Central Bank: If The Entire System Collapses, Gold Will Be Needed To Start Over

[ivakar]

the problem is not a dollar or the gold, the main problem is capitalism itself, imo
it is golden era of consumers, more products, more food and more and more.
even if is not needed the system is build to produce more and more.
now system is broken not sure the gold will fix it

[Febo]

Central Bank: If The Entire System Collapses, Gold Will Be Needed To Start Over

Entire system will never collapse. But USD as world reserve currency and other big currencies can lose its influence or even totally collapse. That will for sure reduce world trade. But there will always exist currencies. Question is how wanted they will be.

[mu_enrico]

OP, did you mean this article?
https://www.dnb.nl/en/payments/goud/index.jsp

I think it's only a "marketing effort" by DNB to show how strong their reserves. As stated in the same article:

De Nederlandsche Bank (DNB) holds more than 600 tonnes of gold. A bar of gold always retains its value, crisis or no crisis. This creates a sense of security. A central bank's gold stock is therefore regarded as a symbol of solidity.

and full context:

Gold: anchor of trust
Shares, bonds and other securities are not without risk, and prices can go down. But a bar of gold retains its value, even in times of crisis. That is why central banks, including DNB, have traditionally held considerable amounts of gold. Gold is the perfect piggy bank – it's the anchor of trust for the financial system. If the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the central bank's balance sheet and creates a sense of security.

Both sources: https://www.dnb.nl/en/payments/goud/index.jsp

AFAIK, central banks have portfolios of different assets as their risk management practice. However, maybe only Venezuela has BTC in its reserves (CMIIW). If BTC becomes more and more mainstream, we could expect more central banks to add BTC into their portfolios.

[1Referee]

I'm no economist but if the system does collapse, then it is very likely that countries would go back to the gold standard, which was the system before the Americans managed to muscle their way. And it'll likely stay that way until a different currency becomes the reserve.

It's quite difficult to have something so precious as Gold to become the standard of money again, and even if it turns out to happen one day, it's not going to last long before we're subjected to the same shananigans of endless money creation, debt, inflation, etc. As long as the same governments are responsible for creation and regulation of monetary policies, we're not going to move forward at all.

I like that with Bitcoin we don't have to wait for a new monetary system, it's here already and we're using it. Yes, it's priced against the us dollar, but so what? It works exceptionally well and it provides an indication of value, which is extremely hard to do when you start from scratch.

Another problem is that governments going back to the Gold standard will never be able to fully back every single unit because a lot of their Gold is stored in other countries. Not your keys not your Bitcoin is similar to not your physical Gold = you have no Gold. They're way better off hoarding Bitcoin because it's much easier to store. You can store trillions of dollars worth of Bitcoin in a $90 Ledger Nano hardware wallet. 

[joniboini]

If BTC becomes more and more mainstream, we could expect more central banks to add BTC into their portfolios.

If this happens, then our fiat is Bitcoin backed. Meh, might as well go with Bitcoin instead.

Another problem is that governments going back to the Gold standard will never be able to fully back every single unit because a lot of their Gold is stored in other countries.

I think they'll withdraw their gold before the collapse unless they're too stupid to do that. But, regardless of what happened, gold-backed currency in the hand of the governments is not good enough because they could lie and repat what happened a few decades ago.

[deisik]

I'm no economist but if the system does collapse, then it is very likely that countries would go back to the gold standard, which was the system before the Americans managed to muscle their way. And it'll likely stay that way until a different currency becomes the reserve

Most countries went off gold standard during WWI (or soon thereafter)

While the Americans forced their way only in 1944 (with the establishment of the Bretton Woods monetary system). Although countries can return to gold for international settlements of payments, it is not very likely that we will be back to the proper gold standard when you could freely and fully exchange (redeem) whatever piece of paper is called money for real gold. It seems we are irrevocably past that point already

[Eclipse26]

You mean all paper money will collapse at the same time? Is that possible? A country who has a lot of debt is most likely to collapse, but if all country, to whom they have debts?
Well I do believe that the second option when fiat collapses is gold. Because it's the traditional one and already tested by the past. So possibly it'll just go back to the traditional way of trading.

[error08]

Central banks are the source of financial crisis since the beginning with all their policies to wrap countries in debt. That's why in economics, hoarding gold and other hard assets far better than have trillion in bank accounts. In a collapse financial system, gold will be the new standard, hopefully fiat currency in the future made of gold like the system thousands of years ago.

[fiulpro]

I think offered the conditions are the same and like right now I do think that instead of gold we could be really happy about owning bitcoins since ;
  This way the small countries would indirectly get the support of the big ones and the economy would be global for once and the currency would be stronger since it's not depending upon one person or one country but on all ..
  No matter what people might say it doesn't directly get  affected with the price of other stocks and cryptocurrencies like the dollars or the gold, that could be a good thing for us in time time of recession.

