If gold is so great?

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Thomas Hedin's picture
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If gold is so great?

If gold is so great why are all of these people with their gold trying so hard to trade it for Federal Reserve Notes?

 

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Re: If gold is so great?

Because they have to pay their bills.

Denny Johnson's picture
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Re: If gold is so great?

Which people? Seems that for several years there have been more buyers than sellers.

Treah's picture
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Re: If gold is so great?

I've been having trouble with this gold thing. It's only worth something if people think it is. When fuel, food & water supplies are scarce, what good will gold be?? Besides, isn't accumulating wealth, be it in gold, stocks or cash, part of the old paradigm that needs to be eased out? In other words, the message seems to be, buy gold so you can "protect" your wealth. I'd like to hear Chris's take on this as I know him to be a believer in a new way of thinking.

Treah

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Re: If gold is so great?

Gold is a better store of value than paper currency, but it still cannot be:

1. Eaten
2. Use for anything (apart from some applications in Electronics)
3. Divided easily to buy common goods
4. Traded for goods and services without intervention by the IRS and their many enforcement agencies.

It's probably a good idea to have some gold if you've got a lot of extra wealth in paper notes or banks - but if you're like me, eating moss while desperately trying to aquire staple foods, heirloom seeds, alternative energies and so on, then there are probably better ways to spend your FRNs.

Cheers!

Aaron

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Re: If gold is so great?

I agree.

Gold is only of value in a true SHTF scenario for a limited time. Its value will only be as great as the item(s) you need most desperately to survive at any given moment.

Of course, you could use it as a temporary means of procuring tools, seeds, and other vital commodities once fiat currency has lost all its value. But I for one would prefer to aquire those things sooner rather than later, while my money is still worth something and "stuff" is cheap and widely available.

Also (and this is something you'll no doubt agree with, Aaron), in a real post-collapse world, whoever has the guns will likely end up with the gold... and food....

Byron

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Re: If gold is so great?

Gold has been used for money for more than 2000 years. 

It is easily divisible.

Doesn't rust, tarnish, errode.

It is valuable and easily traded for currency in almost every country.

It can be traded for goods and services if the provider accepts it.

The value cannot be erroded away by inflation.

It takes great sums of energy to remove it from the ground and refine it.

It is found in limited supply in the ground.

In truth I see gold as the world's currency.  If anyone one monetary system fails the others still value gold in their own system and thus it can be transfered for currency, goods, or services.  Its kind of like holding money that is independant of a country.

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Re: If gold is so great?

The answer to this question depends at least in part on how quickly you think things are going to deteriorate.  I personally believe that deindustrialization will take some time.  It's not going to happen overnight.  Along the way, as fiat currency increasingly loses it's value, commodities like precious metals, oil and foodstocks will logically appreciate. 

At some point in the future, it's entirely possible that people will value precious metals - which have no inherent worth other than what people ascribe to them - much less than they do today.  But I think that time is quite a ways off, if it ever comes at all.  Gold and silver have had monetary value over many different time periods in many different civilizations.

It's also important to recognize that even in a systemwide crash, there are still people with money and they need to put that money somewhere.  A lot of these folks aren't going to be buying solar panels and greywater systems (although some will, which is why the next bubble will probably be in green tech).  They're going to put their money in the safest place they can think of, which historically has been precious metals.

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Re: If gold is so great?

Good points.

I do agree that gold, silver, etc. will always have value in societies that have some remnants of commerce still functioning.

However, unless you have significant surplus currency NOW that you are able to convert to actual, physical gold in small, tradeable denominations, then you might find that there are many other more pressing needs that will actually help you through the very turbulent transitional phase ahead - the duration and severity of which none of us can accurately predict. These include: arable land, seeds, tools and associated skills, clean water supply, firearms/ammunition, renewable sources of heat and electricity, to name just a few.

I'm not discounting the concept of acquiring/holding gold as a hedge against hyperinflation, it's just that in my opinion and current fiscal situation I don't see it as a high priority.

Byron  

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Re: If gold is so great?
ByronS wrote:

Good points.

I do agree that gold, silver, etc. will always have value in societies that have some remnants of commerce still functioning.

However, unless you have significant surplus currency NOW that you are able to convert to actual, physical gold in small, tradeable denominations, then you might find that there are many other more pressing needs that will actually help you through the very turbulent transitional phase ahead - the duration and severity of which none of us can accurately predict. These include: arable land, seeds, tools and associated skills, clean water supply, firearms/ammunition, renewable sources of heat and electricity, to name just a few.

I'm not discounting the concept of acquiring/holding gold as a hedge against hyperinflation, it's just that in my opinion and current fiscal situation I don't see it as a high priority.

