeemed at a later date. It's stupid, I know, but I'm not actually suggesting that xboxes be used as a currency, just as I wouldn't gold. In gold's case, there'd have to be pretty much constant and quick revaluing of its value as demand for currency far outstrips the supply of gold.

No.

It would be the value of commodities and the price of work that would be re-evaluated.

Today money supply increases but if production doesn't increase, assets/commodities will also increase in price, so we go from a $50000 wage to $500000 wage, but product X goes from $5 to $50 or even higher - you make a higher unitary amount of USD but you are as rich (or are actually poorer).

 

[BigDH01]

Yes, in the end you use USD because the government forces you to (you are basically its slave and it might let you keep a fraction of your wages, until it decides it needs more money and designates you as a rich bastard hoarding money).

I'm sorry you feel the situation is so onerous, but I'm glad you finally see the logic of it. This situation creates real demand and doesn't rely on your circular logic.

The reason people use gold is because they can indeed buy stuff with it, even if they have to trade it first for other currencies to go to shops, but they can use it avoid the government hidden taxes on your saved money due to monetary expansion/inflation.

Again though, I can do that with just about every asset, not just gold.

Every time there is monetary expansion stuff you buy using a fiat currency does up in price - gas go up, food goes up, other forms of energy go up, etc. But so does gold, so if you bought a gold coin for $100 and now that coin is worth $105 bucks you can buy the same amount of gas with it while some other guy that held the $100 now puts less gas on the tank.

And usually, my wages go up too (if true monetary inflation). But again, you've just described an asset. During monetary inflation (and I use these words because people seem to attribute all increases in prices, even ones do to simple supply/demand mechanics, to inflation) nearly all assets should increase in value, at least ones that don't see a concurrent increase in supply.

 

[GaiaHunter]

In a deflationary environment, the valuing would go the other way. You'd be constantly creating smaller denominations. Governments with pegs usually get around this by changing the value of their peg.

You can as well remove currency from circulation during inflationary periods and of course use less valuable precious metals or simply issue paper currency backed by gold for smaller denominations.

Again though, I can do that with just about every asset, not just gold.

Not every asset - some are perishable. Some aren't divisible. Some offer storage problems - hoarding a few tonnes of grains is a bit harder than hoarding a few gold bars.

And usually, my wages go up too (if true monetary inflation). But again, you've just described an asset. During monetary inflation (and I use these words because people seem to attribute all increases in prices, even ones do to simple supply/demand mechanics, to inflation) nearly all assets should increase in value, at least ones that don't see a concurrent increase in supply.

Gold isn't going to see a great increase in supply.

And usually, my wages go up too (if true monetary inflation). But again, you've just described an asset. During monetary inflation (and I use these words because people seem to attribute all increases in prices, even ones do to simple supply/demand mechanics, to inflation) nearly all assets should increase in value, at least ones that don't see a concurrent increase in supply.

Your wage is simply the price you sell your work to your boss.

So again, not storing your purchasing power in fiat money is better in an inflationary environment (especially one occurring due to increase in money supply) - gold is just a convenient mean to store purchasing power, hence being money while an asset like an house isn't money because the value of the house depends on finding buyers for that specific house. Gold has a market has money and always had.

 

[BigDH01]

OK, I see what you're talking about now. It really shouldn't be that big of a deal. The value of things change all the time. The amount of gold in circulation would also slightly increase every year to help offset the deflation. Its natural for the price of things to fall as they get cheaper to produce. Throughout the the 1800s there was a deflationary environment. 1 oz of gold bought more in 1900 than it did in 1800. I don't see this as that big of a problem as you make it out to be though.

Increasing supply or cheaper inputs is not monetary deflation. I think the scale changes a lot with 300 million people needing a form of currency. How much gold is there in the US anyway, and what would be the average slice based on average household value?

 

[Trianon]

And usually, my wages go up too (if true monetary inflation). But again, you've just described an asset. During monetary inflation (and I use these words because people seem to attribute all increases in prices, even ones do to simple supply/demand mechanics, to inflation) nearly all assets should increase in value, at least ones that don't see a concurrent increase in supply.

If you have bargaining power, they do(sometimes, except stagflation, as seems to be the case now), if you are retired/unskilled/... - they don't
Sad to see that dogmatic beliefs within the confines of existing system prevent thinking outside the box

 

[matt0611]

Increasing supply or cheaper inputs is not monetary deflation. I think the scale changes a lot with 300 million people needing a form of currency. How much gold is there in the US anyway, and what would be the average slice based on average household value?

I don't know if there is data about the amount of gold is in the US, not sure if you can actually get that number. People wouldn't have to use gold either, they could be free to use other things as well. Silver, platinum, whatever they wanted to.

 

[BigDH01]

The following is the definition of money

"Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context.The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can serve as money.

You failed on the first line. Gold isn't accepted as payment in the US. Dollars are accepted, but some people are willing to do that conversion for you. That doesn't mean gold is a money any more than it makes my watch money when I trade it for groceries or booze.

Fiat money is without intrinsic use value as a physical commodity, and derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private".

Which is why it is universally accepted as payment within the US.

Of course money can appreciate the same as fiat money - you lend 10 gold coins and they have to pay you 12.

Commodity money is inherently limited in this respect because of it's limited-supply nature. You call this a virtue, I say it lacks flexibility and severely restrains monetary policy.

Today money supply increases but if production doesn't increase, assets/commodities will also increase in price, so we go from a $50000 wage to $500000 wage, but product X goes from $5 to $50 or even higher - you make a higher unitary amount of USD but you are as rich (or are actually poorer).

Lucky for us we have an un/underemployment rate probably close to 20% and capacity utilization closer to 75% so there is plenty of room to increase supply.