China to install more than 2,000 gold ATMs

[moore_capital54]

Again with respect to Cullen Roche who is a blogger and Mosler who ran for president then moved his base to St. Thomas to avoid US Taxes, I prefer to read Adam Smith, and Murray Rothbard, two geniuses who figured this all out a long time ago.

 

Watch Rothboards videos on Youtube, such an intelligent human being.

 

What is going to get the US or any fiat money country back to sustainable growth has ABSOLUTELY NOTHING to do with the level of dilution initiated at the government level. Ultimately its going to depend on trust, confidence, innovation, and growth. And in that order as well. The US Politicial System has proven to be the leader when it comes to unleasing these qualities. And if you read your history, you will see that some of the qualities we currently take for granted: IE: Trust, and Confidence, were only achieved with a strict hard money system. That is what got human beings to feel good about entering into transactions with each other, after already experiencing currency dilution by the european monarchs.

 

Interest Rates are a great tool and I think they need to be kept, Central Banks are great too, I am in no way as extreme as Ron Paul, he just wants to make the US an analog to 1700's hes a little overboard with his policies. The Central Bank is a great institution and it was borne out of the need to prevent bank runs. The Central Bank should be just that, but its reserves should be a ratio of Gold and even Silver. A tangible asset needs to regulate human behaviour, this is the only way we get to actually benefit from the unleasing of all these qualities. Otherwise we will end up with all this debt while the productive nations learn all our tricks and come out of it with all the wealth :)

 

 

[moore_capital54]

Shalab please read the article,, it seems you have somewhat misunderstood Franklins meaning. He is advocating the usage of paper money in the context of easily transportable paper bills that are backed by money or some asset at the bank, he is not advocating an arm of the government print bills into existence backed by nothing...

 

Those Places being Seats of vast Trade, and the Payment of great Sums being for that Reason frequent, Bills of Credit are found very convenient in Business; because a great Sum is more easily counted in Them, lighter in Carriage, concealed in less Room, and therefore safer in Travelling or Laying up, and on many other Accounts they are very much valued. The Banks are the general Cashiers of all Gentlemen, Merchants and great Traders in and about those Cities; there they deposite their Money, and may take out Bills to the Value, for which they can be certain to have Money again at the Bank at any Time: This gives the Bills a Credit; so that in England they are never less valuable than Money, and in Venice and Amsterdam they are generally worth more. And the Bankers always reserving Money in hand to answer more than the common Run of Demands (and some People constantly putting in while others are taking out) are able besides to lend large Sums, on good Security, to the Government or others, for a reasonable Interest, by which they are paid for their Care and Trouble; and the Money which otherwise would have lain dead in their Hands, is made to circulate again thereby among the People: And thus the Running Cash of the Nation is as it were doubled; for all great Payments being made in Bills, Money in lower Trade becomes much more plentiful: And this is an exceeding great Advantage to a Trading Country, that is not over-stock'd with Gold and Silver

 

 

Trade in general being nothing else but the Exchange of Labour for Labour, the Value of all Things is, as I have said before, most justly measured by Labour. Now suppose I put my Money into a Bank, and take out a Bill for the Value; if this Bill at the Time of my receiving it, would purchase me the Labour of one hundred Men for twenty Days; but some time after will only purchase the Labour of the same Number of Men for fifteen Days; it is plain the Bill has sunk in Value one fourth Part. Now Silver and Gold being of no permanent Value; and as this Bill is founded on Money, and therefore to be esteemed as such, it may be that the Occasion of this Fall is the increasing Plenty of Gold and Silver, by which Money is one fourth Part less valuable than before, and therefore one fourth more is given of it for the same Quantity of Labour; and if Land is not become more plentiful by some proportionate Decrease of the People, one fourth Part more of Money is given for the same Quantity of Land; whereby it appears that it would have been more profitable to me to have laid that Money out in Land which I put into the Bank, than to place it there and take a Bill for it. And it is certain that the Value of Money has been continually sinking in England for several Ages past, because it has been continually increasing in Quantity. But if Bills could be taken out of a Bank in Europe on a Land Security, it is probable the Value of such Bills would be more certain and steady, because the Number of Inhabitants continue to be near the same in those Countries from Age to Age.

