Gold

[ciangerry]

About 2000 years ago Aristotle defined the characteristics of a sound form of money. They were as follows:

1. It must be durable.

2. It must be portable.

3. It must be divisable.

4. It must be consistent.

5. It must be a value of itself.

Gold fits all 5 of the these characteristics. Fiat currency, which is what we use, only fits the first 4 of these characteristics.

It's amazing the amount of ignorance that surrounds basic financial and economic principals. It does not say much for our educational system, or should I say indoctrination system when people think that pieces of paper have value.

[Ferru123]

Ciangerry

What is the intrinsic value of gold though?

Surely, as with fiat money, people pay so much for gold mainly because they know other people are willing to pay lots of money for gold in the future, rather than because of the benefit they get from a metal with very limited practical use.

BTW, you've misspelled principle. The 'pal' spelling relates to the head of a school - imagine him as your pal, and you'll remember the spelling!

Jeff

[to75ne]

jeff,

gold as tons of practical uses and is a widely used metal(other than jewellery).it is an excellent conductor of electricity and heat, and does not oxide. very malleable, easy to work. it is highly valued in power supply, telecoms, satellites/space exploration, chip/electronic component manufacture,aeronautics,and many more industries; due to its excellent conductivity and its inertness to the vast majority of other elements and compounds. its extremely stable. the same reasons its also been valued as a form of currency/measure of wealth since the dawn of civilisation (apart from its rariety and probably not its conductivity). it does not corrode/rust away. 1 ounce of gold mined 5000 years ago will still be exactly the same weight today, with no tarnish or corrosion at all. not many substances are that stable.

the pc you use to post on these boards will have quite a lot of gold used in the components that make up your machine. gold is a very practical/useful metal and therefore will always have an intrinsic value, as opposed to fiat money, which just represents an abstract notion of monetary value.no real intrinsic value.

[Ferru123]

Hi Tony

Yes, it does - you've got me bang to rights there.

What I meant (but didn't say) was that it's not those practical uses that give gold such a high price.

IMHO, the reason gold costs so much is because of what people think other people will be willing to pay for it in the future, not because of its practical uses.

Jeff

gold as tons of practical uses

[to75ne]

jeff,

yeah that is true. seems stupid really, a truely remarkable material doing nothing but sitting in bank vaults and museums.

and its value is decided not by what use it is, but how much can someone/institution aquire and hide away/put out of circulation so to speak.

[Ferru123]

From an interview with Donald Trump (http://video.cnbc.com/gallery/?video=3000045806):

I rented one of my buildings 40 Wall Street. I rented a metals specialist. They said to me, 'Could we pay you in gold?'

I said, 'I'll take the gold'.

Now, I hope for the day when I would say to them 'No, no, no, I don't want gold. I want the dollar'.

Frankly, it's easier. I couldn't believe how heavy it was. It's heavy. I know, but it's so small. I talked about this earlier. it's not a size of the big candy bar bar. It's worth $60,000. They gave me $180,000 in three little bars. There will be a day, I think, if we're smart where I will say and others will say, 'No, no, no, I want the dollar. I don't want the gold'. That will be a great day for this country. I think that day will come.

Jeff

2. It must be portable.

[superfrank]

There will be a day, I think, if we're smart where I will say and others will say, 'No, no, no, I want the dollar. I don't want the gold'. That will be a great day for this country. I think that day will come.

That day will come when money printing stops, interest rates rise and budgets are balanced.

To me that day seems a very long way off - mainly because tptb won't accept the necessary destruction of the phoney wealth created during the (credit) boom.

IMHO the bull market in gold and silver has many years to run.

[superfrank]

great article

Financial Warfare
http://www.zerohedge.com/news/financial-warfare

central planners can win battles but not the war

[Euler]

Silver is taking a beating, it's seems every asset is headed south at the moment!

[superfrank]

yeah getting thumped. when commods get hammered because of global growth worries it goes south hard (same thing happened in 08/09). silver gets treated as just like any other industrial metal at these times.

my bet on silver is that one day in not too distant future it will be treated as a wealth preserver as fiat currencies collapse (just like gold is).

i just wish it was gold that was falling as hard cos I don't have much of that (gold in GBP has hardly budged).

wealth destruction is going into overdrive atm - and that's probably a good thing for the longer term. it was the phoney wealth created by reckless credit expansion, and maintained by reckless deficit spending, that got us where we are today.

edit: btw i don't want fiat currencies to collapse!, but unless central bankers come to their senses there's a good chance that they will.