Gold is the ultimate anchor of trust

So says a representative of the Dutch Central bank on Twitter:

3 Likes

Question

If the system collapses what sort of values would gold have?

I am curious how you would see that as value? Would you sell the gold then?

6 Likes

Really, what is gold useful for? Yes, there are a few, but, if the grid irrevocably collapses, I would much rather be a Amish farmer with a solid team of horses, and the machines they pull, than have a few tons of gold.

Steve

8 Likes

I am interested in how the OP clarifies things.

1 Like

Me Too! But I’ve no chance of doing that so I must look for an alternative.

There are stories of people buying blocks of flats or houses in Germany and Venezeula with an ounce or two of gold after the currency has collapsed but these are probably just stories.

Since the USA reneged on the Bretton Woods agreement gold has gone from $35 to $2,000 dollars an ounce. A return of 8% pa according to Excel. In the last 10 years or so this growth was around 3% pa and has been outperformed by the stock market.

So I’m hoping my gold and silver will increase in value, but that’s all it is hope, the same as with my shares and a few other things I hold.

It is after the ‘collapse’ that gold will still have some value with whatever new toilet paper currency we are issued with.

Gold will have value when the dollar, sterling and the euro are all but a distant memory. Why else are the world’s central banks buying all that they can get?

1 Like

You can repair teeth with it but you can’t eat it. :imp:

The Captain

3 Likes

When you buy gold with fiat currency, are you shorting the fiat currency, are you fighting your central bank?

The Captain

2 Likes

I think the words “ultimate anchor” also describe gold’s investment potential.

If you think the world’s economies are going to crash, then maybe it makes some sense. But that means being right about a worldwide economic crash AND the timing of said crash. It’s tough to hit one moving target. Hitting two moving targets is even harder.

I’m a conservative financial investor. I own a small amount of gold as a hedge. But it’s really a lousy investment.

5 Likes

I see it as various things - my gold has increased in nominal value, although, in reality fiat currencies have been sinking against it. It’s an insurance policy against severe economic times. I checked on how many severe economic problems there had been and came across this site that went back to the 1st century where there was a financial crisis due to:

The result of the mass issuance of unsecured loans by main Roman banking houses

How little times have changed :slight_smile:

How much of the need to see hard economic times coming is your own outlook in life? How much of it is based on some FA or TA? Or better yet a modern economic theory?

The last question is key. The reason in my mind is the fiat currency in the US is backed by the GDP. Instead of going to the window and demanding some gold for a gold certificate you go to a local shop and demand some goods or services.

I get that someone buying into gold might reject that definition of fiat currencies.

That definition is in place right now. The idea that the fiat currency has dropped is a mistake in that there are deflationary forces in goods and services. Medicine offers better treatments for fiat currencies, pharma can keep more people alive longer in fiat currencies, luxury productions proliferate for the top 20% in particular in fiat currencies, computer power is a deflationary product and energy production is going to become a deflationary force in fiat currency.

The biggest deflationary force in fiat currencies is manufacturing. That needs the flexibility of a fiat currencies in the exchange precisely of a fiat currency.

Gold, BTC and Eth have a higher transaction cost. This is a difficulty in a modernized economy. The three have values. For trade they are less useful to the general public. As you are pointing out there are times that has not been true.

Why are central and commercial banks buying gold. Just ‘tradition’ according to Bernanke who doesn’t see gold as money:

Well it’s tradition – long-term tradition.

No wonder the economy is where it is :slight_smile:

Bernarke is right, of course. To be “money” it has to be a medium of exchange for most (if not all) commercial exchanges. Just because gold is valuable doesn’t make it money. My house is valuable. My car is valuable. My wife’s jewelry is valuable. None of those are money.

You mean as rich and prosperous as at any time in human history? With the lowest unemployment in half a century? Where even the poor have flat screen TVs and automobiles? Yeah, I guess that’s a problem for somebody.

8 Likes

Yep,

All paid for by credit because:

Less than fifty percent of Americans could afford a last-minute, $1,000 emergency, like an unexpected car repair or visit to the emergency room, shedding light on just how hard inflation and other factors are hitting Americans’ finances.

Not forgetting:

Sounds wonderful :slight_smile:

Back when currency was made of gold, it might have had value. Now, “currency” doesn’t even need paper. Gold is running on “tradition”. Value comes from utility. Food has utility. Fuel has utility. Copper has utility. Gold? Fancy geegaws to decorate yourself. You can only sell gold because someone is willing to pay for it. People are willing to pay for Elvis commemorative plates, with “numbered certificate of authenticity”, too, but I would not want to base the global economy on Elvis plates.

Steve

2 Likes

Hah! I’m sure glad other have chimed in on the “value” of gold. I’ve tried that over the years and it’s like Tinker Bell or a dream. It’s only real as long as you believe it’s real.

At the macro level after some sort of “collapse” countries might agree to pay each other in gold because it’s easier than pricing things in “tons of cardboard” or carrots but again, that speaks to utility and not to “intrinsic value.” And of course, it’s “value” for transactions will have to be defined. So, where’s it’s “intrinsic value.” On the street gasoline, penicillin, Slim Jims, and shoe laces will have more value.

5 Likes

So is the US dollar, sterling, the euro, etc. All of these are at the mercy of governments and banks. If you want to believe that these organizations have your best interests at heart then that’s OK by me!

Gold and silver have no counterparty risk.

1 Like

I am reminded of Al Bundy explaining garage sale dynamics, and counterparty risk. (the net is a wonderful thing. someone uploaded the clip I had in mind)

5 Likes

The thing that is hilarious is that even if countries agreed to pay each other in gold, they wouldn’t move the physical gold from place to place, they would simply use a ledger somewhere and write a negative number in the column for one country, and write a positive number in the column for the other country. Which is pretty much the same as is done today with fiat.

Of course they do! After mad max times happen, when you walk up to your counterparty with a pouch of 30 quarter ounce gold coins and begin the purchase of something, if that counterparty wants to rip you off, they might whip out a weapon and take your entire pouch and throw you out. Then what? Even if you find some sort of authority to come help you, how do you prove those 30 coins were yours?

5 Likes

I’m not sure what this has to do with anything. This has been true throughout human history; there are confirmed records of credit dating back to the Hammurabi Code 4,000 years ago, and you can guess it existed long before that because people don’t write laws about things that don’t exist.

Credit is a double edged sword, obviously. It creates capital for those who don’t have it, but incurs and obligation to repay which some people can’t/don’t. So what? We’ve had credit in the US ever since there was a US, even during those periods when we were on the gold standard.

The History of Consumer Credit in One Giant Infographic.

5 Likes

Or, more likely, the guy has surplus food to sell, and needs fuel. Why should he take your gold coins? If he takes the coins, he no longer has the surplus food, and still doesn’t have any fuel. So now he has to go on a scavenger hunt for someone with surplus fuel, that is willing to trade it for these little bits of metal, that he can’t do anything with. They may as well be “collectable” Elvis plates.

3 Likes