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http://whiskeyandgunpowder.com/gas-prices-dont-move-much-in-good-currencies/

ahhh  Silver, God love it!

Problem is, you're only getting paid $0.40/hr in 90% silver dimes.  ;)

I don't see the problem.  I'll take silver dimes any day.

I'm just saying, the price of gas only costing you $0.20 in 90% silver dimes is a pretty pointless metric.  It's still the same percentage of income today as it was back in the 60's (give or take 20%).

That's the point of owning Gold and Silver.  It keeps its value against Inflation.

Right, but a lot of other investments grow faster than inflation.  Why would I invest in gold/silver when there are better options for investment?

It's not and investment.  It's value doesn't change.  The only thing that changes is the value of what you use to buy it.

USD goes down, price of Gold goes up.  USD goes up, price of Gold goes down.

Price of Gold in 1950 was about $34.  The value of the USD has dropped so much that $34 then is worth over $1600 now.  In non Gold terms we can equate this to the price of a really nice suit.  Worth about $34 then, and about $1600 now.

This is what the Bankers have done to our Dollar.

It IS an investment.  You can't buy things with it directly (except for gas in Ashland).

There are not a lot of other investments that grow faster than inflation.  Some do, and have, but picking the right one is key.  If you can reliablely do so in advance, then do it.  But most people don't have the time or skills to research through all the crap in order to find the diamond.  Given no other real choice, buying gold or silver simply as capital preservation against debasement is a valid stragedy.

Exactly.  What your doing is locking in the value of your Dollars now, so that when they go down you don't lose anything.  Smart money does it this way.  The stock market is a rigged game, and only a sucker plays a rigged game.

Also, with inflation, you constantly have negotiate wage increases just to keep the same income.
With a hard currency this is not an issue.

lulz

So when silver was $5/ounce a decade ago, was gas still 20 cent per gallon?  How about all the people that loaded up on silver during the 1970's price spike?  That worked out really well for those people. lulz


Also, biased article is biased.  He starts and stops the chart on price spikes and calls the area in the middle (the normal price of silver) a spike down. LOL  Here's a full silver price chart:

http://www.silverbarter.com/charts_files/historical_silver_prices.gif


Minus the BUBBLE price increases in the 1970's and at present, silver has spent the other 98% of the time trading at $5/ounce or less.

If nobody would bring their surplus dollars (savings) to the banks, those banks wouldn't have any leverage (other than their own private capital) to emit loans and inflate the currency on, so their wouldn't be any inflation at all. It's the peoples' fault to trust the banks with their own money, giving them the opportunity to debase the currency.

This is not so.  Fractional reserve banking doesn't work like you think it would work.

there is a lot to hate about fiat, but I hate this constant misleading twaddle.

as mentioned you didnt earn that much back then.

silver is also way higher now than in the 90s.. so you are cherry picking.

gas is a limited resource, it really doesnt matter your comparison, GAS IS GETTING MORE EXPENSIVE AND IT HAS NOTHING TO DO WITH FIAT(well ok there is a fiat component but there is also a supply and demand component) and when you use gas, it goes away, unlike when you use gold.


This is nothing more than twaddle designed to mislead

There will come a day that supply finally peaks worldwide (and this might have already happened, but demand is also down from 2007) and then the cost of energy is going to rise.  We are not there yet, however; so (due to the competitive nature of oil refineries) so the primary contributers to the cost of a gallon of gas are 1) production & shipping and 2) goverment taxes.  Usually in that order, but I believe they are reversed in parts of Europe.  Middle Eastern dictators make a fortune from exporting oil (primarily) because they pay local skilled labor wages that are lower than they would be in the US or Europe while charging slightly less than the cost of production for those same regions (those that still have oil, anyway).  The proven reserves of oil in the US are higher than those of Saudi Arabia, but those are not "economicly viable" reserves so long as the Saudis can provide oil cheaper.

Thus, the cost of a gallon of gas has been fairly stable (measured over months to years, not days) when viewed relative to either silver or gold.  I admit the article is biased, and so am I, towards silver.  Gold would probably have been a better comparison.  Yet, the point stands.  Inflation isn't the prices rising, it's the value of the currency dropping.  Gold and silver both (tend) to reflect that debasement in their spot pricing, over the long term.

That's awesome. It's not like you can legally melt down the coins though, which sucks.

There is no need to, and if there ever was a need to do so, that law is going to lack force without a functional government.

Well it would be nice to have the silver out of them without them being us currency ::)

Yea bro, the price of oil is definitely steady when adjusted for inflation...

http://www.antagoniste.net/WP-Uploads/2007/01/oil_prices_1861_2006.jpg


It's so easy to demolish you with simple and easy to find facts and numbers.


Someday the gold bugs will realize that gold is not the holy grail of absolute value.   It's a commodity (a shitty one at that) and fear investment whose value fluctuates significantly based on speculation.  Silver is even less reliable as a constant store of value, as even a passing glance at a silver price chart will show anyone with working eyes.

I like gold and silver but I agree with AyeYo (for once?) that they are not a magic measuring stick of value. You can presuppose that gold's "value" is constant and that it's the values of everything else that fluctuate in relation to it, but that's just a game of semantics. On the other hand, we all know that paper money doesn't just fluctuate over the long term but also gradually approaches zero buying power in most cases. Almost any commodity metal is better than that as a long term store of value, but many of them take up a lot more space per unit of value than silver and gold do.

