Who Owns the World's Gold

[c1ue]

Re: Who Owns the World's Gold

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

While I do hold gold and do consider it a store of value right now, let's not get too carried away.

1) You can't buy groceries or anything else with gold directly. Therefore, it is NOT money.

2) A store of value is too vague a term.

Buying gold in 1979, value would still exist but the stored amount varied wildly in that period.

Similarly having gold in 1932 (prior to the confiscation/revaluation), gold's storage value was both disintermediated (removed from your hands legally) and value changed (also by government decree). And gold was even legally money then.

For that matter, you can apply the same value metrics to some cars: a Ferrari bought today will be worth still a lot of money tomorrow, 5 years, even 10 years. But you can't buy groceries with a Ferrari, and the value of the Ferrari will fluctuate up and down.

[BuckarooBanzai]

Re: Who Owns the World's Gold

While I do hold gold and do consider it a store of value right now, let's not get too carried away.

1) You can't buy groceries or anything else with gold directly. Therefore, it is NOT money.

2) A store of value is too vague a term.

Buying gold in 1979, value would still exist but the stored amount varied wildly in that period.

Similarly having gold in 1932 (prior to the confiscation/revaluation), gold's storage value was both disintermediated (removed from your hands legally) and value changed (also by government decree). And gold was even legally money then.

For that matter, you can apply the same value metrics to some cars: a Ferrari bought today will be worth still a lot of money tomorrow, 5 years, even 10 years. But you can't buy groceries with a Ferrari, and the value of the Ferrari will fluctuate up and down.

You are telling me that you couldn't trade some gold for a bag of groceries if you actually tried a little? Don't be ridiculous.

Furthermore, how can you assume that just because something can't easily be used as a Medium of Exchange that it is not money? That assumption belies a misunderstanding of what Money is.

Money is an abstraction with three defining characteristics: (1) Store of value, (2) Unit of Account, (3) Medium of exchange; when this abstraction is implemented in the real world, there is no "perfect" form of money, rather, the concept of "money" can only be fully embodied by a combination of things. Only one specific thing approaches perfection as money, and that is gold. But even that has some definite limitations.

Your assertion that "a store of value" is a vague term is nonsensical. Please read the above paragraph a few times to understand why.

[c1ue]

Re: Who Owns the World's Gold

You are telling me that you couldn't trade some gold for a bag of groceries if you actually tried a little? Don't be ridiculous.

This is a nonsensical statement.

I could turn this around easily: Would you trade a bag of groceries for a 1 carat diamond?

What about for a slightly used car?

A bicycle?

Does this then mean that cars, diamonds and bicycles are stores of value? And how are they different than gold?

And for that matter, what about silver? Silver also used to be legal tender, is a precious metal, etc etc. Would you trade a bag of groceries for 100 ounces of silver?

And so on to food: taxes used to be paid for in food in the middle ages.

Even Zimbabwean currency has some store of value; you can't buy one easily for face value - on Ebay they're selling for $15 or more as we speak - clearly far more than $100000000000 ZD is worth in Zimbabwe.

So I reiterate: store of value is vague and useless. What you are attempting to say is that gold can preserve purchasing power - but that is very different than being money.

Money is very straightforward: legal tender. Gold used to be legal tender via redeemability, but it isn't now.

You don't get taxed when you sell (spend) money, but you do when you sell gold.

I'd also note that preserving purchasing power is also a relative term. If gold enables you to buy relatively more food in 10 years than the equivalent dollars today, that is still only useful in the context of what some OTHER form of dollars might do. Maybe it will be oil which buys even more in 10 years than gold; both have thus preserved purchasing power but at different levels.

So no, rereading your paragraph yields the same conclusion as before: you are jumbling several categories together.

[raja]

Re: Who Owns the World's Gold

Gold's Role under Several Possible Scenarios:

1) Big Inflation or Hyperinflation
Gold will be widely seen as a way to preserve wealth against devaluing fiat. Fiat will still be used for daily transactions, but the denomination of bills will get progressively larger (think Zimbabwe) . . . and the new "dollar" will eventually be created. During this time, gold and silver will not be used much at stores for small purchases, but it will be accepted and preferred for major purchases between individuals as well as businesses.

When the inflationary or hyperinflationary period ends, gold will continue to be valued, because almost all people would have lost most of their wealth . . . something not easily forgotten. Gold will continued to be valued for insurance against future "hard times", and thus maintain its price.
Examples of gold's wealth-preserving ability through economic crises are Ukraine after the Soviet breakup and Weimar.

2) Mad Max Lite
Sudden stop, breakdown of commerce and transportation, government nationalizes food and energy (ration cards). Here to, gold will be seen as a protector of wealth. Trading, ration cards and silver will be used for small exchanges, and gold for larger purchases.

