China Is Hiding 9,500 Tons Of Gold

The answer could define, in no uncertain terms, how important or irrelevant gold is in the modern world.

Is gold obsolete, or does it still have a significant role to play?Today we consider that question, and look once again at China’s gold...

Some people argue that gold is just an inert, useless metal, good for little more than jewellery. Its role in finance is as obsolete as the horse is in transport, or the telegraph in communication. The world has moved on. As Ben Bernanke famously said, it is just a ‘tradition’.

At the other extreme are those who argue that gold is essential. It is nature’s money, it is honest money, it is sound money. The serial abuses perpetrated by commercial banks, central banks and governments mean the resumption of its historical role is inevitable. It is just a matter of time.

I get both arguments, but it’s the price of gold, I suppose, that tells us which argument is winning.

Precious metals (Gold, Silver) are money. They are the only entities that have all of the attributes of money (fungibility, portability, store of value and so forth)

Something that has the attributes of money is valuable because it has those attributes. Would-be barterers can use money to overcome the otherwise insuperable problem of discovering a Coincidence_of_wants .

Trade requires money. Let's examine this vital function of money with respect to the coincidence of wants:

My Chicken farm example:

You run a chicken farm, and you need to buy a great many things to keep your farm and family going.

In a given month you need - for instance - to buy chicken feed, to hire someone to repair your generator, to buy a nailgun to allow you to mend chicken barn #9, to hire a midwife to help give birth to your widowed daughter’s baby, to buy milk and bacon - and so on.

Some of these resources will be buyable with chickens or eggs. And some of them will not - there's no coincidence of wants if the midwife or the nailgun owner don't want chicken meat or eggs.

But all or most of these resources will be buyable with money - with Gold or Silver. Because offering money in a transaction vastly improves the chance of a coincidence of wants

My Chicken farm example - continued:

You’ve had a successful month at the farm, and you now have loads of chicken meat and/or eggs to sell.

100 people line up to buy what you’ve got.

* 50 of them have horribly devalued fiat money, food-stamps and a bad attitude

* 40 of them have plans for barter - some of which are better than others. One is willing to work on your farm for food: another is willing to sell you their body, another has a stack of AA duracell batteries, another has some miniature bottles of scotch - and so on, with dozens of variations. You have to gauge each transaction on its own merits - an exhausting process - and half of the barter offers are simply going to be unworkable.

* 10 of them have Gold and/or Silver.

Which customers will you prefer selling your produce to? They all want what you've got - but do you want what they've got? Again: real money vastly increases the chance of a coincidence of wants.

Only Gold and Silver fulfill all of the prerequisites of money. This gives them inherent value - useful (for instance) in a survival situation.

Of course Fiat currency can also be used to run a chicken farm. However in time all Fiat currencies - without exception - revert to their true value of zero. When our current Fiat currency is no longer trusted then only precious metals will act as money.

Hope this was helpful.

Gold fits the coincidence of wants very nicely.

Throughout history:
- the amount available divides nicely among the total wealth/value in society. An ounce of gold is about on par in value with a good suit, handgun, computer, etc. A year’s wages fits in a small box. Serious wealth is still quite transportable. A nations GDP would fit in a room.
- the amount available increases about the same as total wealth/value in society. As more people are bred and enter the workforce, and as efficiency of productivity increases, available gold increases roughly to match. This keeps prices (measured in oz of gold) stable for the long term. Longstanding aphorism: a good suit or handgun always costs an ounce of gold.
- gold is fungible. It’s gold; who refined it, molded it, stamped it, and sold it matters not so long as it is refined to a given purity and they didn’t plate tungsten with it.
- gold is easily refined. Don’t have to worry about tarnishing or contaminants. Just melt it, scrape off the crud that rises, cool it, weigh it. (OK, slightly more complex than that, but much easier than darned near any other precious commodity.)

Yeah, you can’t eat it. Most people don’t need its physical properties. It’s great at _representing_ wealth though. Money is just otherwise worthless objects which we agree to impute value upon; gold does this better than anything else.

Yes, gold is useless during a SHTF scenario. Your rusty cans of stewed tomatoes, and expended bullets, will be worthless once society emerges from that scenario; gold is great for _preserving_ wealth thru such scenarios. Society will re-emerge, and those with the gold are starting out ahead of the rest.

The listed “price of gold” is trending ever downward but the reality seems to be otherwise. To buy gold for cash over the counter, at least hereabouts, requires a premium of as much as $200 an ounce. The premium for silver is higher as a percentage. $14.65 silver eagles cost that plus $5 and change at the moment. And that is if it is available at all. At the two places in town that sell gold all the gold that might be delivered is already purchased. Large sums have been deposited with the dealers to take whatever gold and silver might arrive in the shops. I can get some silver from time to time because one of the dealers is a personal friend of long standing. The other is a questionable purveyor. I worked for him once long ago and his practices then deter me now from ever having any dealings with his shop. I would suspect tungsten in his gold at least. If anyone could get slugged gold he could.

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