Is gold actually worth anything?

[Ageo]

You can lease the stuff out too!?

Of course, its used as a security (similar to your house etc..).

Watch out for those December contracts!!

P.S here banks dont use gold as a form of security (not sure why) but in Italy its normal to use gold as a form of security to receive a loan (gold is much more liquid than houses so im not sure why its not used here).

Actually come to think of it gold is 1 of the most liquid physical assets there has to be on the market today (selling can usually take place on the day).

 

[Temjin]

From a pure theory point of view, gold is only worth what people are willing to pay for it.

If everyone suddenly decided that gold was worthless, then it would be just that.

A more specific question, which has already been answered somewhat, is; Why do people think gold is worth anything?

With this question its the supply side of the equation that comes into play.

That's true though. We humans have developed the technology to turn subatomic particles and arrange them to make gold atoms, at a relatively cheap input cost, then gold will become worthless.

By then all matters would become worthless because they are all easily produced and replicable.

And then perhaps stuff like anti-matters and pure energy density would be a form of currency.

Ahhhhh, too far into the future. And if we get to that stage of technological sophisication, humans would have destroyed themselve.

So I guess gold will be our choice of hard currencies for the foreseeable future.

 

[GreatPig]

It seems to me that the next level of global currency control could be technological - some sort of high-security computer that controlled the amount of money in circulation (mostly in the form of "credits").

Such a computer would need to be secure, with multiple redundant units running in parallel in separate locations around the world, and require concurrent authorisation from a number of selected people to adjust its operation (which should be rare, and could therefore be based on some relatively arduous political/financial process requiring agreement from a quorum of members around the world).

I think the technology for this is already available, but trying to get political agreement from all the world's countries as to how it would operate, without one or more countries trying to sneak back-door entries into the system for their own use, would probably be very difficult.

GP

 

[Ageo]

It seems to me that the next level of global currency control could be technological - some sort of high-security computer that controlled the amount of money in circulation (mostly in the form of "credits").

Such a computer would need to be secure, with multiple redundant units running in parallel in separate locations around the world, and require concurrent authorisation from a number of selected people to adjust its operation (which should be rare, and could therefore be based on some relatively arduous political/financial process requiring agreement from a quorum of members around the world).

I think the technology for this is already available, but trying to get political agreement from all the world's countries as to how it would operate, without one or more countries trying to sneak back-door entries into the system for their own use, would probably be very difficult.

GP

There is 1 problem with that, those that are in power of such a device can easy manipulate it uses (just look at the printing press). Hard commodities used as an exchange for money like gold is good because to produce more you need to physically work for it (making it hard to control it all).

And no i dont believe the government would be able to confiscate all gold again as they did previously since people today would revolt. (i know i would)

 

[GreatPig]

There is 1 problem with that, those that are in power of such a device can easy manipulate it uses

That's why it would need to be secure with highly regulated control.

And no i dont believe the government would be able to confiscate all gold again as they did previously since people today would revolt. (i know i would)

That's what they have riot police, tear gas, and prisons for.

GP

 

[cuttlefish]

I guess we get trained our whole lives to march to the beat of pieces of worthless paper ... its not much of an extension for that to become credits in 'The Great Machine of Wealth".


We're not far off it anyway ... its not like the banks hold much real paper ... the US fed doesn't have a big pile of dollar bills stacked away anywhere. Rudd isn't sitting on a big pile of aussie notes ready to toss 'em over to the banks when bailout time comes.

The printing press is already like punching the credit button on a faulty computer game ... bang bang 99 credits please and I can play all night for free.

 

[Ageo]

That's why it would need to be secure with highly regulated control.


That's what they have riot police, tear gas, and prisons for.

GP

Anything that is regulated by man can be manipulated, history has proven this (even if its highly sophisticated).

Also riot police, tear gas and prisons would not be able to control a full blown revolt (but that can be left for another discussion)

 

[explod]

That's why it would need to be secure with highly regulated control.


That's what they have riot police, tear gas, and prisons for.

