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Why Gold Is Money
Authored by Alasdair Macleod via GoldMoney.com,
It is clear that Western capital markets no longer generally regard gold as money. It has been relegated to the status of a risk asset, useful collateral, or simply a commodity with a history of being used as money. This is a mistake.
The great Austrian economist, von Mises, wrote that true money had to survive the regression test. Put simply, it must be established whether or not money had value before it was used as money; otherwise it is only a money-substitute which ultimately depends for its value on confidence. So we need to ask ourselves two questions: what value did gold have before it was used as money, and what value did modern currencies have before they were used as money?
The answer to the first question is clear. Anyone who has seen the Alfred jewel in the Ashmolean Museum in Oxford (over 1,000 years old), the Snettisham torc in the British Museum (over 2,000 years old), or Tutankhamen’s gold mask in the Cairo Museum (over 3,000 years old), regard these fabulous items with astonishment. They are simply priceless, being desirable beyond reckoning. There is therefore no doubt that gold, the major element in all these objects, survives von Mises’s regression test. Furthermore the Aztecs and Incas in the New World, completely isolated from Eurasian values, held the same human view.
Paper currencies do not survive this test. They started as money-substitutes for gold or silver and over time lost all their convertibility. As a result they now depend for their value on confidence alone.
Traders and investors in capital markets are unconcerned about this distinction. Instead of realising that Gresham’s Law applies, that bad money has driven out the good, they regard currency as the only money for modern times. This is understandable, because they draw up their accounts and pay their taxes in currency. They invest to make a profit in currency. And so long as they can hedge currency risk by acquiring capital assets, they can manage investment portfolios without recourse to gold.
For these practical reasons mainstream opinion holds that gold is no longer money; but this complacency is likely to be undermined by events. We already see the four major central banks committed to issuing their confidence-based currency in increasing quantities, to finance their governments and to prop up the banks. We have yet to see how they intend to stop doing so.
The effect of monetary inflation was usually predictable. It raised asset prices first, which we are already seeing. It then raised prices of raw materials and manufactured goods, as people started to spend encouraged by low interest rates, leading inevitably to rising prices and rising interest rates. The sequence of credit-fuelled economic cycles is all too familiar.
This time, given the likelihood of a financial and collateral crisis from falling asset prices, the economic cycle is in grave danger of a short circuit. Rising prices for raw materials and goods are likely to be driven by falling confidence in fiat currencies, instead of rising confidence in the economic outlook.
It will be the ultimate test for unbacked currencies. Everyone wedded to modern currencies will then wish they had been aware of von Mises’s regression theorem.
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Is this you?
http://www.youtube.com/watch?v=aX8lx9Mglcg
Good vid.
Good one.
I am extremely pro-gold, but I also enjoy Squeeky's stuff. Go get 'em girl! (But, it would not hurt for you to join the 1%..., the 1% who own gold)
DoChen:
Thank you!!! I try to make my comments fun sooo even people who think I am wrong will at least enjoy reading them. My father does own a little gold, kinda by accident. He wishes he had sold at $1,800 but like he says, if he was perfect he wouldn't be no fun to be around.
Squeeky Fromm, Girl Reporter
He wishes he sold it at $1800 today - if it goes to $18,000 he'll change his mind!
Then he'll wish he could buy more. Trend chasers never learn....
So that is why you mock gold savers? Father issues?
So sorry for you. Keep saving in paper. Having lots of paper is gonna do a lot of good when you're cold.
And winter is coming.
My father does own a little gold, kinda by accident. He wishes he had sold at $1,800 but like he says, if he was perfect he wouldn't be no fun to be around.
Squeeky Fromm, Girl Reporter
Your Dad willl wish to God he had bought more at 1800, when the reset starts.
Your "poem" inspired my creative juices
.....
my dick is humongous
it's covered in fungus
from pokin' all dem hoes
dat be livin' amungus....
ZHedgers fail to realize that "wrap" Royalty is livin' amongem........
btw, my lawyer just called and said I'm being subject to an IRS audit.........
google "What hasn't obama lied about" to find out why......
bwaaahahahahahaha
GoldBug reply to PaperGirl: I will respect your attempt at poetry here but there need to be some edits because it's fucked for flow. I am not going to rewrite anything but simply delete a few things and italicize a few things you might want to reconsider. Consider it a free gift.
Common Cents
An Epic Poem by
Squeeky Fromm, Girl Reporter
Poor Melvin was in Georgia
Where on business he'd been sent.
