Topic: The Real Story of Gold - page 3. (Read 6736 times)

I agree with RealBitcoin, silver has been the money most widely used throughout history among the 2 precious metals, and about the ROI, that is something that I agree as well, one of the reasons for that is that most uses of gold actually preserve gold (examples, jewelry, coinage, etc) while a significant amount of the industrial uses of silver, destroy it. (or make it very difficult to recover)

Very much interested information from this thread. Hopefully the OP got his answer.

Thanks for a thoughtful response.  I agree that most people don't really understand money (and its relationship to the economy.)


We would certainly like currency to support prosperity, but in my opinion, trying to control currency to bring about prosperity is exactly equivalent to the argument for economic central planning that if we don't control food production, the population will starve.

In the rare modern examples of money that was not controlled by the state, i.e. the Italian Renaissance and the Scottish free banking era, there was great prosperity.  When money and finance were left to market forces, there was also enough credit and financial innovation to support economic growth.  The difference was that there was no artificial (government-driven) support for debt, so lenders took the full hit when borrowers couldn't repay.  As a result, lenders were careful and there were none of the bubbles and financial crises we see today.


I think the key issue here is not limited quantity (which also applies to Bitcoin)) but fungeability (divisibility.)  If gold becomes mainstream money, the market should provide 100% reserve gold banking that allows depositors to transact with electronic gold.  This would solve the problem you describe.


This is good in theory and in an ideal world.  But the elites of this world don't support such an ideal.  The amounts of dollars and closely related assets far outstrip any conceivable economic output of the US, at current prices (and the same could have been said about the issuance of paper sterling by Britain when it was dominant.)  The reason is that issuance of money is an easy way to get "free" wealth and power, and to "solve" problems, for the elites, and no human being has proved to be able to resist the temptation to over-issue money.

While your idea is theoretically sound, there is no practical way to set up incentives to implement it.  So we are now left with the second-best option, which is a limited-supply currency that no one can expand.

Given that there's no practical and ethical way to tie the quantity of money to real economic output, what medium money takes becomes really pretty arbitrary.  I would agree that this facilitates speculation initially, but the steady state should see convergence to some standard with an ethical distribution of wealth.  (If South Africa doesn't produce much real wealth, eventually, most of the diamonds would go to other countries and S. Africans would have to work for a living.)


Speculators have an incentive to be right, since they lose money if they are wrong.  Thus, they serve a socially-useful purpose by correcting bad market signals (and especially those sent out by governments to confuse the public.)  For example, speculators in gold today are probably responsible for the US not issuing even more money (and thus destabilizing the world economy more.)  When too many people want gold, it becomes difficult for the authorities to issue too much money and still keep gold prices down.

Traceability also has both pros and cons.  Governments in modern times have, most of the time, engaged in some degree of financial repression.  (A mild form is suppressing interest rates while issuing assets to drive inflation higher than interest -- thus making savers lose wealth automatically by staying in safe assets; a severe form would be capital controls as practised by China to stop savers dumping yuan to get into dollars, at present.)  While traceability helps fight crime, it also helps financial repression, which ultimately helps the elites temporarily by propping up asset values, but also makes the eventual crash worse.

I`m not saying gold=silver, because it clearly is not equal.

But at current silver/gold rates, you can see that from a healthy 20:1 ratio the ratio now is over 60.

So just from an investment standpoint, if the precious markets kickoff, you could make a bigger ROI with silver, than with gold.

That is the question, wtf. Part of that gold had evidently been sold to France (well, exchanged for the US dollars), and a few other smart govts in the 60s. And you guess, France is now the second largest holder of gold...

...

bryant.coleman

Yes, it would cost money.  $5 million indeed might be too low, I was making a mental calculation in hatching that number.

An adequate team would indeed be necessary to do a reasonably thorough job of an Audit.

But, I put "statisticians" in my list for a reason.  Were it me (oh, what fun!), I would walk into each room at Ft. Knox, and say: "unstack that pallet right there.  OK, take THAT bar in the middle with that number, core it, and check its (core) purity.  Oh, and THAT one over there in the corner.  And THIS one in Room B, melt the whole thing down and assay it."  Etc.

I think that a well-chosen PORTION of each gold pile would be enough to satisfy everyone that the gold amount is pretty close to what they claim.

I don't think it would cost a fortune.  And it SHOULD be done.  Perhaps it would cost the government MUCH less, as I am sure there would be LOTS of volunteer experts (high visibility!) who perform some of those services GRATIS!

^^^^ I am afraid that it will cost much more than $5 million. The auditors need to check the authenticity of gold, which itself can be quite time consuming as well as expensive. Then they need to determine which bullion bar belongs to which department of the United States treasury. It is quite time consuming, but not impossible to put in to action if we consider the total worth of the gold.

Great thread, lots of useful information here that I did not previously know, and I follow gold closely.  Clearly gold is a BIG subject.

I believe that an "Audit of US National Gold" would cost peanuts, relatively speaking.  Hell, even I could put a team together to do a proper audit (that would include several kinds of specialists like metallurgists, testing equipment, auditors & accountants, statisticians, security, credible representatives from the press, etc.) and do a reasonably good job, for, say $5,000,000 (it would cost, but $5 million is PEANUTS vs. the value of the gold we supposedly have).

Such a comprehensive Audit, visible to the world and done by competent specialists, would END the the matter once and for all.

