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Deutsche Bank: Gold Is Money
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.
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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.
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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.
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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 banks, paper 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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No, it's a collectible. The IRS says so, and looks forward to your 28% confirmation.
That doesn't bother me at all. In fact, I very much enjoy buying PM tax free, and I also enjoy the 'appreciation' without paying capital gains on it. Fuck the IRS, fuck Ben, and fuck fiat. I sleep very well at night knowing that my MONEY is safe from these sons of bitchez.
That's right.... You do not have to pay any 28% Collectibles Tax if you never sell it.
The funny thing is they had to ban incandecent light bulbs since the needed the tungsten for other, er, um, uses.
I'm so glad that you have a sense of humor.
Give some fucking assclown morons 6,000 years and even they finally realize that the only currency still on the planet is really money.
3,800 Fiat's gone. Gold still here.
Fucking rocket scientists Deutsche Bank analysts Daniel Brebner and Xiao Fu.
Wait to Jan Thirteen when gold becomes a tier 1 asset, then maybe a few more momo bankers will get some more clues.
but... but... unicorm sparkles? :(
http://www.youtube.com/watch?v=2NJnL10vZ1Y
OH REGINALD!
http://www.youtube.com/watch?v=pzOBlPKZjxE
MINERALZ BITCHEZ !!!!!1`1!1
so yeah, stack metal like a chinese central banker, nothing you good hedglians dont already know
ty (i think) george for making it even more painfully clear and irrefutable
i really think the gold buying by central banks and the large, institutional moves say it all like a canary in some digital coal mine - but then again, this isnt history - this is post history and the age of InfiniMoney Holographic Economic Deathstar run by banking cartel etc.
Dr. StrangePonzi: or How I Learned to Stop Worrying and Love the Debt Bomb
http://www.youtube.com/watch?v=UAeqVGP-GPM
I'm waiting for sovereigns to cut out the "middle man" and just start buying miners. (companies)
Like the theory but when the stockmarket tanks due to a few Led Zeps (AAPL), then the contagion spreads to other sectors, the miners suffer (short-term). I concur that gold miners by-pass the middle man but when other commodities tank Au miners get hit. 2008 case in point. Great buying opportunity but you have to wait for it to tank to buy in at a sensible price.
Thanks George,
I looked at the pictures of the tungsten filled 10oz bar found in Manhattan and if the bar was hollowed out it would have had mill marks on the inside. We can clearly see no mill marks in the picture with a thin layer peeled back! In fact the inner side has taken on the texture of the tungsten core.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012...
The bar is layered in 9999 that’s gold soft enough to mark with your teeth when bitten, how the fuck you going to chuck up that soft a metal with out making marks and milling out to 1/16th walls?
The point is these counterfeits are made by very skilled and desperate bankers.
Do you think that’s air you’re breathing?
Do you think the Swiss PAMP bars where picked to counterfeit just coincidence?
The Swiss have fucked up big time, many will see jail time because the clients they fucked by selling allocated gold are no small fish. The fake gold was made to buy time. That’s all the fucking banks do now is buy time. The end is drawing near prepare your selves!
Fucking banks!