His wallet had been stolen,
Lord, he did not have a cent. < rewrite
But Melvin was a Gold Bug,
And he had a Krugerrand,
Tucked inside his loafers
'Cause he liked it close at hand.
Off to Piggly Wiggly
Melvin walked without a care.
After all, he had some gold
He'd buy some groceries there.
Melvin filled his grocery cart.
It came to just about
One hundred thirty dollars,
Melvin whipped his gold coin out. <-WTF?
He took his little pocket knife
And then shaved off a sliver.
Just about one tenth he thought,
And this he tried to give her.
But Lulubelle, the checkout girl
Was having none of that.
And thought perhaps he had been
In the sun without a hat. (that?)
So Melvin gave the Gold Bug speech
About how Gold IS money.
Lulubelle, she called the cops,
Who did not think it funny.
"Boy, are you a Communist???"
"Or maybe just a freak???"
"A foreign agitator???"
Or a Yankee con man sneak???"
Sooo, Melvin tried to tell the cops,
About the price of Gold,
And how his little Krugerrand
Would pay his debt tenfold. < weak assertion even for what you are attempting here. Try harder.
Now Melvin thought his logic
Would secure a quick release.
Instead they hustled him to see
The Justice of the Peace.
"Judge, we got this fellow here,
We don't know what to do.
He's got some kind of foreign coin,
That he done cut in two."
"Now theory's nice, young man," he said
"But law is not your sayso,
Sooo, let this be a lesson:
There ain't nothing wrong with dollars.
Use a little common sense,
And, ignore Internet scholars!!!
There, at least now it does not sound 100% full retard anymore even though it still is.
ManF:
Thank you for your critique. I usually edit these things over a few times. The only line that I am not real fond of is the last one, It needs to scan better. On some of the other ones, when you are doing 7 syllables per line, you can slip in an 8 and a 6 here and there. Plus "Out in the sun without a hat" is a fairly common saying in the South. It indicates that one's crazyish behavior may the result of a heat stroke.
As far as the values, I based the Krug on $1,300 per ounce so the poem would be relevant for a few more days at least. One tenth of that is $130 or the amount of groceries. In toto, the coin could cover 10 x that amount if worth $1,300.
But, thank you for taking the time to offer me advice! I am far from perfect.
Squeeky Fromm, Girl Reporter
Not a problem as I am far from perfect as well. Oh well, I saw what you did as a rough draft. Actually, you have a lot of very well done stanzas in that poem and that is why the weak ones stick out. Even though I disagree with your premise and content, I can not deny that there is something there as far as some talent. I have read plenty of your other posts. Other than bashing Goldies on ZH with cleverness, do you have any other interests with your writing? I would say that there are some undertones in your writing that I agree with. It's not that I disagree so much as it is just that those days, which we all recall, are long gone and never to return.
Who is John Galt?
Manip:
I'll probably do some novels one day. Blogging is fun, but kind of depressing, too. People's beliefs are mostly based on emotion, and facts and reality seldom intrude. So, I just do hinky little doggerels. And an occasional sonnet in proper rhyme scheme. Here is one that I wrote for people who worship Obama. I call them the Obotski.It came with a big picture of The Lady of Shalott floating downstream in her skiff:
I Am Thy Fool
by Squeeky Fromm
How do I worship thy One-derfulness?
Shall I measure slobber by the barrel,
Or celebrate thy Blessed Birth in carol
Circulated free by the Main Stream Press?
Or shall I be discreet, and not confess
Nor speak of fascination so feral?
Hiding away Love’s risque’ apparel
As if it were but some blue stain-ed dress.
Yet, when every momentary stutter
Or pregnant pause is cause for happiness,
Must I draw the shades and close the shutter?
There, in Dark, lest thrill’d legs and lips a-drool
Proclaim, in involuntary mutter
For all the world to know. . . I am thy Fool.
Squeeky Fromm, Girl Reporter
Please, please make it stop....
Manip: You know, if you like good poetry, you might try this guy. I once paid him $20 to write a poem just to screw with somebody, knowing whatever he wrote would suck big time. Boy did I ever get my money's worth.
http://charlestanz.wordpress.com/2011/02/14/thank-god-it-is-only-chlamydia/
Squeeky Fromm, Girl Reporter
http://www.quotes.net/mquote/73260
Stupid female runt = dumb reporter cunt. Haiku 2 u
Where's that little tighty,Squeeky.....the girly reporter...?
I know she is hiding around here somewhere...!!!
The girl just don't get it.
Why is gold better than silver?
The standard 16:1 ratio is based on the actual proportion of physical silver to physical gold in existence in the earth's crust.