Demolish me?  You just proved the point.  The trendline of that chart is flat for the past 120 years.

And that idiotic conclusion makes as much sense as looking at a town in which 10 residents make $1mil/year and 10 make $1,000 year and then going around telling people that the town is well off because the average income is $500,500/year.  Or it's like telling someone a hiking trail is flat because the starting and ending elevations are the same... totally ignoring the fact that it's got +/- 6,000ft. of elevation change in between.

A flat trend line doesn't mean a damn thing when we've had 500% price fluctuations over the years.


Furthermore, if you extend it up to 2011, the trend line is no longer flat.  That chart doesn't show the run up to $140+ and it doesn't show the following crash to <$40.  It doesn't include the years following that crash in which it's never seen sub $80.  The trend is clearly UP.

We haven't had 500% price fluctuations over the past 120 years.  Oil was first discovered in 1861, the first 20 years mostly involved finding a use for it and then developing the tech to get it out of the ground.

And if you don't think that the 10 residents of that town that make $1000 per year are better off than you are, then you have no concept of reality.  The adult children of the wealthy residents don't make anything in the real world, but I'd wager that you would rather be them then their hard earning father.

We haven't?  We must not be looking at the same chart.  I see a low price of $10 and hit a high of ~$150 (so about $130-140 conservatively corrected to 2006 dollars for that chart).  So you're right, we haven't had 500% price fluctuations, we've had more like 1,500% fluctuations.

Shit man, we've had price swings range from $140 to $35 within the last decade.

Oh, I'm sorry, that's a dollar chart!  I thought you had actually posted something relevant to a topic for once!  I should have known better.

I already stated that I'm talking about the average across years, not the spikes; and relative to silver, not US FRN.  Of course, I shouldn't expect you to actually read any posts that precede yours. that not being your style of debate.

I just explained to you why averages are meaningless and actually ridiculously misleading in many cases.

The chart is inflation corrected, so it shows the actual cost of oil and the fact that it is NOT steady, as you said.  I understand what you said perfectly.  Your argument is that silver maintains a constant value (untrue), oil priced in silver has been the same price since ever (untrue), therefore oil price fluctuations should be attributed almost entirely to the value of the dollar (untrue).

Certainly gold and silver prices fluctuate versus currencies and commodities just like everything else on the market.  The argument against fiat is that having a currency pegged to gold and silver makes your currency much more stable and decentralizes the control of the currency.  Fiat currencies are controlled by the central bank which can inflate at will ruining your savings and destroying the purchasing power of the dollar. 

For example, here is a chart of the purchasing power of the US dollar from 1792-2011.  Note the dotted lines where we went off "hard currency".

http://i293.photobucket.com/albums/mm45/antiwave/Stuff/dollar-chart-1792-2011.gif

http://www.wealthwire.com/news/inflation/773

Stuff like that is misleading.  There is FAR FAR more to the monetary control debate than "zomg the dollar is worth only a fraction of what it was!!!"  Charts like that designed to get an emotional reaction out of people that don't think.  Without even getting into details, just consider for a second that in 1900 people worked for pennies an hour.  So, yes, the dollar was worth more, but that's only a tiny part of the story.  You can't just look at relative value of a dollar and ignore all other factors.

I understand that it is a complex issue and that wages were lower in the 1900s than they are now, but the decline in the purchasing power of the dollar still means something.  I want to learn more about the complex issues and discuss them with people.  I'm willing to discuss them with you if you are interested. 

On August 9, 1971, Richard Nixon closed the gold window. The dollar could no longer be converted into gold.

The best place to start is to ask yourself... lost purchasing power against what?  Who decided where to set the $1 baseline on that chart and what are they using to consider how value has fluctuated?  It seems like they've used gold (no surprise there).  Is a speculative metal like gold the best thing to use to determine relative purchasing power of the dollar?  Why not use eggs, milk, iron, corn, sheep, oil, etc.?

A loaf of bread cost $0.05 1930 and it costs $3.00 today, but is that the whole story?  $0.05 was a couple hours' wage back in 1930.  $3.00 is less than half of minimum hourly wage today.  So yea, you could purchase a nice car for $2,500 back in the day, but that was a year's salary for many people.  So were people really better off when the dollar's purchasing power was higher?  Obviously a good bit of that chart is exaggeration and hyperbole, because the average American wasn't exactly rolling in wealth when the dollar was at its supposed peak.


The dollar's purchasing power is entirely relative.  If real wages increase at the same rate the dollar declines in value, then the decline isn't really a big deal - stuff costs more, but everyone makes more. If real wages increase at a slower rate than the dollar declines (or decline themselves), then we've got issues.  Obviously that's only the tip of the iceberg (foreign trade really messes everything up), but it's a good place to start to decide whether the decline is of concern or not.

The dollar being pegged to gold is what started the deflationary spiral we call "The Great Depression".

Yes, it is.  Because it has 5K years of history as the international baseline for money.  The past 100 years is a small data set by comparison.

