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Guest Post: Are There Any Currencies Backed By Gold?

Tyler Durden's picture





 

Submitted by Simon Black of Sovereign Man

Are There Any Currencies Backed By Gold?

Dumbfounded.

That’s the only way to describe the reaction that future historians will have when they look back and study the utter perversion that is our global financial system.

We live in a time when a tiny handful of people have their fingers on a button that can conjure trillions of dollars, euro, yen, and renminbi out of thin air. In the United States, it comes down to one man. Just one.

With a single decision, he controls the lever that dominates the entire economy. When you control the money, you control everything– financial markets, consumer prices, risk perceptions, investment habits, savings rates, hiring decisions, pay raises, sovereign debt, housing starts, etc.  One man.

This irrational, arrogant system presupposes by design that a central banker is smarter than everyone else; that markets are incapable of determining appropriate risk and value; that he is more effective at allocating our time, capital, and labor than we are.

Future historians will probably also be dumbfounded when they see how long people allowed worthless, unbacked fiat paper to pass as money.  It’s extraordinary that most people today happily accept a digital abstraction of paper currency controlled by a single individual as ‘valuable’.

It was more than 5,000 years ago that primitive commodity money was used in Mesopotamia, and it’s been over 3,000 years since metal coins began circulating.  For more than 99.2% of human civilization, money actually meant something… right up until 1971 when Richard Nixon ended any remaining link between the dollar and gold.

Ever since, the US government has refused to acknowledge precious metals as money… yet if the Treasury’s financial statements are to be believed, Uncle Sam is still holding  261,498,900 troy ounces of gold. Let’s dismiss the tungsten possibilities for now and presume that it’s real gold. At today’s prices, the value would be about $437 billion.

Meanwhile, M2 money supply at last count was about $9.8 trillion as of March 12, 2012. This means that roughly 4.46% of US dollars in circulation are ‘backed’ by gold, the rest backed by false promises and goodwill.

In the UK, the government’s Exchange Equalisation Account shows 9,971,000 troy ounces of gold on the books. At today’s market value (1,054 British pounds) and the Bank of England’s most recent statement on reserve balances and notes (259.5 billion pounds), Britain’s gold supply constitutes roughly 4.05% of pounds in circulation.

Simply put, the price of gold would have to rise 20-25 times in order for the US and British governments’ gold assets to match the supply of money in circulation.

In fairness, very few countries hold meaningful gold positions when compared to their money supplies. Even Singapore, generally regarded as having one of the healthiest balance sheets on the planet, holds a mere 2% of its money supply in gold.

(Singapore does, however, consistently run budget surpluses and control two sovereign wealth funds which manage the equivalent of 130% of GDP…)

Lebanon is an exception. According to Banque du Liban statistics, the value of Lebanon’s gold holdings is equivalent to nearly 50% of the country’s money supply. To boot, Lebanese banks tend to have very high liquidity ratios and are willing to open accounts for most nationalities.

The problem with Lebanon is that the country is deep in debt– well over 100% of GDP.

With an additional $30 billion in foreign reserves on the books (i.e. other people’s paper), though, Lebanon does have the capacity to pay off over half of its debt. And there are a number of state-owned companies that could be privatized to generate even more revenue.

Given the how sophisticated government corruption is in Lebanon, though, such solutions may never come to pass. Go figure… the one place on earth where the currency is actually backed by something becomes the next shoe to drop.

Fortunately there is another place worth considering. For now, gold only comprises about 5% of Mongolia’s $4 billion money supply. Not much. But the important thing to pay attention to is the trend.

A few months ago, the government of Mongolia nearly doubled its gold holdings to 3.5 tons. This is a huge move.

Given the massive resources in the country (coal, copper, gold, oil, uranium, etc.), Mongolia is set to become one the world’s richest countries. And I think we can expect them to continue trading out paper reserves for the gold that’s already under their soil.

It’s possible that, if the trend holds, Mongolia’s gold holdings will back 10% to 25% of the tugrik money supply in just a few years’ time. Over the same period, gold holdings in the US, UK, and Europe will probably decline to less than 2% of their perpetually inflating money supplies.

Moreover, bank accounts denominated in the Mongolian currency (tugrik) yield an impressive 13% to 15% for savers.  As far as paper goes, this one actually may be worth betting on.

 


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Wed, 03/28/2012 - 14:32 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

Chinese Copper Speculation Bubble Burst?

...They don't get shipped to end-users because they were bought for speculative reasons," said a warehouse manager at the port...

...The average time these copper stocks spend in bonded warehouses have stretched on to nearly one year from just two months in the past...

http://economictimes.indiatimes.com/news/international-business/chinas-copper-traders-play-yuan-for-profits/articleshow/12435238.cms

Wed, 03/28/2012 - 14:42 | Link to Comment Pladizow
Pladizow's picture

Francisco d’Anconia, one of the central characters in the novel Atlas Shrugged by Ayn Rand, explains the following in his famous “money speech”:

“…Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or the looters who take it from you by force. Money is made possible only by the men who produce… Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into bread you need to survive tomorrow… Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values… Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims…”

Wed, 03/28/2012 - 14:48 | Link to Comment johnu1978
johnu1978's picture

Silver may be the poor man's Gold, but Copper is the very poor man's Gold! :o)

 

-John
Wild Edible Tours
http://www.heartrootnatureconnection.com

 

Wed, 03/28/2012 - 15:27 | Link to Comment THECOMINGDEPRESSION
THECOMINGDEPRESSION's picture

I'm still waiting for the 9 trillion dollar "loss" or "misplaced" or "missing" funds by the FEDS..Anyone know where it went? LOL

http://blog.alexanderhiggins.com/2011/06/14/9-trillion-dollar-missing-fe...

