Yup. If the economy collapses and U.S. currency is worth nothing, people with gold will be trying to trade it for, e.g., bullets, penicillin, cough syrup, flour or winter coats. But they’ll have trouble doing it because those who have some of those things will be wanting to trade them for, e.g., bullets, penicillin, cough syrup, flour or winter coats.Why is gold not a commodity like other metals? It has less inherent value than most commodities. You can’t eat it. You can’t build a shelter out of it. You can’t clothe yourself with it. If there were a real economic meltdown in America, one would expect the value of the kinds of pure luxury items made from gold to plummet. If one were expecting an apocalyptic economic event (and I am not), one should stock up on things that are inherently useful, not stock up on pretty metal that no one will want when their stomachs are empty. That gold was used for money at many times throughout history means nothing. So was silver and copper, and paper. All money - whether mettalic money or paper money - bases its value on the beliefs and expecations of those that trade that money. Gold is no different.
Gold is most valuable as money because it has the best characteristics of a good money. People put inherent value on things because of it’s usefulness. Do not think of usefulness simply on terms of its luxuriousness nor its non edibility yet the very important factors that money must have, which items rarely have(thus giving gold great value).Why is gold not a commodity like other metals? It has less inherent value than most commodities. You can’t eat it. You can’t build a shelter out of it. You can’t clothe yourself with it. If there were a real economic meltdown in America, one would expect the value of the kinds of pure luxury items made from gold to plummet. If one were expecting an apocalyptic economic event (and I am not), one should stock up on things that are inherently useful, not stock up on pretty metal that no one will want when their stomachs are empty. That gold was used for money at many times throughout history means nothing. So was silver and copper, and paper. All money - whether mettalic money or paper money - bases its value on the beliefs and expecations of those that trade that money. Gold is no different.
Copper is an industrial metal and it is a commodity. Silver is also an industrial metal and it is also a commodity, even though it has been used as a monetary metal. Gold is different.Why is gold not a commodity like other metals? It has less inherent value than most commodities. You can’t eat it. You can’t build a shelter out of it. You can’t clothe yourself with it. If there were a real economic meltdown in America, one would expect the value of the kinds of pure luxury items made from gold to plummet. If one were expecting an apocalyptic economic event (and I am not), one should stock up on things that are inherently useful, not stock up on pretty metal that no one will want when their stomachs are empty. That gold was used for money at many times throughout history means nothing. So was silver and copper, and paper. All money - whether mettalic money or paper money - bases its value on the beliefs and expecations of those that trade that money. Gold is no different.
Wow! This is a very good explanation of the attributes of money.Gold is most valuable as money because it has the best characteristics of a good money. People put inherent value on things because of it’s usefulness. Do not think of usefulness simply on terms of its luxuriousness nor its non edibility yet the very important factors that money must have, which items rarely have(thus giving gold great value).
Gold has the following characteristics to make it valuable.
To have ALL these features in a money is NOT common thus, the law of supply and demand puts a higher price on gold as money because it makes such a good one.
- It is very durable and will not break or wear easily.
- It is portable, one ounce(comparatively high value) is easy to transport.
- It is not easily mined or copied. This is a very important one. You can not print and print and print gold. You can mine gold yet it is controlled by the economic feasibility of mining gold. This is one of the worst traits of our current currency or any fiat currency because there is no limit to inflation.
- It is easily divisible.
5.It is easily recognizable; it is hard to pass off something that is not gold as gold to someone.
Barter is very, very inefficient. If there is no money, people will invent money.Yup. If the economy collapses and U.S. currency is worth nothing, people with gold will be trying to trade it for, e.g., bullets, penicillin, cough syrup, flour or winter coats. But they’ll have trouble doing it because those who have some of those things will be wanting to trade them for, e.g., bullets, penicillin, cough syrup, flour or winter coats.
This further identifies why gold is so valuable, people need money to have complex and fair exchanges, thus the medium of exchange, aka money! Since they need money to maintain any kind of civilized economy, money is in demand. Now since it is in demand we need a good one, thus bringing us to gold. : DBarter is very, very inefficient. If there is no money, people will invent money.
Thank you : )Wow! This is a very good explanation of the attributes of money.
But people do barter. But I will agree in part.Barter is very, very inefficient. If there is no money, people will invent money.
History says that you are right in the very short run. In the long run however, gold will win. People realize the inefficiencies of whiskey (to easy to produce) or whatever else you are going to try an use for a currency. It must have the characteristics I describe below to survive in the long run.But people do barter. But I will agree in part.
My part of the country was very isolated for a long time. There was no government issued money and no way to get it. So people invented money. It was whiskey. Millers were the source. Farmer would bring his grain to be ground, the miller would take part of it as his payment. Miller would turn it into whiskey and use it to buy the things he needed. It was poured out in bottles of precise measurement. If the thing being bought was worth less than the precise bottle amount, the buyer could pour out a lesser amount to the seller.
Whiskey was valued for itself, kept well and was easily recognizable. Gold does keep well, but that’s all.
