Why would anyone want gold standard?

[psionl0]

types of people who irrationally mock / hate gold and anybody who mentions it.

*SNIP*

that about has it covered, which of these are you all?

You forgot to mention the people who think that gold would interfere with the banking system that has made the world so prosperous today (if you ignore the debt).

 

[kevsta]

You forgot to mention the people who think that gold would interfere with the banking system that has made the world so prosperous today (if you ignore the debt).

lol. are there people who think the banking system is prosperous today and we can ignore the debt? seriously? surely not.

actually I think that's mostly covered in #2 isnt it? I dont think there's all that many of the public worldwide who think it's so great as-is?

lots of vested interests do, the non-involved public? not seeing it really

 

[psionl0]

actually I think that's mostly covered in #2 isnt it?

No, that is for people who have a vested interest in the banking system.

I was referring to the people who have been taught that the existing banking system is just the bees knees and no-one must ever interfere with a banker.

And yes, lots of people believe a liability is something you can get out of scott-free.

 

[kevsta]

ok, so just people who believe what they've been told and are not paying attention to our global systemic banking failures lately?

PS.. look at my superior money outperforming everybody else's, for the 10th year in a row.

 

[The Central Scrutinizer]

Mises.

It was only a matter of time.

 

[Mark6]

types of people who irrationally mock / hate gold and anybody who mentions it.

1. people with no money to spare ever.
2. people who would lose advantages gained from the current system, banks, governments and their media etc.
3. academia & econ professors (see 1 & 2.)
4. people who are locked into 401k's and cannot easily get out (see 1.)
5. people who are locked into real estate and cannot easily get out (see 1.)
6. people who see, but are too scared to partake (bull market wall of worry)
6. keynesian woo disciples.

that about has it covered, which of these are you all?

I am not any of the above. In fact, I do not have any real objection to gold standard, provided it remains standard. And there is the problem:

this nonsense they continually dream up about it being absolutely set in stone that Gold always crashes, when in fact we have a set of exactly one previous case.

Actually, "we" (as in, human race) has seen quite a few gold crashes, every time a large new supply was dug out of the ground and dumped onto market. The worst one was Spanish conquest of Mexico -- Spaniards brought so much gold from the New World, they effectively devalued their own treasury and destroyed their own economy. But lesser gold rushes, such as Yukon, did not do the countries involved any good either.

Granted, all easily mined gold has already been mined out. But...

We have been through this before. At current prices, there is not enough gold in the world to replace US base money - not to mention the money created by banks (and we haven't even touched on the rest of the world).

To become the world's money supply, the value of gold would have to increase considerably and since much of the world's gold is privately owned, a lot of people are seriously in favour of a gold standard.

Which, I repeat, does not bother me in itself. I do not care whether an ounce of gold buys a moped (which now it does) or a car. But if an ounce of gold buys a car, it becomes a huge incentive to invest in new mining techniques, and to dig MORE gold out of the ground. Which inevitably drops the price, and if the currency is tied to gold causes more market problems. Again.

Which was the point of my OP, which everyone seems to have ignored. My complaint about gold is -- the supply is not fixed, and the more valuable it is, the more likely it is to suddenly increase and devalue.

 

[The Central Scrutinizer]

types of people who irrationally mock / hate gold and anybody who mentions it.

1. people with no money to spare ever.
2. people who would lose advantages gained from the current system, banks, governments and their media etc.
3. academia & econ professors (see 1 & 2.)
4. people who are locked into 401k's and cannot easily get out (see 1.)
5. people who are locked into real estate and cannot easily get out (see 1.)
6. people who see, but are too scared to partake (bull market wall of worry)
6. keynesian woo disciples.

that about has it covered, which of these are you all?

if none of the above covers you, please explain why you think, and act here, like you do.

7/8. People with high IQ's and an understanding of investing.

 

[kevsta]

I am not any of the above. In fact, I do not have any real objection to gold standard, provided it remains standard. And there is the problem:

Actually, "we" (as in, human race) has seen quite a few gold crashes, every time a large new supply was dug out of the ground and dumped onto market. The worst one was Spanish conquest of Mexico -- Spaniards brought so much gold from the New World, they effectively devalued their own treasury and destroyed their own economy. But lesser gold rushes, such as Yukon, did not do the countries involved any good either.

Granted, all easily mined gold has already been mined out. But...