A commonly believed myth, because that is what is taught to schoolchildren in history books written by historians instead of economists.  Even the majority of Kenyesian Economists reject this concept.  The gold standard was functionally defunct in 1913.  At best, the argument is that the Federal Reserve started a 'deflationary spiral' in 1929-1930 by failure to supply "liquidity"; an argument that has been disproven repeatedly, but persists.

LOL  You need to brush up on your history.  Everything from rocks to cowhide to glass beads has been used as money.  Tradition is a very poor reason to do anything.

I think you're asking the right questions. Gold and the dollar need to be compared to at least one additional commodity to triangulate stability, but ideally you should compare multiple commodities with substantial historical data. Similar to your suggestion, I might include cement, steel, copper, wool, maize, sulfuric acid, sodium hydroxide, and coal. This includes construction materials, industrial metals, plant and animal farm products, commodity chemicals, and energy. Everything in the collection has been produced and traded on a large scale for at least 100 years.

Once you have the basket of items to compare, you can see how different prices correlate over time. If gold is more stable than the dollar then you should see a stronger positive price correlation coefficient, with lower standard deviation, between gold and the members of the basket of commodities than between the dollar and the basket members. That is, if 1 gram of gold buys 150 kilograms of steel today, and 1 dollar buys 2 kilograms of steel today, the gold to steel ratio should deviate less over time (past and future) than the dollar to steel ratio, and the changes should be positively correlated: steel moves up when gold moves up, steel goes down when gold goes down, and by similar amounts. You can even perform the correlation exercise with pairs of mundane commodities: maybe it turns out that sulfuric acid tracks other commodity prices more closely than dollars or gold, and cautious savers should actually clamor for an acid-backed store of value.

Even without running the exercise over a full century of data -- which I don't have to hand, alas, else I would have -- I don't think gold is going to perform too spectacularly. The tremendous gold price volatility around 1980 was not, so far as I know, reflected nearly to the same degree in mundane commodities like coal and wool. It may well be that gold holds its value better over long periods if you smooth the time series, but people can't (directly) trade in smoothed time series: someone who decided to convert all their saved dollars (or steel, coal, wool...) to gold in July 1980 would have taken a heavy loss only a year later and would have needed to wait 10+ years to recover anything like their previous holdings, converting back from gold to useful commodities. The same specious arguments (scarcity, durability) sometimes advanced now to justify an irreversible value increase for gold were being touted just a few years ago about real estate. Value is always relative.

Let's get back to silver dimes and silver as a value store for a moment. Mercury is rarer in the Earth's crust than silver, it's been known since antiquity, it's shiny and dense, it can be neither created nor destroyed, and supplies and production rate from mining are limited. It even has more desirable properties for commerce: since it's a liquid at room temperature, it can be subdivided for any transaction as needed, down to the limits of the traders' scales. So why do the traditional coinage metals have their privileged position, if (as sometimes claimed) precious metals are "natural" monetary standards rather than reflections of human psychology and historical inertia? Despite all these wonderful attributes of mercury which should make it equally or more precious than silver, it currently trades at less than 5% of silver's price, and no nation has ever backed its paper notes with mercury.

And seashells, salt and nails.  None of which has either the continuous duration of use nor the international scope that gold, silver, copper and yes, even mercury, has had.  Ironicly, considering that citizens of the Roman Republic used nails as money for at least two hundred years, and the trade value of same was so stable (until the Roman Empire began to debase the national currency) that the standard Roman sizes for nails were denominated in the smallest national currency, the Denarius.  This is exactly why, in the United States, the AS metric for nail sizes is shown as a lower case "d"; the denarius became the pence, which became the penny.  So you can go to any hardware store in the US and ask for an 8 "penny" (8 d) nail and they will know exactly what you are talking about.  Yet, an 8 penny nail costs less than 8 pennies.  Why?  Due to productivity improvements in the production of nails, from the mining of iron ore all the way to the automated manufacturing of the flat nail head.  A gold standard does not suffer from the distortions that changes in technology to any degree that is the case for nails, mercury, cow hides or glass beads.  Or even for salt.  Certainly a gold standard has it's own problems, but those are well known problems that are difficult (probably impossible) for individuals, no matter how well connected or well heeled, to distort for any significant duration or degree.

If only the fiat currencies of the world could have had nearly the success of the Roman black iron nail as a trade unit, we wouldn't be having this conversation for another 100 years, and there wouldn't likely have ever been a need for Bitcoin at all.

Very well summarized.  I wasn't going to bother typing up something that extensive because, as you can see above me, the majority of these guys aren't interested in reality.

AyeYo, you are the saddest example of an American.  You have direct access to the greatest concentration of public wealth in the history of the world, including a constitutionally founded library system that is the largest in human history, and you choose to remain willfully ignorant.

Excellent refutation of the points he made.

He did make good points.  I was talking to you.

As to addressing his comments...



Gold is compared to everything, continuously.  That is the very point of using the standardized unit of value measurements that we call 'currency', to have a common reference to base those comparisions on.  Since we are no longer on a gold standard, that reference floats, so there must be a 'gold price' in the fiat currency in order to make said comparision.  Steel, copper, wool, maize, industrial chemicals of all sorts, most agricultural products, and coal have dropped in their relative value due to massive improvements in productivity over the past 100 years.  Thus, using any or all of these things would give you a distorted perspective, as the value of the currency dependent upon them would change with every significant improvement in any of those industries, thus making the economic calculations (and thus predictive capacity of economic calculations) vastly more complex and inaccurate.