 Since no government would be able to control it , this way the corruption will decrease and the risk factor would go down.

[boltz]

Besides Gold which is the top asset of the world and will never loose its value I think land will become again a great investments in order for the system to resume its power as with agriculture comes food , houses, drinks and all sort of things , depends what you do with the land. Anyway , until then , lets enjoy the digital age and Bitcoin.

[Mometaskers]

I'm no economist but if the system does collapse, then it is very likely that countries would go back to the gold standard, which was the system before the Americans managed to muscle their way. And it'll likely stay that way until a different currency becomes the reserve.

It's quite difficult to have something so precious as Gold to become the standard of money again, and even if it turns out to happen one day, it's not going to last long before we're subjected to the same shananigans of endless money creation, debt, inflation, etc. As long as the same governments are responsible for creation and regulation of monetary policies, we're not going to move forward at all.

I like that with Bitcoin we don't have to wait for a new monetary system, it's here already and we're using it. Yes, it's priced against the us dollar, but so what? It works exceptionally well and it provides an indication of value, which is extremely hard to do when you start from scratch.

Another problem is that governments going back to the Gold standard will never be able to fully back every single unit because a lot of their Gold is stored in other countries. Not your keys not your Bitcoin is similar to not your physical Gold = you have no Gold. They're way better off hoarding Bitcoin because it's much easier to store. You can store trillions of dollars worth of Bitcoin in a $90 Ledger Nano hardware wallet. 

I agree with everything you pointed out. Even if there was a movement among the governments to go back to gold standard to break the dollar's hegemony, it won't last long. Even if there's enough gold in each country's treasury to back the fiat, they'll want to keep on printing money. It's an addiction.

Of course this is not an issue with bitcoins (though some would argue that forks fulfill that want for money creation) though only time will tell if it'll be enough to compete with whatever new currency becomes the world standard.

[exstasie]

It's quite difficult to have something so precious as Gold to become the standard of money again, and even if it turns out to happen one day, it's not going to last long before we're subjected to the same shananigans of endless money creation, debt, inflation, etc.

Why would that be so difficult? If the USD collapsed, faith in fiat monies would be shattered. There would be an urgent need to circulate currency that people have faith in. I think the most intuitive response would be for governments to return to the pre-fiat system of gold-backed money.

This would probably devolve to fractional backing and free float again, yes, but for as long as government-issued notes are convertible to the underlying, it would function as expected.

[Google+]

gold will always be a currency that is very used from before there was a bank system until the bank collapsed gold can always be relied on so it doesn't hurt if you have and store gold in physical form because someday it will definitely always be used for transactions and has a very sale value high.

[btctaipei]

Keep in mind now a days you have more paper gold than physical gold, and there are plenty of Tungsten filled gold too!  I think physical delivery process may change significant for those 400oz CME gold bars, in that they would be melted on the spot to make sure it isn't filled with fake Tungsten bar inserts.  This is why you don't want those physical gold to be audited, so when the house of card fails, it would truely be too big to fail indeed!

value of dollar is backed by man with guns.  Man with guns needs to be paid just like anyone else to be loyal.  I wonder the magnitude of the problem shall become if they were paid with worthless fiat, would then dollar still be backed by man with guns? or man with mountain of toilet papers?

[STT]

There is not alot of Tungsten gold stored in any volume because any big buyer of gold will reforge the gold they purchase and the asset is confirmed in quality at that time.   Its worth their time to do so, in particular instances there is fraud but it obviously damages the reputation of those involved and is not common place.  

for years in preparation of the big crash.

Real gold bugs have been holding gold their whole lives and probably too great an extent which is why the vast majority dismiss gold as a form of money.   Its easily the case that many things return value better then gold ever will for most, just buying your own house is easily justifiable over gold for most as it helps reduce rent costs.  Where as gold stored does have a cost to it in storage its not zero but at least some form of security and holding is required.   Every person who works a career and hopes to retire should be saving a gold coin per year at least, so far as I know most people dont though China and India and other parts of asia do have more respect then the west I think.

   Gold is justified where the majority of money used is no longer employed profitable, like a scales tipping we will have bias switch back to gold as solid money and it will serve a purpose to society in its constant quality over time.   I think any big reset does involve gold as OP argues as it is a good touchstone for value over time between generations and a common point of reference between varied nations across the world, it has that use to the world that will be called upon in future more then now.   A rising usage is going to match a price rise also, it probably relates to some measure of volatility over years.

[btctaipei]

There is not alot of Tungsten gold stored in any volume because any big buyer of gold will reforge the gold they purchase and the asset is confirmed in quality at that time.   Its worth their time to do so, in particular instances there is fraud but it obviously damages the reputation of those involved and is not common place.   