Byron  

Byron,

I would add only that there may come a point in this process where you would not find gold available to buy even if you had the money and desire to purchase it.

Coop

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Re: If gold is so great?

Exactly!

If the supply of gold within a given regional, quasi-barter economy is severely limited, and only a relative few have it, does that actually make those few "richer"? For how long? 

Will there be enough gold in circulation so that it can realistically function as a tradeable currency? Once you have spent all/most of your (limited) gold on things you really need to survive, will you have a product, service/skill that you can trade to get it back again?

I feel that is is far more likely that local currencies will be created, as a means of exchanging goods and services within a small geographic area. These currencies already exist in many communities, and were created as a means of keeping wealth local. 

I suppose the real question here is (and I don't pretend to have the answer), just how low will we go with regard to commercial, financial, social collapse, and how long will that period of disruption last?

Byron  

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Re: If gold is so great?

Byron,

For the record, I agree that investing in skills and resources that contribute to survival and well-being is the best possible use of capital.

However, there are other considerations.  Timing, income, employment, location, whether one rents or owns a home, etc. all come into play.

The point of holding gold is to preserve whatever savings one might have in the event that they aren't ready (for any number of valid reasons) to employ those savings in the ways you describe.  For example, a young couple may not yet be able to afford a house or qualify for a mortgage, but they hope to do that in a few years.  What do they do with that "nest egg" in the interim period?  If they leave it in cash, and inflation or hyperinflation ensues, they could lose much of their purchasing power.  

I don't look at gold as a long-term "investment".  I look at it as a temporary holding place for money that you don't want to disappear.   

And while I don't claim to have the answer to your last question, my opinion is that civilization isn't going to crumble into something unrecognizable in the next few years.  The history of the collapse of civilizations tells us that it generally takes 100-300 years for a major empire to completely disintegrate.  Of course there are precipitous periods of decline during those "Long Descents", as John Michael Greer calls them, but historically collapse doesn't happen overnight.

I think that there will still be a market for buying and selling gold, houses and most other things that are bought and sold today in five years.  But who knows?  Maybe I'm wrong.

Chris

 

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Re: If gold is so great?
Quote:

I've been having trouble with this gold thing. It's only worth
something if people think it is.

True.  The same can be said of anything in this world.  The point of money is to have a common medium by which to trade things which "are considered worthy of value".  Gold isn't valued because you can use it to catch a fish, roast a pig, or raise a chicken coop.  It is valued as a form of money because it is highly transportable, divideable, and it lasts forever.  I would ask you, what is the inherent/intrinsic value of a piece of paper with fancy drawings and numbers? 

 

Quote:

When fuel, food & water supplies
are scarce, what good will gold be??

It won't be any good unless you want to trade your food, water, or other supplies with other people, and you do not have enough time to find a chicken farmer who happens to want the 1/2 pig roast you got, and instead would prefer to sell your 1/2 pig roast to someone that actually needs it, and use those proceeds to buy your chickens.  That is, if there is a demand for a tradeable commodity, there will always be demand for gold, because it meets the basic desired qualities of money better than any pther commodity.  Pieces of paper with pictures on them are not a commodity.

 

Quote:

Besides, isn't accumulating
wealth, be it in gold, stocks or cash, part of the old paradigm that
needs to be eased out? In other words, the message seems to be, buy
gold so you can "protect" your wealth.

If you are implying that Chris advocates a new paradigm where the fruits of your labor cannot be saved in a store of value of some sort for future use, then I must have taken a different Crash Course than you did.  What I hear Chris saying is that we need to live within our means - financially and energy-wise.  When you produce more than you consume, that wealth must be save-able.  Otherwise, we are wasting our energy.  Fiat money is not save-able because it robs us of what we produced yesterday, and forces us to pay it back tomorrow, with interest (read, more energy).

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Re: If gold is so great?
ByronS wrote:

Will there be enough gold in circulation so that it can
realistically function as a tradeable currency?

Byron 

If you really think about it, any amount of gold is enough for it to function as a tradeable currency.  To use an example from "The Creature from Jekyll Island", is a mile an inadequate unit of measure to determine the length of a rug?  Would not a 10-foot rug be just a easy to quantify by saying it is 0.0018929 miles long as it would be to say it is 10 feet long? It's just math and division.

The point is, gold is very easy to divide, dilute, and make into whatver unit is adequate for it to function as a currency - another reason why it makes such a great form of money.  If 1-ounce coins are too big (which at about $1,000 each they are for most transactions), there is no reason why 0.001 ounce coins or 0.010 ounce, or 0.10 or  0.25 ounce coins cannot be made and used.

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Re: If gold is so great?

If gold is money, then how could it ever have been de-monetized?