Wed, 03/28/2012 - 18:16 | Link to Comment smiler03
smiler03's picture

I preferred the Simon Black that told us of his journeys around the world meeting Presidents, Prime Ministers and Entrepreneurs.

The same Simon who loves his paid for communal farm in Chile with 7035 partners, the land is pollution free, the most fertile on earth, everything is organic.

He personally backs friendly, obviously honest, chatty people in countries without corruption. Western Union is always the safest way to make transactions with Africans. If you're in New Zealand, your Bolivian bank will transfer your money to Tuvalu within seconds, no charge.

At the shops in Chile he can pay for ultra cheap produce in US Dollars, Swiss Francs or even Zimbabwe dollars, nobody cares, everybody is wonderful.

He has 75 passports and has bank accounts in 529 countries, some of which pay 201% interest per month, even if he's overdrawn.

Simon Simon, come back to us, I miss you!

 

Wed, 03/28/2012 - 17:59 | Link to Comment SilverRhino
SilverRhino's picture

Amazing ....

http://www.khanbank.com/en/670/Fixed-amount-term-deposit.html 

14% Annual interest on a fixed term account.    Try getting that ANYWHERE in North America.

 

 

 

Wed, 03/28/2012 - 18:30 | Link to Comment smiler03
smiler03's picture

Amazing indeed. I presume you'll take advantage.... but.... a few conditions to comply with.. which I'm sure you took into account....

 

Foreigners:
  • Foreign passport.
  • Completed "Account opening application form"
  • Resident permit

Terms:

For nonresidents, the bank opens accounts on case by case basis, which requires additional KYC documents such as (but not limited to) bank reference and employer reference. 

Oh, and the USD interest rate is 6%, I presume you read that or maybe you are thinking of saving in Mongollan tögrögs.

Put your money in there, if you dare. I'm sure the IRS will be very pleased. 

Wed, 03/28/2012 - 18:33 | Link to Comment smiler03
smiler03's picture

I have to say this....

There are some ridiculously ignorant idiots on ZH. When I first found this site I remember telling my Wife, "There are a lot of very intelligent people on here".

I've changed my mind and I'm counting the days 'til I lose it and get banned or beg Tyler to delete me.

 

Wed, 03/28/2012 - 20:53 | Link to Comment prole
prole's picture

But what are we muppets going to do without your especial brand of sarcasm sir?

We already lost Trav/Beavis .. Don't desolate us ....

http://www.youtube.com/watch?v=55fSUqIqaeA

Thu, 03/29/2012 - 01:26 | Link to Comment hedgehog9999
hedgehog9999's picture

Banks do it all the time, they borrow from Fed at near zero% and then buy debt on countries like Brazil, Mexico CETES , etc at 4 to 5 or even 8% in some cases, just leveraging 3 to 1 you have risk free 14%....

scared about not being paid back or currency being devalued?.

No problem!, just leverage a little more and then buy credit deafult swaps while at the same time setting up an equally leveraged short position on the Mexican Peso or Brazil real just in case the bottom falls off on these currencies......

Banks do it all the time , thanks to Ben and their other fed friends, I wish we could borrow that easy and leverage like they can to earn risk free money, everything else is a side show to keep the concern and their tentacles going........

Banks are riddled with schemes like these, hence $700 Trillion in derivatives from which they constantly skiim (suck the interest from most countries in the world.

Technically US T-bonds would require more leverage to earn 14% but then someone has to buy all that debt and fed forces their primary dealers to buy it. But then the fed buys debt back from the primary dealers or takes it as collateral for even more loans to continue this circular process. It can go forward quite a bit longer before it all implodes at some point.

This is helped by the fact that most everyone is playing the same game these days. That keeps relative overall inflation in check....while the standard of living of most everyone except the elites is steadily going down.

At some point it will end, we got a few more years to go..........

 

Hedgehog.

 

Wed, 03/28/2012 - 14:33 | Link to Comment vmromk
vmromk's picture

Hey Bernanke, FUCK YOU

Wed, 03/28/2012 - 15:06 | Link to Comment nuinut
nuinut's picture

Q: Are there any currencies backed by gold?

 

A: Can the currency in question be exchanged for gold.... if so, then it is backed by gold.

 

Why should governments exchange their gold for currency when the marketplace already does this for them, at no expense to govt?

Fact of the matter is the entire system still is and always was "backed" by gold, and this is the only reason that it even continues to operate. Once currencies are no longer exchangable for gold (because no one with gold is willing any longer to exchange it for currency) then the system ends. There is no better metric for this event.

By manipulating both the "price" and people's perceptions of gold, it is made sure that there are plenty of sellers (aka weak hands) and traders who don't understand the role of gold in the monetary system (the bedrock) and are willing to "trade" it willy-nilly and even accept paper claims in lieu of the real thing thus ensuring a continuous flow of gold for currency and the continuation of our celebrated dollar-based system (backed, ironically, by gold).

