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Steve Netwriter

The History of Gold

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For me, gold is something that stops my guts performing somersaults. I think you over analyze.

Its by analysing (understanding) that one stays ahead of the crowd. ...and my guts are OK as well!

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Its by analysing (understanding) that one stays ahead of the crowd. ...and my guts are OK as well!

I would also add: ...defining "a commodity", and thereby deciding whether or not gold is one, is really just a pointless acedemic excercise. Instead, I suspect the recent debate on this point is really driven by a desire to understand what gold is and is not so that one can make good predictions about its future price. That dimension seems to be missing from many of the recent postings.

 

 

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What would you say to this ?

Cant you see that many many commodities have been used as currency over time? Land, food even water. Gold is not different, it is simply a tangible good which has the ability to be bartered. That doesnt make it money, that makes it .... a commodity!

This false differentiation is being pushed by people with a severe agenda to make a lot of money form gold over the next couple of years. I know this first hand and it makes me quite worried for people who see gold as something it simply is not. Same as people made assumptions over property... that were a bit.... naive.

This argument (especially the bold part) is so wrong I usually wouldn't even bother to answer. But OK, here we go:

 

LAND: Is not easily transportable, not compact/dense, and not necessarily consistent/homogeneous. It is therefore no good money.

 

WATER: Is on a global scale not easily transportable, and not compact/dense/rare. It is therefore no good money.

 

FOOD: Is perishable, and therefore no good money. (other arguments might apply as well)

 

The person who wrote the comment has clearly no understanding of what properties real or naturally evolving money (on a global scale) should have.

The person should do some essential reading.

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This argument (especially the bold part) is so wrong I usually wouldn't even bother to answer. But OK, here we go:

 

LAND: Is not easily transportable, not compact/dense, and not necessarily consistent/homogeneous. It is therefore no good money.

 

WATER: Is on a global scale not easily transportable, and not compact/dense/rare. It is therefore no good money.

 

FOOD: Is perishable, and therefore no good money. (other arguments might apply as well)

 

The person who wrote the comment has clearly no understanding of what properties real or naturally evolving money (on a global scale) should have.

The person should do some essential reading.

 

Might have been used to barter - NEVER as money.

 

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Hoping it stays in the doldrums for just a little while longer [ decent funds coming through on friday]. I have a sneaking suspicion it may be the last time I will be buying gold. Why, you may ask. I feel that once the Autumn season arrives, POG will catch a breeze and leave me behind. :(

 

All good things must come to an end I guess, and I have to be glad that I got in when I did.....in my solid little metalic dingy ready to face any storm to come. :lol:

Hoping it will buy me an island one day. :D

 

 

Are you expecting islands to become more numerous?

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Have my doubts about global warming if thats what you mean. :P

 

It's all about cycles.

 

So potentially we have two things going on.

 

1. A quantity of one commodity against another rises (or is expected to rise dramatically) and therefore we say the price of the latter should rise to compensate (e.g. $ and Au).

 

2. And then on the other hand, we say there are cyclical price mismatches whereby the price of one (islands) is presently too expensive and will revert to a mean allowing less of another commodity (Au) to buy it.

 

Is that what you are saying Roman?

 

What additional premium does the role of 'money' place on a commodity chosen for that purpose - or is it merely a reflection of additional demand for that commodity when it is seen to perfom that role?

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(I haven't read the other replies yet, but here's my view.)

 

Cant you see that many many commodities have been used as currency over time? Land, food even water. Gold is not different, it is simply a tangible good which has the ability to be bartered. That doesnt make it money, that makes it .... a commodity!

This false differentiation is being pushed by people with a severe agenda to make a lot of money form gold over the next couple of years. I know this first hand and it makes me quite worried for people who see gold as something it simply is not. Same as people made assumptions over property... that were a bit.... naive.

He says that other things (commodities) have been used as a means of exchange (specifically for barter).

 

He then says gold has been used as a means of exchange and concludes that gold is therefore a commodity.

 

That's clearly a false argument.

 

I might use potatoes in exchange for apples. But neither is good as a general form of money, as they do not keep, and the guy with apples may not want potatoes.

 

Silver and gold have the necessary properties to make them highly suitable for use as money.

 

(Would you like to link us to the discussion itself?)

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This argument (especially the bold part) is so wrong I usually wouldn't even bother to answer. But OK, here we go:

 

LAND: Is not easily transportable, not compact/dense, and not necessarily consistent/homogeneous. It is therefore no good money.

 

WATER: Is on a global scale not easily transportable, and not compact/dense/rare. It is therefore no good money.

 

FOOD: Is perishable, and therefore no good money. (other arguments might apply as well)

 

The person who wrote the comment has clearly no understanding of what properties real or naturally evolving money (on a global scale) should have.

