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Who's Buying Gold

Discussion in 'Speaker's Corner' started by fester, Feb 4, 2009.

  1. Tefal

    Capo Crimine

    Joined: Jun 30, 2007

    Posts: 66,559

    Location: Wales

    what you expect the company you bought some gold from on line to stand and fight off the police in perpetuity to protect you?
     
  2. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Or just not want to go to jail. Plus, unless you own the gold and have it in our physical possesion, as other people have said, it would be recovered at source and you wouldn't have much say in the matter.

    This isn't idle speculation on my part, in the past governments can and have requisitioned gold and owners be damned.
     
  3. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Today unlike in UK 1917 and US 1933 the amount of gold in private hand's and business is minuscule.During that time most of the gold was confiscated buy removing it's legal tender status in a similar way the old £1 notes or big 10p's where taken out of circulation.Also in the US it was still legal to own up $10,000 worth at $35 per Ozt.The aim of this was to go after the huge amount used in business transaction's. The only gold worth going after to day are The ETF's.


    Why Is a gold-backed currency such stupid an idea ?

    I ask this as the British Empire did quite will under it until it bankrupted it's self with war's as did the US up to the end of the Bretton Woods system in 1971.
    In fact the Bretton Woods era 1946-1971 under a de facto world gold standard had the greatest and the most stable period of real economic growth in modern history.
     
    Last edited: Jun 21, 2011
  4. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    With a gold backed currency a government cannot expand or contract the money supply to meet the demands of economic circumstances. Keynes called it a 'barberous relic', and it played a very major part in making the Great Depression as deep and long as it ended up being, and allowing it to spread from being basically an American problem to a worldwide one. There's a reasonably strong correlation with countries coming off the gold standard and the beginnings of their economic recoveries, as they were able to expand the money supply and stimulate demand, like with the New Deal and re-armament spending.

    Unlike what a lot of people seem to think, printing money does not necessarily lead to excessive inflation unless there is very little slack in the economy - meaning that we are at or close to full unemployment, which we clearly aren't at the moment. Which is why I think as our economy begins to recover, unemployment and inflation will begin to subside and gold will quite rapidly head into a decline.

    I think anyone holding gold needs to seriously reconsider their position - timing the market is pretty much impossible and lots of people are going to be taken to the cleaners unless they are careful.

    e: also, as a point of contention, Britain was not 'bankrupt' after WW1. We haven't defaulted on debt since the Bank of England was founded in 1694, nor has the US defaulted since it was formed in 1776/1789, unless you count bonds issued by the CSA. In fact, it was Churchill putting us back on the gold standard in 1924 at the pre-war rate that played a big part in inflating the bubble which burst in 1929.
     
    Last edited: Jun 21, 2011
  5. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    That Keynesian argument can now been thoroughly dismissed simple by looking at history.

    The real problem with a gold standard is that it keep Government's honest.It stops "creative and innovative" ways of having cake and also eating it and above all else it's shows the true cost of war's.

    Briton my not have defaulted on bonds but it did on it's currency the pound £ before WW1 a pound was .2354 otz Au or 3.36 ozt of Ag after ww1 it was 1.81 ozt of silver. Thought deficit war spending the inflation genie was out of the bottle.This is why Churchill's crazy attempt to go back to the pre war value of .2354 ozt to £ was doomed to failure.

    The US also may not have defaulted on bonds but it sure did default on currency with the end of convertibility with the closing of the gold window.This was due to the same old war spending inflation genie that can't be put back in the bottle.
     
    Last edited: Jun 22, 2011
  6. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Speaking as a qualified historian, it really can't. Keynesianism was found to have limits in the 70s, true - it had no answer to external price shocks. But the gold standard was also shown to have been more of a hindrance at the same time, hence why it was ditched. The disadvantage of floating currencies is that inflation is higher, true, but we've seen such a long period of high inflation that it's extremely likely that it will mean revert and we'll see a period of low inflation.

    Also, 'defaulting on a currency' is a completely meaningless statement. It's not even possible. Revaluation is not a default.
     
  7. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Sorry if a country can not fulfil it's international legally binding contract, the promise on it's promissory notes it's a default requiring a revaluation.
    ie US $35 for 1 ozt gold ah sorry can't do that because we created too many $$$ to fund the Vietnam War so lets change the rules .