Don't tell anyone though, okay?

Flow

Wed, 03/28/2012 - 15:14 | Link to Comment manhunter
manhunter's picture

Well said.

Wed, 03/28/2012 - 15:25 | Link to Comment nuinut
nuinut's picture

There is never too much currency nor too little gold, just an incorrect rate of exchange.

link

 

Wed, 03/28/2012 - 21:04 | Link to Comment prole
prole's picture

I agree with nunit (except for the incorrect rate of exchange part)

All Paper scrip are backed by gold at floating rates. Currently Bernanke Bux can buy one ounce of gold at rate of 1660 per ounce with some modest (2%? ~ 6%?) premium. Pound, Euro, Yen same story. Only absolute joke currencies like North Korean JokeWon and Zim Dollar if one even still exists probably no amount can buy one ounce of gold.

When no amount of X currency/scrip can buy one ounce of gold, and the .gov sponsoring the scrip also refuses to honor it by selling gold at the price, then that scrip has officially collapsed. I doubt the US will ever get there, ponzi masters have taken their game to a new level. They can buy print mint tax and control the game to such a level that we muppets are just hamsters running on a wheel, while they laugh and control all.

If you own some fiz you get to hop off the wheel for a while that's all that is my opinion muppet master.

Wed, 03/28/2012 - 15:15 | Link to Comment Ghordius
Ghordius's picture

right you are - and perception is everything...

and, of course, "run budget surpluses" - but this is of course hard - plenty of though choices this way

Wed, 03/28/2012 - 16:18 | Link to Comment hmmtellmemore
hmmtellmemore's picture

A: Can the currency in question be exchanged for gold.... if so, then it is backed by gold.

 

Convertability from paper to gold is always possible, of course.  But the important distinction is that there is no offical "peg" from paper to gold that forces central banks & treasuries to be careful with printing.  If there was, then you could save that currency in cash with less fear of inflation.

Wed, 03/28/2012 - 18:01 | Link to Comment BigJim
BigJim's picture

Indded, convertability of paper for anything of value at all is the test of that paper's acceptance as money.

Fri, 03/30/2012 - 23:18 | Link to Comment mkkby
mkkby's picture

By that definition the dollar is backed by tulips and pet rocks.  Anything you can exchange, right?

Wed, 03/28/2012 - 14:35 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea well the way things are going, there may not be any future historians.

Wed, 03/28/2012 - 14:37 | Link to Comment pashley1411
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I saw it on a Mayan stella, about 850 AD.  "And then they discovered fiat money".   A few more temples, and then the civilization disappears shortly thereafter.

Wed, 03/28/2012 - 15:50 | Link to Comment rosiescenario
rosiescenario's picture

....I think you translated this wrong, replace 'fiat money' with cocaine....

Wed, 03/28/2012 - 14:41 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

In the United States, it comes down to one man puppet. Just one.

Malkovich Malkovich Bernanke Bernanke.

Wed, 03/28/2012 - 14:43 | Link to Comment malikai
malikai's picture

I liked 'Being Ron Jeremy' better.

Wed, 03/28/2012 - 14:35 | Link to Comment rajat_bhatia
rajat_bhatia's picture

try the Indian Rupee. as close to gold as possible, 20000 tonnes of it, in indian households, $20billion of it in a recently discovered Hindu temple

Wed, 03/28/2012 - 14:38 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Last time I checked, the Swiss had enough gold to cover all the Swiss Francs in circulation-- and then some. Although, legally speaking, the Franc has been an unbacked currency for a few decades now.

Wed, 03/28/2012 - 14:42 | Link to Comment akak
akak's picture

Apparently, then, you have not checked for 60 or 70 years.

For many decades, the Swiss Central Bank held a 40% backing of the nation's total money supply in gold, but even that requirement was abolished by the referendum of 2000, after an insidious pro-bankster campaign and propaganda barrage led by the IMF.

Wed, 03/28/2012 - 14:45 | Link to Comment Quisat_Sadarak
Quisat_Sadarak's picture

He who controls the specie controls the universe!

 

Wed, 03/28/2012 - 14:46 | Link to Comment akak
akak's picture

The printer has awakened!

Wed, 03/28/2012 - 15:29 | Link to Comment tmosley
tmosley's picture

Specie must flow...

Wed, 03/28/2012 - 15:19 | Link to Comment Ghordius
Ghordius's picture

...and some "help" by the US Government. And the British. And the French. And...

though, in truth, the currency was getting too "hard" - it's though to have a very hard currency while the others soften continuosly, this is why currency wars happen at all.

Wed, 03/28/2012 - 18:04 | Link to Comment BigJim
BigJim's picture

Yes, one of the conditions of entry to the IMF is removing a currency's peg to gold, because the IMF was set up along with Bretton Woods, which stipulated that only the USD was pegged to gold, and everything else was pegged to the USD.

Stupid Swiss. Still, they held out longer than the rest of us, you have to give them that.

Wed, 03/28/2012 - 14:36 | Link to Comment SilverIsKing
SilverIsKing's picture

He makes it sound like FRNs are worthless pieces of paper.  They are backed by the full faith and credit of the US Government.  Who the hell made up that line, "full faith and credit of the US Government?"

I must thank them for the laugh.

