Korean Job Discussion Forums

[keane]

This sure don't look good.

[ontheway]

Very good chart. It shows why we need a gold standard. Price stability over the long term, from 1800 to 1933. During that time period, one dollar was defined as one 1/20 ounce of gold. This is not what people think of as a "peg," $20 WAS one ounce of gold, or one ounce of gold was twenty dollars.

However, it was the Fed, expanding the money supply that caused the run up in stock prices in the twenties, by expanding the money supply. They created money not backed by gold.

The government tried to solve the growing effects of the bubble with the Smoot-Hawley tariff law that caused the stock market to crash.

FDR gradually changed the definition of the dollar, finally settling in at $32 per ounce. In order to steal the wealth of Americans effectively, he had to first confiscate the gold that was in private hands. People who were not net holders of dollar denominated assets were not as badly injured.

(FDR also turned the recession caused by the Fed into the Great Depression by instituting government policies that prevented market forces from shaking off the effects of earlier harmful government policies.)

The difficulties of the financial arrangements after WW2, - the fact that the Fed and other central banks tried to link their currencies, backed variously by gold, dollars or a combination thereof - and then, each central bank inflated its currency, stealing the wealth of its citizens and violating both the law and the principles of a gold standard - led to massive distortions and a variety of currency management problems.

The massive spending by the US govt. led to massive deficits financed by the growing inflation of the money supply, greenbacks printed illegally without gold backing, led to another crisis that Nixon sought to ameliorate by ending the gold backing of the dollar.

The "real" value of the dollar became zero on that day. The fact that people still accept them and that it takes time for the dollar to fall to zero, notwithstanding, people who actually understand money and economics realize that the fall to zero became an academic exercise on that day, estimating the rate of decline, how long it would take, and when the final race to complete collapse would occur.

You can get a better picture of what happened by turning the graph upside-down.

[Atavistic]

[keane]

I read a young adults/kid's book long ago by a well-known author whose name I don't recall, The Forgotten Door. There's a quote from it that I have never forgotten:

"How can a thing have two values?"

In the book, a boy comes from another world - and another culture. It is highly developed, yet lives close to, and in harmony with, nature, using technology and knowledge to enhance what is natural rather than bend it to their will. I see it as the ideal, and may be what is meant by an ecotechnic society.

[ontheway]

Sorry, typo, going too fast.


One ounce of gold WAS twenty dollars or twenty dollars was one ounce of gold.

That means that the dollar wasn't just pegged to gold, the dollar WAS gold. In order to print paper money equal to $20 dollars, the government had to have an ounce of gold on hand to redeem the $20 dollars. The $20 in currency was merely a paper receipt that represented your money, in gold, that was held on deposit. That is what a real gold standard means.

Gold backed paper currency represents gold, just like a hatcheck represents your hat. Imagine that a theater decided that it no longer had to redeem hatchecks with hats. Just let the patrons circulate the hatchecks in place of the actual hats. This, of course, sounds too ridiculous to be believed, but that is the same as ending the gold backing of a currency and replacing it with FIAT money.

But while few people would be fooled by the theater, most have been fooled by the lies of the government about their money.

[huffdaddy]

[ontheway]

With a gold standard, the market price of gold, that is minted gold, not ore or gold with different purities, cannot deviate. That's because, please read:

The $20 per ounce is not the PRICE of gold, rather, the piece of paper that is issued that says $20 represents an actual ounce of gold that is on deposit. That piece of paper that says $20 IS one ounce of gold. Your ounce is on deposit. You can ALWAYS go and get your one ounce for your $20. It is a receipt for your gold. Deviation is impossible.

The $20 IS one ounce of gold. A is A.

These paper dollars allowed people to spend their gold in fractions and to carry paper instead of heavy metal. Of course, back when people were freer, we could also carry notes of $500, $1000 and even $10,000. Those $10,000 bills represented 500 ounces of gold. Much easier and safer to carry a single bill for 500 ounces of gold than to carry the 500 ounces.

Now, to carry 500 ounces of gold in currency, you'd have to carry 4000 $100 bills, and you'd have to hurry and convert your currency to gold before its value fell again.


However, thanks to the Fed, FDR and Nixon, a person who held a $10,000 all those years would have seen his wealth decline from 500 ounces of gold to about 13 ounces today (at about $800/ounce) So, the government has stolen 487 gold coins from that hapless saver.


But, when the Fed printed paper currency WITHOUT having the gold on hand, that was counterfeit. That was illegal. That was theft. It set the stage for contractions and recessions. It set the stage for devaluations and it set the stage for Nixon's eventual betrayal of the American people.

