The Real Story of Gold

[Miss Fortune]

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

Gold is one of the most valuable mineral in our planet and we find it very pricey. And also gold can be used in investing the price of it will become more expensive as years go by when it is invested in the right way.

[Erdogan]

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

An interesting contrarian view of the repression of gold as money, and I think you are right. The current situation at least allows for private gold holding, for those who want.

[BobK71]

Silver is bad money while gold is good money. The bad money drives out the good money from circulation. That's why silver had been more widely used than gold through history. People spent silver but saved gold specie...

I suspect that very few people realize the true meaning of Gresham's Law, and especially as applied to gold and silver.  Gresham's Law really says that, *where there is an artificially supported exchange rate between two monies*, the undervalued money will be hoarded, and only the overvalued money will be left in circulation.

Gresham's Law (or, rather, the principle behind it) would hold even in the case of a floating exchange rate (for example, Bitcoin vs USD). I have explained this here (and in greater detail further on)...

In the case of truly floating exchange rates, when A's price drops against B, you could argue that A is now undervalued, but you could also argue that A was never worth as much as its old price.  This is just like any other market, and there's no clear answer.  When the state is supporting an exchange rate, and the market leans one way, the state must lean the other way.  There is no question which currency is undervalued, and which is overvalued.  Gresham's Law concerns itself with state intervention, which is distinct from the free-market scenario.

[deisik]

Gresham's Law (or, rather, the principle behind it) would hold even in the case of a floating exchange rate (for example, Bitcoin vs USD). I have explained this here (and in greater detail further on)...

In the case of truly floating exchange rates, when A's price drops against B, you could argue that A is now undervalued, but you could also argue that A was never worth as much as its old price.  This is just like any other market, and there's no clear answer.  When the state is supporting an exchange rate, and the market leans one way, the state must lean the other way.  There is no question which currency is undervalued, and which is overvalued.  Gresham's Law concerns itself with state intervention, which is distinct from the free-market scenario.

In fact, you didn't say anything new beside what has already been said in the thread by the link I provided. We have agreed there that we would call this an expansion of Gresham's Law (for the convenience sake)...

Personally, I think that Gresham's Law is primarily about one money driving out another from circulation

[Miss Fortune]

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

Gold has its price fixed for many decades now and very pricey because many consumers want it.
It is a good investment in the future.

[deisik]

In the case of truly floating exchange rates, when A's price drops against B, you could argue that A is now undervalued, but you could also argue that A was never worth as much as its old price

If we really talk about truly floating exchange rates, we can say neither, that is, A cannot be undervalued at the moment, nor can it have been overvalued in the past. Why? Because the very definition of a floating exchange rate excludes such an option. If the rate of A to B changes with time, it just means that the value of A has changed against B...

In other words, a truly floating exchange rate correctly reflects the ratio of values at any given moment

[MasterYii]

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

Aside from gold is a very known natural metal we have, and it is very valuable a lot of consumers want it and the price of it is very high. Gold miners and the companies producing gold got very rich because of its value. It is a good investments in the future too.

[BobK71]

True but it's only one part of the story, its given the investment banks absolute dominance of the markets and so the ability to pump and dump any part of the global economy at will, in comparison to that the gold market has about as much chance of escaping their grip as the bitcoin market does, ie. none. The sooner folks see QE and the bailouts for what they where the better, it was the biggest land grab in history, shiny beads for real estate and fists full of real assets globally and lots of that about to get dumped so they can scoop up even more.

That saw tooth pattern on the major indexes is no accident but just like the PM markets most of it it worthless paper with nothing real behind it, maybe this time around all that will end and they'll kill the goose that lays a golden egg every 7 or 8 years but it wont happen simply by switching to gold, it has to go way deeper into the foundations of value. Lots of things have been currency at one time or another, for example risk is a currency to investments and carries a far higher value than dollars. Trust has been a currency at various times and its one the investment banks and the markets they live on have a very weak position in, personally I have great hopes for it.

If I read you correctly, you seem to be saying that the state needs the power of issuing money in order to protect us against the banks.

The truth is that the state and banks are in alliance.  The state needs banks to invent new assets that people might trust temporarily, to provide demand for the money and public debt issued by the state, so politicians can continue to receive "free" power by issuing debt.  The investment banks (and the commercial banks before they were properly regulated) are rich and powerful precisely because the state stands behind their debt (in one way or another.)  This public guarantee of private debt is what the state has to offer to banks for their service of propping up the state-issued assets.  The real role of the central bank is to keep the alliance alive by holding each side to its bargain.