Wed, 03/28/2012 - 15:52 | Link to Comment rosiescenario
rosiescenario's picture

....so your saying at one time it was backed by a "credit" which has now morhped into a "debit"...so each FRN represents a share in the Fed's deficit?

Wed, 03/28/2012 - 14:36 | Link to Comment yabyum
yabyum's picture

I am powerless to say what my country will do. However the house of yabyum is backed by PM's

Wed, 03/28/2012 - 19:05 | Link to Comment perchprism
perchprism's picture

 

So also is the House of PerchprisM.

Wed, 03/28/2012 - 14:37 | Link to Comment Theta_Burn
Theta_Burn's picture

Future historians will be shocked that we made it through these dark days at all.

 

 

Wed, 03/28/2012 - 17:02 | Link to Comment mick_richfield
mick_richfield's picture

You have an assumption there that you ought to think about real hard.

Wed, 03/28/2012 - 14:38 | Link to Comment akak
akak's picture

Central planning ALWAYS fails, and Bernanke, in his academic arrogance and cluelessness, is as pernicious and bumbling a central planner as was any apparatchik in the old USSR.

Wed, 03/28/2012 - 15:29 | Link to Comment zerozulu
zerozulu's picture

Bernanke knows what he is doing. It is the 99% who fucken have no idea what is happening with them.

Wed, 03/28/2012 - 14:39 | Link to Comment Vincent Vega
Vincent Vega's picture

From now on I'm going to demand that my employer pay me in the 4.46% of USD backed by gold...problem solved.  /s

Wed, 03/28/2012 - 14:40 | Link to Comment Freegolder
Freegolder's picture

Eurosystem gold reserves: 65% and rising. Enough said.

Wed, 03/28/2012 - 14:44 | Link to Comment akak
akak's picture

But with no formal or practical tie between those gold reserves and their increasingly debased fiat currency, also meaningless.

I don't know where this wild notion comes from that the euro is somehow more "hard" a currency than the dollar, the yen, the pound, or any other piece of shit fiat currency imposed on us by near-totalitarian governments.

Wed, 03/28/2012 - 14:48 | Link to Comment manhunter
manhunter's picture

Wrong. You can go in any bank in Europe and exchange euros for gold, at the 'floating price'. This is much more powerful than a fixed gold standard.

Do you know what % of reserves gold made up at the beginning of the euro? Hint: less.

 

Wed, 03/28/2012 - 14:48 | Link to Comment akak
akak's picture

Wrong. I can do the same thing in the USA or Canada --- that does not in any way make either of the currencies of the USA or Canada "backed by gold".

Wed, 03/28/2012 - 14:54 | Link to Comment manhunter
manhunter's picture

You can get gold from the teller window in USA? Which one?

Again, not gold backing, exchange reserves. There is a difference. See the quote from ANOTHER below. The euro will survive, not that the fate of the euro matters to me. Freegold is our destination with or without the euro.

Wed, 03/28/2012 - 15:03 | Link to Comment akak
akak's picture

I will NEVER put my faith in ANY government-issued fiat currency, under some mythical Freegold scenario or in any other.  Anyone suggesting or advocating that we MUST always continue using government-issued, unbacked fiat currency, instead of free market money, is either a dupe for TPTB or a monetary saboteur.

The issuance of money MUST be divorced from the state, just as religion has been, and for even better reasons.

Wed, 03/28/2012 - 15:03 | Link to Comment manhunter
manhunter's picture

It doesn't matter what you put your faith in. It matters what the Giants put faith in, and they have chosen gold. The euro was designed for them, not you.

The euro is a reserve currency for trade that is not also trying to be a wealth reserve. It solved the Triffin dilemma by not trying to be as good as gold - its juts a trade currency. The Euro is a product that the marketplace will freely choose to conduct trade (not to store wealth), because:

5/22/98 ANOTHER (THOUGHTS!)

If the Euro does fail, gold will become the "world oil currency". We do know this full well, "the Central Banks will hoard all gold and buy any offered if this new European currency does not work" and "debt currencies fail". If this does come, no paper asset of world economic system will survive, nothing! Not a good thought, no? Thank You

 

Wed, 03/28/2012 - 15:23 | Link to Comment akak
akak's picture

The Euro is a product that the marketplace will freely choose to conduct trade

Why would the free market ever chose an unbacked, government-issued, infinitely inflatable fiat currency, when much better choices are available?  (or would be, anyway, in a truly free market).  When has the free market EVER made such a choice, when such a choice was available?    WHY do you continue to advocate for monopolistic, totalitarian, government-controlled currency over free market money?

Your argument makes no sense, and is contrary to ALL of monetary history.

Wed, 03/28/2012 - 15:25 | Link to Comment manhunter
manhunter's picture

Because a transactional currency is more efficient than settling trade flows in physical gold.

As Victorthecleaner says: Since the ECB has never claimed that the Euro were as good as gold, they need not redeem any Euros for gold. If somebody purchases gold with their Euros, these Euros continue to circulate. The Euro is explicitly advertised as a transactional currency, but not as a store of value. Gold is the store of value. This is Free Gold, the separation of the store of value from the medium of exchange, i.e. from the credit money that forms the transactional currency.

http://victorthecleaner.wordpress.com/2012/02/22/currency-wars-why-the-united-states-cannot-return-to-a-gold-standard/

Wed, 03/28/2012 - 15:32 | Link to Comment akak
akak's picture

Well, given the choice, I would NEVER chose to accept or use government-issued fiat currency --- nor would many millions of others, I dare say.  So in your supposed Freegold scenario, are those such as myself going to be PREVENTED from exercising our freedom of choice in regards to money and FORCED to use your shitty government fiat?  If not, then your pie-in-the-sky scheme is going to almost instantly collapse in the face of the shunning it will receive from myself and all those who refuse to accept fiat.  If yes, then fuck you and fuck it.