Which, I repeat, does not bother me in itself. I do not care whether an ounce of gold buys a moped (which now it does) or a car. But if an ounce of gold buys a car, it becomes a huge incentive to invest in new mining techniques, and to dig MORE gold out of the ground. Which inevitably drops the price, and if the currency is tied to gold causes more market problems. Again.

Which was the point of my OP, which everyone seems to have ignored. My complaint about gold is -- the supply is not fixed, and the more valuable it is, the more likely it is to suddenly increase and devalue.

the fluctuations of the past are very unlikely these days, with an already large supply (compared to annual production, and unlike silver) above ground stockpile, and a constant-ish 1.5% -2% per annum production.

in fact it seems to me to be ideally matched for humans to try to reach a sustainable real 1-2% per annum growth. there will not be any more massive surges in supply, like oil, its getting more expensive and difficult to produce.

http://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/

Today, the overall level of global mine production is relatively stable. Supply has averaged approximately 2,497 tonnes per year over the last several years. The stability of production comes from the fact that when new mines are developed, they’re mostly serving to replace current production, rather than expanding global production levels.

Gold production does experience comparatively long lead times, with new mines taking up to 10 years to come on stream. That means mining output is relatively inelastic, unable to respond quickly to a change in price outlook. Even a sustained price rally, as experienced by gold over the last seven years, doesn’t translate easily into increased production.

in the last 10 years the "price" has risen substantially, so from your logic we should expect that supply would have surged and the price dropped by now, no?

 

[ZouPrime]

the fluctuations of the past are very unlikely these days, with an already large supply (compared to annual production, and unlike silver) above ground stockpile, and a constant-ish 1.5% -2% per annum production.

in fact it seems to me to be ideally matched for humans to try to reach a sustainable real 1-2% per annum growth. there will not be any more massive surges in supply, like oil, its getting more expensive and difficult to produce.

http://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/

These numbers won't hold the day gold backs money again, since if the price of gold skyrocket, the motivation to find it will too.

in the last 10 years the "price" has risen substantially, so from your logic we should expect that supply would have surged and the price dropped by now, no?

Gold is in a bubble right now, it's been so for a while in fact. So yeah, it's a good investment if you bought it low and sell now. I know plenty of people who were big into real estate 10 years ago and who also thought it was a amazing investment that couldn't ever go wrong.

 

[ZouPrime]

I know I'm late to this thread, but I wanted to address another claim:

Why do people say (I'm paraphrasing) that "the rich" are the ones who don't want to go back to a gold standard? A gold standard could easily lead to depreciation. Who benefit in a depreciating economy? People who have a lot of savings, since these savings will only grow in value if left untouched (instead of having to invest them to beat inflation). The poor don't earn enough to save anything, they won't care if tomorrow's gold dollar will be worth more than today's, because they need to buy something to eat today.

The rich would be thrilled about a gold standard. It means they don't have to invest (risk) in anything, and they can still continue to be richer and richer.

 

[UndercoverElephant]

Let me guess...."Peak Oil"?

How is today's Peak Oil different than the Peak Oil of the 70's.

There was no PeaK Oil of the 70's. There was a political embargo on oil in the 70's.

Then compare it to the Peak Oil of the 80's, 90's and 2000's.

There was only one peak oil, and it happened between 2005 and 2010, mini-peaking in 2008. This period is called "bumpy plateau", and it is ending about now. The reason it is ending now and not continuing for another 5 years or so is because there is also a monetary/debt/economic catastrophe unfolding due to...

Anyway, there loads of fungi around at the moment.

 

[The Central Scrutinizer]

There was no PeaK Oil of the 70's. There was a political embargo on oil in the 70's.

Oh really?

June 1974:

"'THE END OF THE OIL AGE is in sight,' says U.S. petroleum geologist M. King Hubbert.... If present trends continue, Dr. Hubbert estimates, production will peak in 1995 -- the deadline for alternative forms of energy that must replace petroleum in the sharp drop-off that follows."

I can certainly post more, but this is enough.

There was only one peak oil, and it happened between 2005 and 2010, mini-peaking in 2008. This period is called "bumpy plateau", and it is ending about now. The reason it is ending now and not continuing for another 5 years or so is because there is also a monetary/debt/economic catastrophe unfolding due to...

Anyway, there loads of fungi around at the moment.

