On Gold

[Aussie]

That's a very cogent point about a gold currency fluctuating from day to day.  Imagine going down to the pub to get rat-arsed and finding you barely had enough to get mouse-arsed.

[Origisaurus]

All currencies fluctuate.

But on a day-to-day basis, not enough to affect the price of a pint.

Bullion-based currencies are the most stable.  And that is what the manipulators (including national treasurers fear. Because it reduces their power).

[The Gorn]

How the value is assigned to gold as a day to day currency (which I think is being proposed here) makes all the difference.

IE: are prices of goods posted in paper dollars, and the price of gold floats relative to those paper dollars?

Or are prices of goods posted in gold backed dollars, and the paper currency becomes subordinate to those gold backed dollars?

If gold is used to extend paper (unbacked) currency with a new more substantial form, then yes, of course, its value relative to goods will fluctuate day to day.

Say an ounce costs $800 today. $825 tomorrow. So you buy that $800 (price+tax, paper dollar denominated) flat screen TV tomorrow. Do you get $25 back in semi worthless paper scrip (as Unix says, tokens?)

Or does the price of the good (TV) stay stable relative to the gold? So all paper denominated prices of goods in the economy that were $800 today jump to $825 tomorrow?

Gold can jump around that much in a day.

Only gas at the pump and diesel oil does so day to day.

Anyway, I'm describing an "implementation detail" of something that will never happen, except on an informal barter level in a "Mad Max" future... coming soon to a US street near you... 

[Peter Gibbons]

"How the value is assigned to gold as a day to day currency (which I think is being proposed here) makes all the difference."

No, no - I was not trying to propose anything.


I just found the quote attributed to Buffett ridiculous:

"Gold 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."

I could come up with something just as ridiculous myself:

"Trees get killed somewhere in America so we can print banknotes. They get loaded on armored trucks and transported to big buildings with vaults. We pay people to stand around guarding it. It has no utility. Anyone watching from Venus would be scratching their head."

If this trend continues people will soon have chips implanted under their skin so they will not be "inconvenienced" to carry a plastic credit card.

[The Gorn]

I don't expect the super-rich to say anything useful that will allow the common person to protect themselves. Buffet could cause considerable damage to the economy by simply stating something like "you'd better buy gold just in case."

He's not going to be frank or give hints, guaranteed.

[Aussie]

You know, you hear the old stories about the gold rushes.  The 49ers and the Yukon in the States, Ballarat and Bendigo and such in Australia, and you think, what schmucks.  Only the vanguard ever made a buck out of the gold rushes.  But if you were there at the time, and you hadn't two shekels to rub together, and the promise of riches was a few weeks tramp to the west or north, sure, you'd probably give it a go.  Doesn't do to run down folks in the past when you haven't walked a mile in their shoes.  (Of course, as Billy Connolly says, while you should never slag off a man until you've walked a mile in his shoes, after that, who cares?  He's a mile away, and you've got his shoes!).  Way I feel now, if a rich strike was made somewhere over the Great Dividing Range, I'd sure as heck consider trekking out there to try my luck.  But if I bided a moment, and thought it through, I'd realise that the way to profit from a rush of ANY sort is not to dig for gold/etc.  The profit is in selling shovels to all the other damm fools.  And that is applicable to dot.com booms as much as gold rush ones.  So remember that the next time the Western world get a dot.com-esque bee in its bonnet.

[David Randolph]

The discussion of gold as a standard assumes one thing: that something is standing behind the coins to insure that the coins are of the stated value. The Romans were mentioned. One problem that the Romans had was that their government kept modifying the purity of the gold. Coin size kept shrinking during the Roman period. At one point, a "barbarian" king refused the payoff that the Romans were offering as it wasn't pure enough gold. The only reason that Roman coins have the same purchasing power today that they did in the past is because nobody is minting new ones of dubious purity and the fakes made then have been taken out of circulation. Constrast that with the ads I've seen for replicas of the American $50 gold coin - 24 karat gold plated only.
http://www.mariamilani.com/ancient_rome/roman_coins.htm

A "gold standard" means that someone is upholding that standard through power and adherence to some moral authority. That means that the government is adhering to some idea or principle instead of being a way for one group to take from others.

Politicians have always over promised and then tried any way they can to hide how they are taking from everyone to give to their friends. Currency manipulation is just one way that they do this.
Inflation is the politician's friend for hiding tax increases and overspending.

[unix]

These are statements for public consumption, I am sure in private, they talk much differently.

Measuring their wealth in the ever fluctuating FRN token doesn't make any sense, they keep boxes full of these:

[unix]

<p>Here is a quote from Warren Buffett on gold investing:</p>  <p>"Gold 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."</p>

More thoughts on this --

Ludwig Von Mises, in his "Theory of Money and Credit" first published in 1912, said that one of the functions of money is to transfer wealth through time and space. So people who "hoard" gold, one of the accusations  against gold currency made by the FRD administration circa 1933, indeed perform one of the basic functions of money, they save them and hold them. When you bury a pot of gold in your backyard (or keep a bar in a vault)  it's not just sitting there, it's performing a critically vital function of storing wealth for future needs.

Great book... Reading it like getting a degree  in economics. I also got some other books he wrote, like Human Action. Definitely some high-calorie reading.

This BTW really highlights why paper cannot really function as a medium to store wealth. Bury a mil in your backyard and 20 years later it might buy you an ice-cream cone.  So people invest in other things for stability, like real estate, causing bubbles.  I find it very doubtful there could be a RE bubble under some kind of commodity-money currency.

Under a metallic standard, money would gain in value and everything else would fall price-wise.. just the opposite of what  we have here.