Who Owns the World's Gold

[Munger]

Re: Who Owns the World's Gold

Is the flat-lining of US gold since 1972 correct, or is it just an indication of no more accurate reporting since then? I doubt the reporting, myself, but then I would.

Probably due to dollars being redeemable in bold before then. If I remember correctly, I believe France trying to redeem massive amounts of dollars for gold prompted abandoning the gold standard.

U.S. to World in 1972: "That was fun. Thanks for playing. Come again."

[Southernguy]

Re: Who Owns the World's Gold

Exactly: fiat money supposedly backed by gold. Once people begin asking for their gold....one day the central bank decides that is not possible any more, so youīre back in explicitly fiat again.

[bart]

Re: Who Owns the World's Gold

Certainly interesting - thanks, Bart.

I am led to wonder two things from this chart:

1. Is the flat-lining of US gold since 1972 correct, or is it just an indication of no more accurate reporting since then? I doubt the reporting, myself, but then I would.
2. Is the decline in holding by major official holders since 1964 likely to reverse at sometime? I'm suspecting it will reverse, with gold moving from us small time holders back to the center, sometime in the next few years.

1. Yes, the flat-lining is correct. Keep in mind that Nixon closed the gold window in August 1971 since gold had been flowing out since the late '40s, and especially since 1957 (Sputnik) or so... which was what mostly kept Bretton Woods I working.

2. It actually has already reversed, as of late 2008 and 2009. Central banks have been net buyers since then per the WGC etc., and more than a little of that buying is behind the scenes like China's admitted addition of 1054 tonnes last year. For what its worth and per my work, the ECB has not been a net buyer since mid 2008.

[gnk]

Re: Who Owns the World's Gold

Exactly: fiat money supposedly backed by gold. Once people begin asking for their gold....one day the central bank decides that is not possible any more, so youīre back in explicitly fiat again.

I guess I may have misunderstood you. Technically, fiat money is backed by nothing other than the government's decree; that is, it is not redeemable for anything other than more fiat. The picture I posted was of a US dollar that was once backed by gold, meaning, you could exchange/redeem it for gold.

[Minion]

Re: Who Owns the World's Gold

But maybe they'll say "F**k you, my currency is *the military* and I will take the natural and _useful_ resources I need from the countries close to me."

How very interesting that USA is #1 holder of gold and weaponry in all the world....

Indeed, both have served as money when fiat has crashed.

[Ben]

Re: Who Owns the World's Gold

You have to trust the government for any currency system

Fiat - trust the government not to print too much
Gold standard - trust the government not to alter the conversion ratio

We had a gold standard. It didn't help.

[c1ue]

Re: Who Owns the World's Gold

Followup data for Euro region gold backing:

https://stats.ecb.europa.eu/stats/do...t02_03_nsa.pdf

M1: 276.9
M2: 412.4
stock of domestic credit: 1055.5

Makes China look good...

[gnk]

Re: Who Owns the World's Gold

Gold standard - trust the government not to alter the conversion ratio

We had a gold standard. It didn't help.

New redistribution of the global balance of power (new geopolitical paradigm) and resource depletion will reinforce gold in ways it hasn't been before.

No more printing away to consume. Manufacturing and Resource exporting nations will not be as forgiving in the new world that is emerging.

[BuckarooBanzai]

Re: Who Owns the World's Gold

The way I look at it, Gold is worthless if TSHTF. It only has value if the countries _decide_ that it has value; it has no intrinsic value.

So the U.S. apparently owns 1/2 the world's gold, or something like this. So you think in a new currency regime, China will simply say, "Ok, you have half the world's currency, no problem?" Maybe. But maybe they'll say "F**k you, my currency is *the military* and I will take the natural and _useful_ resources I need from the countries close to me."

Now geez -- what is useful and necessary from _that_ posture? It surely isn't gold. Oil comes to mind ... steel ... copper ...