 

 

Franklin is making a point that gold and silver on their own should not be an arbiter of value for all commodities, instead there should be a measurement of Labour. I can assure you this, Franklin would be rolling in his grave if he saw the current system in place where central banks are the arbiter of value for labour deciding for example that wall street fund managers are worth a lot more than factory workers.

 

This is yet another example of people completely misunderstanding both the current system and the history of money and central banking.

[moore_capital54]

This is really funny, you totally fumbled this one Shalab lol Mr. Franklins words:

 

For as Bills issued upon Money Security are Money, so Bills issued upon Land, are in Effect Coined Land.

 

 

 

[moore_capital54]

In letters written in April and May of 1787 Franklin also

writes favorably about the new bank-based paper money

that arose after the revolution. He says that there is “one

bank in good credit. I myself purchased ten actions [shares

of stock] in it, which, at least, shows my good opinion

of it.” He also writes that the bank’s “management is so

prudent, that I have no doubt of it continuing to go on

well. … Their notes are always instantly paid on demand

[in gold and silver], and pass on all occasions as readily as

silver.” This bank was the Bank of North America, started

in 1782 and the precursor to the first Bank of the United

States.

 

Franklin saw paper money as a method to increase velocity as the US needed all the momentum in trade to succeed in the mass creation of wealth for its citizens. He did not ever once advocate the usage of fiat money, money backed by NOTHING. His idea for a land bank is interesting, but we now have the benefit of hindsight and know that land can be very illiquid making the convertibility from note to sale of land to exchange for gold less seamless than Franklin hoped.

 

Even in Franklins "coined land theory" he always saw the foundation be gold and silver as evidenced by that note.

 

Franklin is one of my idols and I believe he had one of the greatest minds in history, he would have never advocated such an an insane system as the current fiat system.

 

Only crazy people would advocate for such a system, people like Nixon (Check), Keynes (Check), enormously complex people with questionable ethics and moral character. Brilliant nontheless but again I keep repeating this quote on this board:

 

It aint what you don't know that gets you in trouble its what you know for sure that just aint so!

 

Instead of coming up with all these theories about why fiat system is so great, why not look at the facts!

 

It has never worked, it has never been implemented by respected governments on such a wide scale, and it always ends with hyperinflation.

[moore_capital54]

No, not really. You can also read it in his autobiography on how money supply increased and helped trade. In your example, "bills issued upon land..." - land must be valued. What happened here is that houses got valued ( or overvalued.. ) and we would have outright deflation if you went by gold standard.

 

 

 

About this time there was a cry among the people for

more paper money, only fifteen thousand pounds being extant

in the province, and that soon to be sunk. The wealthy

inhabitants oppos’d any addition, being against all paper

currency, from an apprehension that it would depreciate, as

it had done in New England, to the prejudice of all creditors.

We had discuss’d this point in our Junto, where I was on the

side of an addition, being persuaded that the first small

sum struck in 1723 had done much good by increasing the

trade, employment, and number of inhabitants in the province,

since I now saw all the old houses inhabited, and many

new ones building; whereas I remembered well, that when I

first walk’d about the streets of Philadelphia, eating my roll,

I saw most of the houses in Walnut-street, between Second

and Front streets, with bills on their doors, “To be let”; and

many likewise in Chestnut-street and other streets, which

made me then think the inhabitants of the city were deserting

it one after another.

....

 

Shalab, you are going to need to do better than that, that explanation is very ambiguous.

 

What is your position? Please define it clearly. Do you think that Franklin advocated for Fiat Money? Or do you understand what is a fact and that is Ben Franklin was advocating for the inclusion of other hard assets to form the reserve and backing of a paper money.

 

I spent quite some time reading your posts, you should at least agree or disagree without being ambiguous.

 

Your initial post indicated your belief that Franklin was advocating for a paper money in the context of the fiat money we all use today. That is absolutely false.

[RichardGibbons]

So with the gold standard, how do things work as labor produces value in excess of the world's gold supply?

 

For instance, suppose the entire world consists of $1 backed by 1 oz of gold, and 1 person producing 1 widget per year that they sell for $1.  Suppose that a bunch of people are born, and productivity goes up with the new iWidgetMaker, so  that you have 10 people each producing 10 widgets per year.