    As for high and low inflation I think this chart say's it all.
    [​IMG]
    The sorce articlce of the above chart
     
    Last edited: Jun 22, 2011
  8. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    It really isn't.
     
  9. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Last edited: Jun 22, 2011
  10. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    How about, 'the end of the gold window?'

    If you don't agree that the gold standard is far more of hindrance than a help then I don't know what to tell you. What do you think would have happened if we were still on it in 2006-2008? There would either a) have been no bank bailouts either here or the US, or b) they would have been bailed out using funds gathered by deep cuts and tax increases, which either way would have led us straight into a depression.

    I can recommend some books that might help you with investment history, which are a bit more useful than macro-economic concepts which aren't all that relevant to a small investor. You can never learn enough about this stuff and it all helps:

    Once in Golconda - John Brooks (about the US government finally getting a grip on Wall Street on the 30s)
    Where are the Customers’ Yachts? - Fred Schwed (about how the entire investment banking industry exists to transfer wealth from customers to the banks, also in the 30s, but still applicable to today)
    Capital Ideas - Peter Bernstein (a history of financial theory)

    At £10 a pop these will turn out to be a better investment than anything else in your portfolio, I guarantee it. And they are all very readable, they're not dry financial tomes by any means.

    e: and please, please expose yourself to ideas other than the Austrian School, even if only to get another perspective. They have some fringe views to say the least.

    e2: that was pretty amusing actually!
     
    Last edited: Jun 22, 2011
  11. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    I think I if we had been on a pure utopian gold standard from 1695 and everyone played by the rules the banking crises of 2006-2008 would not even have happened ;)

    Where are the Customers’ Yachts? looks like a good read.Reading the amazon reviews reminded me of the time got a rubber cheque from deadbeat 'independent financial adviser' for whom I did some work and had to take to the atm to get some cash.This guy was selling financial advise and products yet couldn't run his own current account successfully.

    I try to keep and open and very cynical mind about every thing in life.One of the flaws I see in Austrian school is it's ignoring of other powerful manipulating forces on free markets other than government and unions.

    Socialism also has it's place I believe especially when it comes to protecting and building infrastructure, health and utilities these are economy's of huge scale that require central planing to be efficient.
     
    Last edited: Jun 23, 2011
  12. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    My counter to that would be we had as close to a 'utopian gold standard' as is pretty much possible to have in 1929 and it led us to disaster.
     
  13. markweatherill

    Mobster

    Joined: Jun 16, 2009

    Posts: 2,567

    Location: Bucks

    I'm concerned about the concept that Someone, or a group of Someones, is so keen to remove gold from individual hands. Real physical gold, that is.
     
  14. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    The classic gold standard was all but over by the end of the first world war.

    [FONT=Arial, Verdana, Helvetica, sans-serif][FONT=Verdana, Arial, Helvetica, sans-serif]The Demise of the Gold Standard[/FONT][/FONT]
    [FONT=Arial, Verdana, Helvetica, sans-serif][FONT=Verdana, Arial, Helvetica, sans-serif]Sir Isaac Newton’s invention remained largely untouched from its implementation in 1707 until 1914. I say ‘largely’ because the rules of his classical gold standard were occasionally broken. During periods of war, for example, the redeem-ability of paper into coin was often suspended and credit was expanded beyond the prudent limits that normally prevailed. But the rules governing the gold standard more or less remained in place, with the wartime suspensions usually lifted soon after hostilities ceased. Further, redeem-ability of banknotes into coin was re-established at the pre-war rate, which deflated the war induced credit expansion. [/FONT][/FONT]

