Gold is not Magic

[RGacky3]

A lot of the free market fundementalists have this love affair with gold, as though its some how different from every other security, some even act as though its a currency, and treat it as though they were trading currencies. Its not.

On the Gold market you have Gold, Gold futures (promises to buy) and Gold ETFs (securities tied to the price of gold), all of these things allow you to effect the price of gold without actually purchasing physical gold, you can see how that would inflate gold prices.

Gold EFTs are purchased in much higher volume than actual gold, which means that the price of gold is actually more likely to represent that speculation rather than actual demand.

Speaking of futures, remember 2007, the food market? Where banks make futures contracts, higher and higher this inflating the food prices, the differences is people HAVE to buy food, no one has to buy gold.

Not only that but when you look at the prices of gold going up, when you adjust it for inflation, its not really that big a deal, ALL commodity prices go up during inflation (thats what inflation is).

My point here is not to say gold is not a good investment, (I'm not some investment guru), my point is just don't listen to tools like Peter Schiff that think Gold is magic and not subject to the same economic laws that other investments are subject too. (I also think gold prices are inflated and will normalize pretty soon, but thats just my opinion).

[PhoenixAsh]

Gold prices and silver prices are inflated....and they will go down pretty soon.

However gold is a scarcity product in high demand. Buying it when the price is low is a good investment....because in the future the price will certainly rise again....its a cyclical product...it will always be considered a product which is in demand. Not only because of its scarcety value as a precious metal but also because it is used in many high tech products.

The main arument why you should buy physical gold...the raw material that is...or better silver...is because of its scarecity value and the fact that in an apocalyptical world paper money and coins will loose their value....precious metal will not.

Offcourse....that is if you even survive a state collapse and apocalyptical event ;)

[PhoenixAsh]

....o....and as to the "magical" nature of gold...gold is being used in anti aging medication and beauty products. Aswel as in anti microbal infections and anti cancer medication...gene expression theraphy...anti arthritis medication...inflamatory diseases.

Its pretty damn useful :D

[Jimmie Higgins]

Well, Soo-Soo does need her medicine money.

http://i234.photobucket.com/albums/ee133/clcoyle/most_expensive_ice_cream.jpg

Sorry, but I can't think about gold anymore without thinking of that David Cross bit.

[RGacky3]

However gold is a scarcity product in high demand. Buying it when the price is low is a good investment....because in the future the price will certainly rise again....its a cyclical product...it will always be considered a product which is in demand. Not only because of its scarcety value as a precious metal but also because it is used in many high tech products.


Keep in mind a huge amount of the world reserves are held by governments, imagen if even a fraction of these are dumped.

Sure it will always be in demand, but no more than houses, no more than any other commodity, however unlike these commodities, its use value is extremely limited, its price is in no way linked to its use value (unlike say, houses).

[PhoenixAsh]

Keep in mind a huge amount of the world reserves are held by governments, imagen if even a fraction of these are dumped.

I agree.



Sure it will always be in demand, but no more than houses, no more than any other commodity, however unlike these commodities, its use value is extremely limited, its price is in no way linked to its use value (unlike say, houses).

Hmm...well value is also a percieved aspect. Gold derives its worth because of its scarcity and beauty (subjective)...mainly as a luxury product and mainly to show one can afford the luxury.

It has industrial and medical uses which I think are infinately more important than its function as jewelry but I completely agree...its use value is incredibly limited outside the scope of industry and medicine.

[RGacky3]

Gold derives its worth because of its scarcity and beauty (subjective)...mainly as a luxury product and mainly to show one can afford the luxury.


But that is nowhere NEAR being the deciding factor in its market price, if you look at how its traded, its treated almost as a currency.

People don't buy gold because they think jewlery is going to be more popular, or because indstry wil use more gold.

[Havet]

My point here is not to say gold is not a good investment, (I'm not some investment guru), my point is just don't listen to tools like Peter Schiff that think Gold is magic and not subject to the same economic laws that other investments are subject too. (I also think gold prices are inflated and will normalize pretty soon, but thats just my opinion).

Couldn't agree more, although it was my understanding that most right-libertarians prefer gold simly because you can't print more of it into existance.

But you're right, there's loads of mechanisms to inflate the value of gold.

[Bud Struggle]

Gold is just an arbitrary substance that can be used as a standard for international monitary control. Using gold was a good idea a couple of hundred of years ago when governments had no means of international exchange--but the idea is antiquated and dangerous today.

The people that would want to go back to this standard are no doubt the people that have large amounts of gold on hand.