Dr. Christoph Rühl, chief economist of BP, disagrees.

Physical peak oil, which I have no reason to accept as a valid statement either on theoretical, scientific or ideological grounds, would be insensitive to prices. In fact the whole hypothesis of peak oil – which is that there is a certain amount of oil in the ground, consumed at a certain rate, and then it's finished – does not react to anything.

Whereas we believe that whatever can be turned into oil strongly depends on technology and technology depends on prices as well.

Therefore there will never be a moment when the world runs out of oil because there will always be a price at which the last drop of oil can clear the market. And you can turn anything into oil into if you are willing to pay the financial and environmental price.

It is more likely that demand will peak, which is what we are seeing in Japan and in Europe.

And then of course there is another constraint. The human capacity of digging hydrocarbons out of the ground and burning them and turning them into energy seems to be much larger than the atmospheric capacity to absorb the resulting CO2.

That is likely to be more of a natural limit than all these peak oil theories combined. Peak oil has been predicted for 150 years. It has never happened, and it will stay this way.

No offense, but I think you'll understand why I might take his analysis over yours.

 

[elbe]

why? because it has other uses too?

Making it a currency pretty much out prices it from industrial use, and for what? Because some people think it's pretty? All of it's "intrinsic values" make it a somewhat useful industrial metal. Can't you find a substance with barely any market to turn into your miracle currency?

 

[Sceptic-PK]

what I am interested in is how you got like you are. why you irrationally hate the idea and by extension anyone who espouses it. why you feel it is ok to troll and feel superior, without ever once addressing a single question.

The major theoretical benefit of a gold standard is it puts a constraint on spending by governments. But it doesn't do this. Governments set the standard. Government can change the standard. So it can't even fulfill its only selling point.

I "got this way" because so many fans of the gold standard are nutters (not directed at you). But if you're a nutter in the history/polsci/economics/banking vein than it's almost a given that you're a gold bug.

in the face of a continually rising gold price, which we have all been telling you is going to happen.

But what does the rising price of gold have to do with the gold standard? Why should we care? There is economic turmoil all over the place and people are looking to put their money into gold. So what?

How long have you been telling us its "going to happen"? If you'd bought into the paranoia in 1980 for instance, this is how you would've done:

Obviously had you bought at other times (as seen in the other graphs) things would have been different. But that's the point.

so why the cocksure confidence about the future? dont you know the old adage about pride and falls?

Again, many of us don't care about the price of gold at all. Who accurately predicts when the price will rise/fall says nothing about the pros or cons re the gold standard.

I have a theory on this, please feel free to comment or critique with your opinions as it relates to you.

types of people who irrationally mock / hate gold and anybody who mentions it.

1. people with no money to spare ever.
2. people who would lose advantages gained from the current system, banks, governments and their media etc.
3. academia & econ professors (see 1 & 2.)
4. people who are locked into 401k's and cannot easily get out (see 1.)
5. people who are locked into real estate and cannot easily get out (see 1.)
6. people who see, but are too scared to partake (bull market wall of worry)
6. keynesian woo disciples.

that about has it covered, which of these are you all?

if none of the above covers you, please explain why you think, and act here, like you do.

many fans of the gold standard are nutters (not directed at you)

Whoops, went a little early there!

It makes no sense to tie your money supply to a commodity, particularly a commodity that has no real relationship to whats going on in the actual economy.

 

[UndercoverElephant]

Dr. Christoph Rühl, chief economist of BP, disagrees.

No offense, but I think you'll understand why I might take his analysis over yours.

No offence taken. If you want to base your opinions on propaganda produced by a person who quite obviously has a vested interest in not telling you the truth, that's your funeral. Why should it bother me?

Do you also believe what politicians tell you without bothering to do your own research?

Your username is a joke, my friend. You are no "central scrutinizer".

Instead of "taking his analysis over mine", why don't you provide your own? Why not actually do your homework on peak oil and come to your own opinion. You have not done this, or you would understand what is wrong with the quote above.

Therefore there will never be a moment when the world runs out of oil because there will always be a price at which the last drop of oil can clear the market.

The above is a "straw man" if it is supposed to be a response to peak oil theory because peak oil theory is about (wait for it...) PEAK oil, not "the world running out of oil." Do you understand the difference?

And you can turn anything into oil into if you are willing to pay the financial and environmental price.