    [FONT=Arial, Verdana, Helvetica, sans-serif][FONT=Verdana, Arial, Helvetica, sans-serif]Over time, however, bankers and politicians began to understand that if they broke Newton’s rules, they could gain an advantage. Bankers would make a greater profit because they could expand credit (make loans) beyond the self-imposed constraints. Politicians could gain greater power because instead of being restricted to just spending gold, they envisioned creating a seemingly unlimited amount of money-substitutes and spending those instead. Newton’s rules were voluntary and worked only so far as banks and governments agreed to them. By the 20th century, bankers and politicians were not just breaking the rules – they were discarding them. [/FONT][/FONT]
    [FONT=Arial, Verdana, Helvetica, sans-serif][FONT=Verdana, Arial, Helvetica, sans-serif]Thus, given the powerful interests lining up against it, it is not surprising that the classical gold standard began being painted as undesirable, despite its splendid 200-year track record of maintaining relatively stable prices. What’s worse, it started to be blamed for things for which it was not responsible. For example, it was not the gold standard that caused the Great Depression, but rather, it was imprudent credit expansion by the banks, which was made worse by the growth of government and the rising expenditures this burden entailed. The last vestiges of the gold standard were jettisoned in August 1971], ushering in the present era of fiat currency. [/FONT][/FONT]

    [FONT=Arial, Verdana, Helvetica, sans-serif][FONT=Verdana, Arial, Helvetica, sans-serif]So is it now clear why Keynes was taking a potshot at the gold standard? It is not surprising that Keynes – a statist who supported government management of the monetary system – would claim that the gold standard is a barbarous relic. But even though Keynes was no fan of gold, he no doubt understood that it would be foolhardy to attack gold itself. That would come later, from anti-gold propagandists and central bank apologists misusing what Keynes really wrote. But that is not quite the whole story.[/FONT][/FONT]
    [FONT=Arial, Verdana, Helvetica, sans-serif][FONT=Verdana, Arial, Helvetica, sans-serif]
    full article for the above extract
    [/FONT]
    [/FONT]
     
    Last edited: Jul 1, 2011
  15. e36Adz

    Capodecina

    Joined: Nov 28, 2003

    Posts: 11,074

    Location: Manchester, UK

    If I had a lot of money saved up, I definitely would have been buying gold.

    The subject of 'money' is very interesting when looked at from a religious point of view. I'm muslim, and the sheikh who's work I study and try to follow has been saying for the past 10 odd years that paper money is fraudulent and very soon the whole system will collapse, and he has been urging people to buy gold if they have any wealth saved up. Funnily enough, soon after reading and listening to his lectures about 'the international monetary system' about 2-3 years ago, I began seeing adverts pop up out of nowhere - 'Gold for Cash'. That confirmed for me that something is not quite right here. While people are getting rid of their gold for worthless paper, once it all comes crashing down, the people will be without the actual wealth. It's criminal to put wealth on paper then be able to print out as much as you want, if you or I were to do it, we would be put in jail, yet nothing stops these criminals printing as much 'wealth' as they want.

    The prophet Muhammed PBUH and infact all the prophets of God (may peace be upon them) traded in gold and silver coins. In Islam we are taught that if we abandon the sunnah (example/way of life) of the prophet PBUH then we will be punished for it. Criminals have replaced actual wealth which has intrinsic value with worthless paper and mankind has accepted it, and it is no surprise that as a result people will probably lose their life savings. Nor is it a surprise then when you get stats showing that 95% of the worlds wealth is owned by around 5% of the population, without criminal activity it wouldn't be possible.

    I am by no means an expert on the monetary system, but those who have more knowledge on the subject could you answer a question for me please. If the dollar was to completely collapse, what implications would this have on other currencies?
     
  16. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Why would you need a lot of money saved up first? If buying scrape you can buy as little as £5, 10 or £20 pounds at a time even 1/2 sov's are still around £115-125.

     
    Last edited: Jul 2, 2011
  17. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Muhammad didn't drive cars, watch TV, or use the internet. If we did as you say we'd all be in the dark ages still, so why should we go back to dark age financial practices?

    Fester: why do you think in your extract (why am I not surprised that a website called 'goldseek' is pro gold :rolleyes:) that the gold standard and/or convertibility has been abandoned in times of hardship? Because it is a singularly disastrous in those times. What's the point of a financial system that is completely useless when the going gets tough?

    Also, I should point out that the Spanish Empire in large part collapsed because of inflation within their gold based currency. They mined so much of the damn stuff in South America that it became increasingly worthless and this is a large part of the reason why Spain has been largely irrelevant as nation for the last 400 years.
     