 

What's supposed to happen in this scenario?  Your economy is still 1 oz of gold, but you have 100 widgets to trade.  Are you supposed to just get super high velocity of money so that the widget still costs $1 and backed by 1 oz, but people are moving that $1 around 100 times faster?  Or is there supposed to be huge deflation so that the cost of the widget decreases to be worth a penny, 1/100th of an oz?  Or is your economy basically constrained by how fast you can produce gold, such that a huge portion of humanities resource goes towards finding more effective ways of digging up rocks?

 

If the total economic output is growing at a higher geometric rate than the growth rate in gold, how is the gold standard supposed to handle that divergence?  (This isn't a rhetorical question.  I haven't thought about the issue much, so I'm curious whether there's something simple I'm missing, or whether gold standard advocates just pretend it isn't a problem.)

[AZ_Value]

So with the gold standard, how do things work as labor produces value in excess of the world's gold supply?

 

For instance, suppose the entire world consists of $1 backed by 1 oz of gold, and 1 person producing 1 widget per year that they sell for $1.  Suppose that a bunch of people are born, and productivity goes up with the new iWidgetMaker, so  that you have 10 people each producing 10 widgets per year.

 

What's supposed to happen in this scenario?  Your economy is still 1 oz of gold, but you have 100 widgets to trade.  Are you supposed to just get super high velocity of money so that the widget still costs $1 and backed by 1 oz, but people are moving that $1 around 100 times faster?  Or is there supposed to be huge deflation so that the cost of the widget decreases to be worth a penny, 1/100th of an oz?  Or is your economy basically constrained by how fast you can produce gold, such that a huge portion of humanities resource goes towards finding more effective ways of digging up rocks?

 

If the total economic output is growing at a higher geometric rate than the growth rate in gold, how is the gold standard supposed to handle that divergence?  (This isn't a rhetorical question.  I haven't thought about the issue much, so I'm curious whether there's something simple I'm missing, or whether gold standard advocates just pretend it isn't a problem.)

 

Great post and question. I am also wondering the same but you expressed it exponentially better than I could ever have. Thanks.

 

In my view orderly inflation is the way advanced societies deal with the widget scenario presented above and over time it works really well, actually it has worked really well if we look how great we've done over the long term.

Of course, just like anything that is heavily influenced by human beings, it sometimes gets out of control and we need heroes willing to give everybody their medicine like when Volcker stepped with both feet on the brakes by raising rates to 20%, even though it meant we all went through the windshield when he did that, it was needed to break the back of out of control inflation.

 

To me I just can't square this circle either, maybe due to my own limits, how do you tie the aggregate output of a global population that is increasingly more productive decade after decade to a set metric (the gold available to us) without incurring never ending deflation?

 

[seshnath]

The worst thing that could happen is for the USD to lose its reserve status. Especially to an RMB that is backed by gold..

Considering that there is about 5 Trillion Yuan issued, that will be an interesting move - to have about a trillion USD worth of gold in China (at today's exchange rate, that is) backing the currency.  Isn't that about a seventh of the world gold stock?  The world wouldn't bat an eyelid - all PBC has to do is to confiscate all gold from individuals like the US did back in the 30s.

Then what?  RMB becomes as strong as CHF - China loses the advantage it has as an exporting nation.  What did they accomplish?

I would rather be in BYD than in gold - under that scenario.

[meiroy]

The worst thing that could happen is for the USD to lose its reserve status.

 

 

Some might say that is the best thing that could happen to the USA.

[moore_capital54]

Hey guys I only saw your posts today, as the thread kind of disappeared.

 

You are all forgetting a key pillar behind a gold or precious metal standard. You guys keep trying to match the world's gold supply to the world's money supply, and that is the wrong way to look at it.

 

There are many ways to expand the base, be it fractional reserve banking, changing of the ratios of gold to base money, and finally even bimetallism where silver and gold equal some ratio of base money.

 

Moreover you should all know that there is roughly 1 ounce of gold per capita on Planet Earth, so the scenarios you describe is hardly realistic. That is why we began to use gold as a currency many thousands of years ago.

 

I hope this answers it.

[moore_capital54]

One more thing, current mine supply equates to roughly 0.9% inflation per annum on a gold standard, and think of the job creation and wealth creation that goes into mining an ounce of gold, as opposed to just creating money on Maiden Lane on a computer screen, then buying some treasuries from a retiree or a billionaire who uses the cash to reinvest in securities.

 

Gold mining advances civilization and advances the planet in a very beautiful way. Many of the communities and towns you see today in remote places of the world were all borne as a result of gold mining. There is absolutely nothing wrong with a gold standard, and any caveats are outweighed by caveats in a fiat money system.