[SmoothCurves]

Fiat has reached it's breaking point. Private Space companies like Planetary Resources will eventually succeed in the coming decades and the increased supply of PM will crash their prices. Crypto is the only game in town on a long enough time frame.

[markj113]

Fiat has reached it's breaking point. Private Space companies like Planetary Resources will eventually succeed in the coming decades and the increased supply of PM will crash their prices. Crypto is the only game in town on a long enough time frame.

I think you are living in fantasy land.

Why do you think developing mining spacecraft, fueling, launching into space, finding/landing/mining a pm rich asteroid, return to earth and safely land with  tonnes of metal on board will be any cheaper than just mining it directly out of the ground on earth.

The Rosetta mission where a space craft landed on a comet cost 1.4 billion euros and that was a one way trip with no mining operation and return trip bolted on.

If you put the total cost at 3 billion for the bolt on mining equipment and return trip you need to mine 92,914 tonnes of pure gold just to break even at current spot prices.  Bearing in mind the gold will be contained within an ore so the total tonnage to return to earth will be far higher than the 92,914 tonnes.

Maybe in several hundred years but not something I believe I have to worry about in my own or child's life span.

And as for Bitcoin going to the moon, I think the far more likely outcome is that governments will launch their own versions of bitcoin so they can maintain full control and bitcoin will either be made illegal or just fade away and remembered as the first "crypto" experiment.

[BobK71]

I'd say both the state and the banks can go to the seven circles of hell and the world would be far better for it, imho money is the religion of our age and we're worshipping with blind faith but I agree with what you say completely, the two work hand in hand to gain power. What I meant in that post is attempting to integrate with any part of that existing system, the markets, what's traded on them, their legal framework, etc. only re-enforces that blind faith, in keeping with the topic the belief that paper gold is real. As things stand very little value is placed on that distinction, a contract for something that may or may not exist versus something provably real so giving value to that distinction brings the blind faith into question, an economic renaissance.

Thankfully, there's a growing awareness that, among all the gold-based assets, only physical gold is worth the proverbial powder.

Money has been around for millennia, while paper money has only been around for 400 years.  Human experience seems to suggest money is very useful to the economy.  E.g. it provides a way to save for old age.  Having little intrinsic value, money requires faith.  It's just that modern elites have managed to extend that faith to a system whose incentives make it inherently unstable and exploitative.

Hopefully, with growing awareness, the elites will eventually have no choice but to dismantle this system.

[deisik]

Thankfully, there's a growing awareness that, among all the gold-based assets, only physical gold is worth the proverbial powder.

Money has been around for millennia, while paper money has only been around for 400 years.  Human experience seems to suggest money is very useful to the economy.  E.g. it provides a way to save for old age.  Having little intrinsic value, money requires faith.  It's just that modern elites have managed to extend that faith to a system whose incentives make it inherently unstable and exploitative.

Hopefully, with growing awareness, the elites will eventually have no choice but to dismantle this system.

If only they can substitute the fiat money with something better. And no, Bitcoin is not any better, it has the same major problem that gold had when it had been money, i.e. money supply totally detached from the needs of an economy...

Credit money is perfect in this respect, but it is easily misused and heavily abused

[OROBTC]

...

deisik & BobK71

I think all three of us agree that a system like a Gold Standard or gold coins being circulated is likely unwieldy and not even desirable. 

Fiat is with us and likely always will be.  Yes, it is easily abused (now is but one of hundreds of examples we see in history), but fiat works well as a Medium of Exchange.  All societies need currency for the economy to flow smoothly.  If our US$ fails us, then another currency will come along.  And it will likely not be "backed" by anything either.

Gold will serve perfectly in its role of Store of Value.  That is its highest and best value.

[RealBitcoin]

...

deisik & BobK71

I think all three of us agree that a system like a Gold Standard or gold coins being circulated is likely unwieldy and not even desirable. 

Fiat is with us and likely always will be.  Yes, it is easily abused (now is but one of hundreds of examples we see in history), but fiat works well as a Medium of Exchange.  All societies need currency for the economy to flow smoothly.  If our US$ fails us, then another currency will come along.  And it will likely not be "backed" by anything either.

Gold will serve perfectly in its role of Store of Value.  That is its highest and best value.

Atlest then have competition in currencies. We need a free market for currencies, not just a few central bank controlled ones.

We need intependent currencies like bitcoin to even the balance of power. Gold is not suitable for that.

[BobK71]

...

deisik & BobK71

I think all three of us agree that a system like a Gold Standard or gold coins being circulated is likely unwieldy and not even desirable.  

