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Deutsche Bank: Gold Is Money

George Washington's picture




 

Deutsche Bank analysts Daniel Brebner and Xiao Fu  have just released a new report saying that gold is money (via Business Insider):

While it is included in the commodities basket it is in fact a medium of exchange and one that is officially recognised (if not publically used as such). We see gold as an officially recognised form of money for one primary reason: it is widely held by most of the world’s larger central banks as a component of reserves.

 

***

 

We would go further however, and argue that gold could be characterised as ‘good’ money as opposed to ‘bad’ money which would be represented by many of today’s fiat currencies. In describing gold as such we refer to Gresham’s Law – when a government overvalues one type of money and undervalues another, the undervalued money (good) will leave the country or disappear from circulation into hoards, while the overvalued money (bad) will flood into circulation.

 
***

In our view the ideal medium of exchange must balance the paradox of representing value while having little intrinsic value itself. There are very few media which can do this. Fiat currencies physically have no use other than that which is prescribed to them by government and accepted by the public. That fiat currencies cost little to produce is of a secondary concern and we believe, quite irrelevant to the primary purpose.

 

Gold is neither production good nor consumption good. Jewellery we see as a form of storage or hoarding (the people of Portugal have all but exhausted their personal gold stores – hoarded in the form of jewellery – having converted them to survive the crisis). If gold did have a meaningful commercial use we believe that it would make the metal less attractive as a medium of exchange as the value of the metal in whatever market it was used in could periodically interfere with its medium-of-exchange role…

 

Other characteristics are important of course in fulfilling the requirements for ‘good’ money: indestructibility, divisibility, transportability and universal acceptability.

They are not alone …

World Bank president Robert Zoellick pointed out in 2010:

Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.

Former Fed chairman Alan Greenspan said in 2009:

Gold prices that jumped above $1,000 an ounce this week are signaling that investors are buying metals to hedge against declines in currencies, former Federal Reserve Chairman Alan Greenspan said.

 

The gains are “strictly a monetary phenomenon,” Greenspan said today at an investment conference in New York. Rising prices of precious metals and other commodities are “an indication of a very early stage of an endeavor to move away from paper currencies,” he said…

 

What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment,” Greenspan said.

And we noted in 2010:

Alan Greenspan told the Council of Foreign Relations last week:

Fiat money has no place to go but gold.

Greenspan also said that supply and demand explanations treating gold like other commodities “simply don’t pan out.”

 

Greenspan also spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes, and said:

If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.

Former chief Merrill Lynch economist David Rosenberg wrote in March:

The best currency may be physical gold…

Phoenix Capital Research argues that central banks are themselves loading up on gold because they know that the entire fiat money scam will soon collapse.

Indeed, it is fiat currency – and not gold – which is in a bubble.

As Bond king Bill Gross said recently:

Gold can’t be reproduced.  It could certainly be taken out of the ground in an increasing rate but there’s a limiting amount of gold.

 

And there has been an unlimited amount of paper money over the past 20 to 30 years and now – in this period of central bank expansion where it’s QE1 or QE2, or whether it’s the LTROs of the ECB or this potential new program … then central banks are at their leisure to basically print money.

 

Gold is a fixed commodity that has a considerable store of value that paper money has not….

 

When a central bank starts writing checks and printing money in the trillions of dollars, it’s best to have something tangible that can’t be reproduced, such as gold.

Forget Theory …  Are People Actually Accepting Gold as Money?

But forget all the theory.  Are people actually accepting gold as money?

Utah has declared gold coins to be money.

CNN reported in February:

A growing number of states are seeking shiny new currencies made of silver and gold.

 

Worried that the Federal Reserve and the U.S. dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option.

 

***

 

Unlike individual communities, which are allowed to create their own currency — as long as it is easily distinguishable from U.S. dollars — the Constitution bans states from printing their own paper money or issuing their own currency. But it allows the states to make “gold and silver Coin a Tender in Payment of Debts.”

Financial Times reported in 2010:

Intercontinental Exchange, the US futures exchange group, has followed rival CME Group by allowing its European clearing house to accept gold bullion as collateral for transactions.

JP Morgan accepts gold bullion as collateral.

So does Donald Trump.

China is paying for oil with gold.  India is probably doing so as well.