I would proceed with "caution". reports of 400 oz. “good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong went back to time where Satoshi was still active on this forum.  Keep in mind those 400 oz bar were mostly traded on professional markets and turn over are alot lower, yet fakes do exist. Also tampering of serial no. on those bars does happen, consider the following:

DA investigating NYMEX executive - Manhattan, New York, district attorney's office, Stuart Smith - Melting Pot - Brief Article – Feb. 2, 2004

A top executive at the New York Mercantile Exchange is being investigated by the Manhattan district attorney. Sources close to the exchange said that Stuart Smith, senior vice president of operations at the exchange, was served with a search warrant by the district attorney's office last week. Details of the investigation have not been disclosed, but a NYMEX spokeswoman said it was unrelated to any of the exchange's markets. She declined to comment further other than to say that charges had not been brought. A spokeswoman for the Manhattan district attorney's office also declined comment.

"The offices of the Senior Vice President of Operations - NYMEX – is exactly where you would go to find the records [serial number and smelter of origin] for EVERY GOLD BAR ever PHYSICALLY settled on the exchange. They are required to keep these records. These precise records would show the lineage of all the physical gold settled on the exchange and hence "prove" that the amount of gold in question could not have possibly come from the U.S. mining operations – because the amounts in question coming from U.S. smelters would undoubtedly be vastly bigger than domestic mine production."

just be warned.  The truth is out there.

[magneto]

I'm not sure if gold is necessary. Bitcoin essentially performs the exact same function as gold as a store of value, except it exists on a trustless ledger, and is much more convenient for international remittance as opposed to gold.

We've already seen vaults in certain countries that hold custody over certain country's gold refusing to release them, and using them as leverage. I think that central banks should also be aware of centralisation of such reserves.

But yes, some sort of decentralised money will be needed as a money base, at the very least.

[mu_enrico]

If this happens, then our fiat is Bitcoin backed. Meh, might as well go with Bitcoin instead.

Yep, go ahead and store your Bitcoin in your own wallet. That's the best way to store Bitcoin IMO.
The same thing can be done with gold. You can store physical gold by yourself or assign 3rd party to store it for you in a vault.

About Bitcoin as a currency, the problem is that the government would not allow Bitcoin to be used as a legal currency. Except something "big" happens, fiat would not disappear anytime soon. Also, improvements (technical) need to be made before Bitcoin can on-board the majority of people on earth.

[espressodoppio]

In the original post I read, "the IMF bashed Germany's adoption of the gold standard in the 1870s," yet we forget how quickly the German economy turned upside down around the 1920s. It may have been 50 years later, but things moved much more slowly within the area of economics. Globally, we had transitioned into the manufacturing era in the early 19th century and would be in that era for another 70 years. They needed a lot of help getting out of their recession, but it just goes to show the IMF is not always right or has the right view on a certain topic.

Let's fast forward to the current day. In recent months, the IMF has opened up to the concept of cryptocurrencies. There were some meetings or summits regarding monetary remittance in commercial banks with a creation of their own cryptocurrency. Each individual banking system is unique based on domestic regulations and given economic conditions, so it may not be legal in some countries, but it does introduce the concept of a completely virtual system. Of course, no system is too good or too big to fail, but looking at Germany adopting the gold standard and then letting it go is definitely one of the earlier examples. Main point is that we will need some sort of reserve bailout in this global economy if it were to collapse. Some central banks have had to bail out struggling countries like the ECB with respect to Greece's situation.

Many banking systems had gold as their choice, but there are other options especially within the world of cryptocurrency. Some coins or tokens are backed by stock within a company so they're like a utility instead of traditional gold-backed fiat currencies. I recently attended an AMA session hosted by some blockchain startups and they seemed to be attached to an alternate standard of backing their tokens as a utility. These tokens can be used on their platform and It is a rather new concept, but still similar to this gold standard requirement like most believe that we need. If each unit of currency was backed by a gold standard, there would be a much larger vault space needed for the actual gold whether it be for fiat or crypto compared to the days when Germany and the US had their respective gold standards.

Well that's my two (or three) cents, but let's just keep in mind that there is no perfect or completely fail-proof system especially with a shift toward cryptocurrencies. Maybe the IMF also missed the mark on cryptocurrencies and it doesn't have the right amount of centralization needed to move forward successfully. Only time will tell...

[BChydro]

the problem is not a dollar or the gold, the main problem is capitalism itself, imo

What do you suggest, communism takes from the rich and gives to the poor, socialism will not work all the time.

it is golden era of consumers, more products, more food and more and more.
even if is not needed the system is build to produce more and more.
now system is broken not sure the gold will fix it

There is a stagnation in the market and how to revive that depends upon individual government, many government hold gold as reserves and in times of crises they will be using that, will it revive the market is to be seen.