Nope. You can turn anything into oil if you are willing AND ABLE to pay the financial and environmental price.

It is more likely that demand will peak, which is what we are seeing in Japan and in Europe.

Of course demand is going to peak. The higher goes the price, and the worse the state of the global economy, the greater will be the downward pressure on demand. Does the author believe that peak oil theory claims that oil consumption will start falling simply because people can no longer physically get hold of oil? Of course it doesn't! What happens when the availability of oil declines is that the price goes up until a sufficient number of potential customers have been priced out of the market. This process has already begun.

You are a classic example of a denier of things like climate change, peak oil and evolutionary theory. What all of those people have in common is that they do not understand the thing they are denying, because they think they already know enough about it to have an informed opinion without actually bothering to make an effort to understand that thing. I have encountered very few individuals who both understand peak oil and deny that it has happened (or will happen in the very near future.)

 

[kevsta]

Gold is in a bubble right now, it's been so for a while in fact. So yeah, it's a good investment if you bought it low and sell now.

I completely disagree. Gold is not in a bubble. It is so far from being in a bubble at this point it is a joke. it is impossible for something to be in a bubble, without major public participation, and without institutional money being involved

ask everybody you know whether they have any gold / silver.

then walk up and down a high street asking the general public.

go on (non-goldbug) internet forums and ask (like this one lol)

the bubble callers are simply incorrect, and I'm going to be here the whole way up this bull run reminding them so

Gold is in a secular bull market, and has only just started the second part of the bull run, having recently moved from the stealth phase to the second phase where *some* but not many start to see, but the majority of people are still kept out by the "wall of worry"

we are years and many thousands of dollars away from the top, please see comparative bull moves on graph

I know plenty of people who were big into real estate 10 years ago and who also thought it was a amazing investment that couldn't ever go wrong.

So do I. However I pride myself on being a bit smarter than that, I could see the crash coming from 02, sold in early 06 and got out. Everybody told me I was mad, and would never be able to afford to get back in.

..Interesting that should I want to, I could now buy back a very much nicer property now using real money, and by the end of this cycle about 5x the house I could have owned before.

Why do people say (I'm paraphrasing) that "the rich" are the ones who don't want to go back to a gold standard? A gold standard could easily lead to depreciation.

do you mean deflation?

Who benefit in a depreciating economy? People who have a lot of savings, since these savings will only grow in value if left untouched (instead of having to invest them to beat inflation).

my mum has some small savings. is it ok to steal it directly out of her account to pay for bankers mistakes by way of inflation?

The poor don't earn enough to save anything, they won't care if tomorrow's gold dollar will be worth more than today's, because they need to buy something to eat today.

yes, unfortunately the poor are poor, better money wont necessarily help them.

The rich would be thrilled about a gold standard. It means they don't have to invest (risk) in anything, and they can still continue to be richer and richer.

"the rich" - by the end of this cycle, lots of people who thought they were rich with imaginary wealth, will no longer be. people who are ahead of the curve always do better than the less sighted, its the way of the world.

 

[kevsta]

firstly, I just wanted to say thanks for probably the first reasonable answer here from an "opponent" rather than a "supporter".

I knew at some point somebody would have to stop with all the JREFGheyness and just talk.

The major theoretical benefit of a gold standard is it puts a constraint on spending by governments. But it doesn't do this. Governments set the standard. Government can change the standard. So it can't even fulfill its only selling point.

so the fault is with government implementation, not the idea?

it is true that there have been flawed implementations, setting the price too low, that kind of thing, and obviously if you get the price wrong from the start it cant work well for long.

I "got this way" because so many fans of the gold standard are nutters (not directed at you). But if you're a nutter in the istory/polsci/economics/banking vein than it's almost a given that you're a gold bug.

But what does the rising price of gold have to do with the gold standard? Why should we care? There is economic turmoil all over the place and people are looking to put their money into gold. So what?

No you shouldn't care especially, (unless you'd like to protect your wealth and possibly a little appreciation) I didnt mean to come here and have to defend every aspect of gold, unfortunately when you have trolls with entries like:

Originally Posted by The Central Scrutinizer
Game, set, match.

It's 1980 all over again, for those playing along at home.
Yep, when the economy improves investors will sell their gold for more profitable investments, and the price will plummet.

And all the gold bugs will be wondering what happened.

(and quote of the week, before she got ignored was the $400 one ) ..so apologies the conversation has strayed because the trolling lead the direction.