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Re: If gold is so great?
Thomas Hedin wrote:

If gold is money, then how could it ever have been de-monetized?

It was demonetized by banks, who have the most to lose by the implementation of a gold standard and the most to gain from the implementation of fiat money.

Think about it this way:  How great would it be to have a gold mine all to yourself that didn't require any mining?  That's what fiat money is.  Banks, through the central banking cartel they have managed to get legalized, have given themselves a gold mine they don't need to mine.  Whenever they want to loan money, they create it.  How great would it be to create gold out of thin air?

If you are really interested, I recommend "The Case Against the Fed" by Murray Rothbard, and "The Creature from Jekyll Island" by G. Edqard Griffin.

In the end, ironically, gold is still money.  Paper money eventually returns to it's intrinsic worth - zero, whereas gold continues to hold value because it takes value to produce it.

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Re: If gold is so great?

If gold really was money then wouldn't it be impossible to de-monetize it?  Either that or gold isn't money?

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Re: If gold is so great?

And it was de-monetized by the congress.

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Re: If gold is so great?

Patrick........ 

Thanks for addressing my questions & comments so well. However, I'm still caught on the opinion that if someday there truly are shortages of vital goods, no one will want gold (or fiat currency either). They will want food, water, an ax & even toilet paper... :-). Of course, this scenario presumes we will all be in a more local community & not travelling far distances because of the disappearance of fossil fuels. Granted, that may not occur in my lifetime, but for the sake of argument, my opinion is goods & services will be king & queen, not gold & silver. And people will always have things to trade, including their labor.

Treah

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Re: If gold is so great?
Treah wrote:

Patrick........ 

Thanks for addressing my questions & comments so well. However, I'm still caught on the opinion that if someday there truly are shortages of vital goods, no one will want gold (or fiat currency either). They will want food, water, an ax & even toilet paper... :-). Of course, this scenario presumes we will all be in a more local community & not travelling far distances because of the disappearance of fossil fuels. Granted, that may not occur in my lifetime, but for the sake of argument, my opinion is goods & services will be king & queen, not gold & silver. And people will always have things to trade, including their labor.

Treah

Why?  There have been countless times and places throughout history with shortages of vital goods and services, and yet gold and silver were still in demand. 

There are people now in the world who lack food, water, an ax & even toilet paper.  Yet gold and silver are still in demand, even in those same places where people lack such basic necessities.

A common misconception in mainstream culture is that the current civilization is our industructible birthright.  On the other hand, the resilience of modern, Western civilization has been repeatedly underestimated again by its critics.

There may indeed come a time when the world collectively decides that
precious metals have no inherent value, and that the only commodities
worth trading are those that contribute directly to survival.  But I
think it's extremely unlikely that we'll see such a shift in our
lifetimes.

Civilization as we know it isn't going to disappear overnight.

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Re: If gold is so great?
Quote:

Patrick........ 

Thanks for addressing my questions & comments so well. However, I'm still caught on the opinion that if someday there truly are shortages of vital goods, no one will want gold (or fiat currency either). They will want food, water, an ax & even toilet paper... :-). Of course, this scenario presumes we will all be in a more local community & not travelling far distances because of the disappearance of fossil fuels. Granted, that may not occur in my lifetime, but for the sake of argument, my opinion is goods & services will be king & queen, not gold & silver. And people will always have things to trade, including their labor.

Treah

As long as there is a desire to trade between people, they will need a form of money.  In the absence of money, barter, with all its limitations, would be the only way to trade.  I do not understand the equivalence being made here between technology or advanced societies, and a money medium.  Money has been around for thousands of years, and the gold standard itself was used by ancient civilizations, before oil, micoprocessors, industrialization, even before the Roman Empire.  In fact, the only advances I can think of that predate money, would be math and possibly writing.

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Re: If gold is so great?

Treah,

In the end, you have to pick your posion:  either fiat money, or commodity-based money.  Gold just happens to be the commodity with the best money-qualities.  As for why it's better than fiat money, the following mat help:

Pretend for a moment that dollar bills were not printed into
existence.  Pretend that instead, dollar bills were mined from
mountains, requiring actual labor and capital to extract.  

Now, imagine a scenario whereby, at the moment, it costs exactly $1
to extract $1 from the ground.  That is, the labor and capital it costs
to dig up the earth, comb through all the rubbish, and extract $1 is
$1.  Such a system would, in that moment, be balanced.  There would be
no point in extracting any dollars because it would not be profitable.

Now, imagine the economy grows a little bit.  More goods and
services come into being.  The cost of labor and capital goes down
because there are more goods and services being chased by an
equal-amount of dollars.  The dollar-mining companies immediately
realize that (because that is the business they are in) it now costs
them $0.90 to extract $1.  So, they mine dollars and make a nice 10% by
doing so.  

