Gold and Steel

[bkveen3]

Does no one notice the most basic problem with using gold? When the price of gold represents all the things in the world then the price must be continually rising to be evenly divided and still equal all assets. If you could make a continuous return just by holding on to the asset why would you ever loan it out to make a return? What happens when everyone just holds on to the medium of exchange?

You are correct that there is a way to create a system that runs on gold. The question is whether that system has enough benefit to replace the current system. In my mind, the answer is no.

 

[antitrust]

Quote from bkveen3:

Does no one notice the most basic problem with using gold? When the price of gold represents all the things in the world then the price must be continually rising to be evenly divided and still equal all assets. If you could make a continuous return just by holding on to the asset why would you ever loan it out to make a return? What happens when everyone just holds on to the medium of exchange?

You are correct that there is a way to create a system that runs on gold. The question is whether that system has enough benefit to replace the current system. In my mind, the answer is no.

well said a fixed amount of money is often mistaken for a stable system. Also why would anybody with gold produce anything, you give up your gold to make more cars, but those cars go down in gold value as more cars are added to the economy.might as well keep the gold and let someone else add production and let your gold rise. A constant money deflation as gold would be wouldn't promote production it would do the opposite.

A main argument is that gold has commodity value, But what would happen to the price of gold against other commodities if gold was monetized. Gold would sky rocket as demand increased. the majority of golds value would be derived from the fiat value. So whatever the Gov. decides as money will be a fiat currency as it's demand was created by government decree.

A system that doesn't create money as debt is the logical conclusion. check out this web site. It monetizes production instead of creating money as debt

http://www.wealthmoney.org/

 

[peilthetraveler]

Quote from bkveen3:

Does no one notice the most basic problem with using gold? When the price of gold represents all the things in the world then the price must be continually rising to be evenly divided and still equal all assets. If you could make a continuous return just by holding on to the asset why would you ever loan it out to make a return? What happens when everyone just holds on to the medium of exchange?

That is a false statement....Just because people start valuing things in gold does not mean there needs to be an equal amount of gold for that asset sitting in a vault somewhere.

If we were in an all gold system people would loan gold out and get the interest back in gold. For instance...loaning 10 oz of gold at 10% interest and you would get 11 oz of gold back when the borrower pays you back.

To answer your question though, if everyone held onto the medium of exchange, then prices would get cheaper in relation to gold. The free market would get people spending that gold because if the price of a new car went from 20 oz of gold to 2 oz of gold, I imagine people would start spending their gold and once that happens prices rise.

With dollars you can manipulate how far prices go up or down, but with gold, its pretty stable. People will spend gold if prices get too low.

 

[athlonmank8]

This thread is pathetic. You guys seriously have nothing better to do?

 

[Enfinity]

Quote from athlonmank8:

This thread is pathetic. You guys seriously have nothing better to do?

Professional Douchebag!

Checkout his posting history:

http://www.elitetrader.com/vb/search.php?s=&action=showresults&searchid=3687442

 

[antitrust]

Quote from peilthetraveler:

That is a false statement....Just because people start valuing things in gold does not mean there needs to be an equal amount of gold for that asset sitting in a vault somewhere.

If we were in an all gold system people would loan gold out and get the interest back in gold. For instance...loaning 10 oz of gold at 10% interest and you would get 11 oz of gold back when the borrower pays you back.

To answer your question though, if everyone held onto the medium of exchange, then prices would get cheaper in relation to gold. The free market would get people spending that gold because if the price of a new car went from 20 oz of gold to 2 oz of gold, I imagine people would start spending their gold and once that happens prices rise.

With dollars you can manipulate how far prices go up or down, but with gold, its pretty stable. People will spend gold if prices get too low.

but a car dealership who had no gold and had to borrow wouldn't be able to sell those cars at a profit as the price of cars go down. Or even if he had the gold to begin with he would be operating at a loss.Merchants holding inventory lose as well which kills trade. But just as neo classical economics, austrian ignores the element of time in their theories. who can generate a profit in constant deflation. you can also manipulate prices by lending or withholding gold as well so what.Why hasn't gold been more widely used there is nothing stopping stores and commerce from accepting gold now.

 

[psytrade]

Kind of ironic when some credit card company offers you their "Gold Card"

 

[peilthetraveler]

Quote from antitrust:

but a car dealership who had no gold and had to borrow wouldn't be able to sell those cars at a profit as the price of cars go down. Or even if he had the gold to begin with he would be operating at a loss.Merchants holding inventory lose as well which kills trade. But just as neo classical economics, austrian ignores the element of time in their theories. who can generate a profit in constant deflation. you can also manipulate prices by lending or withholding gold as well so what.Why hasn't gold been more widely used there is nothing stopping stores and commerce from accepting gold now.

They lose when dollars deflate too.

 

[peilthetraveler]

Quote from antitrust:

well said a fixed amount of money is often mistaken for a stable system. Also why would anybody with gold produce anything, you give up your gold to make more cars, but those cars go down in gold value as more cars are added to the economy.might as well keep the gold and let someone else add production and let your gold rise. A constant money deflation as gold would be wouldn't promote production it would do the opposite.

A main argument is that gold has commodity value, But what would happen to the price of gold against other commodities if gold was monetized. Gold would sky rocket as demand increased. the majority of golds value would be derived from the fiat value. So whatever the Gov. decides as money will be a fiat currency as it's demand was created by government decree.

A system that doesn't create money as debt is the logical conclusion. check out this web site. It monetizes production instead of creating money as debt

http://www.wealthmoney.org/

Why would someone part with their gold to buy a car that goes down in value against gold? People buy cars all the time with dollars and the car goes down in dollar value, but people dont horde dollars. Its silly to think that people are going to stop buying things because we use gold instead of paper money.

Also, If we monetized gold, it wouldnt go up in value against other commodities (well it might temporarily) but gold stays pretty much in line with commodities when its not being manipulated.

 

[antitrust]

Quote from peilthetraveler:

Why would someone part with their gold to buy a car that goes down in value against gold? People buy cars all the time with dollars and the car goes down in dollar value, but people dont horde dollars. Its silly to think that people are going to stop buying things because we use gold instead of paper money.

well that's not actually what i said. I was speaking from a producer stand point. during deflation the time lag between manufacturing will make his production worth less then when he bought the raw materials for production. It gets worse when you add the fact that the raw materials he used to build the plant was at a high price relative to the cars he sells, that keep going down in value. So he starts off with high cost of plant raw materials, then can't pay off the return on capitol because the things he produces goes down in value. If a dealership takes out a loan to buy cars for delivery for 1 year later. the price of the cars will be less then the loan.

Quote from peilthetraveler:




Also, If we monetized gold, it wouldnt go up in value against other commodities (well it might temporarily) but gold stays pretty much in line with commodities when its not being manipulated.

so you don't think demand for gold would increase, I guess everyone without gold would revert to barter.Does gold magically not follow supply and demand like every other commodity.