Wed, 03/28/2012 - 23:05 | Link to Comment lookma
lookma's picture

Yes, peoples can use whatever they want for the MoE, and they will.  

But they will save in gold.

Wed, 03/28/2012 - 15:32 | Link to Comment tmosley
tmosley's picture

>>Implying that current transactions are settled with physical dollars.

>>Implying Another and Co are all idiots.

>>Implying this time it will be DIFFERENT!

Wed, 03/28/2012 - 17:24 | Link to Comment Zero Govt
Zero Govt's picture

Akak  -  spot on.

we have numerous shills dissing the current (monopoly) money system only promoting another (monopoly) money system as the 'answer'

beware our saviours, for they are full of the same shit

Wed, 03/28/2012 - 17:33 | Link to Comment akak
akak's picture

Indeed ZG. Although I am not sure that FOFOA is one such monetary shill, I do reject his implicit support of government-issued fiat currency, as opposed to having a free market in monetary matters (such as should exist in ALL matters).  However, the real wolves in sheep's clothing are those lying, malicious bastards Bill Still (the Fiat Shill) and Ellen Brown (the Money Clown) --- they have repeatedly gone FAR out of their way to denegrate and disparage gold, misrepresent and outright lie about many aspects of monetary history, and defend government-issued and controlled fiat currency.  Beware those two disingenuous and duplicitious monetary hucksters!

Wed, 03/28/2012 - 23:03 | Link to Comment lookma
lookma's picture

akak,

You will be pleased to learn FOFOA *does* not support anything in terms of the transactional medium, he just acknowledges that there will be competition and fiat will win for the transactional medium.

http://www.ecb.int/pub/pdf/scpops/ecbocp77.pdf

http://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/Luther_ASSC.pdf

 

Wed, 03/28/2012 - 15:36 | Link to Comment Ghordius
Ghordius's picture

wonderful exchange - IMO you are both right in principle and have both very valid points.

Akak, the EUR was designed for currency war, for a possible reserve currency role (though more by the flexibility of accepting new joiners), and as a trade-block currency for a possible trade war. It's a modern trade currency.

And the "Giants" (in truth all europeans) of FOFOA in europe never stopped believing in gold as the main storage for liquidity, it's the US that tried to get gold out of the way. Complete different set of perceptions - 1971, the "Nixon Shock" was shocking for us, not for you. Hence the clear "float" of the gold assets on the ECB's balance sheet, among other things.

manhunter, you forgot one little detail: the EUR was also designed as tool for common european political goals. If it breaks, nobody has patriotic misgivings. It does not even have faces on it so that you don't develop any emotional attachment. So it's also disposable, if really, really, necessary. For a very high political price.

Wed, 03/28/2012 - 15:48 | Link to Comment akak
akak's picture

Interesting thoughts and observations, Ghordius.

I just bristle, though, when I read these Freegolders always implicitly defending government-issued, value-stealing fiat currency, and arguing AGAINST freedom in the monetary sphere. The fact is that if their Freegold scenario were going to be a natural outgrowth of the free market, then it would already have happened in the past; since it never has been observed, then I suggest that their theories are flawed.

Wed, 03/28/2012 - 16:31 | Link to Comment Ghordius
Ghordius's picture

;-) bristling does you good... not at all sure about the history thing, though - is there a place for the historic tax-gathering in your "free market" scenario? A tax-gathering-token is a government tool, after all. Taxes have a longer history, in europe, and where often politically more important than free markets. And currency competition is something that europe has experienced much more often than the US.

Wed, 03/28/2012 - 16:13 | Link to Comment manhunter
manhunter's picture

The currency war is over. The dollar is checkmated. It must hyperinflate or die. Hyperinflate and die. Same thing.

Wed, 03/28/2012 - 16:36 | Link to Comment Ghordius
Ghordius's picture

also not sure at all - and not so sure at all if the EUR will not trail the USD until the end - for political and trade-political reasons...

anyway, aren't freegolder supposed to talk about gold more than the EUR? I thought it was only an example for how much europeans think about gold vs. how little the Americans do, thanks to FDR and Nixon.

Wed, 03/28/2012 - 23:14 | Link to Comment lookma
lookma's picture

But with no formal or practical tie between those gold reserves and their increasingly debased fiat currency, also meaningless.

Hi!  FYI, a free market physical gold price >> a government imposed price.

Just sayin'.  :)

Wed, 03/28/2012 - 14:42 | Link to Comment q99x2
q99x2's picture

No the historians will look back and see how the masacre of the bankers took place shortly after the NWO failed. The NWO failed because those in the military had much more to gain by siding with the population and made the very easy choice of turning on their masters. Trials were later held which led to the total annihilation of the Rotheschilds, Rockefellers, Bushs, Harriman and so on. That is how historians will look back on the time just after there was not a single currency backed by gold.