Why should I buy gold, other than it it is easier to store/conceal? Silver is historically undervalued.
Only "reasonable" explanation that I have read is that the PTB will have to 'let gold go' and control 'peg' the price of silver cuz itsa 'industrial metal' needed for economic exspansion......
You've learned your prayers well, but your preachers may have less than Papal Infallibility. Is that claimed 16:1 ratio based on mass or individual atoms? Something so precious ought to be valued by the atom, and not something so capricious as an ever-changing standard of weight, don't you think? After the Big Reset, we both know they're going to be taking atoms for a Slurpy at 7-11. One thing though, the USGS has the mass ratio at 25:1. Maybe those ancients were not good geologists?
And what's the calculation? Is the current gold price the base, in which case silver is undervalued, or is the current silver price the base, in which case gold is overvalued? Is there an arb there?
And do I add in the labor value associated with extracting and refining? If I don't consider associated costs, but just the elemental ratio value, then damn, are Beverly Hills and the Hamptons overvalued! I mean, those houses sit on a bunch of mostly silicon, and are made of what? Carbon, calcium and sulfur in the gypsum, maybe some copper? Add it all up and even Lloyd's place is probably only worth about $3.95, and that's even if I use the gold crust elemental ratio. And oil? Hell, that's only the carbon bonds that make it a convenient fuel, but given carbon's crust ratio and using silver price as the base, a gallon of gas ought to be nearly free.
Time to re-write all those economic textbooks, I think. Even the Austrian ones. Forget all that supply demand stuff, it's all about crust ratios at the elemental level. Maybe Robert Friedland is the new Paul Krugman.
But here's a tip, just between you and me: rhodium. Ignore that nasty 90% drop, that was clearly MANIPULATION! Just as RhodiumCore. Given the crust ratios---and rhodium is a platinum group metal, so it's precious---rhodium should be $2700 if the silver price is the base, and $6200 if gold is the base. And forget about the PGM's ugly stepsister, osmium. Off the charts. Frankly, if anything IS money, it's osmium. I just checked, too, and www.wizardofosmium.com is free. Get it and you could be the next Jim Willie.
Havin' some fun lest PM threads become a broken record of prayer and blasphemy.
I suggest Iridium.
Chindit:
I like the cut of your jibe!
Squeeky Fromm, Girl Reporter
You're both too clever by half. That's 3 clevers between the pair of you!
Time to re-write all those economic textbooks, I think. Even the Austrian ones. Forget all that supply demand stuff, it's all about crust ratios at the elemental level. Maybe Robert Friedland is the new Paul Krugman. But here's a tip, just between you and me: rhodium. Ignore that nasty 90% drop, that was clearly MANIPULATION!
************
You haven't got a fucken clue and it's very clear by your ridiculous comparisons- the men that built the China/Berma link (Chindits) were all true soldiers that showed up every day- right or wrong-
I have a feeling you are not a good soldier and won't show up- should you be proven wrong-
You have some more studying to do. Gold is superior to Silver for use as money. Among the reasons: (1) Gold is inert, while Silver rusts; (2) Gold stores more value in the same volume of space; (3) Stock to flow ratio: (gold is not consumed) - nearly all gold mined still exists, while Silver is consumed in the process of manufacturing other goods. Only gold is money. Silver is a money substitute. This isn't to say you should prefer one over the other - indeed, it's theoretically possible that one day Silver could be more valuable than gold -- but know why you're buying it!
silver historically has the longest succesful run as money in china in excess of 300 years and i believe the word for silver translates to money in many languages argent etc... only gold is money is fofoa spoiling what was otherwise a decent bit of work...real historical study would give silver the practical edge as use as money. Ask your self is no of gold coins ever made>no of silver coins ever made..... therin you may get a better answer
I would say both the 'density of value' and 'stock to flow' ratio can be considered both positive and negative for silver. Lower density than gold makes silver good for groceries/daily purchases. Lower stock to flow ratio means stocks of silver are being consumed, or have been. There is not that much silver that can flood the market. Most of the heirloom silver has already been melted down. Dwindling stocks + industrial demand = ???
in EU gold is tax-free but silver is considered industrial metal and is taxed with VAT (around 20%)
Sooooooooooooooooooooooooooooooooo.....
Who is buying up silver rounds at 23.67......price has been hanging there for weeks.......
How about this for an observation.
US, EU and in general, Western Banksters and Governments have stripped gold of its money status - at least at the common man, retail level. This gold stirpping has been physical as well as figurative. Faith in fractional reserve fiat money has replaced gold as a transactual and store of value basis.
