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Where Is Germany's Gold?

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Re: Where Is Germany's Gold?

#21

Post by lisa_henderson »

Whenever I find myself in a conversation with a goldbug, and they complain about something like "the craziness of unbacked monetary systems" I say "I like your shirt. I will give you $500 for that shirt." (This assumes the shirt is clearly worth less than $500.) If they ask why I make such an offer, I ask if they would accept such an offer. If they suggest they would, then I ask why they would accept such an offer. If they think my "unbacked" $500 is crazy, why would they take the deal? The shirt is a real physical object, and the fact that it has value to them is demonstrated by the fact that they are wearing it. The $500 in paper money is to them "a fiction", as it says in the article. So why would they take a fiction over a real shirt that that gives them real value?

This rarely changes anyone's mind (few people ever change their minds about issues regarding money) but I hope I can at least raise the contradiction to the top of their minds. All currencies are backed by our willingness to accept them, and that is the only backing that any currency ever needs.

Re: Where Is Germany's Gold?

#22

Post by orik »

nosuchthing wrote: post #12
tdees40 wrote: post #3

So here's how this works. Gold bugs are big fans of buying gold. They have lots of gold. Their narrative of the financial system is that gold is the uber-asset that all other assets must be denominated in, and that fiat currency is doomed to collapse. The massive run-up of gold prices during the financial crisis played into this narrative, and despite the fact that mainstream economists, politicians, bankers, etc. st…

People should really try and understand what makes things valuable beyond the beanie baby pokemon hype bandwaggon. Gold as a raw material is useful to a degree, just as diamonds are, but artificial scarcity [1] [2] and wild speculation create a mess of distortions. [1] http://www.theatlantic.com/magazine/archive/1982/02/have-you... [2] http://archive.wired.com/wired/archive/11.09/diamond_pr.html

At the end of the day we live in a world governed by supply and demand.

We're not going to shift to a 'usefulness' based mindset, and we should avoid shifting to the mindset that an object is equal to the sum of it's parts. Supply and Demand are king.

Re: Where Is Germany's Gold?

#23

Post by xmjee »

tdees40 wrote: post #3

So here's how this works. Gold bugs are big fans of buying gold. They have lots of gold. Their narrative of the financial system is that gold is the uber-asset that all other assets must be denominated in, and that fiat currency is doomed to collapse. The massive run-up of gold prices during the financial crisis played into this narrative, and despite the fact that mainstream economists, politicians, bankers, etc. st…

> So now, gold prices have been weak for a few years, so they have to come up with a new narrative. And that narrative is global conspiracy. So you get groups like GATA [1] and Zero Hedge [2] pushing various stories about how gold is being squirreled away somewhere mysterious, or prices are being suppressed by faceless multinationals or what-have-you. Maybe it's true! I don't know, but there's never really been any evidence, and it just sounds like someone justifying a failed investment thesis.

I've been following the Gold bug sphere in 2006, 2007 and there's absolutely nothing new about these conspiracy theories. They have been pushing them ever since, and you haven't even scratched at Bilderberger/Illuminati/Jews/Take your influential minority.

Re: Where Is Germany's Gold?

#24

Post by wolfgke »

lisa_henderson wrote: post #21

Whenever I find myself in a conversation with a goldbug, and they complain about something like "the craziness of unbacked monetary systems" I say "I like your shirt. I will give you $500 for that shirt." (This assumes the shirt is clearly worth less than $500.) If they ask why I make such an offer, I ask if they would accept such an offer. If they suggest they would, then I ask why they would accept such an offer. I…

I'm not a goldbug, but I'd answer to

> So why would they take a fiction over a real shirt that that gives them real value?

Because they can nearly immediately exchange the $500 (fiction) into something of real value (gold).

Re: Where Is Germany's Gold?

