-I see Gold as money that never ever changes in value
it is Fiat currencies that have the wild swings.
Id much rather do all my dealings in Gold and Silver but things dont work like that (yet)
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Really, you want to lug physical gold around, seems like a step back to the dark ages to me.
Perhaps a gold linked currency....now there's a novel idea!!
CanOz
http://www.ecb.int/press/pr/wfs/2011/html/fs110706.en.htmlAcceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002.
What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. But, just as importantly, money is also defined by the community for whom it performs these functions. Because it is an economic instrument for each of its users, it is also a political and cultural bond between them. Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value. We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the confidence that we place in money itself. And it tells us much more about the confidence that we place in each other. Hence, money is, in essence, a social contract.
The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to the euro.
The point is that the Eurosystem's response (volume expansion) to its current systemic threat (the debt crisis) is not surprising. Does this mean the euro will collapse (experience hyperinflation)? No. Because, for one reason, it has severed the link to the nation-state. The euro is behaving perfectly predictably in maintaining the nominal performance of its system through expansion, but it cannot be forced to fund the future government profligacy of the PIIGS through volume-only expansion. That link is severed.
But the dollar, on the other hand, is nominally on the hook not only for the debt mistakes of the past, but for all future dollar-denominated liabilities, obligations, entitlements and promises of the biggest debtor in all of history, on top of a debt mountain that is probably another $100T in size depending on your measurement criteria. That's a big difference. The dollar is an old currency in the winter of its life, linked to the greatest profligate debtor the world has ever known. The euro is a young currency that has severed its link to the nation-state. The ECB can save its own system, but the member states cannot force it to fund perpetual profligacy.
Here are a few simple principles that will save you the hassle and embarrassment of constantly being surprised by the actions of politicians and central bankers. They will never sacrifice the system to preserve the value of the currency. But they will always sacrifice the currency to save the system. And there is a very simple formula for how they do it.
Whatever...my point was that a gold linked currency is LIGHTER than carting around physical gold...
I'll leave the fiat currency argument to you and UF...not much interest in it.
CanOz
My point is that someone came up with an even better concept than that, gold linked currency might be lighter than gold but its supply doesn't expand and contract readily enough for the means of exchange/unit of account needs of modern economies. Gold linked currency might weigh less than gold but that doesn't make it very economically useful.
The Euro has been set up specifically for consumers/debtors to have a stable means of exchange and unit of account, leaving the gold as a store of value for the producers/savers. So you get all the benefits of 'lighter than carting around gold' coupled with golds systemic stability/confidence on the ECBs balance sheet.
So basically the currency is fine, in design. Its just the politics and the lack of a fiscal union that lets it down?
CanOz
Define let down, right?
If by let down you mean that profligate countries can't murder the "medium of exchange" to dig themselves out of a consumption hole at the expense of taxpayers? Then yep, the Euro has been let down.
But on the other hand, all those people using/trusting Euro as a medium of exchange/unit of account haven't been let down, the ECB has fulfilled their stability mandate, and any dilutions/liabilities added to the balance sheet are announced to the market every month/quarter in the ConFinStat. i.e. the market can discount/markup the price of the Euro to match what they see on the balance sheet.
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I Beg to differ, Gold changes in value every day, less than a year ago it was over 1900 USD now it's closer to 1600 USD, do you really think that the USD has improved in value by that amount
Nomura Securities cut its gold price target this year to $1,754/oz from $1,791/oz, but lifted its targets for 2014 & 2015. Nomura said that central-bank buying, continuing strong Chinese demand, persistently negative real interest rates, and a growing bunker mentality for those investors who see dark scenarios on the horizon, were all positive for gold.
..... unfortunately Buffett probably won't be around to see that his old rules don't apply anymore?
if that deflationary period comes to pass very few will have the purchasing power to accept your gold and such a severe event gold will be sold at heavy discount to pay down debt.......it's a liquidity vehicle not sure-fire concrete guarantee
Cracks me up too
The purchasing power will be in the form of what they own, & willing to exchange for what they need.
It appears that finally after months of "being long of Gold in Indian Rupee terms" having proven to be quite a resilient and profitable strategy, the Indian state has also figured it out. And they are unhappy. Because to them, the key reason for the rupee weakness has nothing to do with the actual economy, and all to do with the Indian population trying to protect against currency debasement coupled with inflation: i.e., purchasing gold. And they will no longer allow it.
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