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In the same sense that cans of Campbell's Pork & Beans are money. If they are a store of value and a medium of exchange, you can call whatever you like money.
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Originally Posted by IDtheftV
People keep writing that gold is priced in dollars, but gold is "priced" in every single currency because one does not "buy" gold, they exchange their currency for gold.
Buying gold is the principal means of acquiring it. Like any other asset, you will need to exchange for it something of equal value, most often some number of units legal tender local currency.
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Originally Posted by IDtheftV
Just like every other country that controlled the world's gold supply, "we" ( the US ) tried to stick to a gold standard until the gold essentially ran out.
Actually until -- in its absurdity -- the gold standard became inconvenient (as during wars and depressions), or in the end, completely unsustainable at any time at all.
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Originally Posted by IDtheftV
It's now a "currency" outside of the control of any government and now serves as a reference point for other currencies.
To use gold in commerce, you have to sell it first to obtain units of local currency. The same rule applies of course to cans of pork & beans.
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Originally Posted by IDtheftV
Most important industrialized countries have more reserves stored in gold than in any other form of reserve.
And it just sits there gathering dust like some faded photograph of old. Along with national debt, a national currency today is not backed by gold, but by ALL goods and services produced in the domestic economy.
Gold is not just a commodity. Gold is money. People keep writing that gold is priced in dollars, but gold is "priced" in every single currency because one does not "buy" gold, they exchange their currency for gold.
In the same sense that cans of Campbell's Pork & Beans are money. If they are a store of value and a medium of exchange, you can call whatever you like money.
Soup is not a medium of exchange and neither is gold any more.
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Originally Posted by Pub-911
Buying gold is the principal means of acquiring it. Like any other asset, you will need to exchange for it something of equal value, most often some number of units legal tender local currency.
No, you don't "need" to do anything with it.
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Originally Posted by Pub-911
Actually until -- in its absurdity -- the gold standard became inconvenient (as during wars and depressions), or in the end, completely unsustainable at any time at all.
Convenience has nothing to do with it. When they didn't have enough gold, they made their currency inconvertible.
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Originally Posted by Pub-911
To use gold in commerce, you have to sell it first to obtain units of local currency. The same rule applies of course to cans of pork & beans.
No, you don't HAVE to sell it if the parties agree to just accept the gold or the soup. You are just making up your own rules and demanding that other people follow them.
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Originally Posted by Pub-911
And it just sits there gathering dust like some faded photograph of old. Along with national debt, a national currency today is not backed by gold, but by ALL goods and services produced in the domestic economy.
This is a talking point. National currencies are not backed by anything. You are living in the past. National currencies don't HAVE to be backed by anything.
Being able to exchange dollars - backed by gold - for gold via the government simply became inconvenient and ridiculous.
Eventually, having cash and checks will simply become inconvenient and ridiculous.
Further along, credit cards will follow the same path. In the future, using our phones to conduct transactions will also become obsolete as some other new thing comes along.
There is nothing inherently wrong with fiat currencies or electronic money as long as there are checks and balances on the ability to create it out of thin air.
There is nothing wrong with gold - - -
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- - - just sitting there gathering dust.
So what if it does? You act like this is a big deal. Again, you are making up rules/conditions and expecting others to respect them. I could not care less if some gold has dust on it.
Someday in the future, it will probably be possible to obtain gold in quantities like copper of today and it will no longer be useful as money, but until that day in 100 or 1,000 years, gold will be money.
The fact that YOU don't find it useful when you buy your Pork & Beans isn't any more relevant than the fact that you don't find it useful to use Renminbi to buy it.
The only thing that is useful is for you to use canned goods as a strawman argument.
Monopoly money is not backed by anything. The value in an actual ten-dollar bill is meanwhile evidenced in the fact that you can both demand and receive a taxi ride, a slice of pizza, a movie ticket, or even a couple of cans of pork & beans in exchange for one. A ten-dollar bill after all is simply an IOU in your favor that can be pressed against anyone doing business in the domestic economy. All national currencies (and by extension, all national debt) are simply claims on the output of goods and services produced within the issuing economies. Those real goods and services are their backing. Currencies have value in proportion to the breadth and depth of the baskets of goods and services that stand behind them. The fact that the US produces some 22% of all the real goods and services produced anywhere in the world is what gives US dollars their breadth and depth in the global economy.
forget about all this last man standing stuff and zombie attacks .
i was playing around a fairly new site that can compare all kinds of popular portfolio's in use .
what i found interesting is that many of the portfolio's that use gold in them in fairly high proportions have had real returns over long periods of time on par with more conventional portfolio's that don't .
but the bigger aspect is they tend to have smaller deviations and swings , less losing years and have hit their average real returns more times historically .
it appears that while gold does not usually do much return wise what it seems to do is set a floor when other assets have negative real returns . that floor seems to give the portfolio's better risk to reward , smaller swings and in some cases better returns .
i spent a few hours looking at this stuff and it was a bit surprising . of course the past may not be the present but it does make you think a bit .