The productivity issues undermine your theory here.  The costs of production of raw steel is one such example.  Another is, what kind of steel?  There are hundreds of standard steels in use in modern industry, most of which were not yet invented 100 years ago.  The grades of steel that were available 100 years ago, for the most part, are no longer produced in any significant quantity.


Yes, value is always relative.  And a gold standard is a simple metric for common valuations.  Real estate backed currencies have been attempted, but they all failed.  Why?  Because unlike refined gold, not every acre of unimproved real estate is interchangable with another.  Said another way, real estate is not fungible.


The fact that no nation has ever backed a paper currency with mercury is actually irrelevent.  Mercury has been used as a trade medium on occasions.  However, mercury does not have better properties for commerce than gold silver or copper.  The first and most obvious, is that the liquied state of mercury is a problem for trade, as it requires that those who trade in it have both vessels to hold it and scales to measure it, but also a means to verify that it's all mercury in the bottles.  You can weight the bottles full, and then empty them into another container using a strainer to make sure that tere is no lead dust mixed in, but that is a lot of work for the common trade.  The minted coin, with a recognizable size and weight, and the mark of a trusted (bank, government, king, whatever) tells the casual trader the value of the thing pretty fast.

The Whiskey and Gunpowder post you used to start this thread says Largely forgotten the silver version of the currency is keeping its value relative to things you buy. A gallon of gas is still less than $0.20. Twenty REAL cents. Not the forgeries that pass for money in the minds of the unwary. If you think that’s something, realize that a gallon of gas is just five or six cents in terms of the old dollar bills that were also gold certificates. (One pre-1934 dollar was good for 1/20 ounce of gold, or about 80 of today’s dollars.) That’s an even more impressive holding of value than the silver coins. That's a claim that is subject to empirical scrutiny. It is not a distortion to cross-correlate exchange rates of different commodities, precious metals, and currencies. It's a test of the hypothesis that silver and gold have characteristically high exchange rate stabilities that justify their use for savings and for backing currencies used in day to day transactions. If you have a better test, please explain it and your reasoning.



Coins could be and were debased, forged, and clipped. If the trader actually measured coin mass and density to check its composition and value, there is no reason he could not do the same with mercury. In any case, I have the (perhaps mistaken) impression that enthusiasm for a return to gold or silver standards does not literally imply that every transaction would involve the trading of metals in person. It simply means that the issuing agency of a currency would maintain a fixed metal:currency unit exchange rate, and would trade its currency (paper, coins, electronic records...) for the metal on demand. There's no reason that we would have to give up electronic bank transfers or lightweight paper bills for everyday use as long as users always have the option to exchange for metals.

By that same reasoning, it is strange that enthusiasm for silver does not extend to other materials whose availability is limited by geological facts. Why no bismuth, indium, or mercury standard cheerleaders? Silver is more abundant and currently mined at a higher rate than any of those elements. Geologically speaking none of them is any more likely to go inflationary than silver. I think there is a substantial amount of magical thinking that leads people to specifically value gold or silver, and advance justifications for those metals as currency standards after they've already made up their minds. If they were starting from their claimed justifications, and simply looking for durable, rare substances whose production is limited and cannot be rapidly increased, then I'd expect as many cries for the Selenium Standard as the Silver Standard.

That hits the nail on the head.  They're bandwagon metals, which is why they have a history of multi-hundred percent price spikes.

I find it highly ironic that the crowd which blasts the dollar for being valued far in excess of its intrinsic worth is the same crowd that champions gold and silver, two metals (especially gold) that are valued grossly in excess of their intrinsic worth.  The industrial demand for gold take alone would place its price at only a fraction of a fraction of where it currently is, and the same goes for silver (which is why it's historically traded around the $5 mark, except when bandwagons form).

There's nothing magical about it. Gold and silver have thousands of years of historically being accepted as money therefore it's likely to continue that way. Whenever the free market decides what it will use as money, it settles on gold and to a lesser degree, silver and other metals. That's what I'm more interested in, free market money, rather than any specific metal. Let the market decide. Historically, it's been gold. What's the point in trying to fight that? Just so you can seem sophisticated?

I'm a scientist, or at least I was until I discovered that employment writing software offers steadier and better pay. I was first interested in Bitcoin as a field experiment in economics. Later I realized that with wide enough adoption it could be a truly disruptive technology, due to its international reach and lack of central control. The deflationary nature of Bitcoin has never been especially important or interesting to me, but it seems to have attracted people who make wild, unsubstantiated claims about deflation, the nature of money, precious metals, and related topics. My bullshit detector goes off when someone makes a claim contrary to empirical evidence, without empirical evidence, or of such a nature that it cannot be tested. Examples of popular bullshit in this vein include "vaccines cause autism," "a truly free market will care for the destitute better than government," and "God created the universe 6000 years ago but doctored the evidence to make it look older."