And central banks are considering allowing banks to hold gold as a risk-free, tier 1 asset.

Caveats:  Be careful with unallocated accounts, accounts held by big bankspaper forms of gold and tungsten (see this, this, this and this).

Finally, note that FDR was not the only leader to confiscate gold.  Gary North alleges:

When World War I broke out in 1914.  The banks suspended redemption of gold for paper money.  This broke their contracts, but the governments all ratified this action.  Then the governments had their central banks confiscate the gold that had been stored in the vaults of the commercial banks.

Hitler, Mao and Stalin also allegedly confiscated gold.

And in the Yuan dynasty six centuries earlier  – in an attempt to prop up its fiat currency and prevent runaway inflation – the Chinese government attempted to prohibit all transactions in or possession of silver or gold, which had to be turned over to the government.  (China has outlawed possession of silver several times since, and has just lifted the most recent ban.)

 

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Thu, 09/20/2012 - 10:42 | 2814948 dearth vader
dearth vader's picture

Deutsche Bank is terminating its storage facility of allocated physical for private clients in the Netherlands as per December 1st.

Their PMs desk has been shut down per August 22nd, formally, without prior notice; changing the amount in a PMs account into physical will end October 1st, and all allocated physical already in storage has to be cleared out before December 1st, or changed back to an unallocated PM account.

Hollandsche Bank Unie (hbu) - the only bank in the Netherlands to provide this service to private clients - was bought by DB from Abn/Amro in 2010 on instigation of EU Commissar Neelie Kroes.

Thu, 09/20/2012 - 09:31 | 2814636 ATM
ATM's picture

Shit, I bought a fine pointing dog a couple years ago for one ounce of fine gold. So yes people accept it as a medium of exchange.

So in answer to that inane comment that "you can't eat gold" I always counter with the answer that they are correct, I cannot eat gold, but I can convert gold into something that will help feed me for a decade. 

Thu, 09/20/2012 - 15:23 | 2815900 cannonfodder
cannonfodder's picture

ATM - I've always found that comment to be absurd.  My reply many times in the past is, "I can't eat my gold, but you can't make teeth out of paper."

Thu, 09/20/2012 - 08:42 | 2814412 Hobbleknee
Hobbleknee's picture

I guess they didn't get the memo 5,000 years ago.  Man, these guys are slow.

Thu, 09/20/2012 - 06:54 | 2814219 magne13
magne13's picture

Federal Reserve Notes Outstanding = $1.3Trn

Total Gold Held by FED = 282Bln Ounces-------@1750/oz = $493.8Bln

FRN to Gold Held = 2.63 to 1

When we refer to our currency not being backed by anything, that is completely false, Nearly 38% of outstanding Notes are backed purely by gold.   Now if gold should begin to rise rapidly and the Federal Reserve maintains some restraint on physical currency then perhaps we may see the ratio drop to 2 to 1 which if gold rises to $2400 than the ratio would get there.  

Obviously physical currency is not the only thing that matters as credit far outstrips physical currency and thus the reasoning for debasement and inflation.  Gold will continue to rise and asset prices will continue to lag well behind the price of gold.  Fed is backed into corner of zero rates and continue to disrupt real economic growth with this policy.  As the rest of the world sees the fruits of our monetary policy and act out as expected.

Thu, 09/20/2012 - 08:19 | 2814341 Sean7k
Sean7k's picture

http://www.nowandfutures.com/key_stats.html

M3 is over 15 trillion. 

The FED is backed into a corner? They CONTROL interest rates and the money supply. If they are in a corner, it is one they created. 

Don't the bankers have better propaganda?

Thu, 09/20/2012 - 07:41 | 2814266 daily bread
daily bread's picture

Magne13, you really believe the FED when they say they have X ounces of gold?  I bet most of any physical they have left has been re-hypothecated so many times that effectively they have zero.

Thu, 09/20/2012 - 09:55 | 2814746 magne13
magne13's picture

daily bread, i do think the fed has the gold, but i also think a lot of gold that is floating around is fake, maybe the fed is behind that as well, perhaps their whole goal was to keep real gold and pawn off fake gold.  whatever the case the fed is doing all it can to keep status quo, it will lose that battle, the best trade to make is to sell treasuries and buy gold, there is no way treasuries will keep up in the long run, plus the fed and treasury continue the circle jerk ponzi scheme for long end debt.  interest rates are fake and gold and silver are highly undervalued in future dollars, someone has all the real gold, just not sure who.  see the central banks are all tied and the experiment is failing, so its going to get interesting

Thu, 09/20/2012 - 08:46 | 2814423 gold-is-not-dead
gold-is-not-dead's picture

they have it mate, it is just filled with tungsten...