How long have you been telling us its "going to happen"?

telling what is going too happen?

If you'd bought into the paranoia in 1980 for instance, this is how you would've done:

[qimg]http://4.bp.blogspot.com/-VHtuCpQxxpU/TVSjdGd8nvI/AAAAAAAAAZo/iZqotsPilZE/s320/S%2526P_Golg_1980.JPG[/qimg]

Obviously had you bought at other times (as seen in the other graphs) things would have been different. But that's the point.

of course, look at all the numpties who were still piling into real estate in 07/08 go and watch a few Peter Schiff videos from prior to the crash with the permatan Realtards telling everybody "buy buy buy it can only go up"

THATS what a bubble looks like, and it has major public participation. How many people STILL own property compared to precious metals?

Again, many of us don't care about the price of gold at all. Who accurately predicts when the price will rise/fall says nothing about the pros or cons re the gold standard.

I wont mention it anymore if we don't get any more trolling about price crashes.

Whoops, went a little early there! It makes no sense to tie your money supply to a commodity, particularly a commodity that has no real relationship to whats going on in the actual economy.

I disagree, but thats the point of this thread isnt it

 

[kevsta]

Making it a currency pretty much out prices it from industrial use, and for what? Because some people think it's pretty?

All of it's "intrinsic values" make it a somewhat useful industrial metal. Can't you find a substance with barely any market to turn into your miracle currency?

apologies, again, this strand of the conversation came up because someone said incorrectly that its utility value was nothing and it was worth $20 or $50 per Oz.

while the adult thing to do would be ignore nonsense provocation like that, it was so ridiculous it needed pointing out all the ways it was incorrect.

 

[armageddonman]

So I've been wondering.

If western civilization really would come to an end or at least there'd be a serious economic collapse, why on earth would anyone be interested in gold? You cannot eat it, after all.

Let me share this little anecdote from my grandma:

After WW2 in Germany, there was a pretty harsh economic crisis. Combined with two very cold winters, there was even a famine during the winters of 46/47 and 47/48.

My grandma's family were big landowners so they (and their staff) never had to go hungry.

During the "Hungerwinter", the people from the cities tried to buy food from the farms and were so desperate that they often offered the only stuff which they thought had value: their gold and jewellery. Suffice to say that the value of gold these days dropped very, very quickly and it did not take long before you wouldn't get much even for a lot of gold. Farmers were more interested in petrol, nails, seeds etc. than they were in gold.

TL;DR: when **** really hits the fan, gold will not get you very far. If you are afraid of societal collapse, invest either in equipment or learning skills that are useful instead of shiny, yellow metal that nobody really needs.

 

[kevsta]

So I've been wondering.

If western civilization really would come to an end or at least there'd be a serious economic collapse, why on earth would anyone be interested in gold? You cannot eat it, after all.

Let me share this little anecdote from my grandma:

After WW2 in Germany, there was a pretty harsh economic crisis. Combined with two very cold winters, there was even a famine during the winters of 46/47 and 47/48.

My grandma's family were big landowners so they (and their staff) never had to go hungry.

During the "Hungerwinter", the people from the cities tried to buy food from the farms and were so desperate that they often offered the only stuff which they thought had value: their gold and jewellery. Suffice to say that the value of gold these days dropped very, very quickly and it did not take long before you wouldn't get much even for a lot of gold. Farmers were more interested in petrol, nails, seeds etc. than they were in gold.

TL;DR: when **** really hits the fan, gold will not get you very far. If you are afraid of societal collapse, invest either in equipment or learning skills that are useful instead of shiny, yellow metal that nobody really needs.

"you cannot eat it" one of my favourites. and well actually you can, but that's not important. it's no more or less nutritious than paper though is it?

granted you can at least burn paper for warmth. but I bet I could swap gold for way more paper to burn.

you left out all the stories about buying whole blocks of apartments in central Berlin for an Oz of gold during the hyper, but no matter. I am not afraid of, or hedging for societal collapse, so much as economic and funny money collapse.

I think there will be societal problems elsewhere in the world, where I live, probably not so much (one of the reasons why I relocated here) my Toyota truck runs happily all day on veggie oil, (free to collect, just have to filter it) and there is ample rich productive farmland here, with a long history of island self sufficiency prior to tourism arriving.

in short, Im not worried for myself.