 

Dig in, study the topic, you will see I am right.

[woodstove]

Bmichaud ... just want to say thanks for the links to pragcap that you posted early in this thread.  Some good discussion there.

[AZ_Value]

Hey moore,

 

Thanks for the reply. I really appreciate the conversation that you've initiated over the last few weeks (months maybe) as to me a return to a gold standard for the USD had never entered my mind until it was brought up in a couple of threads on this board so that goes to tell you that I am no expert at all. And even though we disagree I like that you usually have well articulated arguments for your position.

 

To me it seems to boil down to the fact that human beings tend to be nostalgic about what was to the detriment of what is maybe... I fail to see how one can conclude by looking at the exceptional success America has enjoyed that our system hasn't worked. We've had hiccups and we'll have more but I disagree that our monetary system hasn't worked overall.

 

Also, if one of the answers to the point that Richard raised is this:

 

changing of the ratios of gold to base money

 

So if we say that we start with a system where $1 is backed by let's say 30oz and Richard's scenario plays out and we wake up to find that it is no longer adequate and I assume we still have some Federal Reserve-like entity that would decide to readjust the ratio to $1/20oz, how exactly is this different from what we have right now? We'd just end up continuously readjusting the ratio I think.

And maybe we would give that power to Congress so that we can give those yoyos in DC one more thing to fight about every year and hold us hostage over  ;D ::)

 

 

[AZ_Value]

Bmichaud ... just want to say thanks for the links to pragcap that you posted early in this thread.  Some good discussion there.

 

I second this.

I've spent the last two days on the site. Thanks.

[bmichaud]

Woodstove & AZ,

 

Make sure to take the pragcap site with a bucket of salt b/c it is just a blog  ;D

 

Good article here: http://pragcap.com/art-cashin-tells-very-scary-stories

[link01]

Wealth = the annual produce of the land and labour of the society

 

When you run deficits IE: PRINT MONEY you are diluting the value of that wealth

 

that's 1 side of the equation. the other side, net wealth, would be the excess (or shortfall) of wealth created over dilution (money printing, deficits etc). if the  annual produce of the land and labour of the society increases 10% but deficits or inflation dilutes it by 4%, then you are still left with a net weath increase of 6%. 

[moore_capital54]

Hey AZ, I thought about some of the posters on this thread today and how I might articulate the gold standard in a way that would just "click" within a few sentences. Unfortunately I arrived at the conclusion that it would not be possible.

 

This would be no different than trying to explain value investing to someone in a few lines. Sure it could be summarized but if someone starts asking you questions like: "But how do you know a stock will reach its intrinsic value" or "But doesn't the market know all the available information", these points would bring up a lengthy debate that would require several major rounds, and even still the person may not be convinced.

 

The common denominator I see is that fundamentally a lot of you guys have been trained to think of a gold standard as something bad, due to buffet's comments on gold as an investment.  And I don't expect to change your minds. What I do suggest is that if you are genuinely interested, pick up some books and study the history of money and how rare a functioning fiat money system really is, in those books you will find all the answers you need.

 

I will take one last shot here responding to AZ:

 

Let me start with this one:

 

To me it seems to boil down to the fact that human beings tend to be nostalgic about what was to the detriment of what is maybe... I fail to see how one can conclude by looking at the exceptional success America has enjoyed that our system hasn't worked. We've had hiccups and we'll have more but I disagree that our monetary system hasn't worked overall.

 

Do you realize that in 235 years of existence the US has only employed a fiat money standard for 40 years? Would you really say that last 40 years were the best in terms of wealth creation as measured by even Keynesian economic metrics? We know that in these 40 years, debt has become more ubiquitous than ever, interest rates have asymptotically reached zero and the savings rate has reached all time lows.

 

In reality the US has only employed a fiat money system for 17% of it's life.

 

I can go on and on and on. The experiment has not been a good one as far as I am concerned.

 

So if we say that we start with a system where $1 is backed by let's say 30oz and Richard's scenario plays out and we wake up to find that it is no longer adequate and I assume we still have some Federal Reserve-like entity that would decide to readjust the ratio to $1/20oz, how exactly is this different from what we have right now? We'd just end up continuously readjusting the ratio I think.