Asia, Russia, China, India and most of Arabia still consider gold (if not transactional,) as a store of value and the protector or inter generational wealth. This is the tug of monetary war being played. Its the FED, IMF and BIS against billions of individuals from China, India, Asia, etc. Compromise does not appear to be coming from the West. For them, its FIAT or bust.
Which is easier to do. Convince billions of Asians that FIAT money is the way to go or wake up the American and European sheeple on the viability of gold? Anyone care to bet how this will turn out?
I think the damn Austrian will win in the end. The Damn barbarous relic.
The question is, can I hang on till that happens.....
Zero Debt: I theoretically believed in sex .... as a young lad .... when I finally got laid .... I became a Sex Bug ! Gold and Silver are money .... because they are shiny and easy to find .... at night when you stumble out of a bar .... and you need them to pay the hooker !
Dr. Doom was ranting about physical gold buyers the other day. He did not explain why he cared that the buyers were going to lose money though he maintained that they would. He felt that gold bugs were distorting the market. I think his real beef was that it was affecting the paper gold market where he likes to play.
Sounds like it. Soaring physical demand has proven very bearish for the paper crap during the last months.
He should have shorted the paper instead. Or rather, short paper long rock.
Matter of simple time, I said it 2 years go and nothing's changed.
"Only a fool looks for logic in the chambers of the human heart"
http://youtu.be/r0Sy4twXSn0
Fuck the juice crew ........
My Pseudo says it all.
I'm not that blind to just give Gold the money aspect, but things which can be easy converted, cut into pieces and which simply stay around for long enough. There is hardly any Gold lost, we might not reach it always but it's not gone. You can put gold into the salties waters and still it remains. It's easy, stable and can be portioned to whatever you like you can make it thinner than a hair and it still is gold. It barbarous, but it still stands the "proof" of time and the best of it all. Governmant can not print it... So it's near ideal. And therefor we should go back to a proven record of the success with Gold as money.
But I know the fiat-money believers will try everything (beyond any rights of course) to keep there "paper" and they will work against gold whenever and whereever they can. They still will not be able to get it all and it will be quite a task to destroy it.
So let's hope we get back to Gold as money and take back our freedom from big government, big banks and big gangsters....
http://en.wikipedia.org/wiki/Argument_from_authority#See_also
Ages ago, the government main task about coins -or money, or whatever you call it- was to certify the weight and fineness of the precious metals -gold, silver or bronze- they were made. This is, authority assures value: proper weight and purity.
But, in the Middle Ages, some kind of superstition came upon the government -the state-: that the simple act of government confers value upon money. The legal doctrine of "valor impositus" was borne: a governor -king, prince or any kind of authority- can impose the same value over coins containing a smaller amount of the precious metal.
Moreover, in order to charge the cost of the raw material and the minting cost, the government discovered "seignorage" -it was just a question of time-: a fee charged to cover the cost of minting. But when the certifier of weight and purity of money issued, the determiner of the quantity of money to be issued and the receiver of "seignorage" are the same and the one -some kind of Holy Trinity- the perfect storm is unleashed.
This monopoly -forced, legalized and worst of all, normally taken as pursuing the common well- has gone as far as issuing pure "fiat" money out of thin air. Adding fractional reserve banking to the formula and hyperflation is surrounding us.
Please, consider reading Prof. F.A. Hayek "Denationalisation of Money".
Which is more stable and a better store of value? Physical Gold forged in collapsing stars or colliding neuron stars, or Bernanke Bucks (FRN's) typed into the computer somewhere at the Federal Reserve?
"So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed."
- Ben Bernanke, 60 Minutes interview. March 12, 2009, http://www.cbsnews.com/stories/2009/03/12/60minutes/main4862191_page2.sh...
"The relative average abundance (of gold) in our Solar System appears higher than can be made in the early universe, in stars, and even in typical supernova explosions. Some astronomers have recently suggested that neutron-rich heavy elements such as gold might be most easily made in rare neutron-rich explosions such as the collision of neutron stars."
-http://apod.nasa.gov/apod/ap080518.html
"Only in a supernova is it possible to create atoms with 30 protons, 40 protons, 50 protons or even 60 protons. Nature prefers even numbers for stability, but every so often, the star will forge an odd-numbered atom, a real rarity: gold! Gold is a rare, odd-numbered atom with 79 protons. For every single gold atom in the universe, there are 1 million iron atoms..."
- http://www.npr.org/templates/story/story.php?storyId=7397200
sadly, the money masters will never allow an alternative currency, so saying it over and over doesn't make it true. :(