Gold Standard

[Odyessus]

7. If you can't say why banks would have near 100% reserves then doesn't gold have many of the same problems as fiat?

It could, if people chose to use fractional reserve banks. It depends on the legal system in force. With a system of free banking, people who received a banknote from a bank which was perceived to have low reserves would seek to redeem it in gold and convert it to a banknote from a bank with higher reserves (so they didn't have to share their claim to gold with so many other people). In that way there would be a gold outflow from banks with lower reserves to banks with higher reserves.

In short, there could be the same problems, but people would be free to escape from them and set up alternative arrangements.

But suppose someone discovers a goldmine containing another thousand tons of gold, isn't my 100 ozs of gold in the bank immediately devalued?

[silvernut]

Lets say that new $10 goes to the government of the island and they spend it on planting coconut trees instead of coconuts they plant enough to produce 2 extra coconuts. So now there is $10 extra in the money supply but 2 extra coconuts are produced. Inflation didn't increase the amount of coconuts but something that caused the coconut supply to increase also increased inflation.

But what if the new $10 is kept by the owners of the press under the guise of a bailout and used to buy up half islands supply of coconuts?

[rhonda15]

See the proposed bill at the following link:
https://www.yousendit.com/transfer.p...aFJRR2RMWEE9PQ

Bill Summary
(Note: This summary applies to this bill as introduced and does
not necessarily reflect any amendments that may be subsequently
adopted.)
Establishes a system for certain transactions to allow the state and
political subdivisions to make and receive payment using an electronic
gold currency, which transactions shall include:
! Taxes and other involuntary charges;
! Purchase or sale of property by the state or a political
subdivision;
! Any payment that arises out of the exercise of eminent
domain;
! Judgments, decrees, or orders; and
! Wages, salaries, fees, or other monetary compensation.
Requires tobacco taxes to be paid using electronic gold currency.
Requires the state treasurer to designate electronic gold currency
providers through which the electronic gold currency transactions will be
conducted for the state and political subdivisions. Requires any person
that wants to make or receive a payment in electronic gold currency to
maintain an account with an electronic gold currency payment provider.
Requires the state treasurer and a fiscal officer of a political subdivision
to facilitate the implementation of the electronic gold currency system.
Establishes qualifications for a designated gold currency payment
provider, which include:
! Storage of gold representing the electronic gold currency
units in each customer's account by an independent specie
vault;
! Association with, or provision of services of, a specie
exchange to allow the customers of the electronic gold
currency payment provider to undertake various
conversions involving gold and silver coin, electronic gold
currency, and legal tender of the United States.
Establishes qualifications for an independent specie vault and for
specie exchange.
Establishes civil liability and criminal penalties for the inaccurate
determination of exchange rates between electronic gold currency and
legal tender of the United States.

[stringjack]

It doesn't matter what we're talking about. Value is always subjective. And if we're talking about a metal, there are all sorts of objective non-scarcity-related properties which someone might subjectively value (besides completely subjective reasons you won't read about on Wikipedia).

Value is a subjective ranking of states of the world; the opportunity cost of something that is subjectively valued is measured by what has to be given up to acquire it; opportunity cost is driven by scarcity. (ibis's point may have been more clearly expressed had s/he said that the 'utility' (or 'usefulness' even), rather than the 'value', of a currency commodity is its scarcity.)

[youngdan]

I just love threads like this where lads come along to argue that gold is of no use, valueless and that fiat currency is the way to go.

Meanwhile today gold makes another new alltime high of 720 euros.

It is a waste of time talking to these people and let them stick to their euro because there is a fortune to be made off their stupidness

[Odyessus]

I just love threads like this where lads come along to argue that gold is of no use, valueless and that fiat currency is the way to go.

Meanwhile today gold makes another new alltime high of 720 euros.

It is a waste of time talking to these people and let them stick to their euro because there is a fortune to be made off their stupidness

So this valuable gold is worth 7 valueless pieces of paper with €100 printed on them, plus another with €20 printed on it?

[silvernut]

So this valuable gold is worth 7 valueless pieces of paper with €100 printed on them, plus another with €20 printed on it?

It's worth even more in Zimbabwean dollars!

[Irish Liberty Forum]

Lets say that new $10 goes to the government of the island and they spend it on planting coconut trees instead of coconuts they plant enough to produce 2 extra coconuts. So now there is $10 extra in the money supply but 2 extra coconuts are produced. Inflation didn't increase the amount of coconuts but something that caused the coconut supply to increase also increased inflation.

They could have planted the trees even if nobody had given them pieces of paper with $ printed on it.

[Seos]

1. Why is gold being useful for non-monetary reasons a reason for it to be used as money?

Money is the most saleable commodity - the commodity for which there is the most widely held and highest demand. Useless paper with € symbols would have no demand except that people are forced to use it. It only persists because of a fake economic system which relies on our confidence in the stability of governments. When the government abuses the currency, the functions of money (including medium of exchange, unit of account, and store of value) cannot be properly fulfilled. If the commodity had non-monetary uses, we wouldn't need to worry so much about the stability of those who manage it.

But if gold is used as currency then it's use monetarily will compete with all it's other uses. As fiat money's only use is as money it's use monetarily does not compete with anything.

[rhonda15]

LONDON, Jan 30 (Reuters) - Gold slipped from a three-month high on Friday after data showed the U.S. economy had contracted by less than expected in the fourth quarter, taking some of the heat out of safe-haven buying.

Spot gold climbed 2 percent to $926.90 an ounce, its highest since Oct 10. It was quoted at $918.90/920.90 an ounce at 1406 GMT, up from $906.75 in New York late on Thursday. In the immediate wake of the data it slipped to $916.60.

Gold priced in euros hit a record high of 720.53 euros.

"On first glance the (GDP) figures are generally good, so they should be negative for gold," Calyon analyst Robin Bhar said. "Growth is better than expected, but deflation is also stronger, so it is a bit of a double whammy for gold."

The U.S. Commerce Department said fourth-quarter gross domestic product fell at a 3.8 percent annual rate, the lowest pace since the first quarter of 1982. [ID:nN29308953]

Analysts had forecast GDP contracting 5.4 percent in the fourth quarter.

Gold is still being supported, however, by interest in the precious metal as a haven from risk.

U.S. gold futures for February delivery GCG9 on the COMEX division of the New York Mercantile Exchange were up $15.80 at $920.80 an ounce.

Market talk of China taking an interest in gold as an alternative to U.S. Treasuries, and of a European fund buying bullion, also helped support prices.

PRECIOUS-Gold tips off 3-month high after U.S. data | Commodities | Metals | Reuters