And maybe we would give that power to Congress so that we can give those yoyos in DC one more thing to fight about every year and hold us hostage over

 

Again this was a solution to the pie in the sky scenarios that were mentioned here in previous posts along the lines of "WHAT TO DO IF THERE IS NO GOLD IN THE WORLD?" etc. There are options, and they could be implemented systematically and here too I disagree, the US only adjusted it's gold ratio twice in 195 years.

 

How many times has the Federal Reserve expanded its balance sheet or made rate decisions?

 

There is a lot of buzz around town here, supposedly Alan Greenspan is going to be coming out with a book, in it he is going to make a major admission that from the period 1987-2001 Greenspan used gold as a gauge to make interest rates decisions and that the biggest mistake we ever made was going off the gold standard. This will be absolutely game changing if it's true. I have heard from several people now that Greenspan plans to admit in this book and as part of his legacy that the experiment has gone wrong.

 

You guys shouldn't fear a gold standard, we would all do very well in one. There would be a lot more value in the market too, and multiples would be a lot lower for obvious reasons.

 

 

To Link01

 

that's 1 side of the equation. the other side, net wealth, would be the excess (or shortfall) of wealth created over dilution (money printing, deficits etc). if the  annual produce of the land and labour of the society increases 10% but deficits or inflation dilutes it by 4%, then you are still left with a net weath increase of 6%.

 

I absolutely disagree with you here, you are essentially lobbying that the government is allowed to steal 4% of the nations productivity wealth per annum? Why because some politicians decide to finance discretionary waste? How is that productive for society?

 

 

 

 

[RichardGibbons]

There are many ways to expand the base, be it fractional reserve banking, changing of the ratios of gold to base money, and finally even bimetallism where silver and gold equal some ratio of base money.

 

Moreover you should all know that there is roughly 1 ounce of gold per capita on Planet Earth, so the scenarios you describe is hardly realistic. That is why we began to use gold as a currency many thousands of years ago.

 

So, basically what you're saying is that it doesn't really work, or at least doesn't solve the problem of money printing.  Governments can still basically print as much money as they want by changing the ratio, and indeed will be forced to do so as the economic output and supply of gold diverge.

 

I find it fascinating that it's so easy to refute the "gold standard ensures the government doesn't cause high inflation through money printing" argument. 

 

....  think of the job creation and wealth creation that goes into mining an ounce of gold, as opposed to just creating money on Maiden Lane on a computer screen, then buying some treasuries from a retiree or a billionaire who uses the cash to reinvest in securities.

 

Gold mining advances civilization and advances the planet in a very beautiful way. Many of the communities and towns you see today in remote places of the world were all borne as a result of gold mining.

 

So, you'd opt to spend the resources of humanity digging up rocks instead of, say, travelling to other planets, inventing cheap limitless energy sources, learning about the way the universe works, creating great art, curing diseases, and eliminating the ravages of aging?  It provides jobs, but so does pretty well everything that improves the standard of living.  It seems like the opportunity cost would be very high.

 

Thanks for your help on this.  It seemed to me that it didn't make sense, but I figured that my ignorance just meant that I was missing something.  The fact that someone so knowledgeable about gold and mining in general  talks about changing ratios to solve the basic divergence argument really clarifies the issue for me.

[Liberty]

think of the job creation and wealth creation that goes into mining an ounce of gold, as opposed to just creating money on Maiden Lane on a computer screen

 

That part sounded very Keynesian to me. Reminded me of the famous quote about putting money in empty bottles, burying them in an old mine, and having people dig them up as a way to create jobs...

[bmichaud]

Buffett says that if value investing, i.e. buying a $1 bill for 50 cents, doesn't click in thirty seconds then it never will.

 

There's a reason the gold standard does not "click"...

[moore_capital54]

There are many ways to expand the base, be it fractional reserve banking, changing of the ratios of gold to base money, and finally even bimetallism where silver and gold equal some ratio of base money.

 

Moreover you should all know that there is roughly 1 ounce of gold per capita on Planet Earth, so the scenarios you describe is hardly realistic. That is why we began to use gold as a currency many thousands of years ago.

 

So, basically what you're saying is that it doesn't really work, or at least doesn't solve the problem of money printing.  Governments can still basically print as much money as they want by changing the ratio, and indeed will be forced to do so as the economic output and supply of gold diverge.

 

I find it fascinating that it's so easy to refute the "gold standard ensures the government doesn't cause high inflation through money printing" argument. 

