Gold standard - Should we go back?

[axiomatik]

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago? It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

[imotion s14]

Originally Posted by axiomatik

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold?

lol.



By carrying a $20 dollar certificate that will be redeemable for the fixed quantity of gold. How do you think they did it in the past? You thought that people actually carried physical gold on their persons?

As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago?

Yes, if you bought 1 troy oz of gold in 2000 and you were to sell that 1 troy oz at today's valuation then yes your purchasing power has increased by $1055 dollars. That's what happens when you have monetary policy that uses monetary inflation as a tool to solve economic problems. There is nothing magical about it.

It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

The price fluctuates against fiat because of the very nature of fiat currency. A commodity doesn't fluctuate much against other commodities. The historical charts bear this out. It's true today as it was in the past. That's why gold kept near 1:1 ratio with oil.

[aznpoopy]

Originally Posted by axiomatik

? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago?

i don't know if this is a troll post or what? absolutely.

if we all bought gold in 2000, and if we all sold our gold right now, then yes, we'd all "magically" have almost 6 times as many dollars we did in 2000. that magic is called "investing."

inflation between 2000 and 2010 was 27%. if we held a set amount of dollars in a box somewhere, those dollars would now "magically" have 3/4 times the amount of value they had ten years ago. where did it all go? those dollars the US government printed in the interim sucked the value right out of the box, your wallets and your bank accounts. i don't know about you, but i'd rather have 6x instead of 3/4x.

similarly, if we held a set amount of gold as currency from 2000 to 2010 (and ignored the effect that would have on demand for gold and all that), then yes, in this very instant we'd have roughly six times the buying power we did ten years ago with the same amount of gold, due to artificially inflated demand for gold, (actually not quite 6x, based on the peg of 2000 and 2010 dollars to gold).

why? that magic is simply the power of demand. that's also why you should fear the death of the dollar as the reserve currency of the world. having the dollar as reserve currency "artificially" drives up international demand for the dollar, giving it more buying power it would otherwise have. high demand things are worth more of other types of things. simple enough.

Originally Posted by axiomatik

It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

alright. i don't see how this is an argument against gold? money is also a commodity. the value of the currency also fluctuates with the market (hi, i'm forex, etc.). it has even less inherent value because the US government pretty much pulls it out of thin air all the time.

that doesn't mean gold can't bubble or crash. economic instability drives demand for gold up. if $237 in 2000 is worth $300 in 2010, you'd expect a steady priced commodity bought for $237 in 2000 to be worth $300 in 2010. but instead, gold is worth what, like $1300. however, that doesn't mean much from 2000-2010. at a minimum, you should be able to conclude quite easily that gold from 2000-2010 is clearly a superior store of wealth compared to dollar (and probably all fiat currencies). it probably would have been even without the artificial demand caused by the economic shitstorm. look at any super long term chart for value of gold; it's pretty obvious.

that doesn't necessarily mean it's a good buy or a bad buy. in short term, it depends on the circumstances of the moment what you think is going to happen. in long term, its a hedge for people who already have alot of money. not people with mortgages and expenses. i wish i bought in 2008. my friend told me it was going to jump up, and i didn't believe him. I think it was at $750 or so at that point. he bought in. he held, i told him it was going to drop, and he should sell. he told me to stfu. he said it was going to crest $1000. i think he sold at $1100/oz or so on something like 50oz. 50 x $350 sick ROI. he held it less than two years. i didn't believe them. now it's at fucking $1300, lol. almost double its value in less than 3 years, and i missed out on all of it. good thing i'm not an investor.

[axiomatik]

Originally Posted by kingkilburn

Or do they?

Thanks for CONTRIBUTING something new.

Originally Posted by imotion s14

lol.

By carrying a $20 dollar certificate that will be redeemable for the fixed quantity of gold. How do you think they did it in the past? You thought that people actually carried physical gold on their persons?

It was a semi-joking response to kingkilburn's earlier post:

Originally Posted by kingkilburn

There isn't enough of it to use as currency. It could possibly be used along with gold but I'm not sure how well that would work. Something to look into though.

Where he mis-used the terminology. Gold would not be the currency, it would only serve as a backing for the currency, and be redeemable. There is no reason why any durable material could not be used to back a currency. If the currency was backed by platinum, and you choose to redeem it, you would get some piece of metal that is 0.xxxx% platinum. There is certainly enough platinum in the world to back a currency with, it's just a matter of setting the exchange rate. All modern currencies are really fiat currencies, so the government can announce that $xxx is now pegged to xxx grams of platinum.

If you prefer a more market based transition, then there isn't enough gold in the world either. There is over $8 Trillion US dollars currently in the world. How is the US governement going to buy enough gold to back that many dollars? And, once the government starts buying gold, then the price of gold starts to skyrocket.

Originally Posted by imotion s14

Yes, if you bought 1 troy oz of gold in 2000 and you were to sell that 1 troy oz at today's valuation then yes your purchasing power has increased by $1055 dollars. That's what happens when you have monetary policy that uses monetary inflation as a tool to solve economic problems. There is nothing magical about it.