If the whole economy really collapsed, there would be a lot of social disorder. Likely, if the money was worthless, the medium of exchange would be bullets of the most popular calibres.
But that’s fantasy stuff, like gold becoming the new specie.
One thing to think about. People who buy gold buy those big coins like Kruegerrands and Canadian Maple Leafs. If they’re really going to be worth what $5,000 is now, how are you going to get change when you want to buy a meal’s worth of food for your family, or a tankful of gas? Not in dollars, you won’t want those, right? Do you really think the grocery guy or the station attendant is going to give you change in gold? No, you’ll give him your Kruegerrand if he’ll take it, because you won’t have a choice.
Finally, gold has been around $1200 for a long time now. For every buyer who believes it will go up, there is a seller who believes it will go down. 50-50 odds at best for gaining or losing.
As Ridgerunner has said, one of the real limitations of gold as money is that for small transactions it is not divisible. There are about 31 grams of gold in a troy ounce, at $1200 an ounce, if I could break the coin into 1 gram pieces that would make them worth about $38 each. Not very useful when buying your morning cup of coffee.Gold has the following characteristics to make it valuable.
- It is very durable and will not break or wear easily.
- It is portable, one ounce(comparatively high value) is easy to transport.
- It is not easily mined or copied. This is a very important one. You can not print and print and print gold. You can mine gold yet it is controlled by the economic feasibility of mining gold. This is one of the worst traits of our current currency or any fiat currency because there is no limit to inflation.
- It is easily divisible.
5.It is easily recognizable; it is hard to pass off something that is not gold as gold to someone.
Silver has been historically used for smaller denominations.As Ridgerunner has said, one of the real limitations of gold as money is that for small transactions it is not divisible. There are about 31 grams of gold in a troy ounce, at $1200 an ounce, if I could break the coin into 1 gram pieces that would make them worth about $38 each. Not very useful when buying your morning cup of coffee.
Copper too, as well as other metals. But it could be anything at all, particularly something that actually has intrinsic value. Silver has a lot more intrinsic value than gold, though not anywhere near as much as other things.Silver has been historically used for smaller denominations.
It’s not all fantasy land stuff once the dollar collapses. Fiat currency does not work, that is why I am talking about this. It’s a matter of social justice. Gold/silver or market money is moral, it does not put so much faith in the hands of government, it puts the government in check. Politicians can not take gold out of a man’s safe, it can however, inflate the 100 dollar bills in your safe away to pay for their war’s and welfare state.Copper too, as well as other metals. But it could be anything at all, particularly something that actually has intrinsic value. Silver has a lot more intrinsic value than gold, though not anywhere near as much as other things.
But this is all fantasyland stuff anyway. Governments can reform their currency and make it all moot. And it doesn’t take gold to do it.
But I bear no ill will toward those who want to gamble on gold. After all, one of these days it (and silver) may yet reach the heights it had thirty years ago. The only problem I really have with these gold bug infomercial posts is that they don’t contain the kinds of warnings that are required of any investment prospectus.
Your statement is premised on the collapse of the dollar, a premise that remains unproved. I agree that the present course of this government, if unchecked, will reduce the value of the dollar significantly over time. But that, of course, assumes no changes, either politically or by the Fed. You may recall that the Fed put an end to the 1970s inflation that got gold up to (inflation adjusted) $2,000 and silver up to $40. It was very painful, but it sure did the job. The Fed can reduce the money supply, just as it can increase it. Granted, the congress and administration can foil the Fed’s efforts, because their spending requires the Fed to fund it. All the same, the Fed can put a very hard squeeze on the value of commodities, and has done it before.It’s not all fantasy land stuff once the dollar collapses. Fiat currency does not work, that is why I am talking about this. It’s a matter of social justice. Gold/silver or market money is moral, it does not put so much faith in the hands of government, it puts the government in check. Politicians can not take gold out of a man’s safe, it can however, inflate the 100 dollar bills in your safe away to pay for their war’s and welfare state.
One last post and then I have to start working.It’s not all fantasy land stuff once the dollar collapses. Fiat currency does not work, that is why I am talking about this. It’s a matter of social justice. Gold/silver or market money is moral, it does not put so much faith in the hands of government, it puts the government in check. Politicians can not take gold out of a man’s safe, it can however, inflate the 100 dollar bills in your safe away to pay for their war’s and welfare state.
The money of choice for small exchanges would still be real money. Real money would be 90% silver U.S. coins minted before 1964. I actually saw this happen in some stores in 1979.But people do barter. But I will agree in part.
My part of the country was very isolated for a long time. There was no government issued money and no way to get it. So people invented money. It was whiskey. Millers were the source. Farmer would bring his grain to be ground, the miller would take part of it as his payment. Miller would turn it into whiskey and use it to buy the things he needed. It was poured out in bottles of precise measurement. If the thing being bought was worth less than the precise bottle amount, the buyer could pour out a lesser amount to the seller.
Whiskey was valued for itself, kept well and was easily recognizable. Gold does keep well, but that’s all.