[PhoenixAsh]

THe world gold council states that 80% of the annual gold Gold production goes to industrial and medicinal use (mainly dental)....on the whole this is equating 14% of trade. 30% of trade is used for jewelry.

The current price is being driven up because both China and India are currently buying gold in huge quantities. Traditionally the price of gold also goes up when people fear for their livelyhood...because it increases their demand. This concept is based on the fact that gold used to be and in many parts still is considered as currency....which, unlike coins and notes, does not lose its value.

So indeed...poeple do not buy gold because they think the price of jewelry goes up or because they want to invest in industrial demand. Traditionally that purpose is better served by stocks and real estate....unless there is a crisis....in which case stock and real estate lose their return of profit ability and gold, because of the increase in demand, takes over.

The price of gold is dependent on the fact that it is considered a generally value guaranteed product and is seen as universally accepted money. Prices are naturally influenced by supply and demand and by short selling.

[Demogorgon]

I'm told that in America in the advert breaks between the particularly reactionary TV or radio shows where the hosts scream on about gold, there are many adverts to invest in it hoping to capitalise on this. What the idiots who buy up gold never seem to wonder is why, if Gold is a far safer prospect than the Dollar, these companies are so keen to exchange their gold for your money.

I wonder if when the gold bubble bursts we will here a bit less about the greatness of gold. Ironically though the current inflating of its price shows why the Gold standard wouldn't work. With the value of gold rising much faster than the economy is growing we would end up in a severe deflationary situation.

[Bud Struggle]

I don't think anyone is seriously thinking about returning to the Gold Standard. Glenn Beck (from what I remember from listening to his show) sells his advertisers gold to his customers. I rather think this is more of an advertising scam than anything else.

[Demogorgon]

I don't think anyone is seriously thinking about returning to the Gold Standard. Glenn Beck (from what I remember from listening to his show) sells his advertisers gold to his customers. I rather think this is more of an advertising scam than anything else.
Yeah, what these people are doing is scamming people into buying gold, but I was referring as well as to what impact this may have on the extreme right who wish to return to a gold standard.

[RGacky3]

Glenn Beck (from what I remember from listening to his show) sells his advertisers gold to his customers. I rather think this is more of an advertising scam than anything else.

You got people like Peter Schiff out there too saying GOLD GOLD GOLD, all the time, and a lot of libertarians think somehow gold is a safe investment, a lot of the conspiracy theoryists also think so.


Traditionally the price of gold also goes up when people fear for their livelyhood...because it increases their demand. This concept is based on the fact that gold used to be and in many parts still is considered as currency....which, unlike coins and notes, does not lose its value.


Thats not traditional demand, its speculation.


So indeed...poeple do not buy gold because they think the price of jewelry goes up or because they want to invest in industrial demand. Traditionally that purpose is better served by stocks and real estate....unless there is a crisis....in which case stock and real estate lose their return of profit ability and gold, because of the increase in demand, takes over.


Which (as you understand I'm guessing), is entirely based on a false perception (that gold has currency like value).

Its like the housing bubble, the demand for houses, and mortgages and mortgage based securities went up, why? Because the perception of inevitable returns was there, thats a bubble.

The demand for gold as a security is not the same as the demand for gold as a commodity.

[Amphictyonis]

Alchemy! Do you guys see the same Goldline add on this thread? LOL

[Kotze]

How can paper money be of value, if it can just be printed? A house of paper money is even less stable than a house of cards! Clearly gold represents value, but another idea emerges if the arguments for gold are developed to their logical endpoint.

Gentlemen, I have the ULTIMATE SOUND MONEY PROPOSAL. A unit of truly representative currency must be made of material that requires as much labour in production and transport and storage and maintenance as what it represents. We need one half of the population to produce and maintain useful stuff and the other half to produce and maintain the currency...

[danyboy27]

gold is also used in electronics on circuit boards, its also used to make connector.

But gacky is right, the price of gold is something that is inflated.

the only reason why gold is used has a currency and an economical factor is dirrectly linked to physics.

gold is not a gas or a liquid, and unlike a lot of other rare solid material like, lets say uranium, it cannot kill you.

Silver come second, mainly beccause silver is more common than gold.

[RGacky3]

the only reason why gold is used has a currency and an economical factor is dirrectly linked to physics.

gold is not a gas or a liquid, and unlike a lot of other rare solid material like, lets say uranium, it cannot kill you.


Everything is an economical factor, I don't think its used as a currency anywhere, it used to be used as currency because of the historical value of it.

[Delirium]

The main arument why you should buy physical gold...the raw material that is...or better silver...is because of its scarecity value and the fact that in an apocalyptical world paper money and coins will loose their value....precious metal will not.

