In Gold We Trust
January 16, 2012 10:47 AM Subscribe
In Gold We Trust. With the shiny stuff soaring to $1643.12 an ounce and prominent politicians advocating a return to the gold standard, Wells Tower investigates the latest Klondike gold rush.
Wells Tower is great, I've been following him for years. For a long time a collected post of his writings was far and away the most popular page on my blog. Lots of stuff is now locked behind a paywall, but his fiction collection Everything Ravaged, Everything Burned is well worth your time if you're into that Lipsyte/Saunders weird-lit-with-a-heart continuum.
posted by GilloD at 10:56 AM on January 16, 2012 [2 favorites]
posted by GilloD at 10:56 AM on January 16, 2012 [2 favorites]
Agreed, Wells Tower is fantastic.
posted by shakespeherian at 10:59 AM on January 16, 2012
posted by shakespeherian at 10:59 AM on January 16, 2012
Perhaps gold should be re-priced in tulips.
posted by George_Spiggott at 11:00 AM on January 16, 2012 [30 favorites]
posted by George_Spiggott at 11:00 AM on January 16, 2012 [30 favorites]
A return to the gold standard:
1) Return money to the fed for gold
2) Sell gold on the open market at a price that will be well above what the fed is mandated since governments are both slow to change and at a loathe to debase their currency
3) Return to Step 1 x 1000 times
4) You're a millionaire or maybe even a billionaire!
5) The currency will have to be debased so much that it's not going to fucking matter.
posted by Talez at 11:02 AM on January 16, 2012 [3 favorites]
1) Return money to the fed for gold
2) Sell gold on the open market at a price that will be well above what the fed is mandated since governments are both slow to change and at a loathe to debase their currency
3) Return to Step 1 x 1000 times
4) You're a millionaire or maybe even a billionaire!
5) The currency will have to be debased so much that it's not going to fucking matter.
posted by Talez at 11:02 AM on January 16, 2012 [3 favorites]
Not to get too Californian on you, but some energy is definitely vibing off this thing. Until now the idea of holding gold as an investment or otherwise hasn't offered the faintest allure, but now I am tuning something in, an unheard, insistent bleating that says, "Gather up a bunch of me and you will be safe from a bad and uncertain world."
I don't know much about gold, but this guy is making a great case for a weed-backed currency.
posted by griphus at 11:03 AM on January 16, 2012 [2 favorites]
I don't know much about gold, but this guy is making a great case for a weed-backed currency.
posted by griphus at 11:03 AM on January 16, 2012 [2 favorites]
There's already a weed-backed currency: weed.
posted by CautionToTheWind at 11:07 AM on January 16, 2012 [31 favorites]
posted by CautionToTheWind at 11:07 AM on January 16, 2012 [31 favorites]
Fuck yeah, we need even more short term volatility, along with the inability to control inflation/deflation via policy. Let's tie that shit into production!
Because our fiat currency needs to be just like betting on a horse race, or the stock market.
posted by Threeway Handshake at 11:12 AM on January 16, 2012 [1 favorite]
Because our fiat currency needs to be just like betting on a horse race, or the stock market.
posted by Threeway Handshake at 11:12 AM on January 16, 2012 [1 favorite]
Returning to The Gold Standard sounds like a "we had to destroy the village in order to save it" handling of the Economy. More likely, the Gold Buzz is a great marketing campaign aimed toward people who fear the future, and will ultimately pop its bubble. Because 'investment marketing' needs bubble-after-bubble to continue to be profitable. And it is massively profitable.
As I commented before, the Market Model of Supply and Demand is a crappy way to finance Business and Industry, and as long as Gold is not a necessary commodity to keep everything operating, let them have their fun.
posted by oneswellfoop at 11:12 AM on January 16, 2012 [1 favorite]
As I commented before, the Market Model of Supply and Demand is a crappy way to finance Business and Industry, and as long as Gold is not a necessary commodity to keep everything operating, let them have their fun.
posted by oneswellfoop at 11:12 AM on January 16, 2012 [1 favorite]
Ignoring the craziness, how do gold standard proponents advocate actually switching to the gold standard?
If Wikipedia is to be believed, the US government has about 8,000 tonnes of gold. There are trillions and trillions of dollars that that has to back. But 8,000 tonnes of gold at today's prices is only like 400 billion dollars.
So now someone who purchased an ounce of gold yesterday at $1600 suddenly finds himself with an ounce of gold worth a small fraction of that, whereas someone with a $1600 in greenbacks still has $1600?
posted by Flunkie at 11:12 AM on January 16, 2012 [3 favorites]
If Wikipedia is to be believed, the US government has about 8,000 tonnes of gold. There are trillions and trillions of dollars that that has to back. But 8,000 tonnes of gold at today's prices is only like 400 billion dollars.