If the whole economy really collapsed, there would be a lot of social disorder. Likely, if the money was worthless, the medium of exchange would be bullets of the most popular calibres.
But that’s fantasy stuff, like gold becoming the new specie.
One thing to think about. People who buy gold buy those big coins like Kruegerrands and Canadian Maple Leafs. If they’re really going to be worth what $5,000 is now, how are you going to get change when you want to buy a meal’s worth of food for your family, or a tankful of gas? Not in dollars, you won’t want those, right? Do you really think the grocery guy or the station attendant is going to give you change in gold? No, you’ll give him your Kruegerrand if he’ll take it, because you won’t have a choice.
Finally, gold has been around $1200 for a long time now. For every buyer who believes it will go up, there is a seller who believes it will go down. 50-50 odds at best for gaining or losing.
We do not live in a vacumn. The United States does not control the price of gold. The world controls the price of gold.Your statement is premised on the collapse of the dollar, a premise that remains unproved. I agree that the present course of this government, if unchecked, will reduce the value of the dollar significantly over time. But that, of course, assumes no changes, either politically or by the Fed. You may recall that the Fed put an end to the 1970s inflation that got gold up to (inflation adjusted) $2,000 and silver up to $40. It was very painful, but it sure did the job. The Fed can reduce the money supply, just as it can increase it. Granted, the congress and administration can foil the Fed’s efforts, because their spending requires the Fed to fund it. All the same, the Fed can put a very hard squeeze on the value of commodities, and has done it before.
I guess everybody can armchair quarterback this thing. My own personal view is that it is going to be very difficult to resist inflationary forces once the economy starts to come back. The current government has done a pretty good job of suppressing a recovery, but it will not necessarily have the power, forever, to do that. If it loses sufficient power to get its ideologically-based societal revolution done more than it already has, there will be so much pent up demand in the economy that it is likely to surge, and thereby threaten a ferocious inflation. The Fed will feel obliged to dampen that with high interest rates. The only thing the current government can do, if it retains absolute power, is continue to come up with deficit-creating “programs”. Personally, I think its power is due for a steep decline, and soon. Possibly I’m being too optimistic, but I do think voters do eventually opt for reality-based thinking and stop thinking in the dreamland fashion slick salesmen who tout “hope” and “change” encourage. At a point, people do realize the government is not going to pay for their gasoline. In my opinion, a very large number of people are going to realize, and soon, that it is they, not “the rich” (who are too few anyway) that are going to pay for illusory “health insurance” subsidies.
The fear of high interest rates is one of the big reasons businesses won’t borrow right now. It isn’t totally a matter of not knowing the “ground rules” this government has in its collective head, though that’s a big part of it. It’s also a matter of fearing, e.g., 20% interest rates down the road. It will be hard to cure that concern, and perhaps high interest rates are inevitable, no matter what happens. But I do not disbelieve what I think is the majority of business people, who fully expect exactly that. High interest rates dampen the price of precious metals, and have done so very dramatically in the past. I am inclined to put more belief in the considerations of business people than I am in people like the “gold bugs” who have these millenarian visions of things; visions which I consider just as improbable as snake oil promises of “hope” and “change”.
The gold market is just a market. It’s driven by things different from other markets, since gold has very little in the way of practical uses, unlike, say, pork bellies or earth-moving machinery. It is driven almost entirely by pure speculation, not by the underlying utility of the asset itself. To some degree, its future can be reasonably predicted, but only to a degree, and its value can be severely affected by governmental action, such as high interest rates.
As I have said before, I have nothing against people who think it wise to invest in gold. I do think it ethical for such people to give the proper warnings. If, say, I got on here and devoted one thread after another to the virtues of, let’s say, Caterpillar stock, (I wouldn’t, but let’s say I did) I would feel morally obligated to add a warning that there is always a risk in investing; that the value of the stock can be affected by many things, some of which can be discovered by investigation and some of which cannot. I would warn people not to use the “rent money” to buy CAT, or to fail to have a balanced portfolio.
And gold is still in the $1200 range, which it has been for about a year, despite this government’s fantasyland spending. Buyers obviously think it’s going to go up. Sellers obviously think this government’s programs are already priced into the metal at $1200, and that it’s going to go down. It’s fair to warn people of things like that.
If Repubs take the House this year and Bernanke so much as raises interest rates by a quarter of a percent, gold is going to go down. People need to be careful.
And for quite some time, the world has thought an ounce of gold ought to sell for around $1200 U.S.We do not live in a vacumn. The United States does not control the price of gold. The world controls the price of gold.
I agree with you that investing in gold is very speculative and somewhat risky, you are basically betting that the fed will print and so your taking a little insurance out.…
-There is nothing about gold or silver that is more moral or less moral than government-issued currency. In fact, since there is possibly insufficient gold in the world to actually provide coinage for every economy, turning to a gold standard might be very immoral in its effects, since very few have any of it.
-There has always been inflation in this economy. Sometimes it gets out of hand. Sometimes it doesn’t. Mild inflation can actually benefit ordinary people, and usually does.