In the United States it has been legal since 1977 to write contracts specifying payment in gold and it has been legal to acquire and keep any quantity of gold in any form since 1974. These changes reversed the 1934 Roosevelt order that outlawed private gold hoarding and gold clauses in contracts. Yet gold is still only storing a small fraction of US savings and enters into only a tiny fraction of contracts involving payment. If the market always "decides" gold is great, why don't cell phone contracts, insurance policies, mortgages, employment agreements, car leases, etc. specify payment in gold? It's legal right now and has been for 30+ years.

I'm not interested in promoting mercury or selenium as the basis for currencies, only poking holes in the stories told about gold and silver. I do it in the same spirit as Richard Feynman: "The first principle [of science] is that you must not fool yourself -- and you are the easiest person to fool." If I'm fooling myself I hope that gold/silver promoters will rise to the challenge and provide empirical evidence for the great stability of their metals. If I'm seeing clearly and others are being fooled, I hope that I can convince others to at least approach economics and economic theories with the same scientific, empirical mindset that we'd apply to chemistry or physics.

There is no such thing as 'intrinsic worth'.  All value is a subjective calculation.  Gold is worth what someone will trade for it.  The same thing is true about steel, mercury, salt or real estate.  The fact that gold & silver are both valued well beyond what their market price would be absent their monetary value is entirely irrelevent.  Actually, that is also an argument for gold over any industrial commodity, including silver, since the establishment of a commodity backed currency upon an industrial input is going to increase the market value of that same commodity beyond it's industrial value because someone will always choose to store some of it for it's monetary/capital preservation characteristics.  Thus increasing monetary demand.  This means that gold, having few industrial uses, is ideal as a monetary base even lacking it's 5K year history of same.  For a monetary crisis would be unlikely to upset the supply of any industrial inputs.  Do the same for mercury, (or any of the 'rare earth' elements) and products that depend upon those inputs functionally become out of reach economicly.  CFL's require trace amounts of mercury in their manufacturing processes.  Good or bad, they would not be possible as a consumer product under a mercury standard.  Many forms of vaccines, until recently, required trace amounts of mercury as part of a perservative.  A mercury standard might have cut millions of lives short due to polio and whatever else if it had existed over the past 100 years.

Aren't we all?

Well, not AyeYo.  One would have to be willing, on some level, to challenge one's own belief systems to be a scientist.  At least a good one.

Because of legal tender laws and Gresham's law.

You can write a contract and specify payment in gold but if the other party doesn't pay and you sue them, you're required to accept payment in legal tender. You can't say "but I wanted gold!" Likewise, since you are forced to take legal tender if you want protection from the courts, according to Gresham's law, people would rather save their gold and pass off their paper currency to you. All of this serves to reduce the amount of gold in circulation as money and we get to the state of affairs like today where very few people could even pay in gold without first buying some with paper. That makes it hugely inconvenient and businesses don't want to shrink their market share. Remove the legal tender laws and have courts honor gold contracts and then you can make an argument. As it stands, when there is a truly free market, without government threats, the market prefers gold. You claim to be big on evidence so let's not ignore thousands of years of history.

You may have to take legal tender, but you can link the amount of tender to the exchange rate with gold. A gold clause still lets you do that and it's been perfectly legal to enforce since 1977. See 216 Jamica Ave. LLC v. S&R Playhouse Realty Co. (http://www.ca6.uscourts.gov/opinions.pdf/08a0322p-06.pdf). Gresham's Law makes sense but it also contradicts the idea that the market will always choose gold. You just named some important reasons that market participants will continue to contract in fixed quantities of fiat currencies instead of gold-linked quantities, such as convenience and retaining market share, even though it is legal to specify payments in terms of gold.

If market participants prefer gold, it's even more puzzling that gold doesn't dominate savings. Right now Apple is sitting on more than $75 billion in cash. Microsoft has more than $50 billion and Google more than $35 billion. They don't appear to be in a hurry to spend it. There are many large companies with multiple billions in cash on hand. Why not convert it to gold if gold is stable and fiat currencies are unpredictable? They don't need to worry about any market share loss or customer inconvenience from what they do with their savings.

That's a complete non sequitur. What does that have to do with anything?


I never said that the market "will always choose gold". Where do you come up with that? I said that, in a truly free market, the market prefers gold and by that, I mean gold backed currency. Give someone the option for paper backed by gold and paper backed by nothing and they'll choose the gold backed currency. That's historically speaking and this isn't a truly free market. When there is a truly free market again, the market could settle on palladium. I predict it won't, however.

And fiat currencies, but that item is conveniently always left off the list.

In fact, as ansible adams point out, fiat currencies seem to be the value store of choice for all major corporations and, quite frankly, nearly everyone else as well.  Why is that, given that you're claiming gold and silver are the most stable stores of value?




And just FYI, when people refer to intrinsic value they're not talking about some magical, a priori worth; they're referring to the item's actually usefulness as a life-sustaining commodity.  Paper dollars can be used to start a fire, so that's some small amount of intrinsic value.  Gold can be used for... well not much of anything outside of advanced industry. 

Maybe 10% of those reserves are actually in cash.  Maybe.

A fair point.  I had assumed that this was an obvious fact, and that it didn't need to be pointed out.  Sorry for overestimating you once again.  I'll try to do better next time.