Thu, 09/20/2012 - 02:09 | 2814025 Money 4 Nothing
Money 4 Nothing's picture

Nice to have, but it won't save you.

Thu, 09/20/2012 - 06:52 | 2814216 10044
10044's picture

No but it will liberate you

Wed, 09/19/2012 - 22:58 | 2813768 tony bonn
tony bonn's picture

"...Be careful with unallocated accounts, accounts held by big banks..."

there is a massive swiss gold scandal brewing and it will involve other major criminal banks....the issue is theft of allocated gold....it's not just the swiss....a lot of rich folk who thought that they had gold are finding out otherwise....that gold plated tungsten was no accident....

there is a massive flow of gold to the east and it will not stop which is due in part to criminal wall street and european banksters who got caught in their thefts....this will compound shortages in the west....as john embry noted, gold flows to where work is happening - the fire economy does not work.....

gold is in severe and permanent backwardation.....the times are very dark - we are on the precipice of another dark age - except satan will pull a counterfeit miracle out of his ass to keep the charade going just a wee bit longer....but after that is the glorious light of god's son....the next 15 years are going to be very very rough....

Thu, 09/20/2012 - 09:31 | 2814630 Sigep0612
Sigep0612's picture

The 10 oz. gold plated tungsten bars that has hit Europe and most recently the USA (NYC) is extremely professional replica of the real thing.  So you have to ask yourself....who has the capability to produce such a bar?  The equipment to produce such detail is not synoymous with the Far East. Could a sinster group do it?  Or perhaps could it be a government?   

The world is awash in debt and deleverging requires patience which is in short supply.  Society has become hooked on instant gratification.  I agree with you tony......the pain of the future will be much greater than the estacy of the past.   

Thu, 09/20/2012 - 02:20 | 2814032 Money 4 Nothing
Money 4 Nothing's picture

Exactly! Search Morgan Crucible UK and where ever the term takes you, just follow it.

They re stamp and re designate the spoils of "War". Here is where to start > http://www.morganthermalceramics.com/news-and-events/news/morgan-thermal-ceramics-offers-manufacturing-capability-and-engineering-expertise-for-fired-refractory-shapes-in-metals-market/

Wed, 09/19/2012 - 22:16 | 2813681 HoofHearted
HoofHearted's picture

Who are the totalitarian assholes who have confiscated gold? Hitler, Mao, Stalin, and FDR. Think about it, and think about who the current Asshole in Chief imagines himself to be the second coming of. Now if his ass would just get polio....

I still think they go after retirement accounts first, putting money into T-bills...for our safety. When they come after our gold, they know they'll get a lot of lead first. Anyone know where I can pick up some gold-plated tugsten bars to hand to the nice IRS agents??? Manhattan maybe?

Wed, 09/19/2012 - 22:40 | 2813723 Dr. Sandi
Dr. Sandi's picture

With the rash of boating accidents gold bugs have experienced in the past couple of years, I think the Department of Taking Your Stuff would be hard pressed to find a rather large chunk of privately held gold in the U.S.

Wed, 09/19/2012 - 20:31 | 2813442 orangegeek
orangegeek's picture

"...Gold can’t be reproduced.  It could certainly be taken out of the ground in an increasing rate but there’s a limiting amount of gold. ..."

 

Bullshit.

 

Gold can be created chemically in a lab.  The cost to doing so is enormous, but a some point it becomes economically feasible.

 

 

Wed, 09/19/2012 - 22:07 | 2813656 akak
akak's picture

 

Gold can be created chemically in a lab.

Um, no it cannot.

Gold can be created via nuclear synthesis, but only in utterly minute quantities, effectively costing millions if not hundreds of millions of dollars per ounce.