gold is an asset that really does not do much more long term then track inflation , if it even does that .
but yet when it interacts at the times other assets falter the mere fact it stays close to a positive real return seems to add more value than the sum of the individual parts .
one of the best performing over time has been the golden butterfly . it has surpassed most others on a risk adjusted basis .
that is a recent creation that tried to take the weakness's of the past under various scenario's that were both good and bad for stocks and fine tune them out .
anyway , you can play for hours here doing all kinds of comparisons .
so as an example looking at a total stock market investment going back to 1972 the real return average is 7.50% , the std deviation is about 17.70% , it lost money 32% of the time and made it's average only 14% of the time .
a classic 60/40 portfolio had a real return average of 5.80% , a std deviation of 11.60% ,lost money 30% of the time and made its average 30% of the time .
now the fun comes : something like the golden butterfly which is 20% cash or short term bond ,20% gold ,20% long term treasury bonds ,20% s&p 500 and 20% small value did very very well considering most of us would never do that because of the gold , the cash and the volatility of long term bonds .
but the combo of the cash or short term bonds with the long term bonds actually act as a barbell with a duration around an intermediate term bond fund . but with a higher yield and a lot more oomph in a flight to safety .
so the golden butterfly clocked in with a 6% real return average , only a 7.80% std deviation , lost money 20% of the time and hit it's average 45% of the time .
that combo was the best risk vs reward out of all the other popular portfolio's . it had a hefty 20% in gold .
you can look at lots of things like sensitivity to the time frame you started as well as any time frames you like on all the portfolio's . kind of adds some new thinking for the use of gold that is not a disaster hedge in a portfolio and in heavier proportions .
we wil have to see how some of these do in a rising rate scenario . so far a lot of froth has been removed from long term bonds and gold making this interesting to watch going forward as if you were starting now . .
...And it just sits there gathering dust like some faded photograph of old. Along with national debt, a national currency today is not backed by gold, but by ALL goods and services produced in the domestic economy.
Indeed. The underlying problem with gold, is that it lacks intrinsic value. It can't be eaten, or burned to keep warm, or used as medicine. It's a good electrical conductor, but is not structurally sound. It's soft and heavy. Aluminum or titanium make more sense as storehouses of value, but they are plentiful and not as aesthetically attractive; and so, they're cheap.
Ideally, an "independent" currency, not backed by a government, would be something that's inherently useful. It would also need to be imperishable. Gold fulfills the imperishable-part. But unfortunately, most useful things ARE perishable… food, water, oil, cloth,… Our problem therefore is that intrinsically useful things don't work as currency; so we need to rely on governments to back artificial currency.
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Originally Posted by IDtheftV
... National currencies are not backed by anything. You are living in the past. National currencies don't HAVE to be backed by anything.
National currencies are backed by nations. The US Dollar is backed by the most powerful military in history, the most prolific scientific and technical enterprise in history, and the most efficient market in history. The Zimbabwean Dollar, however, isn't backed by much of anything. If living in Zimbabwe, I'd much rather get paid in cans of soup, than in their dollars.
Quote:
Originally Posted by IDtheftV
Further along, credit cards will follow the same path. In the future, using our phones to conduct transactions will also become obsolete as some other new thing comes along.
That's probably true. But metal coins or paper bills or checks or credit-cards or phone transactions are just a medium of conveyance. The thing being conveyed – US Dollars – is a claim on the power ans stability of the US government. If the US government defaulted on its debt, or collapsed, or got taken over by a foreign power or internal agitators, then the dollar would collapse. Faith in the dollar is congruent to faith in robustness of the US government. The medium of exchange – coins or cell-phones – ultimately don't matter
Ideally, an "independent" currency, not backed by a government...
We've had some eras in which currency was privately issued. They were both brief and disastrous. The private sector is simply not qualified to many tasks.
forget about all this last man standing stuff and zombie attacks .
i was playing around a fairly new site that can compare all kinds of popular portfolio's in use .
what i found interesting is that many of the portfolio's that use gold in them in fairly high proportions have had real returns over long periods of time on par with more conventional portfolio's that don't .
but the bigger aspect is they tend to have smaller deviations and swings , less losing years and have hit their average real returns more times historically .
it appears that while gold does not usually do much return wise what it seems to do is set a floor when other assets have negative real returns . that floor seems to give the portfolio's better risk to reward , smaller swings and in some cases better returns .
I caught that too when I was looking at all the model portfolios on the site you linked to and thought it interesting. I've always tended to view gold as a doomsday play but using it for the counterbalance effect makes sense once you think about it. At this particular moment the smoothing effect of gold going forward might actually be more prudent than bonds. The model portfolios didn't mention whether they were using physical gold but I'm imagining for most folks that GLD or some such instrument would be an easier holding with the same effect as physical.
Thanks again for linking to that site. It is quite eye-opening.
I'm seeing the same thing for soybeans and sowbellies.
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