That has nothing to do with inflationary monetary policy. All that tells you is that gold is a commodity with volatile pricing. If you bought 1 troy oz in 1995 at the then current price of ~$550 and then sold it in 2001 at the then market price of ~$325, you would have lost $225. And yet, both periods experienced similar inflation. The difference is what the stock market was doing. Gold is an openly traded commodity considered by traders as a safe haven. When the stock market is tanking and they want to store their money in a safe place to ride out the storm, they put their money it into commodities. That is why the prices of all commodities started shooting up in 2005, as the stock market was starting to show signs of cooling off and the Fed was raising interest rates, so traders poured billions upon billions into commodities. This is also why oil hit $150/bbl back in early 2008, as it was also a commodity that traders were stashing money into.

Originally Posted by imotion s14

The price fluctuates against fiat because of the very nature of fiat currency. A commodity doesn't fluctuate much against other commodities. The historical charts bear this out. It's true today as it was in the past. That's why gold kept near 1:1 ratio with oil.

See my comments above. Commodities don't fluctuate that much relative to each other because they are all the same class of investment. Compare the prices of commodities versus the S&P 500, and you will see that commodity prices rise when the S&P goes flat or starts to drop, and then commodity prices drop again once the stock market picks back up again.

Originally Posted by aznpoopy

i don't know if this is a troll post or what? absolutely.

Yeah, I was joking around there.

Originally Posted by aznpoopy

if we all bought gold in 2000, and if we all sold our gold right now, then yes, we'd all "magically" have almost 6 times as many dollars we did in 2000. that magic is called "investing."

inflation between 2000 and 2010 was 27%. if we held a set amount of dollars in a box somewhere, those dollars would now "magically" have 3/4 times the amount of value they had ten years ago. where did it all go? those dollars the US government printed in the interim sucked the value right out of the box, your wallets and your bank accounts. i don't know about you, but i'd rather have 6x instead of 3/4x.

You would only have 6x if the US Dollar remained a fiat currency and you invested a bunch of that fiat currency into gold. If the dollar was pegged to gold, you would not have any more money than before.

Originally Posted by aznpoopy

similarly, if we held a set amount of gold as currency from 2000 to 2010 (and ignored the effect that would have on demand for gold and all that), then yes, in this very instant we'd have roughly six times the buying power we did ten years ago with the same amount of gold, due to artificially inflated demand for gold, (actually not quite 6x, based on the peg of 2000 and 2010 dollars to gold).

Not exactly. If the US Dollar was pegged to gold, then the value of the dollar floats with the value of gold. Assuming the US went to a gold standard, and the rest of the world didn't, then our buying power relative to those currencies would fluctuate with the price of gold. However, it would have no effect on transactions within the US. If you wanted to buy something made in Europe, and gold was worth 6x as many Euros as before, than, yes, you would have 6x the buying power. But if you wanted to go to Quiznos and buy a sub, that sandwich isn't going to cost 75 cents all of a sudden, because the wages they pay are in gold-backed dollars, and the lettuce they buy from california farmers is in gold-backed dollars.

Originally Posted by aznpoopy

why? that magic is simply the power of demand. that's also why you should fear the death of the dollar as the reserve currency of the world. having the dollar as reserve currency "artificially" drives up international demand for the dollar, giving it more buying power it would otherwise have. high demand things are worth more of other types of things. simple enough.

The much larger factor driving down the value of the dollar versus other currencies is the huge trade imbalances the US maintains. When we import $40 Billion dollars more than we export every month we are constantly expanding the supply of US dollars outside of the US. That drives down the value of the US dollar versus the currencies of net exporters such as Japan and the Euro-zone.

Originally Posted by aznpoopy

alright. i don't see how this is an argument against gold? money is also a commodity. the value of the currency also fluctuates with the market (hi, i'm forex, etc.). it has even less inherent value because the US government pretty much pulls it out of thin air all the time.

Both are commodities. However, one is much more liquid than the other. Gold is a commodity that is really only traded by a very tiny percent of the population. If you invest in gold, there isn't much you can do with it besides sell it to another gold trader for whatever the current price is. US Dollars are a little more flexible.

Originally Posted by aznpoopy

that doesn't mean gold can't bubble or crash. economic instability drives demand for gold up. if $237 in 2000 is worth $300 in 2010, you'd expect a steady priced commodity bought for $237 in 2000 to be worth $300 in 2010. but instead, gold is worth what, like $1300. however, that doesn't mean much from 2000-2010. at a minimum, you should be able to conclude quite easily that gold from 2000-2010 is clearly a superior store of wealth compared to dollar (and probably all fiat currencies). it probably would have been even without the artificial demand caused by the economic shitstorm. look at any super long term chart for value of gold; it's pretty obvious.

Gold prices are really all over the place historically. It is really only since 2000 that it has reliably increased. It is an option for investment, but I wouldn't necessarily consider it a safe bet for long term investment, only short term.



Compare that to the S&P 500 for the past 50 years.

[ranger240]

Originally Posted by axiomatik

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago? It's a commodihttp://icandy.zilvia.net/img/smilies/cry.gifty. It's price fluctuates with the market, and has very little inherent value besides being shiny.

its ok, dont feel bad that people who havent read books on the interwar period or gold specie flow or any history book on how the gold std DIDNT work disagree with you. they dont get it, they'll never be in a position of power to change back to it, you're arguing french pronunciation to someone who only speaks english, and they speak it poorly.



can one of you pro-gold std people read Globalizing Capital by eichengreen

or here... let me google him for you

globalizing capital eichengreen - Google Scholar




killburn and company, do some research, learn something and then get back to the party...


this article looks juicy

Global imbalances and the lessons of Bretton Woods - Cairn.info

DONE