I challenge you to find a single US corporation or major investor that keeps more than 10% of their savings in cash.  They value it in cash, but very little of it is actually kept in cash.  There is an obvious reason for this.


As noted, I have to be careful with you, AyeYo.  I can't assume that you understand what this economic terms actually mean.  As for gold's 'use value', it makes for a hell of a ship ballast.  Good for bullets as well.  And silver has well known anti-bacterial properties, which are useful to everyone should the collapse of civilization destroy the monetary value of silver.  I challenge you to tell me what use a pint of mercury has to Mad Max.

Then what are they kept in?  I guess you aren't familiar with accounting, but cash means cash.





Regardless, you've sidestepped the question.  If gold and silver are the ultimate mediums of stable value storage, when why aren't all these massive cash stores converted to gold and silver bullion?

Absolutely.  But I haven't heard anyone argue that the US dollar has lost value versus things in general, are you saying it hasn't?  Here (http://www.measuringworth.com/uscompare/result.php?use%5B%5D=DOLLAR&use%5B%5D=GDPDEFLATION&use%5B%5D=VCB&use%5B%5D=UNSKILLED&use%5B%5D=MANCOMP&use%5B%5D=NOMGDPCP&use%5B%5D=NOMINALGDP&year_source=1774&amount=1.00&year_result=1913) is how much a 1774 dollar was worth in 1913 based on multiple indicators (CPI, value of consumer bundle, nominal GDP per capita, etc.) and here (http://www.measuringworth.com/uscompare/result.php?use%5B%5D=DOLLAR&use%5B%5D=GDPDEFLATION&use%5B%5D=VCB&use%5B%5D=UNSKILLED&use%5B%5D=MANCOMP&use%5B%5D=NOMGDPCP&use%5B%5D=NOMINALGDP&year_source=1913&amount=1.00&year_result=2009) is how much a 1913 dollar is worth in 2009.  Finally, here (http://www.measuringworth.com/uscompare/result.php?use%5B%5D=DOLLAR&use%5B%5D=GDPDEFLATION&use%5B%5D=VCB&use%5B%5D=UNSKILLED&use%5B%5D=MANCOMP&use%5B%5D=NOMGDPCP&use%5B%5D=NOMINALGDP&year_source=1971&amount=1.00&year_result=2009) is how muach a 1971 dollar is worth in 2009.

So you would agree that the US dollar has lost value, right?


The problem with a decline in purchasing power is that it hurts people who are saving and discourages it.  Wages will adjust to inflation, but they don't adjust right away, so the middle and lower classes are hurt by this kind of monetary policy.

Not really.  Mostly it means highly liquid investments, such as money markets.  That said, the 'cash' position of any particular corporation; or even all of them taken together, is only part of the equation.  You have to consider their debts as well.  Although most large corporations are net positive, they aren't by much.  They tend to own each others' debts via money markets, which are basicly mutual funds for corporate bonds.  This is very similar to how the banks all seem to owe each other money.  The idea that there is corporate cash sitting on the sidelines, or even private investor cash, waiting for the right moment to jump into the market is a sad myth.  That money doesn't, for the most part, actually exist.  And what doesn't exist can't be traded for gold.


As stated above, mostly because it doesn't really exist.  And for that which does exist, much of it is invested in bullion, either directly or indirectly via the 'paper' metal funds.  The thing about gold, is that it is as untraceable for corporate entities and very wealthy individuals as Bitcoin is for us.  There are estimates about how much refined "above ground" gold exists in the world, but the thing about that is that no one can really ever know with any certainty how much actually exists.  And if we can't know how much there is, we can't ever know who is trading the "shadow" supply on the margins.  Also, there are other highly liquid investments that can do as well or better than gold; such as oil futures, or ag futures.  With value levels at the top of the corporate food chain, it would be unprofessional for the CFO to invest all of the net 'cash' of the company in any single commodity, no matter how wise that particular investment might be.

Again you've sidestepped the quesiton.

WHY IS THE MONEY NOT KEPT IN GOLD?  If the money can be used to purchase commercial paper, it can be used to purchase gold.  WHY IS THE MONEY NOT IN GOLD?






Claim not evidenced.  Citation required.





Totally contradicts your statement that gold and silver are the ultimate stores of value.  If that claim was true, it would be criminal to NOT store all the company's excess cash in gold and silver.

No, I didn't.  You just didn't understand it.
I don't feel obliged to provide evidence to you.  You wouldn't accept anything I provided anyway.  You just want to see me expend time and effort in a futile effort.  If anyone besides yourself actually cared, I might consider it.  Otherwise, google is your friend.

I don't think you understand what is going on.  If gold were the ultimate store of value, it'd be worth something like $1700 per ounce!  Just because something is the best choice overall, (and historicly) doesn't mean that it's still the best choice for a particular person or corporation.  A company that has a lot of production inputs in oil or steel would be wise to invest reserves into those commodities, by either futures contracts, storage facilities or outright purchase of companies that produce those commodities.

The same tune just keeps playing over and over again... sidestep sidestep sidestep, avoid avoid avoid... sing it with me!


So you refuse to answer my question, you refuse to provide evidence to support your bold claim, and you continue to contradict yourself by saying gold and silver are the best stores of value but companies choose cash as their value store of choice because gold and silver are not the best stores of value.