So now someone who purchased an ounce of gold yesterday at $1600 suddenly finds himself with an ounce of gold worth a small fraction of that, whereas someone with a $1600 in greenbacks still has $1600?
posted by Flunkie at 11:12 AM on January 16, 2012 [3 favorites]
I love the show American Gold Rush. There's something about it that just totally compelling in that trashy reality TV way. This is not that, but that's what I know about the gold rush.
posted by OmieWise at 11:13 AM on January 16, 2012 [1 favorite]
posted by OmieWise at 11:13 AM on January 16, 2012 [1 favorite]
Someone needs to write a parable in the form of a children's fantasy story to explain all of this to me.
posted by bleep at 11:13 AM on January 16, 2012 [9 favorites]
posted by bleep at 11:13 AM on January 16, 2012 [9 favorites]
So now someone who purchased an ounce of gold yesterday at $1600 suddenly finds himself with an ounce of gold worth a small fraction of that, whereas someone with a $1600 in greenbacks still has $1600?No, wait, I've got that backwards - someone with $1600 in greenbacks will have $1600, but someone with $1600 in gold will have $50000 (or whatever) in gold.
posted by Flunkie at 11:15 AM on January 16, 2012
Someone needs to write a parable in the form of a children's fantasy story to explain all of this to me.
This is just like the biblical children's fantasy of Samson, where he made a deal with an angel to have super powers so as long as he never cut his hair.
Returning to a gold standard would be like if Samson's powers were also tied to everybody else's hair instead of just his own.
posted by Threeway Handshake at 11:17 AM on January 16, 2012 [3 favorites]
This is just like the biblical children's fantasy of Samson, where he made a deal with an angel to have super powers so as long as he never cut his hair.
Returning to a gold standard would be like if Samson's powers were also tied to everybody else's hair instead of just his own.
posted by Threeway Handshake at 11:17 AM on January 16, 2012 [3 favorites]
bleep is referring to the Littlefield interpretation of Wizard of Oz.
posted by absalom at 11:22 AM on January 16, 2012 [3 favorites]
posted by absalom at 11:22 AM on January 16, 2012 [3 favorites]
Aren't I allowed to ever ruin a joke?
posted by Threeway Handshake at 11:26 AM on January 16, 2012
posted by Threeway Handshake at 11:26 AM on January 16, 2012
Weren't bitcoins supposed to make this whole government currency thing irrelevant?
posted by mccarty.tim at 11:29 AM on January 16, 2012 [2 favorites]
posted by mccarty.tim at 11:29 AM on January 16, 2012 [2 favorites]
Weren't bitcoins supposed to make this whole government currency thing irrelevant?
According to last night's Good Wife, any day now!
posted by yellowbinder at 11:32 AM on January 16, 2012 [3 favorites]
According to last night's Good Wife, any day now!
posted by yellowbinder at 11:32 AM on January 16, 2012 [3 favorites]
I wish I had gotten into gold a year or two ago, but I just can't make myself do anything Glenn Beck says.
posted by craniac at 11:35 AM on January 16, 2012 [1 favorite]
posted by craniac at 11:35 AM on January 16, 2012 [1 favorite]
I, like OmieWise, am totally addicted to Gold Rush Alaska (especially now that it's mostly taking place in the Yukon). It's awesome because nearly every decision made by most of the principals on the show has "gold fever" written all over it. I keep expecting one of them to start shouting "GOOOOLD!" and shooting pistols in the air. I couldn't believe that they waited until the middle of their second season to hire a fucking geologist and do some test drilling on their claim. But all of these guys are so convinced that they are going to strike it big (and nothing bad ever happened on the Klondike).
posted by TheWhiteSkull at 11:36 AM on January 16, 2012 [4 favorites]
posted by TheWhiteSkull at 11:36 AM on January 16, 2012 [4 favorites]
Ron Paul only believes in purestrain gold.
posted by narcoleptic at 11:38 AM on January 16, 2012 [2 favorites]
posted by narcoleptic at 11:38 AM on January 16, 2012 [2 favorites]
TheWhiteSkull: "I keep expecting one of them to start shouting "GOOOOLD!" and shooting pistols in the air."
I immediately thought of this video.
posted by vanar sena at 11:41 AM on January 16, 2012 [1 favorite]
I immediately thought of this video.
posted by vanar sena at 11:41 AM on January 16, 2012 [1 favorite]
Maybe... maybe instead of gold we need something along the lines of worgl-sript..
posted by symbioid at 11:43 AM on January 16, 2012
posted by symbioid at 11:43 AM on January 16, 2012
If we're going to go back to a standard based on a mineral, we might as well do what we (or at least I) did as kids and collect random rocks on the street and trade them with the neighborhood kids. This time keeping track of the rare ones and putting numerical values on them.
posted by JoeXIII007 at 11:44 AM on January 16, 2012 [2 favorites]
posted by JoeXIII007 at 11:44 AM on January 16, 2012 [2 favorites]
I think we need Gold, man.... Sacks of it.
posted by symbioid at 11:47 AM on January 16, 2012 [4 favorites]
posted by symbioid at 11:47 AM on January 16, 2012 [4 favorites]
I'm a new fan of a show on the Outdoor channel, called "Gold Fever". It appears to be a product of the Gold Prospectors Association of America, and has a good-hearted lunk hosting it, sometimes with his teenaged kids. In one episode, they did a "flashback" to the gold rush, which included the teenaged boy dressed up in a fake handlebar mustache, muttonchop sideburns, and a black hat stealing a gold nugget from the host, who was dressed up like the old prospector from Blazing Saddles. Later in the episode, the teenaged girl was along at a gold mine instead of the boy, and they did another old-timey flashback...with the teenaged girl in a fake handlebar mustache, muttonchop sideburns, and a black hat. Total kitschy awesomeness.