GP

In the scheme of things overall gold is a very small part of world assets. Maybe control in some places, but I don't think they would bother in Australia.

But interesting to think on. The US economists certainly speak of it.

 

[GreatPig]

Anything that is regulated by man can be manipulated

That would include the gold price then.

If gold is used as a backing for currency, that only works if the price is fixed, otherwise to print more money all they'd have to do is say that the price of gold is now higher. If they made the price so high that there was far more gold available than the amount of currency it was backing (say $100 trillion per ounce), then it would have supply-side issues as well.

GP

 

[Ageo]

That would include the gold price then.



GP

Of course and i agree the COMEX gold price is way out IMO and being manipulated, it should track the physical supply since that is much harder to manipulate as such.

The difference between electronic and hard commodity is that it takes man hours to actually produce the hard commodity (not the same for the electronic thow).

 

[Spanning Tree]

Gold I think is a good store of value if you are cynical about government. Gold is for those people who always think the government is corrupt. As an investment gold is not good because gold does not produce any income from e.g. dividends or rents.

Thing is, if the whole world economy collapses, surely the worth of gold collapses with it. I mean you can't eat gold. Gold doesn't keep you warm or is a good material to create shelter out of. So what good is it really......?????

Through tradition and because of the properties of the metal, it will become the de facto currency. E.g. rice cannot be used as a currency because eventually it decays.

Just because it has been used to represent money, doesn't mean its worth anything.

The $50 in your wallet is worth $50 because most people accept it is worth that much and they have faith in the monetary authorities. A currency needn't be necessary for some industrial purpose for it to have value. Paper money cannot be used for anything but it functions as money. What gold has over paper money is difficulty of government manipulation.

Something that has value (or real wealth) requires labour to produce it

This is the Labor Theory of Value and it is the achilles heel of communist theory.

 

[punter1955]

So it's best to hold physical precious metal than having a trade certificate?

 

[prawn_86]

So it's best to hold physical precious metal than having a trade certificate?

Definitely.

In the end trade certs are just paper, and if there is no supply (worst case scenario) thn how can you claim your physical?

 

[GumbyLearner]

Through tradition and because of the properties of the metal, it will become the de facto currency. E.g. rice cannot be used as a currency because eventually it decays.

What gold has over paper money is difficulty of government manipulation

The best thing about physical bullion is that you dont have to worry about other people attaching their liabilities to it including governments

I like your point about rice not being a currency but ST have you considered the possibility of a new barter trade

http://article.wn.com/view/2008/10/...sults&template=cheetah-photo-search/index.txt

 

[explod]

That would include the gold price then.

If gold is used as a backing for currency, that only works if the price is fixed, otherwise to print more money all they'd have to do is say that the price of gold is now higher. If they made the price so high that there was far more gold available than the amount of currency it was backing (say $100 trillion per ounce), then it would have supply-side issues as well.

GP

Well it is well said that there is no manipulation. It is not used to back currencies anymore, paper money is just a proimise. It is static and at the moment its value is deflating. Follwoing quote from the "Privateers" webpage worth a look.

In economics, there is no such thing as "intrinsic" value. This is true for the simple reason that value does not reside in the atoms, molecules, chemical composition, or structure of an economic good. It resides, always, in the MIND of the individual perceiving the good. When looking to acquire an economic good, an individual must decide how much time, or effort, or other economic goods he or she is willing to offer in exchange. That decision determines the value of that economic good, at that particular time, to that unique individual.

This is a crucial distinction. Value is not in what is beheld, it is in the eye (and mind) of the beholder. The reason why some goods evolve into money while most others do not has nothing to do with the "intrinsic value" of the goods so favoured. It is because a large number of individuals have realised that goods used as money have a unique usefulness. Unlike all other goods, they can be exchanged easily, and at any time, for anything.

And as I indicated last week, its all really about sentiment. You can put money away and get interest/yield and capital growth, but when all is looking pear shaped one may need time out. Gold does not pay interest but it is solid in the hand and no promise of government is required to back it.

Great thread all

cheers explod