Most logical reply so far
Why every country stores gold?
- Thread starter GloriaBrown
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Most logical reply so far
IMHO gold ist just a basic material that is of a certain use to industries (computer, jewellery) but doesn't have any intrinsic value other than that.
however humanity has decided to see gold as a valueable asset suitable for exchange and trading since thousands of years. therefore it's very likely it will also be a valueable material in the next century and a good way to make provisions for troubling times.
and there's certainly a form of speculation to all assets - be it stocks, housing, gold, oil,... speculation and the desire to get rich quickly is a part of human nature. in former times speculation was done using even more weird things as tulip bulbs or table salt (especially the country I live in had a famous history for speculating with table salt, although it can be extracted in abdundance from sea water
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however humanity has decided to see gold as a valueable asset suitable for exchange and trading since thousands of years. therefore it's very likely it will also be a valueable material in the next century and a good way to make provisions for troubling times.
and there's certainly a form of speculation to all assets - be it stocks, housing, gold, oil,... speculation and the desire to get rich quickly is a part of human nature. in former times speculation was done using even more weird things as tulip bulbs or table salt (especially the country I live in had a famous history for speculating with table salt, although it can be extracted in abdundance from sea water
).^Gold fascination seems odd at first glance, but not really after some consideration. Shells, beads, feathers, gem stones, beaver belts all served as currency. Why? What is their "value"? Purely decorative and cosmetic....like gold. Further, what intrinsic value does fiat paper hold? Zero. Nothing. Zip. Yet we still value it...just like gold. Whatever form a currency takes, the value ascribed to it is purely a human invention. While some currencies hold more utilitarian value then others (oil versus gold, blankets versus fiat dollars), without humans, those objects become meaningless in themselves.
It's a fascinating topic. Take bitcoin. What makes it valuable? Unlike digital fiat, bitcoin is portable and anonymous. Try wiring 4 million out of a country with no questions asked. With anti-drug laundering rules, anti-terrorism rules and the IRS, you've got defacto currency controls. Part of being a reliable store of value is security. Digital fiat in Western Democracies are increasingly insecure currencies so bitcoin has arbed a place into the currency markets by offering something most digital fiat currencies cannot - superior portability and anonymity.
It's a fascinating topic. Take bitcoin. What makes it valuable? Unlike digital fiat, bitcoin is portable and anonymous. Try wiring 4 million out of a country with no questions asked. With anti-drug laundering rules, anti-terrorism rules and the IRS, you've got defacto currency controls. Part of being a reliable store of value is security. Digital fiat in Western Democracies are increasingly insecure currencies so bitcoin has arbed a place into the currency markets by offering something most digital fiat currencies cannot - superior portability and anonymity.
PM's and crypto-currencies are valued because fiat currencies are imperfect and flawed, despite all the propoganda our social controllers cram down our throats. That's the real take away. If any one currency was perfect and fulfilled it's role perfectly, most other forms of money would be relegated to the dustbin of history. Governments love seniorage and theft to fuel their wars and tyranny > enter currency controls > and the common man must look somewhere else to store their wealth.
ok, well, you buy 10k of gold or CL for that matter, and I'll buy 10k worth of SPY, and we'll see who comes out ahead in ten years. Like the man said, you don't make money owning oil, you make money owning oil wells.
Initially there was a ratio between gold and printed money. Gold backup up money. This is long history now. Gold can in no way backup all money anymore so it's use is more symbolic then anything else. There seems to exist gold that you can eat, maybe better buy that.
no kidding, you can probably get more selling a Federal Reserve Silver Certificate on ebay than you could trying to cash it in for silver.
But still, everybody keeps score in dollars
Yep you got to love those Cyber-Currencies. They are so useful especially when $300 million worth gets lost in a folder on your hard drive like at Mt. Grox. I hear they are renaming it ButtCoin for obvious reasons.
Hello Gloria:
You said "Then why not country stores oil instead of gold?"
Previous posters have already given many of the good reasons why gold versus oil.
A short lesson on money summarizing why gold is the ideal form of money may make it more clear.
For a commodity to be used as money (medium of exchange) there are several requirements. All of which gold satisfies best.
1.
When bartering the two parties have to have a double coincidence of wants. Meaning both parties have to want what the other one has. So for example let’s say you have some lumber, that you want to barter for some thing else, we'll call it a horse. So you have to find some one who is willing to exchange their horse for your lumber. Finding this other party is not so easy when all you have is lumber and you want to buy a horse. Gold works much better as money since a lot more people are willing to trade some thing for gold than for lumber. Since gold is in heavy demand it overcomes the double coincidence of wants requirement of barter.
So for a commodity to be money it has to have a high demand in the market. So instead of bartering your lumber directly for a horse, you could get gold as a medium of exchange for your lumber and then use the gold you got to buy a horse.
2.
Second the commodity should be highly divisible, so that small chunks of other goods can be bought, and the size of purchases can be flexible. A house or a horse could be used as money but are not easily divided. Being easily divisible is also handy if you run a business because now you can compare the relative value of various goods and services and calculate your profit or loss.
3.
The commodity should be easily portable and have a high value per unit weight. Easily portable and a high value per unit weight means it is more convenient to use. In order to have a high value per unit weight the commodity must be in relatively scarce supply. This also means it can’t be created out of thin air like the central banks do with fiat currencies. Fiat currencies lose there value as the supply is increased by the central banks. So fiat currencies are a poor store of value long term.
Fiat currencies eventually become worthless. Where as gold has thousands of years of history of maintaining its value. For example a few hundred years ago during medieval times an ounce of gold could buy you a very nice suit of clothes. An ounce of gold today could still be used to buy you a nice set of clothes and then some.
4.
The commodity should be highly durable so that it can serve as a store of value for a long time. Oil has an expiration date as do many other commodities unlike gold.
Since gold satisfies all of the above requirements very well and oil does not, gold became and has remained a medium of exchange or money for thousands of years and this is the real reason why central banks store so much gold instead of oil. In short they are hedging against the collapse of the dollar a fiat currency, with gold.
For the source of this money lesson see the excellent book
The Mystery of Banking by Murray Rothbard
https://www.mises.org/library/mystery-banking-1
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1 buttcoin worth more then 280 US dollars. Puts the USD to shame, eh