The person should do some essential reading.

yep

 

Rarity

Lack of degradability

Portability

Uselessness

 

All of the above are qualities of a substance that makes it good money

 

All other things being equal, an ec0onomy will always tend to use substances that most cloesely match the above qualities.

 

For arbitary geological reasons, gold has all of the above qualities to a high degree....

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I've recently had someone on another forum insisting that gold is a commodity.

Might you provide a link?

 

I promise, as always, to be gentle. :)

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OK, first - I've moved all the posts. Pheeeeewwwwww :blink:

And I think it all worked :o

 

---------------------

 

I'm a bit wary of providing a link. I've seen "forum wars" before. So I don't want that.

OK, in the hope this won't cause any problems.

 

I need to stress that this is an NZ property forum. So when I joined I made tiny steps before feeling comfortable posting some 'things'.

Thankfully it is not Singing Pig :D

 

This thread & title was peeled off from another thread by essence:

 

Speculation & Gold

http://www.propertytalk.com/forum/showthread.php?t=17168

 

This is the first post by the person I quoted:

http://www.propertytalk.com/forum/showpost...mp;postcount=38

 

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You guys have made a lot of good points. I hope to try and combine all that appears on this thread into a summary.

Most people don't have time to read the rather long articles out there. And non-goldbugs probably won't.

So I think fairly short summaries might offer something. At it will help if they are "pretty" :D

 

By the way, it's good to have responses from the non-goldbugs as well as the goldbugs, because we get a better refined view.

 

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Good man.

 

I'm interested to read. I rarely register for BBs.

 

Once at MSE I was tempted to register when the hpc schadenfreude crowd were laying into some unfortunate amateur BTLer.

 

Thankfully, SuperTed had made a very good post in the thread.

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yep

 

Rarity

Lack of degradability

Portability

Uselessness

 

All of the above are qualities of a substance that makes it good money

 

All other things being equal, an ec0onomy will always tend to use substances that most cloesely match the above qualities.

 

For arbitary geological reasons, gold has all of the above qualities to a high degree....

 

Silver has been used as money for the same period as gold and it is not as 'useless' as gold - I don't think that its 'use' needs to be a factor. The one big extra factor that should be included is demonstrability.

 

It is very hard to fake gold and reasonably easy to work out its purity using a touchstone. There have been touchstones with gold trace on them that have been found in Europe from the late Neolithic period about 4000 to 3500BC.

 

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So potentially we have two things going on.

 

1. A quantity of one commodity against another rises (or is expected to rise dramatically) and therefore we say the price of the latter should rise to compensate (e.g. $ and Au).

 

2. And then on the other hand, we say there are cyclical price mismatches whereby the price of one (islands) is presently too expensive and will revert to a mean allowing less of another commodity (Au) to buy it.

Is that what you are saying Roman?

 

What additional premium does the role of 'money' place on a commodity chosen for that purpose - or is it merely a reflection of additional demand for that commodity when it is seen to perfom that role?

 

Hi Hotair,

 

Not sure if I understand your first point but the other two points i would agree with.

 

2. And then on the other hand, we say there are cyclical price mismatches whereby the price of one (islands) is presently too expensive and will revert to a mean allowing less of another commodity (Au) to buy it.

 

Yes, I think pretty much all of us agree that property is overvalued today. It is now in the process of observing the most basic of economic rules; reverting to it's mean. No doubt it will "undershoot" on the way down. Great buying opportunity... problem is though all sorts of crazy things are going on with our money system today. Suddenly credit has tightened... and now we are beginning to question the efficacy of our money [fiat]. Which brings us to the last point you made:

 

What additional premium does the role of 'money' place on a commodity chosen for that purpose - or is it merely a reflection of additional demand for that commodity when it is seen to perfom that role?

 

This is central to my master plan [to dominate my little corner of the globe :lol: ]. I am banking on the credit collapse and the inherent contradictions of the fiat system to work themselves out. Of course, if this happens [as I think it will] there will be a renaissance in the metals and a huge demand for them as the masses rediscover the monetary function of gold and silver. Of course, at this time, many will be priced out of the market for these..

 

This is the logic of the position. As certain events transpire [asset deflation, currency debasement etc] and the markets and consumers react, this will lead to it's inevitable conclusion.

 

Then all that remains is for one to swap some metal [not all mind] for some property of some kind.

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By the way, it's good to have responses from the non-goldbugs as well as the goldbugs, because we get a better refined view.

 

I do not think the thread title invites debate - if non-goldbugs can even find this thread, they are unlikely to click on a title that states "why gold is good money".

 

Does this mean that debate on long term fundamentals, rather than short term trading, is not welcome on the main board?