Just to recap, the question is: why do major corporations not convert their cash stores into gold?  

This has nothing to do with investments in oil and steel, we're talking about CASH RESERVES AND VALUE STORE, not investments.  If gold and silver are THE BEST and MOST STABLE stores of value (which is exactly you claim) then it would be absolutely criminal for any responsible money manager to not take full advantage of them with every last penny of reserve cash.

MOPEDE TIME!

Yes, I do refuse to play your game.


And a summary of my answer...

Some do, some don't.  We can't really know to what degree that those who do, do so; nor can we know if those that we don't think do, actually don't.  For either of us to speculate on which do or do not, would be a particularly futile form of mental masturbation.  Again, I'm not willing to play in the dirt with you.  Not again.


There is no defining distinction.  Not one that can be agreed upon by all players, anyway.  The differences are both personal to the observer and temporal.


In general, and over long periods, yes.  Local, and near term conditions can render such a statement overly broad, and thus false for a particular set of conditions.  Not knowing any particulars, or not caring enough to do the research, any particular individual investor (saver) or company is likely to do as well or better with gold than anything else.  However, there are many companies with enough 'cash' to manage that hiring a finance manager to do the research is worthwhile.  This is one reason that companys might not (again, we can't really know what they do if they don't really want to tell us) invest liquid reserves into gold while the general statement that gold is history's overall greatest store of value remains true.  Another possible reason is that said finance manager is, in fact, criminally irresponsible and his employer simply doesn't understand that (yet).  Bernie Maddof was considered one of the greatest investment gurus in the country up until a few years ago.

You don't have to speculate.  You claim has now change to: "some do, some don't".  Provide a sitation for that claim.


I know damn well they don't and I don't have to speculate because I can simply look at the publically available financial statements.  Gold and silver are NOT included in cash figures, therefore money in cash is money NOT in gold and silver.






There's absolutely a defining distriction and if you knew even one iota about accounting you'd know exactly what that defining distinction is: liquidity.

Corporate paper can be offed in a matter of minutes through totally electronic means with little change in value.  Oil and steel require massive infrastructure and physical containment areas.  They require finding scarce buyers for the large quantities and slow transportation.  Physical investments are NOT liquid which is, again, why gold and silver are NOT part of the "cash" figure.





Boils down to: gold is the best store of value, but it might not be the best store of value.

Got it.


I'll let you in a little secret.  Large corporations do not hold their cash reserves in gold because gold is NOT a good store of value.  Gold is a speculative investment that has a history of sharp rises and falls based on panic situations.  Gold does well when times are bad and does terrible when times are good.  It is not a measure of absolute value; it is merely a measure of fear.

I wouldn't trade my silver dollar for five gallons of gas, I'll tell you that.  Also a nickel is now worth six cents and will be soon made of zinc.  Right now they're 25% nickel and 75% copper.  Collecting nickels is a risk free metals play, but where do you put em all?

I have.


You seem to assume that the publicly available financial statements honestly reflect reality.  Any rational review of the past statements from such corporations such as GM, Enron and half of the Fortune 500 should expose the lie in this belief for even yourself.  As for gold not being listed as cash, this is true, if it's listed at all.  However, generally speaking anything that the Powers that be (tm) consider to be a "cash equivalent"; such as money markets and government bonds (and basicly anything else with a highly active secondary trade market, such as oil futures within certain constraints) can be reported upon such summary statements as "cash reserves" even though they most certainly are not sitting on cash.  That cash is already back out in the market, because the finance managers don't want to be in a true cash position any more than anyone else does in an inflationary environment.


Those facilities can, and generally are, provided by the oil companies as part of the futures contracts.  Thus oil and steel can be bought and sold as easily as corporate bonds, and thus are liquid assets.  I can buy a futures contract for vastly more oil than I can actually do anything with, with a built in delivery date three months out, and sell it to a refinery (or anyone else) two days before delivery confirmation.


As noted above, yes they are liquid enough to be considered as part of the 'cash reserve' figure in a summary financial statement, if the trading of such commodities is not a fundamental part of the corporation's core business model.  You really should try this thing called Google, it's your friend.  If you work in this field, I feel sorry for your childrens' future.

This seems like a great place for a quote from a recent Wiskey & Gunpowder article (commodities traders, Wiskey & Gunpowder, get it?)

"Oh dear. The gold price in dollars is volatile because the US dollar is volatile. An ounce of gold has almost always bought you a nice suit at any time in history. The volatility in the gold/dollar exchange rate is all on the dollar’s end. And that’s because the supply of dollars is always increasing. Also, the futures exchanges have been pretty active boosting margin requirements on gold contracts. That’s made for some larger-than-normal price moves. But the value? Rock steady over time, baby.

And that’s the point. Gold isn’t really an investment. It’s money. And it’s money that holds value well over time. You only worry about capital gains if you’re investing in gold. If you’re buying money, you’re more focused on preserving purchasing power."

http://whiskeyandgunpowder.com/you-can%e2%80%99t-eat-asset-allocation-either/

Yeah, things are going to get bad in the next couple of years.  I don't think you're going to make it.

Again again, your lack of accounting knowledge shows.  Enron didn't lie.  GM definitely didn't lie.  Half the Fortune 500 companies don't lie.