[ontheway]

[huffdaddy]

[ontheway]

Nothing happens then.

Remember, the $20 IS one ounce of gold.

One ounce of gold is always worth one ounce of gold, because it is one ounce of gold.

You are being confused by Fiat money.

[ontheway]

Do you get it yet.

It isn't that someone states that $20 is worth one ounce of gold. It is a gold standard because $20 IS one ounce of gold.


You have a gold coin that contains one ounce of gold. When you mint the coin, you print $20 on the coin. The coin contains one ounce of gold. It will always be one ounce of gold.


Likewise, the paper currency is 100% exchangeable for gold. Take your $20 to the depository and receive your one ounce of gold.


Now, suppose the demand for gold goes up. That means that the value of one ounce of gold will increase relative to other goods and services. So, you could trade your one ounce of gold for more goods and services. But, you still have one ounce of gold that is also called $20. Your $20 will still be one ounce of gold. However, you will be able to exchange it for more things. The price of other goods and serivces will decline when measured in dollars or in gold.

But your one ounce of gold will still be one ounce of gold. And you will still be able to exchange your $20 for one ounce of gold.

[Pluto]

It makes you wonder whatever happened to that guy who invested in 100 ounces of gold 38 years ago. With the price of gold set to go above $1,000 next year. A $3200 investment giving you a return of $1million
I need to get some of my investments in my long term portfolio into some gold stocks/bonds.

Edit: Wiki is a good place to start looking for information on gold investments. According to Wikipedia, just about all of the gold has been mined; roughly 155,000 metric tons exist in the world today. Although gold remains nothing more than a commodity, there is a perception that it's valuable. So while gold is just an arbitrary commodity, there is a constant high demand for it giving it value.

http://en.wikipedia.org/wiki/Gold_as_an_investment

[ontheway]

(Here is a better question?)


Since one ounce of gold is one ounce of gold, why bother to call it $20?


Calling one ounce of gold $20 allows you to trust the deposiory that is holding your bullion and issuing the paper. Perhaps the issuer of dollars is more trustworthy than the issuer of other deposit receipts called something else. It also allows you to break an ounce of gold into 20 smaller, convenient units called dollars. These dollars can then be broken into 100 even smaller units called cents. It means you can make gold transactions in tiny, convenient increments without carrying and measuring the actual gold. At the end of the day, you can aggregate all your various dollar tickets, go to the depository, and claim the gold that your tickets represent. Or, you can just hold on to the convenient paper.

You can still have banks, savings, checking, loans, credit cards and debit cards. They will be able to operate just fine with a stable gold backed currency.


Gold isn't a utopian money system. It is, after all, a commodity. It is, however, a scarce commodity. Scientists are pretty sure that its supply will remain scarce given its relative rarety in the earth and our solar system. And, other than Nicolas Flamel, there are no alchemists who have managed to transform other elements into gold.

Likewise, for thousands of years, gold has retained its popularity and allure. It has been stable for thousands of years. Sure, maybe, suddenly, people will believe it is cursed and abandon gold. This would make your commodity backed currency, that commodity being gold in this case, fall to zero in exchange value. However, gold has maintained its value for thousands of years, and NO gold backed currency has ever fallen, unless it was debased by printing unbacked currency (as was done by the US Federal Reserve).

OTOH, every Fiat currency, that is, currency backed by nothing, and every debased currency that was not restored to full backing, has fallen (see the chart in the OP) to zero over time. The US dollar has lost 97% of its value since 1932 - that's already pretty close to zero.

The dollar is still falling of course, and it can fall 97% more from its present value, and it can repeat that again and again, becoming an infinitesimally small fraction of its origninal value. Or, there could be a sudden run, abandonment and a crash to zero (think the Chinese and the Euro).

Gold, however, has had only minor fluctuations in real value over the centuries. The risk of gold losing all its value is nearly 0%. The risk of the unbacked dollar losing all its value is nearly 100%. And, in fact, if most people weren't frogs being slowly boiled, they'd have hopped out of the pot long ago and realized that the dollar has already lost 97% of its value. Going off the gold standard means you've already got a nearly worthless dollar compared to what it was worth before the Federal Reserve (created in 1913) began the destrution of the dollar in the roaring 20s.

[ontheway]

The coming final collapse of the dollar:

http://www.youtube.com/watch?v=4n3g5lUgkWk



(Look for the quote by Paul Samuelson)

[Ya-ta Boy]