Wed, 09/19/2012 - 22:50 | 2813744 jimmyjames
jimmyjames's picture

Gold is the byproduct of dying suns-

It can only be created in a supernova-

When the Alchemist appears--load the boat-

Wed, 09/19/2012 - 22:42 | 2813724 DaveyJones
DaveyJones's picture

You mean of like...our Iraqi Oil?

Wed, 09/19/2012 - 21:23 | 2813551 Roger Knights
Roger Knights's picture

First find your philosopher's stone....

Wed, 09/19/2012 - 19:20 | 2813276 new game
new game's picture

the basterds.  wow...

Wed, 09/19/2012 - 18:32 | 2813167 diogeneslaertius
diogeneslaertius's picture

get some lead to protect your gold

(just sayin)

Wed, 09/19/2012 - 18:17 | 2813118 MillionDoIIarBonus_
MillionDoIIarBonus_'s picture

SECRET: I've been silently collecting gold for YEARS. (Sh.. don't tell anyone)

Wed, 09/19/2012 - 18:55 | 2813227 Whalley World
Whalley World's picture

you have emerged from your hole to reveal that you are a tru sarcastican, well done MDB

Wed, 09/19/2012 - 22:15 | 2813679 akak
akak's picture

Actually, you have been taken in by an imposter.

Notice that this faux troll is NOT the original MillionDollarBonus --- he is "MillionDoIIarBonus_".  Who is just a copy of "MillionDollarBonus_".  Just how many of them there are I have not yet discovered.

Wed, 09/19/2012 - 22:38 | 2813719 Dr. Sandi
Dr. Sandi's picture

This imposter needs practice in the fine art of sarcastic commentary.

Thu, 09/20/2012 - 09:32 | 2814641 sdmjake
sdmjake's picture

Apparently this 'alter ego' could teach MDB_ a thing or two as well...

Wed, 09/19/2012 - 18:12 | 2813099 JohnKozac
JohnKozac's picture

More banks are accepting gold as collateral I read somewhere.

Wed, 09/19/2012 - 18:11 | 2813096 Debeachesand Je...
Debeachesand Jerseyshores's picture

Deutsche Bank: Gold Is Money.

What a revelation DB,because you will need every ounce of the stuff just to stay solvent.

Wed, 09/19/2012 - 18:01 | 2813065 Oldrepublic
Oldrepublic's picture

When Gresham's law meets Bernanke's Law

Wed, 09/19/2012 - 19:25 | 2813086 George Washington
George Washington's picture

Government Policy Is Working !!! … ??????

QEs working ... It's WORKing ... IT'S W-O-R-K-I-N-G!!! ... er, oooph:

http://i.minus.com/if6EuBJBKqSzM.gif

Wed, 09/19/2012 - 22:17 | 2813685 Hulk
Hulk's picture

that gotta hurt...

Wed, 09/19/2012 - 17:39 | 2812994 ultraticum
ultraticum's picture

Allow me to add one of the better reasons to own PMs that the Manhattan spreadsheet jockeys probably haven't thought of (yet): civil disobedience. 

If enough people peacefully opted out of their sham currency and so called democracy (democrips and rebloodlicans) . . . the whole fascist edifice would come crashing down on their heads.  Freedom cannot and will not be re-born until sound, debt-free money is re-introduced.

Until then, even if Thomas Jefferson himself were to be reincarnated, he would be derided and cast aside by the Mostly-Moronic-Republic he helped to found.

Wed, 09/19/2012 - 17:53 | 2812892 DaveyJones
DaveyJones's picture

it's less a question of what is money, more a question of what isn't

Wed, 09/19/2012 - 17:00 | 2812860 Dempster
Dempster's picture

Gold, silver, tungsten, perhaps, but ultimately it's likely to be food.

Wed, 09/19/2012 - 17:12 | 2812887 MillionDollarBoner_
MillionDollarBoner_'s picture

I own a smallholding and raise chickens, ducks and geese for eggs and meat.

When the SHTF, I'll be bartering eggs and meat for soft commodities and metal but NOT for paper promises ;o)

 

Thu, 09/20/2012 - 06:53 | 2814218 Watauga
Watauga's picture

MDB--my concern with your approach is that the zombies will so easily take your chickens, ducks, and geese, eat them in about 10 minutes, then take you away as a slave in the short term a meal in the long term.  The entire survive-TEO scenario likely does not work in reality, because the zombies will so outnumber the good guys and will have no hesitation about killing and taking and raping and burning.  It MAY be possible for one to survive, but likely only in a very strong community committed to self-sacrifice for the greater good, made up of former soldiers and marines with exceptional warfighting/streetfighting abilities, armed to teeth, and led by truly great men of character, strength, and vision.  Some such communities may arise out of the ashes of a TEO event, but they will be few and far between and only a fortunate few will have the opportunity to be a part of one.