 

 

 

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I do not think the thread title invites debate - if non-goldbugs can even find this thread, they are unlikely to click on a title that states "why gold is good money".

 

Does this mean that debate on long term fundamentals, rather than short term trading, is not welcome on the main board?

 

I think that you should debate away. As said before this is a well run board and the mods will merge and demerge threads as the conversations ebb and flow.

 

Steve is well practised at moving threads now :lol:

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I think that you should debate away. As said before this is a well run board and the mods will merge and demerge threads as the conversations ebb and flow.

 

Steve is well practised at moving threads now :lol:

 

Why the smiley?

 

What is the main board so scared of? My views are very bearish compared to the mainstream, but here I am called a numbskull for disagreeing with basically a very few of the more extreme posters.

 

 

When I joined this board, it was Green Energy, then it sensibly morphed into Global Edge and took a wider remit. Now it is in danger of becoming a goldbug back slapping society, with all "dissent" banished to the backwaters. That won't convince the neutrals.

 

Edit: maybe I need to start a thread on burgers. That is clearly considered suitable for the main board, but the fundamentals of everyone's favourite investment has to run on the "outside courts"?

 

 

 

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Why the smiley?

 

What is the main board so scared of? My views are very bearish compared to the mainstream, but here I am called a numbskull for disagreeing with basically a very few of the more extreme posters.

 

 

When I joined this board, it was Green Energy, then it sensibly morphed into Global Edge and took a wider remit. Now it is in danger of becoming a goldbug back slapping society, with all "dissent" banished to the backwaters. That won't convince the neutrals.

 

Edit: maybe I need to start a thread on burgers. That is clearly considered suitable for the main board, but the fundamentals of everyone's favourite investment has to run on the "outside courts"?

 

Irony, the smiley is there because of the work that Steve has had to do to demerge the posts as he described in http://www.greenenergyinvestors.com/index....ost&p=51807

 

 

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This thread is created from posts originally on the gold thread after this post:

http://www.greenenergyinvestors.com/index....ost&p=51628

 

The History of Gold

 

There is a tendency to ignore history. We do so at our peril.

We also tend to think only recent history is relevant. This is misguided.

 

This is the history of gold:

 

The_History_Of_Gold.gif

 

Default

1971 AD - On August 15, U.S. terminates all gold sales or purchases, thereby ending conversion of foreign officially held dollars into gold.

 

Steve, perhaps you could clear this up for me.

 

The graph implies that gold was money up until the default in 1971.

 

However, the 20s/30s saw a credit bubble in US that was not matched in magnitude until quite recently. Also, if dollars were all backed by gold, how is a default possible?

 

 

My belief is that fractional reseserve banking was in place well before 1971 and this was the cause.

 

My question is, if FRB is used, can we still call gold "money".

 

If so, then how is it better than "fiat" if it still allows for credit bubbles and defaults?

 

If not, then how far back do we have to go to find a major economy that operated without FRB - i.e. your money stays in the bank vaults, and cannot be lent on by the lender, and the promise to "pay the bearer on demand" can actually be honoured?

 

 

The way I see it, gold has not been money for longer than your chart suggests.

 

 

edit: question not just to Steve

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I found this on a very anti-FED site: http://www.fdrs.org/banking_history.html

 

During the period spanning the years 1836 to 1865, State chartered banks and privately developed "free banks" became prevalent on the American economic landscape. These banks issued their own currency, Prevailing Notion in which only a fraction was redeemable in gold or specie, and offered demand deposits (checking accounts) to facilitate trade and commerce. A rapidly expanding system of check transactions engendered the New York Clearing House Association in 1853 as a vehicle for banks to exchange checks and settle accounts.

 

There was a prevailing notion (created and propagandized by the banking elite) that some system was necessary to stabilize U.S. currency. The National Banking Act of 1863 provided some remedial effect on economic stabilization, but bank failures and financial panic (a product of deliberate manipulation of the money supply) produced widespread anxiety about the future of the American economy.

 

 

This was 170 years ago.

 

 

 

 

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A bit of a nutty site, but it references a published paper: http://www.biblebelievers.org.au/usury2.htm

 

The extraction of usury is "one of the oldest professions of man." (Forrest M. Smith, III, The Regulation of Interest: Practice and Procedure, 10 ST. MARY'S L. REV. 825, 1979). First came the Temple Priests, then the Goldsmiths and the commercial bankers of today. The first use of the fractional reserve system was in the Temple of Shamash under Hammurabi -- the sixth king of Babylon (Peter Cook, FEDERAL RESERVE FRACTIONAL RESERVE AND INTEREST-FREE GOVERNMENT CREDIT EXPLAINED 4, 1991).

 

This "funny money" has a pretty long history too, it seems.

 

 

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