Wed, 03/28/2012 - 14:44 | Link to Comment manhunter
manhunter's picture

6/14/98 ANOTHER (THOUGHTS!)

"Your question of Euro gold backing? The Euro will not be backed or fixed in gold. It will, as Michael Kosares (USAGOLD) notes, be the first "modern currency" to hold true "exchange reserves" in gold. It is important to understand that "exchange reserves" of gold are much more powerful a tool for currency defense than gold backing! In this system, gold must be traded in a "public physical market", in that currency, Euros! As such, the Euro can "devalue gold" (Euro price of gold falls) thereby making it strong in gold! In today's world, this will happen as a "strong Euro physical market" displaces and defaults "the old dollar settlement paper gold market"! The dollar will become"weak in gold"!

Wed, 03/28/2012 - 14:44 | Link to Comment walidsassia
walidsassia's picture

well i m lebanese and i agree completely with what is written in the report, and i would like to add the lebanese currency has been attacked and debased after the civil war by typical western backed governement that made the country under huge debt .

NB: during the civil war the lebanese lira was stronger and more valuable than now after almost of 25 year of peace.

 

Wed, 03/28/2012 - 14:46 | Link to Comment devo
devo's picture

Does all this gold coming out of the ground threaten prices?

Wed, 03/28/2012 - 14:47 | Link to Comment LongSoupLine
LongSoupLine's picture

long Mongolia...

Wed, 03/28/2012 - 14:47 | Link to Comment alien-IQ
alien-IQ's picture

It does not boil down to "one man". He's just the man you can see...but he's merely the mouthpiece for the men behind the curtain...and their names, you will never know.

Wed, 03/28/2012 - 17:12 | Link to Comment Zero Govt
Zero Govt's picture

i think we could have a good guess

Wed, 03/28/2012 - 14:48 | Link to Comment Joebloinvestor
Joebloinvestor's picture

The US LIES about its' gold holdings.

The gold "in reserve" is the un-mined gold (approximated for skewing the #) on FEDERAL land.

Wait till the other countries catch on to this neat accounting LIE (like Greece).

Wed, 03/28/2012 - 14:51 | Link to Comment Bluntly Put
Bluntly Put's picture

"Ever since, the US government has refused to acknowledge precious metals as money… yet if the Treasury’s financial statements are to be believed, Uncle Sam is still holding  261,498,900 troy ounces of gold. Let’s dismiss the tungsten possibilities for now and presume that it’s real gold. At today’s prices, the value would be about $437 billion.

Meanwhile, M2 money supply at last count was about $9.8 trillion as of March 12, 2012. This means that roughly 4.46% of US dollars in circulation are ‘backed’ by gold, the rest backed by false promises and goodwill."

There seems to be a gross miscalcuation, with the treasury book value of gold at $48/ounce, for a holding of roughly $12.5 billion, the dollar is backed by gold at a ratio of around 717 to 1.

 

 

Wed, 03/28/2012 - 15:28 | Link to Comment infiniti
infiniti's picture

M2 is not money in circulation. Using the monetary base of roughly $2.8 trillion and the mkt value of gold at roughly $500 billion, the coverage ratio is around 15%. Probably one of the highest in the world, which is why the DXY hasn't collapsed despite the explosion in monetary base during the last decade.

 

Chinese Yuan, I would guess, is probably less than 5%.

Wed, 03/28/2012 - 16:41 | Link to Comment ginunn
ginunn's picture

M2 is not currency in circulation. The monetary base is not currency in circulation. Currency in circulation is provided by two measures supplied by the St. Louis Fed as data series: WCURCIR and Currency Component of M1. They're both show just over $1 trillion which means if the US gold supply is marked to market at say $1750 per oz, the dollar is backed by gold to somewhere around 43%. If you doubt this, read Table 10 of the statistical release H.4.1 at http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab11. Note that the gold certificate account, which is the legal claim on almost all of the US gold, is valued at $42.22 per oz, not market value. For a discussion see The Gold Holdings of the US.

Wed, 03/28/2012 - 14:54 | Link to Comment ILikeBoats
ILikeBoats's picture

Sounds like Mongolia is the next hideout of Al-Qaeda.  We must liberate the Minerals, I mean, Mongolians, from their oppressive clutches...

Wed, 03/28/2012 - 23:02 | Link to Comment Vlad Tepid
Vlad Tepid's picture

Via Russia or China...no other way in or out.  Being eternally sandwiched between two authoritarian regimes never looked so good.

Thu, 03/29/2012 - 00:26 | Link to Comment Kobe Beef
Kobe Beef's picture

Uganda and the African Rift Valley are probably easier targets. We gotta stop that Kony guy, ya know, he's like evil or somethin.

Thu, 03/29/2012 - 00:27 | Link to Comment Kobe Beef
Kobe Beef's picture

...and free the Darfur oil fields, I mean people.

Wed, 03/28/2012 - 14:55 | Link to Comment Misean
Misean's picture

"This means that roughly 4.46% of US dollars in circulation are ‘backed’ by gold, the rest backed by false promises and goodwill."

No it doesn't. 0.00% of Feral Reserve fiat is backed by gold, or anything else. And USeless Gov't debt is backed by it's ability to loot the citizenry of the planet.

Wed, 03/28/2012 - 15:00 | Link to Comment Bluntly Put
Bluntly Put's picture

Bills are federal reserve notes and liabilities. Minted coins are not.

