Gold Standard (millionaires, economy, financial, money)
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As of 30 June, 2017 Sweden's old banknotes are no longer valid. New banknotes are worth 44.3 billion SEK. On 30 April 2017, the Riksbank owned 125.7 tons of gold. At the same date, the market value of the gold was 45.4 billion SEK.
Sweden's banknotes and coins peaked in 2007 at 108.517 billion SEK. The widespread use of credit cards and phone apps has resulted in the reduction of the cash supply. The loss of most of the large denomination banknotes also means that the use of cash as a "store of value" instead of bank accounts is minimal.
So for the first time in decades a country's gold is actually more valuable than it's banknotes.
Sweden has 4.04 million troy ounces of gold for a population of 10 million or about 0.4 troy ounces per capita.
USA has double that amount or about 0.8 troy ounces per capita. So US gold has almost the same value as all banknotes of denominations less than $100. Of course c-notes are the bulk of the value of US banknotes.
Sweden abandoned the tie to gold on 2 August 1914 over a century ago. Sweden has not declared that it's new currency is backed by gold, but it could theoretically do so.
The gold standard is generally not viable in a modern economy, because it is deflationary and makes credit or borrowing prohibitive
Understood.
Cash is considered a liability to the central bank, but it has no nominal credit risk, as the central bank, cannot go bankrupt.
The money that is use the most in society is commercial bank money. The banks’ so called deposits repayable on demand, that is, deposits with a high level of liquidity that can be used for payments, amounts to around 2,200 billion SEK in Sweden, which dwarfs the 44.3 billion SEK in banknotes.
Commercial bank money is by definition a claim on these banks. However, banks may be forced to wind down, sometimes even going bankrupt. This means that commercial bank money, does entail a risk - even if the risk is slight. If the bank fails, you may not be able to redeem your entire claim on the bank from its bankruptcy estate.
Sweden is the first country in roughly the last 45 years to reduce it's supply of banknotes and coins so that it could be covered by it's gold reserves.
Gold is barbaric nonsense. We live in a world of bitcoins now.
Sweden does not talk much about their gold. The number one issue is issuing of e-krona ( a state sponsored crypto currency, Europe's first).
Quote:
Let me also be clear about the reason. If the Riksbank chooses to issue e-krona, it
would not be to replace cash, but so that the e-krona can act as a complement to
cash. The Riksbank will continue issuing banknotes and coins as long as there is demand
for them in society. It is our statutory duty and we will of course live up to it.
Let me also, for the sake of clarity, repeat that the Riksbank has not decided to issue
e-krona yet, but to investigate the possibilities. The low use of cash in Sweden means
that this is more of a burning issues for us than for most other central banks. Although
it may appear simple at first glance to issue e-krona, this is something entirely new for
a central bank and there is no precedent to follow. There is a long list of fundamental
questions that need to be answered.
Swedish reduction in banknotes has nothing to do with gold. People just aren't using the cash. Gold standard is like the Stone Age. Doesn't work.
Quote:
Originally Posted by PacoMartin
Sweden has not declared that it's new currency is backed by gold, but it could theoretically do so.
I did not imply that the reduction in banknotes had anything to do with gold. I am just saying the reduction now makes it possible to say they have enough gold to back the banknotes. No country has been able to do that for almost half a century.
Norway, for instance could not say something similar as they sold their gold bars 13 years ago.
It would be almost a PR stunt if they made such an announcement. It is unlikely that they would do so, as they probably want the rights to sell their gold like many other countries.
The gold standard is generally not viable in a modern economy, because it is deflationary and makes credit or borrowing prohibitive
Yup.
The world is no longer on the gold standard.
It's on the credit standard now, and that's an entirely different thing. The ability of a nation to pay its short-term debts is now much more important than the gold it possesses.