It is an official story, lol. But there are no audit reports from that time. The US government is said to have lost those reports (for the audits held in between 1974-1986), wtf

The last complete audit was in 1953, but partial audits were conducted several times after that. For example, a partial audit in 1986 covered around 97% of the government owned gold held in Fort Knox. That said, only around half of all the American gold is stored in Fort Knox. Out of the 7,716 tonnes of gold being held by the United States Mint, some 4,583 tonnes is being held at Fort Knox. The remainder is being held at Denver (1,364 tonnes) and West Point (1,682 tonnes).

https://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm

Gresham's Law

I think if you really categorize precious metals as money, then I think only silver is a real "precious metal" money.

Gold still suffers from lack of divisibility which is a core property of money. Prices are generally relatively too low for gold, so this makes trade very difficult with standardized gold coins or gold cubes.

So for everyday goods standardized silver coins, cubes or rounds are a better physical "money".

Perhaps if you want to go higher then use electrum coins with standardized purity ratio, but other than that gold is only for rich people.

But i told you guys already that even if these metals serve as money, bitcoin is still way better than them.

The last credible audit of the gold at Fort Knox (the US gold) was carried out in 1953, that is more than 60 years ago...

Does anyone know the last time a government actually  proved what amount of gold they claim?

...and what happened to all of Gaddafi's?

Hi I want to share my personal opinion about this. The problem here imo lies in the majority of the population don't know really well how money works in our economy.

What makes a currency a source of prosperity?

• Must ease the transaction of assets: for that it must be easily accesible, used worldwide by any person and be easily exchanged (gold does not fit in this rule since it has a limited quantity)
• Its market capitalization, ie total volume of currency, and its rate of issuing by each country or entity must be tied to some form of quantifiable asset owned by the agent wanting to issue the currency: here lies the elephant in the room, what most experts think is the root of the cyclical economic crises the world has; the Fractional Reserve Banking system that allow the banks to only have a 10% of the total of deposits backed by cash-on-hand available for withdrawal. This extends to loaned money so the 10% rule can be reapplied to issue 10 times more money than the bank has over and over again. A recent example of the implications of this system is the intervention of the Bank of China to save its economy by lowering interest rates on its loans. Companies on the verge of bankrupcy can ask for loans at low interest rates to rebuy their stock and inflate its price artificially without any real growth of the company. The stock market will reflect an economic growth but this will be all fake. This, in my opinion will lead to a bigger economic meltdown when those loans are overdue.
• Must be widely accepted and trusted: gold is falsifiable and difficult to track down, you need some form of verification of the metal and when you need to make big transactions it becomes a problem to check every ingot. The only solution that gold contribute is that one mentioned before of representing a quantifiable asset to back currency issuing, for example if the reserve banking system would be abolished. A better quantifiable asset would be an accurate measure of a country industrial power, enterprises, natural resources, but I admit gold (as diamonds, gems or any other scarce resource), in this case would be more comfortable to measure than a country real assets and resources. But imagine we use diamonds, South Africa with its diamond mines would be allowed to issue much more currency than the rest of the world when its growth is not much bigger if not much smaller than other countries. For that reason it is better to establish an inventory of the total of resources, enterprises and industries available to each country or corporation as a mean to establish its assets. Any other way is opening the door for speculation and repeat past mistakes. What leads me to my next point.
• Must not be object of speculation: as I mentioned before when you tie the market cap to an accurate measure of a country assets you can't create artificial scarcities or flood the market with stocks to drive the price down (in this case the trackeability helps to fight this as well). You know something is wrong in the market when you can buy contracts for several tons of aluminum when you aren't going to use that metal for anything productive, just to speculate on the price. Is famous the story of Wall Street brokerage firm that bought several thousands heads of cattle to speculate on their price but forgot to sell them and they ended paying more than what they invested to rent a place to store the cattle and feed them. To avoid speculation a currency with a trackeable source is specially useful since it allows to know if the buyer is an enterprise in need of the resource or a speculative party. Gold is difficult to track and our paper money can be tracked but needs intervention by the government. Some cryptocurrencies allow a easier tracking by normal citizens and even its automatization and implementation of more security measures as they are open source and constantly evolving, adapting to the new needs of the population.

As you see cryptocurrencies comply with most of these requirements and if not they can evolve and address those needs. Gold only use is to give some form of material backing to the currency issuing but is a lacking way to quantify value as mentioned in the post. The only flaw of cryptocurrencies is they need some sort of computational power, a physical support open to attack or malfunction but that happens with any form of currency we choose as anything can be stolen. When cryptocurrencies improve the redundancy of their storage wallets and the majority of the population learn to use it the malfunction flaw will be addressed.

Gold has always had political relationships it is simply due to governments holding large reserves of it
When its devalued its usually to harm or leverage out one country or another.
Geopolitics etc.

I think his argument was going to be directed to a government operating on resources based energies, etc. The whole argument about why gold is one of the best storage of wealth is because it has been around from centuries. Not anything as rare as gold has been around for so long, and if it has, it was unable to capture the potential value people have invested in it. Gold fails in functions for an appropriate currency or storage of wealth but it has one of the most major feature: VALUE AND TRUST OF PEOPLE.

Energy? How do you stockpile energy? 
Do you stockpile barrels of oil? Gold is a lot easier to store? It is a no-brainer to use gold as a store of wealth, rather than oil.

Because a gold bar will be the same gold bar even in a thousand years, and by holding gold governments assume they will exist no less than that, lol ("Tausendjähriges Reich")...

Wait...why?  What's so special about gold, when so many other elements (rarer than gold or not) are just as expendable, but even more applicaple (energy, etc.)

Why do we hoard gold from each other....why can't we see the 'gold' in fort knox (in a way that does not compromise its security)?

Nothing makes sense any more.  The government is fighting the same sort of thing they pretend to venerate.