GOLD PLUMMETS - SPOT CHART

http://www.kitco.com/charts/livegold.html ^

[Fitzcarraldo]

Source: www.kitco.com

[watcher1]

Silver for January delivery traded about $54/oz before closing about $25/oz. The same day
I was there.

[#3Fan]

Why should the world accept a system which empowers South AFrica or Russia merely because of metal deposits?

By the way, how much gold production is there in Russia and what is that in percentage terms of global production? I wasn't aware they were one of the superproducers.

[justshutupandtakeit]

Obviously I did not say that. However, it was a period of very uneven growth and boom and bust. That growth was possible because Hamilton's financial program had created an instant money supply NOT based on gold but on funded government credit.

There was no dollar in 1789 and thus your comment about the relative value in 1900 is fallicious. However, the value of the dollar in 1900 was higher than in 1865 because of systematic appreciation due to removing greenbacks from circulation.

The British Empire was NOT build on gold. War had bankrupted the government and drained away its gold to such an extent that the Bank of England was created in 1692 in order to allow financing of the nation's wars. It was never truly on the Gold Standard and at one point removed the pound from convertibility for almost 40 yrs. Most of the time the pound was a fiat currency with a fig leaf of convertibility which could have never been used if desired.

If your contentions above came from reading "Gold Wars" there is no reason for me to read it since they are clearly false. However, I appreciate the suggestion.

[#3Fan]

Yeah that's why I don't hit the gold bug threads much. Used to be the only support out there was Poobah, and he kind of ticks people off. You also had to put up with Spoosman putting up a new gold bug thread everytime somebody made a good counterpoint on the most recent thread (he wasn't into sticking around for an actual debate or anything silly like that). The more of us there are that have actually studied the history of money and how it works and why it works that way the better. Of course in another few decades the gold bug folks will evaporate because prepared money will be a thing of the past and they will finally understand that currency has ever really represented is buying power; whether that currency is gold, dollars, or bits doesn't matter. It's all just buying power and without a seller willing to take it it's completely worthless.

Ever read stories of hyperinflation of fiat currencies? A German mark of 1923 was woth almost a trillionth less than a German mark of 1911.

[discostu]

Yep. Ever read the about how Spain brought in so much gold from the new world that eventually a ship full of gold didn't carry enough value to pay the sailors their salary for the round trip?

Any form of currency can be devalued if too much of it is introduced into the economy.

[OK]

"it was a period of very uneven growth and boom and bust."

Sounds like a history of fiat currencies in the 20th century.

I disagree with your assessment of the history of the gold standard. "Gold Wars" was extensively researched and footnoted.

Fiat currency is essential for the maintenance of the welfare state, and has been an abysmal failure over and over again in country after country. Germany, Russia, Mexico, Turkey, Thailand, Argentina, Brazil, Italy, etc. etc. Boom and bust, boom and bust.

[justshutupandtakeit]

I don't have the figures immediately available but Russia is one of the top three producers of gold ore. South Africa (2/3s), the USSR (14%) Canada (5.1%) were the top three a few yrs. ago. The U.S. was fourth.

[discostu]

And gold has been an abysmal failure over and over again in country after country. Rome, Empirical England, Spain, pre-fiat America. The punchline is that "the economy" is a human construct and like all other human constructs is doomed to eventual failure. Doesn't matter what your currency is, eventually your economy will meltdown. The only time it doesn't is when the society that built that economy ceases to exist before the economy gets a chance to meltdown. The boom and bust business cycle goes at least as far back as history records and couldn't care less what the currency of the day is.

[justshutupandtakeit]

Fiat currency is a misnomer and inaccurate description of unbacked paper currency. If the word of the government is no good the currency is no good see germany in 1923. It could say "let it be" as much as it wanted but the currency was no good.

When the Continental Congress issued money it was no good because its institutional arrangements were no good and too much was issued. When Lincoln issued greenbacks they were fine because the government stood behind them and didn't sabotage their value by printing too much.

Actually almost all currency has been "fiat" because none could all redeemed at any time. Economic growth in this century in this country has been much less boom and bust than in the 19th. Except for the great depression it has been very steady comparitively.

My historical comments are accurate wrt to reality of the gold standard. If your book tries to claim that the gold standard was actually used rather than given lip service it is not accurate. And if it does not explain the role of the Bank of England in the financing of the Empire it is incomplete. Footnoting inaccuracies does not make them accurate.

There is no other currency than "fiat" never has been and cannot be since who could carry around enough gold to pay for a car or house. In fact, just carrying around enough to do business on a daily basis would be near impossible and horribly inefficent if possible.

As the population grows the per capita amount of gold shrinks in proportion thus there can never be enough for a growing economy.