Credit moves around a lot, lot faster than gold or any other old thing used to value a nation's wealth. It happens in the wink of an eye. Possession of even currency is nowhere as important as it once was nowadays, and currency possession replaced the gold standard quite a long time ago as the de-facto standard of a nation's standing in the world's economy.
Moving cash around is as problematic as moving gold around. That's why credit is so important nowadays.
Walter White had that problem in Breaking Bad. With a storage unit stuffed with currency, he and his wife couldn't spend it fast enough, or spend enough of it to shrink the pile, and holding on to so much of it was dangerous.
And in the end, they weren't able to use most of it anyway. That's how life is these days.
It's on the credit standard now, and that's an entirely different thing. The ability of a nation to pay its short-term debts is now much more important than the gold it possesses.
I don't think you are getting the purpose of my original post. I know how the world works. I know that the world cannot return to the Gold standard. I am saying that Sweden has a rare opportunity that no other nation has to pull off a media campaign.
Currently Sweden has FOREX in five currencies.
Sweden Allocation of assets in SEK (bn)
USD 240.4
EUR 155.4
Gold 45.4 (125.7 tonnes)
AUD 23.3
GBP 18.9
CAD 13.3
Sweden may be tempted like many other nations to sell it's gold an turn it into another foreign currency.
But, as of June 30, 2107 Sweden has reduced it's valid banknotes to the point that they could say that their cash is backed 100% by gold. Now Sweden has not had a major banking crisis since the early 1990's, but that's not to say that if the Euro goes bust, that it won't effect Sweden.
If Sweden says it's banknotes are backed by gold, financial experts would probably say it is meaningless in the big picture. But what would it mean to the rank and file around the world? Would Chinese millionaires looking for homes in Europe be more tempted to buy in Stockholm?
In 1914 the Swedish crown was fixed at 2.48 crowns per 1 gram of gold. Today 1 gram of gold is worth ~ 328.2 Swedish crowns. I am not suggesting that the SEK be fixed to the price of gold at any rate, only that banknotes will be issued at less value than the gold in storage. It is unlikely that they would want to print more than that anyway.
Wouldn't the publicity value far exceed the US$5 billion you could get by selling the gold?
Last edited by PacoMartin; 07-09-2017 at 08:35 PM..
I don't think you are getting the purpose of my original post. I know how the world works. I know that the world cannot return to the Gold standard. I am saying that Sweden has a rare opportunity that no other nation has to pull off a media campaign.
Currently Sweden has FOREX in five currencies.
Sweden Allocation of assets in SEK (bn)
USD 240.4
EUR 155.4
Gold 45.4 (125.7 tonnes)
AUD 23.3
GBP 18.9
CAD 13.3
Sweden may be tempted like many other nations to sell it's gold an turn it into another foreign currency.
But, as of June 30, 2107 Sweden has reduced it's valid banknotes to the point that they could say that their cash is backed 100% by gold. Now Sweden has not had a major banking crisis since the early 1990's, but that's not to say that if the Euro goes bust, that it won't effect Sweden.
If Sweden says it's banknotes are backed by gold, financial experts would probably say it is meaningless in the big picture. But what would it mean to the rank and file around the world? Would Chinese millionaires looking for homes in Europe be more tempted to buy in Stockholm?
In 1914 the Swedish crown was fixed at 2.48 crowns per 1 gram of gold. Today 1 gram of gold is worth ~ 328.2 Swedish crowns. I am not suggesting that the SEK be fixed to the price of gold at any rate, only that banknotes will be issued at less value than the gold in storage. It is unlikely that they would want to print more than that anyway.
Wouldn't the publicity value far exceed the US$5 billion you could get by selling the gold?
Some good points. There remain huge swaths of people everywhere whose brains are still stuck on a gold std. paradigm. William Devane sells gold during lunch on Fox News every day. And like you say the Chinese are another swath. That being said, I think the main problem with this relates to quantity. Similar to Switzerland. Both can be safe havens and benefit their respective countries. Just not large enough to service the world.
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