Wed, 03/28/2012 - 14:58 | Link to Comment TLT
TLT's picture

Important information.

But the author lost himself in the middle of the explanation.

The easier solution when hyperinflation comes will be re-evaluate the price of gold by, lets say, 30 times.

Debt/GDP will go back to 30% in most countries and you can keep "the system" alive another few decades.

If a country holds too much debt, gold will flow to one with surpluses and its currency will devaluate against others that have more gold.

Thu, 03/29/2012 - 02:22 | Link to Comment hedgehog9999
hedgehog9999's picture

This will never happen as the major indebted nations in the world Today are for the most part GOLD holders. (Italy, US, Germany, Turkey, etc.) and even in hyperinflation they would simply chop a few zeroes to their notes write off most of the debt ( a la greece) and carry on borrowing to continue their need to exist while impoverishing ther subdits even more.......from the level at the time they do that.

My bet is something more significant like a war , disease or a major nature originated cataclism will erase the population to such a degree that a reset will occur by default......The pay later scenario has been chosen already!!, the question is how do we meander toward that scenario from here???... really hard to predict..... too many variables and unknown unknowns as some infamous asshole said one day........

 

Hedgehog.

Wed, 03/28/2012 - 15:03 | Link to Comment Pancho Villa
Pancho Villa's picture

Even when a government claims that a currency is backed by gold, that backing is only as good a government's promise which is generally worth very little. Eventually the government will borrow too much (to finance a war or just to stimulate the economy) and will be forced to devalue the currency.

The only case in which government backing might be worth something would be if the government were prohibited from borrowing. Otherwise there is a huge conflict of interest when the entity which is supposed to maintain the value of the currency is also a debtor that stands to benefit from devaluing the currency. But even assuming that the government has no debt, it might still be tempted to devalue the currency if its TBTF banks get too deeply into debt.

Generally what you might expect with a gold backed currency would be fairly long periods of price stability, separated by periodic devaluations.

Never trade your physical gold for paper!

Wed, 03/28/2012 - 15:04 | Link to Comment Dingleberry
Dingleberry's picture

I want someone like Ron to ask the Bernank ONE question: if gold is in fact not money, then why do ya'll central bankers hoard it? Can any non-gold bug answer this?

Wed, 03/28/2012 - 15:09 | Link to Comment Dr. Acula
Dr. Acula's picture

Already happened

http://www.youtube.com/watch?v=2Dj9v9s9buk

Paul: Why don't they hold diamonds [instead of gold]?

Bernanke: Well, it's tradition.

 

Wed, 03/28/2012 - 15:22 | Link to Comment Dingleberry
Dingleberry's picture

Thanks for the replies. But "tradition" line is a bald face lie, even balder than the Bernank's head. I suspect he knows the real deal. Or maybe he is so intelligent that he has thunk himself stupid.  Regardless, when TSHTF, gold is all there is (aside from weapons).

Wed, 03/28/2012 - 16:15 | Link to Comment andyupnorth
andyupnorth's picture

Sadly, considering a digital abstraction of paper currency controlled by a single individual as ‘valuable’ is the new tradition.

Wed, 03/28/2012 - 15:11 | Link to Comment Bluntly Put
Bluntly Put's picture

I'm not a gold bug, just an observer. From observation it's simple to understand the function is too eliminate the circulation of gold as money. The more they hold, they less gold is available to serve or function as money.

Gold as money is only useful when it is available to be used as money, this it the problem with permanent backwardation in gold, as when it enters permanent backwardation it will not be available to liquidate existing debt. The result will be that all debt can only collapse in one huge smoldering heap of waste.

 

Wed, 03/28/2012 - 15:53 | Link to Comment Cugel
Cugel's picture

That theory doesn't work because until you get down to atoms, you don't need a minimum amount of gold to serve as money. As the supply goes down, the price goes up, or rather a smaller amount of gold is used to conduct transactions of equal value.

What kills gold as money is not central banker-imposed scarcity, it's central government imposed capital gains tax.

Thu, 03/29/2012 - 02:38 | Link to Comment hedgehog9999
hedgehog9999's picture

And that's why gold per se is doomed as money, it will go up and down, etc, mostly down I believe as it is becoming increasinly clear that paper is winning and the nations that control most of the world economy Today have a more than vested interest in keeping a lid on gold ( a managed commodity) just as interest rates are managed.

Gold bugs are dreaming gold as money when 50% or more of transactions in the world are done electronically and banks (who fully control the payments system) will NEVER institute an electronic payment system based on gold or a gold backed curreny and that is because for governments to continue to exist need to keep borrowing ad infinitum..............and there you have why governments and banks have to remain in collusion forever.

how they don't get that is beyond me!!!

Hedgehog.

Wed, 03/28/2012 - 15:18 | Link to Comment Piranhanoia
Piranhanoia's picture

Albert Shanker?

Wed, 03/28/2012 - 15:22 | Link to Comment loveyajimbo
loveyajimbo's picture

Too bad the "One Man" is a dumb Keynesian asshole...

Wed, 03/28/2012 - 15:27 | Link to Comment dolly madison
dolly madison's picture

It is my great hope that historians look at the way it is now from a perspective of some major ills having been fixed in this time period.  I hope this goes down as the time period where the people got more power.  I hope they teach in schools how much better it is for the people to vote on issues, not just representatives because when the few rule the many, the few are subject to bribery and threat.