#26

Post by throwaway90446 »

ArkyBeagle wrote: post #17
tdees40 wrote: post #3

So here's how this works. Gold bugs are big fans of buying gold. They have lots of gold. Their narrative of the financial system is that gold is the uber-asset that all other assets must be denominated in, and that fiat currency is doomed to collapse. The massive run-up of gold prices during the financial crisis played into this narrative, and despite the fact that mainstream economists, politicians, bankers, etc. st…

Or gold was in a bubble that collapsed. The Depression proves that the gold standard doesn't work. There was no stability; there was deflation. Since the concept behind the gold standard means "gold always..." - a universal quantifier, one needs only show a counterexample to blow it out of the water.

Agreed that deflation is terrible. I hate paying lower prices for goods and services. Thankfully we have central banks to fight the scourge of lower prices.

Re: Where Is Germany's Gold?

#27

Post by shard972 »

lisa_henderson wrote: post #21

Whenever I find myself in a conversation with a goldbug, and they complain about something like "the craziness of unbacked monetary systems" I say "I like your shirt. I will give you $500 for that shirt." (This assumes the shirt is clearly worth less than $500.) If they ask why I make such an offer, I ask if they would accept such an offer. If they suggest they would, then I ask why they would accept such an offer. I…

> The $500 in paper money is to them "a fiction", as it says in the article. So why would they take a fiction over a real shirt that that gives them real value?

He didn't say that fiat currency is a fiction, he said that he is worried that the world economic system might be built on the fiction of fiat currency.

Since you can print fiat, it's entirely possible in this current fractional reserve system that most fiat's employ to create a lot of artificial wealth.

Just because he's pointing out there could be a bubble doesn't automatically mean he ascribes 0 value to a US dollar, he just won't put his life savings in it.

> This rarely changes anyone's mind

Mainly because it's a dumb strawman.

> but I hope I can at least raise the contradiction to the top of their minds.

I really can't see the contradiction in thinking that there is a bubble in currency and still believing that said currency still has value in the current.

> All currencies are backed by our willingness to accept them, and that is the only backing that any currency ever needs.

Until people aren't willing due to inflation through debasement.... Thats the point....

Re: Where Is Germany's Gold?

#28

Post by shard972 »

wolfgke wrote: post #24
lisa_henderson wrote: post #21

Whenever I find myself in a conversation with a goldbug, and they complain about something like "the craziness of unbacked monetary systems" I say "I like your shirt. I will give you $500 for that shirt." (This assumes the shirt is clearly worth less than $500.) If they ask why I make such an offer, I ask if they would accept such an offer. If they suggest they would, then I ask why they would accept such an offer. I…

I'm not a goldbug, but I'd answer to > So why would they take a fiction over a real shirt that that gives them real value? Because they can nearly immediately exchange the $500 (fiction) into something of real value (gold).

Thanks for raising this to the top of his mind.

Re: Where Is Germany's Gold?

#29

Post by WalterBright »

ArkyBeagle wrote: post #17
tdees40 wrote: post #3

So here's how this works. Gold bugs are big fans of buying gold. They have lots of gold. Their narrative of the financial system is that gold is the uber-asset that all other assets must be denominated in, and that fiat currency is doomed to collapse. The massive run-up of gold prices during the financial crisis played into this narrative, and despite the fact that mainstream economists, politicians, bankers, etc. st…

Or gold was in a bubble that collapsed. The Depression proves that the gold standard doesn't work. There was no stability; there was deflation. Since the concept behind the gold standard means "gold always..." - a universal quantifier, one needs only show a counterexample to blow it out of the water.

> The Depression proves that the gold standard doesn't work.

Not really. The government went off the gold standard in 1914 when it began printing whatever dollars it needed. A legally fixed exchange rate, however, continued. This led to an increasing disconnect between the dollar and gold, by 1929 gold was worth about twice as many dollars as the legal exchange rate.

This is what lead to the banking collapse, as everyone suddenly realized this and rushed to exchange their dollars for gold at the official exchange rate. The runs persisted until the government suspended exchanging gold for dollars.

We see the same thing happen in modern times every time a government decides to peg its currency to a foreign currency, and then inflate it.

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