    Last edited: Jul 2, 2011
  18. e36Adz

    Capodecina

    Joined: Nov 28, 2003

    Posts: 11,074

    Location: Manchester, UK

    Does living in an age which has TV, internet, cars, make it the best age in history though? Even if half the world is living in poverty and dying of starvation? I don't think it does. Mankind has definitely benefited a lot from technology but imo it has been used to make the rich permanently rich, and keep the poor stuck in permanent poverty. When such a large % of the worlds wealth is owned by such a tiny % of the people, it should tell us that something is wrong.

    I know most people on the forum are not religious but there's no harm in looking at things from a different viewpoint. Even in very simplistic terms it is so easy to understand. Worthless paper has been given an artificial value, and those in power can print out as much paper as they want. Yes it is more convenient but it's entirely fraudulent. If you had enough paper from your wages to buy a car, and you decided to put it away for a few years, when you took it out again you'd be lucky then if you could buy a bike with it. You have made a loss, and someone out there, I believe, is benefiting from that loss.

    When the ruling powers have such control of wealth as they currently do, so that they can produce infinite wealth from nothing, and they can cause the whole system to collapse when they wish, by which time they have acquired more of the actual wealth and the masses are left with paper, I believe this is the slavery on mankind that the prophet PBUH warned us about.

    This is what the Quran says: "And O my people! give just measure and weight, and do not deprive people of what is rightfully theirs by diminishing the value of their things (such as value of labor, merchandise, property, etc.) and do not commit evil in the land with intent to corrupt and destroy.” (11:85)

    Lets take a look at history and what happened in 1933:

    "The US Government enacted legislation at that time prohibiting American residents from keeping gold coins, bullion or gold certificates in their possession. Gold coins were demonetized, and were no longer permitted as legal tender. They could not be used as money. In exchange for the gold coins and bullion, the Federal Reserve Bank, which is a private bank, offered paper currency (i.e., US dollars) with an assigned numerical value of $20 for every one ounce of gold. Most Americans rushed to exchange their gold for paper currency, but those who were aware of the rip off that was about to take place bought gold with their paper currency and then shipped the gold away to Swiss banks. After all the gold in USA had been exchanged for paper currency, the US Government then proceeded in January 1934 to arbitrarily devalue the US paper dollar by 41% and to then rescind the law of prohibition concerning gold that was previously enacted. The American people rushed back to exchange their paper currency for gold at the new exchange value of $35 per ounce of gold. In the process, they were robbed of 41% of their wealth. The Federal Reserve Bank appeared in the above incident to have initiated a ‘trial run’ to test domestically the new monetary system through which a massive and unjust transfer of wealth throughout the unsuspecting world could be achieved. That transfer would take place through the simple device of creating money out of worthless paper and then forcing paper currency upon all of mankind. Those who control the monetary system would then target certain currencies and force them to be continuously devalued. As such paper currencies lost value the unsuspecting masses would suffer massive loss of wealth, however, their ‘loss’ would result in ‘gain’ for others."

    This is nothing but legalized theft. The people I believe who are behind it, I pointed out in the thread I made about 'Gog and Magog', have been corrupting and 'ripping off' mankind ever since they emerged. Most of mankind, especially the Islamic world is blissfully unaware of the 'rip off' taking place because they abandoned the sunnah of the prophet along time ago, and the Quran describes such people: "They have hearts wherewith they understand not, eyes wherewith they see not, and ears wherewith they hear not. They are like cattle,- nay more misguided: for they are heedless (of warning)." (7:179)
     
  19. physichull

    Sgarrista

    Joined: Sep 22, 2008

    Posts: 9,158

    Location: Warrington

  20. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Your post was an incredibly long winded way of saying 'inflation hurts savers', which is true. But one of the many other things that inflation does is that it forces people to seek out new investments that actually provide a better return than either gold or cash, that is it encourages people to invest in productive enterprises. At heart this is my objection to gold. It encourages hoarding of wealth, particularly in those who are already wealthy. It is a bad investment because it offers no return. A floating currency encourages money to go where it is the most productively used. Monetary inflation does not cause price inflation if an economy grows at the same rate as the money supply.

    The politics of finance in the last 30 years has been spectacularly bad for most people, it's true, but that's largely because the expansion of credit has been aimed at promoting consumerism, largely in housing and credit card debt, and crackpot financial speculation, rather than investment in industry or other productive areas. Moving to a gold standard will do nothing to change that.
     
    Last edited: Jul 2, 2011