3) Government Confiscates or Heavily Taxes Gold
The government decides that gold is competing with and thereby undermining fiat, and laws are passed to prohibit personal possession of gold in the name of "national security".

Or . . . desperate for tax revenues, government foolishly institutes a prohibitive profit tax on gold sales, driving down demand and therefore gold's price (and any subsequent tax revenue gains).
Were either of these scenarios to come about, gold would not have value as a wealth preserver.

4) Happy Days Are Here Again
Through the extraordinary brilliance of Obama's economic team and the Fed, the US magically fixes its $50+ trillion (or whatever) outstanding obligations and life returns to "normal" . . . the stock market reaches new highs; banks, states, and countries become solvent; unemployment drops to 4%; house prices progressively rise toward infinity; inflation remains "under control"; and pigs fly
Dream on.

Under that scenario, gold would probably not be a good investment . . . .

[BiscayneSunrise]

Re: Who Owns the World's Gold

http://www.ft.com/cms/s/0/e97c15bc-7...tml?ftcamp=rss

FINANCIAL TIMES

Saudis hoard twice as much gold as thought
By Javier Blas in London
Published: June 20 2010 21:06 | Last updated: June 20 2010 21:06

Saudi Arabia, the world’s fourth-largest holder of foreign exchange reserves, is sitting on more than twice as much gold as previously thought, according to new estimates that point to the revival of bullion as part of emerging economies’ official reserves.

The changes in Riyadh’s reserves were revealed by the World Gold Council, the industry-backed body which regularly tracks official bullion holdings. According to the WGC, the Saudi Arabian Monetary Agency, the central bank, has gold reserves of 322.9 tonnes, more than double the 143 tonnes it had previously reported.


The central bank said in a footnote of its latest quarterly report that “gold data have been modified from first quarter 2008 as a result of the adjustment of the Sama’s gold accounts”.

Sama did not respond on Sunday to calls seeking further comment.

Analysts said the rise in official gold holdings probably represented an accounting shift rather than fresh purchases. One possibility is that a large fraction of the country’s gold was not considered until now part of the official reserves.

But without an official explanation, analysts were keeping options open. At current prices, the extra gold in Saudi Arabia’s official reserves amounts to $7bn (€5.6bn, £4.7bn).

The revelation could fuel gold’s rally as it is a further sign that central banks are keen on gold, after two decades of selling their bullion. Gold prices hit a nominal record high above $1,260 a troy ounce on Friday. Adjusted for inflation, however, bullion is still a long way from its all-time high of more than $2,300 in 1980.

The WGC revelation about Riyadh’s gold holdings comes just a year after China surprised the bullion market when it revealed its gold holdings were more than 1,000 tonnes, almost double what it had reported for years.

Analysts believe that central banks could be net buyers of gold this year for the first time in nearly two decades. India bought 200 tonnes of gold from the International Monetary Fund earlier this year, while Russia and others are purchasing bullion from domestic miners on a regular basis, official data show. European central banks, after more than a decade of hefty disposals, have all but stopped selling.

Riyadh is now the 16th largest gold holder, ahead of countries such as the UK and Spain. The US is the world’s largest bullion holder with 8,133.5 tonnes.

Additional reporting by Abeer Allam in Riyadh

[LargoWinch]

Re: Who Owns the World's Gold

Or . . . desperate for tax revenues, government foolishly institutes a prohibitive profit tax on gold sales, driving down demand and therefore gold's price (and any subsequent tax revenue gains).
Were either of these scenarios to come about, gold would not have value as a wealth preserver.

I disagree here raja.

If a government institutes a profit tax on gold sales so what?

Gold is an international currency, and therefore its price will rise.

[raja]

Re: Who Owns the World's Gold

I disagree here raja.

If a government institutes a profit tax on gold sales so what?

Gold is an international currency, and therefore its price will rise.

In that case, in those countries that did institute a tax gold owners would still be able to cash in their gold at high world prices, but the huge tax hit would take away the fun.

Take a hypothetical here:

In order to pacify the Debt Serfs who are rapidly losing their relatively plush "American" lifestyle to which they've become accustomed, the government institutes a 90% profit tax on gold to punish the wealthy "gold hoarders".

EJ bought his gold at $270 in 2001. Let's say gold goes to $2500 and he sells. That's a $2250 profit minus 90% tax = $225 after tax profit. So, he almost doubled his money in 12 years (nominally). But considering that the dollar has devalued say 60% by the time he sells, he profited only $35. That's 14% in 12 years, or about 1.2% per year. No wonder he's now thinking of selling some of his gold to diversify.