Fiat is with us and likely always will be.  Yes, it is easily abused (now is but one of hundreds of examples we see in history), but fiat works well as a Medium of Exchange.  All societies need currency for the economy to flow smoothly.  If our US$ fails us, then another currency will come along.  And it will likely not be "backed" by anything either.

Gold will serve perfectly in its role of Store of Value.  That is its highest and best value.

In a gold world, for example, medium of exchange function could be served by well-regulated 100% reserve banking of gold, using electronic tokens for transactions.  (Banks would essentially be storage facilities.)  For this to work would require a mass awakening, but any real progress in this area would require that anyway.

The core issue is not whether "fiat," gold-standard, or any type of system is better or worse than any other system.  It is who gets to decide.  No one or group is qualified, or should be qualified to decide.  The minute someone is endowed with that power, eventually its full destructive force will visit.  Each type of money has functioned well for millennia by more-or-less surviving in the free market.  Let it continue to do so.

"Easily abused" is putting it too mildly IMO.  The system, at its core, and likely by design, is theft.  Since modern humans don't tolerate being stolen from once they find out, ever greater theft and exploitation must be invented to cover up an original act.  To maintain trust in dollars after the financial busts that led to the Great Depression, money was tightened and the worst of the resulting pain was exported to Germany.  This led directly to the rise of the Nazis, and war.

If the system doesn't directly tell a terrorist to blow something up, it has acted in many ways to create the misery that nurtures the terrorism.  In fact, you could argue that making people angrier and angrier, and not stopping until they lose control is, consciously or not, how the system sustains itself through the centuries.  Once chaos and destruction begin, the dominant imperial reserve issuer is back in the driver's seat, since the world will be forced to beg for its help to bring peace back.

[BobK71]

If only they can substitute the fiat money with something better. And no, Bitcoin is not any better, it has the same major problem that gold had when it had been money, i.e. money supply totally detached from the needs of an economy...

Credit money is perfect in this respect, but it is easily misused and heavily abused

The Italian Renaissance and 18th century Scottish free banking era had great economic progress without managed money.  "Managing the money supply in accordance with the economy" is precisely equivalent to central planners' argument that if they don't control the production of food, people will starve.

There's nothing intrinsically wrong with credit, and it's an engine of growth.  The key is whether the state gets involved in propping up its value, and in deciding how much it's like money.  Once the state (and its banking allies who help it hatch the schemes) gets involved, the system becomes inherently unstable (as opposed to just abusable.)

Without elite intervention, prices tend to adjust healthily to the economy.  Historically, this is not the case 100% of the time.  When Spain found mountains of silver in South America, Europe experienced a lot of inflation and Spaniards became wealthy.  This might not have been fair, but these disturbances were self-limiting rather than toxically contagious.

Probably, if faith in our monetary system collapsed overnight, and people wanted nothing but, say, gold, there would be a lot of economic pain.  (Milder versions of this have happened throughout modern history.)  But the root cause of the problem is not, as widely reported by mainstream economists, the sounder money that people flock to.  The cause is always the financial asset bubble that occurred before the collapse, which is driven by the incentives faced by the elites under state-controlled money, in the first place.

Distortions always cause malinvestment, and the worst kind of malinvestment is probably in people.  The artificially highly valued dollar and the need to invest vast sums of created dollars at anything that might become a good business is building a large cohort of well paid finance and IT professionals in the US, and others who depend on their purchases.  If the dollar returns to free-market determined value, most of these people won't know how to supply whatever little demand there will be in the new economy.

[Gyfts]

Interesting enough, there are conspiracies that Fort Knox, a vault in Kentucky in the US that holds giant stashes of gold, really contains nothing. Given this, USD would most definitely collapse. USD isn't something that's able to hold itself up without having something physical behind it.

[Miss Fortune]

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

Gold is sure a good investment in the future but as of now I dont think everyone can afford it because even now the value of it is very high.

[mordekaiser]

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

The value of gold is a natural metal that is produced but the quantity of of it is very limited that it makes it pricey.

[OROBTC]

...

Miss Fortune

Gold is supposed to be expensive.  It always has been.

Gold is also "wealth dense", perhaps its best characteristic.  Of course, "wealth" is in the eye of the beholder, but for over 5000 years gold has held a lot of value in our eyes.

But, gold can EASILY be bought is amounts as little as 1/10th of an ounce.  Gold 1/10th Eagles are typically available at coin shops and would cost maybe $135.  And there are other options for 1/10th oz pieces (also French 10 Franc pieces at about 0.09 ounces -- slightly smaller, but slightly cheaper too).