Don't be absurd-- after careful examination of the evidence the decision was already taken, thousands of years ago, that gold is empirically the most useful all-around form of money. I suppose that we could all agree that the Law of Gravity no longer applies, but to do so, you'd have to deny reality itself. The same goes for gold.

You could make the case that we might one day come to a point where we don't need or want money, but that kind of world would be post-apocalyptic to say the least.

[BuckarooBanzai]

Re: Who Owns the World's Gold

I
1) Gold isn't directly money anymore

Wrong. Money has three defining characteristics: (1) Store of value, (2) Unit of Account, (3) Medium of Exchange.

Gold is no longer used for (2) or (3), but it most certainly is used for (1). Therefore, gold is still money.

[BuckarooBanzai]

Re: Who Owns the World's Gold

Money can be whatever the buyer and seller agrees upon. No role for monopoly money by government fiat.

Not strictly correct. Money has three defining characteristics: (1) Store of value, (2) Unit of Account, (3) Medium of Exchange.

With respect to characteristic (3), buyers and sellers do indeed have to agree. With respect to (1) and (2), however, what buyers and sellers think is irrelevant, in purely transaction terms that is.

[BuckarooBanzai]

Re: Who Owns the World's Gold

Two points:
1) Gold cannot, I think be a currency. Do you imagine buying your daily stuff with gold coins. Therefore, some paper or otherwise intrinsically unworthy coin must be used. Someone has to produce such. Then, we come back to fiat money.
2) Though I didnīt check most countries, Venezuela at 35% of itīs reserves in gold is a major gold owner. Itīs more than 350 tons are more than gold ownings of Britain.
Chavez is no stupid.......does he read EJ?

Of course gold can be used as a Medium of Exchange. Typically, however, it is used in such a role for large transactions only.

Money has three defining characteristics: (1) Store of Value, (2) Unit of Account, (3) Medium of Exchange. Gold is unsurpassed when used in roles (1) and (2). For role (3) gold is arguably less useful for most people of limited means (silver and copper have been more typically used) but for the wealthy there really is no substitute to gold for large transactions.

[BuckarooBanzai]

Re: Who Owns the World's Gold

Exactly: fiat money supposedly backed by gold. Once people begin asking for their gold....one day the central bank decides that is not possible any more, so youīre back in explicitly fiat again.

Gold-backed paper money is NOT fiat money, by definition.

Money has three defining characteristics: (1) Store of Value, (2) Unit of Account, (3) Medium of Exchange.

Many people consider gold to be inconvenient to use as (3). Consequently, the gold-backed paper note was created as a convenience. Every form of convenience has its cost. In this case, the cost is calculated when banks print more notes than they have gold to back them, thus devaluing the notes by the amount of dilution. The day of reckoning against this cost of convenience is time-shifted into the future. Furthermore, this cost is not spread out evenly, rather, it is like a game of musical chairs-- those that get caught when the music stops pay the cost not just for themselves, but for everyone else as well. Not fair, maybe, but there you have it.

[BuckarooBanzai]

Re: Who Owns the World's Gold

You have to trust the government for any currency system

Fiat - trust the government not to print too much
Gold standard - trust the government not to alter the conversion ratio

We had a gold standard. It didn't help.

Conversion ratio against what? When gold is measured simply by weight and purity, there is no problem with conversion ratios.

Money has three defining characteristics: (1) Store of value, (2) Unit of Account, (3) Medium of Exchange.

Governments can regulate (2) and (3), but there is nothing they can do about (1). That is subject to the laws of nature alone.

Of course, they try to INFLUENCE how you perceive (1), but they never really succeed at it in the long run.

[BlackVoid]

Re: Who Owns the World's Gold

The chart only shows government holdings which is only about 40% of the total gold above ground. So NO, the US does not own half of the gold, it only owns 20%.
And China is the largest gold producer as of now.

In a gold standard if you suspect the government will alter the money to gold ratio, then you can exchange your paper at a fixed rate for gold to protect yourself. In a gold standard it is also impossible to run large deficits or surpluses for a prolonged period. But no, it will not help against fraud by public servants - nothing will help against that.