Fiat currency or more accurately "faith" currency is not responsible for the growth of the welfare state or its maintenance though it is absolutely necessary to fund modern war machines and international trade.

Imposition of the Gold Standard would collapse international trade and generate wars and revolutions across the globe just as it always did.

Germany's fiat currency has worked fine but for the time the government deliberately inflated to pay the WWI debts. So has the Swiss. Third world countries don't do anything right especially monetarily. There has been little boom there mostly busts.

[#3Fan]

Yep. Ever read the about how Spain brought in so much gold from the new world that eventually a ship full of gold didn't carry enough value to pay the sailors their salary for the round trip?

You're going to have to prove that to me with a link.

Any form of currency can be devalued if too much of it is introduced into the economy.

That's never happened with gold. All the gold ever mined could fit into a shed.

[justshutupandtakeit]

I caught spoosman in a lie about Hamilton and kept after him for a couple of days on one thread until he threatened to call the moderator. "Go ahead please" I said but nothing ever happened finally I threw the lie in his face so much he slunk away.

The gold standard never really existed and using the metal is just another form of barter. Most of what is said about it by adherents is false though it takes a lot to deal with brilliant people like Von Mises.

Any time technical problems are brought up the superstitious just get more irrational.

Like most other things people get fanatical about it is no panacea.

[discostu]

All right I'll find your link. But if you honestly think that there's never been too much gold in an economy you really need to study some history. Check out the California gold rush for another. I want to see the size of your shed, there's a hell of a lot of gold out of the ground.

[justshutupandtakeit]

Investments should be diverse but I see little value in holding gold. Those buying it in 1980 for investment would have seen 2/3s of their saving disappear.

[Gritty]

Sorry the link didn't come through. Try pasting this link...

http://www.occ.treas.gov/ftp/deriv/dq301.pdf

To get the numbers on the rest of the exposure, you have to look at the other charts in the presentation.

[justshutupandtakeit]

Gold is not always the result of work. Some has been found just laying around.

The problem with it as money is that it can easily be made less valuable by chance discoveries. And it is worn away at a rate of at least 1% a yr. if used as coins.

Bankers have no incentive to make money less valuable and every incentive to do the opposite. But that is an entirely different subject.

The National Bank created by Hamilton worked wonderfully and accomplished great things for our new nation. National Banks are theoretically private but subject to great restrictions by their governments.

Potential abuse is no reason not to have them just as bad drivers don't mean cars are bad.

[#3Fan]

I don't have the figures immediately available but Russia is one of the top three producers of gold ore. South Africa (2/3s), the USSR (14%) Canada (5.1%) were the top three a few yrs. ago. The U.S. was fourth.

I knew they were huge producers of platinum, palladium, and maybe silver, but I didn't know they were up there with gold. I guess it makes sense though, they own a huge percentage of the land area of the world, there's bound to be gold here and there. At any rate it's the exchange of goods and services that empowers people, not necessarily the act of mining. In an abstract level, a general laboror in our economy is like a miner, he does the physical work that provides capital to our economy, yet he's not the one that is most empowered usually. Investors, business owners, and governments take the fruit of that person's labor and through their management of it, they are usually the most empowered.

[discostu]

Here's one:
http://www.stabi.hs-bremerhaven.de/gbs2/whkmla/region/spain/bullion.html

[Poohbah]

Any form of currency can be devalued if too much of it is introduced into the economy.

That's never happened with gold.

Actually, it DID. Any decent history of European colonization and conflict in the New World will discuss this issue. Spain became an economic basket case because they imported too much gold from America. There was too much gold chasing not enough goods.

All the gold ever mined could fit into a shed. \

It would have to be a VERY big shed.

[Deuce]

So it looks like we are in agreement that a fixed money supply would reflect progress/technological change through increased purchasing power. As to your comment that:

History has shown what happens to attempts to have a Gold Standard. It doesn't work.

This is pretty cavalier. For 5000 years (minus about 30) money was a commodity. It worked fine, except those who understood money best got government to grant them a money creating monopoly. They also convinced enough others that this all made sense.

[a gold standard] gives a natural advantage to countries with mines. Why should the world accept a system which empowers South AFrica or Russia merely because of metal deposits?

Nonsense. First see my post 105. Then, tell me why you prefer the current system which gives Russia credit created from nothing that they can NEVER repay anyway to buy goods rather than have them mine gold for those goods. I prefer an honest monetary system to a debt based fraud.

[#3Fan]

There is no other currency than "fiat" never has been and cannot be since who could carry around enough gold to pay for a car or house. In fact, just carrying around enough to do business on a daily basis would be near impossible and horribly inefficent if possible.

A car is only 63 ounces of gold. The daily business could be done with a few ounces of silver.