The few cannot fix the current problems.  Any that seriously try now will be offered a carrot and a stick, and any that don't take the carrot will get the stick.  The evil is too entrenched to be fixed by a few.  We need the powers of recall & referendum at the very least.  But, those powers will not be handed to us easily.

Wed, 03/28/2012 - 15:27 | Link to Comment Seize Mars
Seize Mars's picture

It would appear that IB doesn't cover the "Tugrik."

Wed, 03/28/2012 - 15:43 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

So....WTF with gold getting bitch slapped today...???

Fuck off and die PPT memebers.

Wed, 03/28/2012 - 15:44 | Link to Comment Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

'When you control the money, you control everything...' Exactly.

 

So the more important question is who will CONTROL the money. Gold is a control mechanism. So what happens if Bernanke controls gold money? I suspect he'll still be able to manipulate the mechanism.

Wed, 03/28/2012 - 15:53 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

USA Goverment has their gold ind "deep storage" and ETF's

Too fuckinfunny.

Wed, 03/28/2012 - 15:54 | Link to Comment alchemystic
alchemystic's picture

If I were a mexican, wait a minute, that song is, If I Were A Carpenter, but I am a Carpenter, just not a mexican Carpenter, I'm an Irish man, so no work for me, ya know,I don't speak their language, so I eat soup with peas, "No Beans For Me!"

Wed, 03/28/2012 - 16:06 | Link to Comment GIABO
GIABO's picture

That is why every 2 weeks I buy my usual 5 gram .9999 gold and 5 ounces of silver. Every 2 weeks for the last 2 years

Wed, 03/28/2012 - 16:35 | Link to Comment AchtungAffen
AchtungAffen's picture

"Given the massive resources in the country (coal, copper, gold, oil, uranium, etc.), Mongolia is set to become one the world’s richest countries. And I think we can expect them to continue trading out paper reserves for the gold that’s already under their soil."

 

Generally countries like those tend to be very poor. At least, the majority is poor and disposessed while a small elite is very rich as you'd originally expect. Who was that political thinker who theorized on the ground reality of resource rich countries being poor? Can't remember now.

Wed, 03/28/2012 - 17:10 | Link to Comment Zero Govt
Zero Govt's picture

"One man"

One Monopoly

everything that follows (ie. shit) is a direct result of that collosal systemic error

The Solution: a free (competitive) market ...no rules. 

Wed, 03/28/2012 - 17:15 | Link to Comment umbertoz
umbertoz's picture

Uzbekistan gold supply constitutes roughly 130% of Sum in circulation.

Wed, 03/28/2012 - 17:37 | Link to Comment boogerbently
boogerbently's picture

The cure is coming:

Drop the price of gold.

Buy up the gold.

Tie currency value to gold.

Run up the price of gold.

(continue printing)

Wed, 03/28/2012 - 19:06 | Link to Comment Praetorian Guard
Praetorian Guard's picture

Enough of the gold bullshit!!!!!! They could easily create a basket currency based on a countrys export and natural resources. Tired of the PM horseshit. If and when the shit goes south PM's will not save your ass...

Wed, 03/28/2012 - 21:33 | Link to Comment prole
prole's picture

If you hate gold tell it to Jesus son, not to us..

"On entering the house, they saw the child with Mary his mother; and they knelt down and paid him homage. Then, opening their treasure chests, they offered him gifts of gold, frankincense, and myrrh. And having been warned in a dream not to return to Herod, they left for their own country by another path." Mathew 2

Gold, tears of the sun, Currency of the Gods, the best and sweetest money since King Tut. From King Tut through Jesus time Roman Empire until now this very day Gold is awesome.

Excuse me, "WAS" awesome. According to Praetorian Guard, all the above must have been stupid.... "Enough of this gold bullshit!!!!!!!!"

Thu, 03/29/2012 - 22:44 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Export can't support a currency because it swings too wildly, requires stable energy availability & cost, requires military control over too many shipping routes & puts the control of one's currency into the hands of your export customers. If it would have worked someone would have tried it already.

Even getting a trade balance, not extreme deficits or surplus, would only be a stepping stone and next to NO ONE does that. Ever.

That should have been your first clue that you're way off base.

If & when the shit goes south, precious metals ALWAYS save your ass. Proven thousands of years of history - it is THE one answer.

Wed, 03/28/2012 - 21:06 | Link to Comment Stuck on Zero
Stuck on Zero's picture

All currencies that can be used to trade for gold are gold-backed.  The problem with our gold backed currency is that it takes more and more of it to turn back into gold.

Wed, 03/28/2012 - 23:09 | Link to Comment alexwest
alexwest's picture

another idiotic post from someone who knows nothing

#
Given the massive resources in the country (coal, copper, gold, oil, uranium, etc.), Mongolia is set to become one the world’s richest countries. And I think we can expect them to continue trading out paper reserves for the gold that’s already under their soil.
#

allow me to retort. 'Given the LACK OF massive resources in the country, Japan has became one of richest countiee in the world, and it has been for man ymany years'

well what about Russia? this country is filled w/ whole Mendeleev table (he was russian too).. is it rich? average life expectancy is about 60-65 years for man there. its about like in Africa.

what about Brazil? similar path... have you ever been in Rio, asshole?

junk
alx

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