Enron used created accounting that isn't allowed anymore.  It wasn't lies, it just took an intelligent person knowing what they're looking for to find out what condition the company was actually in.  Everyone was too busy being greedy and getting rich off the stock that no one gave enough of a shit to give the financials any more than a quick glance - not at all unlike the Madoff scheme.

GM didn't lie, they just sucked.  Everyone knew and acknowledged they sucked except the management, which is why they went down the shitter.  There was no false financial statements involved.

Get your facts straight before attempting to BS.






Holding futures contracts with absolutely no intent of taking delivery != holding physical oil.  That type of activity is used for hedging and doesn't have a goddamn thing to do with what you were talking about.  Keep trying to rationalize it though, if you travel down enough irrelevant roads you might be able to salavage your grossly incorrect original statement.





See above.  Contracts for the purpose of hedging are not physical assets.  Physical assets are not liquid.






Good thing I bought a suit last month, because their prices have shot up over $300 since then.   ::)


The gold/suit example is the most ridiculous, not to mention untrue, (and most often used by the gold bugs) of all.  I didn't realize that suits were the best (or even a good) reference for comparative value.  Someone tell the Fed to stop using a large basket of goods to calculate CPI and just use the average price of a suit.

I didn't say that they lied.  Don't try and put words in my mouth.  I said that their financial statements don't reflect the reality.  A lie implies the intent to deceive, which I don't believe that most corporate auditors participate in.  They simply don't know all the details themselves, because those individuals within the corporation that oversee those datasets have many incentives (personal, professional and political) to not share them.  The financial statements often don't reflect reality, in part, because you believe that you can interpret them.  But you can't, and neither can I.  No one really can, outside of the insiders who helped to create them.  They exist to blow sunshine up the skirts of regulators and mutual fund managers alike, and they work very well at this.  The only detail of any value that I've ever been able to grok from any of those statements is, whenever those things are all sunshine and happiness, it's often because the dark clouds are so dark that even the insiders don't have a viable avoidance stragedy and are afraid to put it into ink for fear of making it too real.  I exited from a strong position in GE common stock, based mostly on the overly optimistic annual report, the Thursday prior to a rumor about the sale of GE core manufacturing plants (such as Louisville Appliance Park) sent the stock price from over $30 to $12 over the following several weeks around May of 2008.  That one annual report saved me quite a tidy sum.  It's what those financial statements don't say that is the most valuable.


They also used creative accounting that most certainly still is allowed.  Encouraged, in fact.  Feel free to search for the term, "Marked to market accounting" and compare that to what is actually allowed.


That is exactly the point.  Enron was an extreme example of the practice, but they did it because they were a company in decline, and they knew it.  What they did, whether it's 'legal' or not, is still standard practice with regard to public reports.  The companies that are doing well, have no incentive to resort to such actions; but because some reports cannot be trusted at face value, the rational investor cannot trust any such reports at face value.  If, for no other reason, he is not an insider and cannot possiblely know when a viable company has crossed the rubicon headed for ultimate failure.


Get your's straight before calling someone else a liar.  Don't forget who you are talking to, either.  You continue to express your "opinions", about my character and my viewpoints, by my own leave.  I will only suffer such abuse for so long before you cease to have a vioce at all.


Hedging is one rationalle, not the only rationalle.  That said, just what do you think that buying bonds are intenteded to do for a company, if not to hedge against inflation of the fiat currency? That's also what gold is good for, btw.

Who do you think that you are arguing here? Logically correct, but still irrelevant to the topic.  Try and focus.

Of course you would focus on the bit about the suit, and ignore the point completely.  I'll give you the benefit of the doubt, and assume that you simply didn't understand the point.

Gold isn't an investment.  Gold is money.  If you are buying gold, silver or even oil futures as a speculative investment, you are as likely as not to lose capital.  If you are seeking an alternative currency to the default, gold is (historicly and generally) the best choice for capital preservation.  I.e. hedging against currency risks.  Most people would simply call this "saving".

So you've still got no answer to the question, just a whole lot of reasons why you can't answer it.  Corporations are too dishonest (highly ironic, given that want you deregulate them to full power over the world), financials are too hard for you to understand, lots of baseless claims... but no actual answer to why corporations are not buying up gold like it's going out of style.

If that's all that you could understand from my responses, then I would guess that I can't answer it for you.


I'm a libertarian, not an anarchist.  Try and understand the differences in the ideologies before displaying your ignorance.  Corporations are a creation of the state, and thus the state has the right to regulate them.  I'm opposed to regulations without basis or merit, which just happens to be the majority of them in our modern world.  That said, not all companies are corporations.  Corporations exist for the purpose of limitation of liability, which wouldn't even be allowed in a true free market economy.  Private companies that do not seek to limit their liabilities by hiding behind the skirt of mama state should not have to deal with the false regulations imposed by that same state.


Yeah, I don't think you're going to make it.

It's not illegal to melt silver coins in the US, hasn't been since a brief ban in the late 60's. Many refiners melt silver coins. There is currently a melt and export ban only on pennies and nickels (specifically exempting silver war nickels) which began in late 2006.
http://www.usmint.gov/pressroom/?action=press_release&ID=724.