Wed, 09/19/2012 - 16:51 | 2812825 stant
stant's picture

tungsten is money

Thu, 09/20/2012 - 13:54 | 2815594 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

Tungsten bullets in good handload rounds are better than money.

Wed, 09/19/2012 - 19:48 | 2813355 rustymason
rustymason's picture

I like money.

Wed, 09/19/2012 - 19:34 | 2813314 GOSPLAN HERO
GOSPLAN HERO's picture

nickel is money

Wed, 09/19/2012 - 17:01 | 2812853 Gully Foyle
Gully Foyle's picture

Utah accepts Gold as currency.

http://www.rawstory.com/rs/2011/05/23/utah-gold-standard-silver-currency/

Utah legalizes use of gold, silver as currency

Funny thing is where the program exists no one ever mentions if it is successful. Fuck Portugal legalized drugs and that tidbit enters every legalization conversation.

So how is that Gold and Silver currency thing working out in Utah? You all bringing the slivers into seven eleven for doritos and slurpees?

 

I spotted this news item today, they described the guy as a "hoarder" but fuck if he wasn't a survivalist or prepper. Lot's of Gold and Guns and canned goods. And con spiracy books.

http://usnews.nbcnews.com/_news/2012/09/17/13921601-7-million-in-gold-fo...

$7 million in gold found in dead Nevada man's home
Wed, 09/19/2012 - 17:11 | 2812888 edifice
edifice's picture

Lot's of Gold and Guns and canned goods. And con spiracy books.

That's probably why he's dead...

Wed, 09/19/2012 - 17:43 | 2813008 ultraticum
ultraticum's picture

Did anybody stop to think why they ransacked his house before locating next of kin?  Reasonable suspicion (of what), perhaps?

Ah, never mind . . . I lost myself.  Forgot we're not allowed to ask those types of questions in post-constitutional USSA.

Wed, 09/19/2012 - 17:35 | 2812980 Gully Foyle
Gully Foyle's picture

edifice

Love Father Jack " FEK OFF! DRINK!"

Old guy died of natural causes.

No heirs so Uncle Sam gets whatever.

He was a recluse, but it makes me wonder how many Gold and Guns posters here will wind up in the same boat.


Thu, 09/20/2012 - 04:34 | 2814123 _underscore
_underscore's picture

He actually didn't do too badly, GF. Although he was said to be a 'recluse', he worked in some public admin job & just kept himself to himself (is that so bad?). He didn't have much family, just a cousin or something I believe.

He was independent, had enough stashed to see him out (I'm sure he'd like to have lived longer, wouldn't we all though..) & spent what he wanted to on what he wanted.  Comapre & contrast with the likely outcomes for most people, esp. in the coming years of gouging inflation & govt. appropriation of (working persons') wealth. Not a bad boat to be in, all said & done.

Wed, 09/19/2012 - 23:04 | 2813775 edifice
edifice's picture

Drink! Feck! Arse! Girls!

http://www.youtube.com/watch?v=-e9Y023-mnc

Wed, 09/19/2012 - 22:35 | 2813714 Dr. Sandi
Dr. Sandi's picture

Looks like a cousin in California will inherit the goodies.

But the 'incident' makes it clear that if you ingest too much truth, you'll end up alone, and eventually dead for a month before anybody notices.

So if you know what's going on, keep it to yourself and only let on if you get a sign that you're talking to a 'friend.'

Otherwise, the cat could end up eating your corpse while she waits for the authorities to let her out.

Wed, 09/19/2012 - 16:45 | 2812798 philosophers bone
philosophers bone's picture

They need to change the rules so that a transaction involving gold does not trigger a taxable event.  Until then, it will be impractical to use gold / silver for all transactions.  Still possible though and will likely become more popular as faith in the paper is lost. 

I was wondering the other day whatever happened to "Stack Attack"?

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