 

....  think of the job creation and wealth creation that goes into mining an ounce of gold, as opposed to just creating money on Maiden Lane on a computer screen, then buying some treasuries from a retiree or a billionaire who uses the cash to reinvest in securities.

 

Gold mining advances civilization and advances the planet in a very beautiful way. Many of the communities and towns you see today in remote places of the world were all borne as a result of gold mining.

 

So, you'd opt to spend the resources of humanity digging up rocks instead of, say, travelling to other planets, inventing cheap limitless energy sources, learning about the way the universe works, creating great art, curing diseases, and eliminating the ravages of aging?  It provides jobs, but so does pretty well everything that improves the standard of living.  It seems like the opportunity cost would be very high.

 

Thanks for your help on this.  It seemed to me that it didn't make sense, but I figured that my ignorance just meant that I was missing something.  The fact that someone so knowledgeable about gold and mining in general  talks about changing ratios to solve the basic divergence argument really clarifies the issue for me.

 

Richard you completely misunderstood the point. You guys were posing some pie in the sky scenario where the gold supply would not match productivity and in that scenario I simply provided a solution followed by a real world example, that in nearly 200 years of a gold standard the ratio was adjusted only twice. Not impressed with your picking and choosing of my comments.

 

Your second point about sense of humanity and flying to other planets is just ridiculous, please apply more logic. A Gold standard would no prevent humanity from doing any of the things you mentioned, my point which was obviously misunderstood was that on a gold standard the process of money creation carries with it advancements in productivity, wealth, jobs and humanity. Whereas the process of money creation under fiat carries with it NOTHING. To think that if people are mining for gold they are being prevented from traveling to space or creating vaccines is childish and borders insanity.

 

Not impressed with the last round of comments at all, and along the lines of Bmichaud, you guys will simply not get it. Stick to what you know. Cheers!

[RichardGibbons]

Richard you completely misunderstood the point. You guys were posing some pie in the sky scenario where the gold supply would not match productivity and in that scenario I simply provided a solution followed by a real world example, that in nearly 200 years of a gold standard the ratio was adjusted only twice. Not impressed with your picking and choosing of my comments.

 

Sorry.  You kind of refuted what people describe as the main benefit a gold standard, and I figured you realized that.  Basically, I think what it amounts to is that the gold standard wouldn't provide the restriction against the government growing the money supply, because the government changing the ratio would be built in.  That said, thinking about it a bit more, it could still be beneficial, in that when the government changes the ratio, at least it would be visible to everyone.  So it would be more difficult to devalue money without people knowing.

 

I don't think the scenario is particularly pie in the sky -- if you have any two things growing geometrically at different growth rates, one is eventually going to grow much, much bigger than the other.

 

Your second point about sense of humanity and flying to other planets is just ridiculous, please apply more logic. A Gold standard would no prevent humanity from doing any of the things you mentioned, my point which was obviously misunderstood was that on a gold standard the process of money creation carries with it advancements in productivity, wealth, jobs and humanity. Whereas the process of money creation under fiat carries with it NOTHING. To think that if people are mining for gold they are being prevented from traveling to space or creating vaccines is childish and borders insanity.

Ok, I tell you what.  Let's each take 10 people.  I'll have 10 of them build a house.  You have 5 of them build a house, and 5 of them dig up rocks.  Then we'll see who finishes building the house first.  You may get your house, but it won't be as fast as I get my house.

 

So, digging up rocks isn't mutually exclusive with spaceflight.  It just involves allocating resources in a way that reduces the overall productivity of society.

 

(Yes, I know that right, it doesn't cost that much today because not that many people are mining gold.  But I thought we were talking about a world where people try to get enough gold to match the growth in GDP, so that lots of people have to spend time mining gold and looking for more efficient ways of mining gold rather than becoming scientists and brain surgeons etc.  (Hey, does this this remind anyone of Wall Street?  :) ))

 

Not impressed with the last round of comments at all, and along the lines of Bmichaud, you guys will simply not get it. Stick to what you know. Cheers!

Fair enough.  I think you're probably right that we won't get it.

 

 

[moore_capital54]

It's totally pie in the sky and your whole post is a wasted effort at refuting the chief benefit of a standard that has been the engine of capitalism for 5,000 years. Keep trusting a system that has clearly not worked for anyone but the top 1%, who have toll roads or have stayed ahead of the erosion of their hard earned money by efficiently deploying and redeploying their capital (the extreme minority).