I'm sure you know how the story concludes:  soon, they've produced
enough dollars to catch up with the increase in goods and services, and
their labor and capital costs are back up to $1 spent for every $1
extracted.  So, they stop mining for a while until the economy grows a
little.

In this type of system, the money growth is naturally,
automatically, double-feedback-looped controlled.  Now just pretend
that what is being extracted is gold, and you will understand why gold,
or some type of commodity based money standard blows away the joke, the
farce, and the theft, that is fiat money.

Cheers,

Patrick

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Re: If gold is so great?
Quote:

And it was de-monetized by the congress.

Uh, yeah.  After the banks lobbied them into it.  

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Re: If gold is so great?

Sometimes its easier for me to internalize a concept that is foreign to my personal experience by finding specific/concrete examples in recent history.   With respect to the use of gold or silver as a medium of exchange - the reflections of a survivor of the Argentina financial meltdown was very helpful (see below). 

Quote:

GOLD:

Someone hit me in the head please because I messed up about the gold issue.

Everyone wants to buy gold! "I buy gold. Pay cash" signs are everywhere, even on TV! I can't believe I'm that silly!

I
just didn't relate it to what I read here because they deal with junk
gold, like jewelry, either stolen or sold because they needed the
money, not the gold coins that you guys talk about. No one pays for the
true value of the stuff, so big WARNING! Sign on people that are buying
gold coins.

Since
it is impossible to determine the true mineral percentage of gold,
small shops and dealers will pay for it as regular jewelry gold.

What
I would do if I were you: Besides gold coins, buy a lot of small gold
rings and other jewelry. They should be less expensive than gold coins,
and if the SHTF bad, you'll not be losing money, selling premium
quality gold coins for the price of junk gold. If I could travel back
in time, I'd buy a small bag worth of gold rings.

Small
time thieves will snatch gold chains right out of your neck and sell
them at these small dealers found everywhere. This is VERY common at
train stations, subways and other crowded areas.

So,
my advice, if you are preparing for a small economical crisis, gold
coins make sense. You will keep the value of the stuff and be able to
sell it for its actual cost to gold dealers or maybe other survivalists
that know the true value of the item.

In
my case, gold coins would have been an excellent investment, saving me
from loosing money when the local economy crashed. Even though things
are bad, I can go to a bank down town and get paid for what a gold coin
is truly worth, same goes for pure silver. But where I live, in my
local are small time dealers will only pay you the value of junk gold,
no matter what kind of gold you have. So, I'd have to say that if TSHTF
bad, gold jewelry is a better trade item than gold coins.

 

I recommend reading the 'entire' blog article (Lesson's from Argentinas Economic Collapse) but some might find it a bit 'disturbing' (I certainly did).

As noted by others - trade (barter) is very inefficient so 'some' form of intermediate exchange (i.e. money) has always been invented wherever a community of people have formed.  Shells, beads, peppercorns, gourds (really!), have been used as has gold, silver, and fancy paper with special pictures and numbers.   As long as society is 'stable' and 'X' units of currency will continue to purchase 'Y' units of good 'Z' (for instance. '$3.00' will still purchase '1 gallon' of 'milk' -> '.003 oz of gold' will still purchase '1 gallon of milk') then dollars are just fine (and more convenient) for purchasing goods.  However, when the 'value' of the local currency is changing wildly and it is now taking $30,000.00 to purchase 1 gallon of milk this week and $300,000 a month from now (think Zimbabwe), approximately the 'same' amount of gold will likely purchase that gallon of milk (the exchange rate will change too, but likely not as much)

 

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Re: If gold is so great?

Ok so I went over to Byron's place on Saturday and filmed this. 

 I'm a firm believer that it doesn't matter what our money is made of, it's what it does.  Loaning gold into circulation(or anything else for that matter) will have the exact same effect as our current money now.

 part 1 (watch in full screen HD)

 part 2 (watch in full screen HD)

 

 

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Re: If gold is so great?

If banks are allowed to use fractional reserve lending, you're right, it will never make any difference.  And history has shown that if demand deposits are allowed to circulate as money, banks eventually abuse that practice and print more demand deposits than there is specie to back them up. 

One experiment that hasn't been tried, however, is to make FRB punishable by death.  I know it sounds extreme, but robbing every citizen of the country through FRB is extreme also.  Bernie Madoff is a Saint compared to central bankers and the governments that prop them up.

Just my 2 cents.

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Re: If gold is so great?

I agree with you that fractional reserve banking is horrible, but our video didn't touch fractional reserve banking, it just shows what interest does.  The real robbing of our country is taking place through lending at interest.

 

Did you even watch the videos? 

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