But consider this . . . the gold price may plunge globally if there is a widespread gold tax . . . .

What if all the major governments follow the U.S.'s lead and collude to institute a gold profit tax . . . for the "good" of the global economy? They each use fiat, and gold threatens fiat, so why not?

I'm not saying to not hold some gold . . . but let's be realistic about the risks

[BuckarooBanzai]

Re: Who Owns the World's Gold

Money is very straightforward: legal tender. Gold used to be legal tender via redeemability, but it isn't now.

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

That is the DEFINITION of money. This is AXIOMATIC and INARGUABLE.

You seem to think money is strictly (3), which is like trying to argue that 1 + 1 = 4

You are now wasting my time.

[metalman]

Re: Who Owns the World's Gold

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

That is the DEFINITION of money. This is AXIOMATIC and INARGUABLE.

You seem to think money is strictly (3), which is like trying to argue that 1 + 1 = 4

You are now wasting my time.

i agree with c1ue. gold is money when gov't sez it is... to pay taxes, settle debts, etc, & then the rest of society goes along with it.

go ahead. try paying your bills in gold. try paying your taxes, buying gasoline (.00244oz/gal), paying your credit card bill with gold. try paying the babysitter with gold. ask your boss to pay you in gold. etc, etc, etc.

gold was (1) Store of Value, (2) Unit of Account, and (3) Medium of Exchange, now only #1. get over i t.

[LargoWinch]

Re: Who Owns the World's Gold

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

That is the DEFINITION of money. This is AXIOMATIC and INARGUABLE.

You seem to think money is strictly (3), which is like trying to argue that 1 + 1 = 4

You are now wasting my time.

Time for a Goldbug groupHuG (the premium one).

[Chomsky]

Re: Who Owns the World's Gold

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

That is the DEFINITION of money. This is AXIOMATIC and INARGUABLE.

And since you reiterated this point nearly verbatim six or seven times in this one thread, you really hammered it home for me, thanks!!!

[c1ue]

Re: Who Owns the World's Gold

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

That is the DEFINITION of money. This is AXIOMATIC and INARGUABLE.

You seem to think money is strictly (3), which is like trying to argue that 1 + 1 = 4

You are now wasting my time.

Sounds nice, but again every single one of those criteria can be applied to anything ranging from silver to chickens. Chickens in fact - if live - can increase in number, but of course have upkeep. According to some Nevada politicians, you can even buy medical services with them:

http://politifi.com/news/In-Nevada-s...ls-717485.html

And I am clearly wasting your time - since you clearly don't want to hear anything different than what you believe.

[ThePythonicCow]

Re: Who Owns the World's Gold

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

That is the DEFINITION of money. This is AXIOMATIC and INARGUABLE.

You seem to think money is strictly (3), which is like trying to argue that 1 + 1 = 4

You are now wasting my time.

Definitions are not the same as axioms, and both are arguable.

Yes, people do use words in different ways. When it is clear, as it is to you in this case, that the other party is using a word in a particular way that doesn't happen to be how you use it, then useful dialog is more likely if you allow them their meaning. Sometimes I do this by suggesting another term, say "currency" instead of "money" in this case. Or, following c1ue's own suggestion, "legal tender."

Insisting on reading someone else's writings while imposing your meanings to his words is indeed a waste of time, his and yours.

[BuckarooBanzai]

Re: Who Owns the World's Gold

i agree with c1ue. gold is money when gov't sez it is... to pay taxes, settle debts, etc, & then the rest of society goes along with it.

go ahead. try paying your bills in gold. try paying your taxes, buying gasoline (.00244oz/gal), paying your credit card bill with gold. try paying the babysitter with gold. ask your boss to pay you in gold. etc, etc, etc.

gold was (1) Store of Value, (2) Unit of Account, and (3) Medium of Exchange, now only #1. get over i t.

You are confusing "legal tender" with "money". Governments determine what legal tender is; markets determine what money is. Sometimes those markets have to move outside the law (i.e. black markets).

[BuckarooBanzai]

Re: Who Owns the World's Gold

Sounds nice, but again every single one of those criteria can be applied to anything ranging from silver to chickens. Chickens in fact - if live - can increase in number, but of course have upkeep. According to some Nevada politicians, you can even buy medical services with them:

And I am clearly wasting your time - since you clearly don't want to hear anything different than what you believe.

Of course every single one of these criteria can be applied to many things! Money is an abstraction! The point I am struggling to make is, when this abstraction is applied in the real world, we discover that certain things may prove to be better (or worse) at achieving those criteria than other things. In a barter system, for example, virtually anything can be used as a Medium of Exchange. That doesn't mean that all of them are equally useful in that regard.