 

Read the Wealth of Nations, Read a World in Debt, read anything pre 1971 and you will see the common denominator was an economy built on trust which was ultimately backed by a sound currency reserved with gold.

 

Its pathetic to even attempt the exercise you are attempting, Do you really think after 5,000 years you are going to sit here and come up with some revelation on an internet message board? You can say you just don't get it or don't agree with it, but to try and refute a gold standard as some type of untrustworthy monetary system is ludicrous. It reminds me of the scene in Social network when the lawyer calculates it cost one of the partners a total of $19K to which Zuckerberg takes a second to check her math. That is what you are doing here. an exercise of futility in an effort to try and protect your argument.

 

For 5,000 years it worked, your beloved fiat system is an experiment that has been in existence on a truly global scale for only 40 years, of which the first 10 during an environment with positive real rates (Volcker era), Oh yeah read about real interest rates as well.

 

Unfortunately you have proven your ignorance.

 

And your employment example is so damn naive, There are nearly 500 million unemployed human beings on planet earth, out of 7 billion not 10 people building a house. Gold mines get developed in places as far off as Siberia the yukon to the Phillipnes, in the US every single town west of the Mississippi was born out of some aspiration for gold. You act as though society is always maintaining maximum employment to a point where resources allocated to gold mining would in turn prevent resources being allocated towards more "productive" areas of the economy. 100% Naive. The multiplier effect of gold mining or any hard rock mining is about 10 or 20 times that of Wall Street gambling, and even 10 or 20 times that of any startup in Silicon Valley. Real Jobs, real wealth creation. Its like manufacturing on crack - mining.

 

Read your history............

 

The world as you know it as you appreciate it has it's roots in a gold backed currency. Not sure what vintage you are but talk to your family members, especially if they lived in North America. Buffett likes to say how standards of living have improved because everyone now has air conditioning and plasma tv's. This is inaccurate, the last 30-40 years have seen people more than ever competing in an ever growing rat race, working far harder for a lot less wealth. This is entirely due to the underlying currency which does not retain its value for longer than 20 years. Thats right, a dollar bill has a lifetime of 20 years, in 20 years its worthless, you need 2 to equal one old dollar.

 

 

[moore_capital54]

Absolutely appalled at how you took a purely technical response of mine to a pie in the sky scenario as an indication that a gold standard is no different than fiat.

 

The price of gold remained remarkably stable for long periods of time. For example, Sir Isaac Newton, as master of the U.K.

Mint, set the gold price at L3.17s. 10d. per troy ounce in 1717, and it remained effectively the same for two hundred years until

1914. The only exception was during the Napoleonic wars from 1797 to 1821. The official U.S. Government gold price has

changed only four times from 1792 to the present. Starting at $19.75 per troy ounce, raised to $20.67 in 1834, and $35 in

1934. In 1972, the price was raised to $38 and then to $42.22 in 1973. A two-tiered pricing system was created in 1968, and

the market price for gold has been free to fluctuate since then as the table below shows.

 

http://www.nma.org/pdf/gold/his_gold_prices.pdf

 

The price of gold from 1971 and up essentially tells you how often the fiat ratio changes, almost daily!

 

Fiat + Fractional Reserve = Deadly

 

 

[moore_capital54]

And you just wait till times get better and you and all the rest of the "rich guys" will be crying about inflation. Inflation is going to come in strong. Of course we all wish for it now, we are in a major deflationary mode. But when it comes back you won't feel so rich.

 

I've seen it first hand with all my rich clients. And there is absolutely no way to protect yourself from it, unless you own a fortune 500 company, where you are immediately benefiting from an increase in inflation in real time.

 

And none of us do, even the best hedge funds will not compound better than inflation and taxes over time. You'll see, for yourself. It's no coincidence that most gold bugs are old timers, its not cause they remember the gold standard, hell most of them were probably in their 30's during the gold standard. It's because they have experienced life and the negative effects of inflation when compounded over time, how easy it is to spend money and how hard it is to save. These are just the facts of life.

 

So my position is this, if you don't agree with the gold standard and prefer fiat, great. I am not going to try and convince you otherwise. But don't sit here and try to come up with a revelation that the gold standard is no different than fiat, that is just blasphemy.