Offcourse....that is if you even survive a state collapse and apocalyptical event ;)

...And long enough for everything to stabilize enough for a barter system. Cause flashing your gold after the apocalypse would probably get shot and robbed real quick.

Gold and silver coins are highly liquid and hard to trace too, perfect for your o shit kit.

[Hoplite]

I don't think anyone is seriously thinking about returning to the Gold Standard.
That was actually a part of Ron Paul's campaign when he was running for president. He backpedaled on it when someone pointed out what a ludicrous idea it was, but none the less it WAS part of his campaign.

Many people support backing our currency with someTHING of value, be it gold, silver, whatever.

The problem is how do you do that when a great deal of money that changes hands in the US doesnt even physically exist? PayPal alone moves hundreds of millions of dollars a day and no physical currency changes hands. So if I have say $50 in a PayPal, could I change that in for real value goods?

Additionally, the amount of money, physical or not, in circulation FAR outstrips our supply of most valuable materials. There are far more US dollars in circulation than we have gold, so what do you cover the difference with?

[Revolution starts with U]

faith :thumbup1:

[RGacky3]

Not only that, but consider the fact that only a few countries are gold producers, which would mean that a few gold mining companies essencially turn into types of central banks.

As a Currency its rediculous, as a security? Its the same as all securities.

[Thug Lessons]

Gold is Magic.

[ar734]

I agree.



Hmm...well value is also a percieved aspect. Gold derives its worth because of its scarcity and beauty (subjective)...mainly as a luxury product and mainly to show one can afford the luxury.

It has industrial and medical uses which I think are infinately more important than its function as jewelry but I completely agree...its use value is incredibly limited outside the scope of industry and medicine.

Gold derives its value because of the amount of labor necessary to dig it out of the ground and to refine it.

[T-Paine]

The only reason why any medium of exchange has value is because it's widely accepted. Paper money only has value because a society commonly accepts it to have value. Gold has an advantage because it's not renewable and the public associates gold with wealth. I personally think the gold fixation is crazy, but demand is very democratic.

As for the labor theory of value, labor is an incomplete guide to value. Why does value change for things where labor does not? Especially on the topic of gold and medium of exchange. The dollar doesn't have more value than other paper because of a difference in labor, it's because it's widely accepted to be the medium for things that have value, things which have very different labor situations. I'm not saying labor doesn't have any input to value...but it isn't the only explanation as 'louisianaleftist' seems to imply.

[ComradeMan]

Gold is always the safe bet. When stocks are up gold is down but when stocks are down and/or there is a lot of instability people invest in gold and the prices go up. Afterall, gold is gold- it's not a currency that could fail nor is it stocks that have an expiry date nor is it tied to anything other than a nice little vault in Zurich...

[Blackscare]

Gold derives its value because of the amount of labor necessary to dig it out of the ground and to refine it.

Then why is it more valuable than tin?

[Thug Lessons]

Then why is it more valuable than tin?

...


The value of a commodity would therefore remain constant, if the labour time required for its production also remained constant. But the latter changes with every variation in the productiveness of labour. This productiveness is determined by various circumstances, amongst others, by the average amount of skill of the workmen, the state of science, and the degree of its practical application, the social organisation of production, the extent and capabilities of the means of production, and by physical conditions. For example, the same amount of labour in favourable seasons is embodied in 8 bushels of corn, and in unfavourable, only in four. The same labour extracts from rich mines more metal than from poor mines. Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass. Jacob doubts whether gold has ever been paid for at its full value. This applies still more to diamonds. According to Eschwege, the total produce of the Brazilian diamond mines for the eighty years, ending in 1823, had not realised the price of one-and-a-half years’ average produce of the sugar and coffee plantations of the same country, although the diamonds cost much more labour, and therefore represented more value. With richer mines, the same quantity of labour would embody itself in more diamonds, and their value would fall. If we could succeed at a small expenditure of labour, in converting carbon into diamonds, their value might fall below that of bricks. In general, the greater the productiveness of labour, the less is the labour time required for the production of an article, the less is the amount of labour crystallised in that article, and the less is its value; and vice versâ, the less the productiveness of labour, the greater is the labour time required for the production of an article, and the greater is its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it.

[RGacky3]

The only reason why any medium of exchange has value is because it's widely accepted. Paper money only has value because a society commonly accepts it to have value. Gold has an advantage because it's not renewable and the public associates gold with wealth. I personally think the gold fixation is crazy, but demand is very democratic.


Gold not being renewable actually makes it a terrible source of currency, also given that only a few countries produce gold, and that it would neccessarily lead to deflation.


Gold is always the safe bet. When stocks are up gold is down but when stocks are down and/or there is a lot of instability people invest in gold and the prices go up. Afterall, gold is gold- it's not a currency that could fail nor is it stocks that have an expiry date nor is it tied to anything other than a nice little vault in Zurich...

See thats EXACTLY the logic people use when assuming gold is safe, simply because its a physical thing, if you read my post you'll see gold is speculated on all the time, you have ETFs, futures, derivatives, you know what else people thought was a safe bet? Realestate, for the exact same reasons. Not only that Gold is a very limited commodity, a house holds more value as a commodity, which makes Gold even more subject to market inefficiencies.

[T-Paine]

Gold not being renewable actually makes it a terrible source of currency, also given that only a few countries produce gold, and that it would neccessarily lead to deflation.

I will agree with you that promoting a limited good as a medium of exchange is ignoring the long term. However, that's where it gets a lot of its worth. If everyone could grow gold in their backyard it would not be $1400 per ounce. The Federal Reserve can print as much money as it wants and decrease the value of the dollar at any time with very little input from voters. That's why gold is being worshiped right now, especially with the additional anti-government sentiments that Obama is going to ruin their lives. What the public perceives to be true is what rules. Gold isn't magic, but as long as people think it is, it is. Perception, along with demand, is democratic.

[RGacky3]

The Federal Reserve can print as much money as it wants and decrease the value of the dollar at any time with very little input from voters.

Absolutely, which is why I think the Fed should be socialized, but you need to have a flexible monitary supply.


That's why gold is being worshiped right now, especially with the additional anti-government sentiments that Obama is going to ruin their lives. What the public perceives to be true is what rules. Gold isn't magic, but as long as people think it is, it is. Perception, along with demand, is democratic.

Which is wierd because the Fed is'nt part of the government. The perception of gold does'nt matter, inflated prices eventually come down, also gold reserves can be horded, causing deflation, even if it does'nt get horded your gonna have deflation, (don't for get gold is being produced by certain countries).

[Dean]

That was actually a part of Ron Paul's campaign when he was running for president. He backpedaled on it when someone pointed out what a ludicrous idea it was, but none the less it WAS part of his campaign.

Many people support backing our currency with someTHING of value, be it gold, silver, whatever.

The federal reserve does back its currency with land and other securities.

[PhoenixAsh]

...Marx


I think that analogy is actually flawed. Introduction of modern and labor reducing machinery and chemical speed up of refinery has not really altered the price of diamonds.

So its definately not the only factor setting price.

Its also a source of rarity and scarcity. Which is actually being proven by the second part...but not logically concluded. Being able to produce new diamonds form carbon would reduce the scarcity simply because it would add to the total amount of diamonds in existence.

This is coollaborated by the fact that publisized discovery of new veigns will result in a drop in price. Thats one reason why diamond companies never release estimates of how much diamonds can be found and keep new discoveries a well guarded secrat.

[Hoplite]

The federal reserve does back its currency with land and other securities.
No, it doesnt

The US dollar is a fiat currency, meaning it's not backed by anything of concrete value and as such cannot be turned in for something else with concrete value such as gold or silver. This enables the Federal Reserve to essentially print money whenever they need to. Interest rates and money printing are both used to control our economy to keep us from spiraling into massive inflation or stagnation.

What backs the US dollar is confidence in the currency and the US economy.

[IcarusAngel]

What backs the currency is labor and land. If it was truly "backed by nothing" I doubt it would continue to be used as a world currency. They cannot create money out of nowhere either, since the money is actually a claim against the assets of the people.

Have you guys heard of T-bills and bonds?

http://www.youtube.com/watch?v=cK-8c-oy-CA

All you actually need is a simple, automatic rule for money growth. It is actually not too complex. Sumner and Beckworth believe you can target NGDP using a futures market. What's funny is if we have the government set the value of gold it would take far more skill and central planning.

Furthermore, a gold standard would mean that the borrower is generally more subservient to bankers.

The gold standard is discredited nonsense.

[T-Paine]

If it was truly "backed by nothing" I doubt it would continue to be used as a world currency. They cannot create money out of nowhere either, since the money is actually a claim against the assets of the people.

As I've already said in this thread, all mediums of exchange, currency, etc. are given value because of acceptability. It doesn't have to be backed by anything as long as society as a whole accepts that it has value. If anything truly backs the US dollar, it's the faith of the people that the US government won't collapse. Of course, if it is backed by something physical it helps increase the accepted value.

The Federal Reserve can create money out of thin air and it does it all the time.