Most episodes, however, just show how to pan for gold. Long, boring scenes of him swirling water around and pointing at little gold flakes. So the goofball segments are rare, but awesome.
So, I guess you can say I watch the show to find the little gold nuggets in amongst all the sand and gravel.
posted by AzraelBrown at 11:50 AM on January 16, 2012 [2 favorites]
Most episodes, however, just show how to pan for gold. Long, boring scenes of him swirling water around and pointing at little gold flakes. So the goofball segments are rare, but awesome.
So, I guess you can say I watch the show to find the little gold nuggets in amongst all the sand and gravel.
posted by AzraelBrown at 11:50 AM on January 16, 2012 [2 favorites]
"we had to destroy the village in order to save it" handling of the Economy
Don't the more fervent gold-bugs, Paulites and Austrian-types actually see this as a feature? I can kind of understand- bubbles that never pop don't seem very healthy.
But I think what they miss is that the massive pain that would be inflicted on the country (the pain they say the fed now protects us from) has consequences. If circumstances are dire enough demagogues and nationalists have a ripe opportunity for mischief. I guess this is obvious. It just recently hit me though.
posted by Mei's lost sandal at 11:54 AM on January 16, 2012
Don't the more fervent gold-bugs, Paulites and Austrian-types actually see this as a feature? I can kind of understand- bubbles that never pop don't seem very healthy.
But I think what they miss is that the massive pain that would be inflicted on the country (the pain they say the fed now protects us from) has consequences. If circumstances are dire enough demagogues and nationalists have a ripe opportunity for mischief. I guess this is obvious. It just recently hit me though.
posted by Mei's lost sandal at 11:54 AM on January 16, 2012
If gold is such a smart investment, why are there so many companies who want to give me their gold in exchange for money?
posted by Faint of Butt at 11:54 AM on January 16, 2012 [7 favorites]
posted by Faint of Butt at 11:54 AM on January 16, 2012 [7 favorites]
I couldn't get past the second sentence in the first link, which starts
It's the lone bright spot on Wall Street
Because some stupid burns just too hard.
posted by ROU_Xenophobe at 11:58 AM on January 16, 2012
It's the lone bright spot on Wall Street
Because some stupid burns just too hard.
posted by ROU_Xenophobe at 11:58 AM on January 16, 2012
Eh. Gold isn't that rare -- in fact you can pull it right out of your ass if you want.
posted by Tell Me No Lies at 11:58 AM on January 16, 2012
posted by Tell Me No Lies at 11:58 AM on January 16, 2012
TheWhiteSkull: "I keep expecting one of them to start shouting "GOOOOLD!" and shooting pistols in the air."
I immediately thought of this video .
posted by vanar sena
I pictured this one...
posted by ShawnString at 12:03 PM on January 16, 2012 [1 favorite]
I immediately thought of this video .
posted by vanar sena
I pictured this one...
posted by ShawnString at 12:03 PM on January 16, 2012 [1 favorite]
The really stupid thing is that the gold fever is actually reducing the demand for gold for practical applications like jewelry. This bubble is going to pop hard.
posted by localroger at 12:05 PM on January 16, 2012
posted by localroger at 12:05 PM on January 16, 2012
I get the use of it hedging against currency devaluation, but the people gathering it in case of the apocalypse always confused me. If US currency can't buy a loaf of bread, it's likely that a bit of gold won't be able to either. Buy guns, ammo, and beans instead.
posted by deanklear at 12:07 PM on January 16, 2012 [3 favorites]
posted by deanklear at 12:07 PM on January 16, 2012 [3 favorites]
So if the Fed fixed the dollar to gold tomorrow at a rate which would leave them enough gold to exchange for all the dollars in existence, say $50,000 an ounce, I wonder what would happen? Presumably everyone who had gold would rush to give it to the Fed, and we'd have some crazy inflation for a while (and rumors of the move would drive up gold to crazy heights in advance, too). After that, I guess you have a gold standard, whatever good that does.
posted by alexei at 12:13 PM on January 16, 2012
posted by alexei at 12:13 PM on January 16, 2012
It would be really great for someone to have an incentive to reopen Giant Mine here and maybe clean up and take care of all this arsenic while they're at it.
posted by ODiV at 12:14 PM on January 16, 2012
posted by ODiV at 12:14 PM on January 16, 2012
I know I've linked to this before, but it's still the best short explanation of the drawbacks of a gold standard that I've seen. Last paragraph:
In short, you don't get anything out of a gold standard that you didn't bring with you. If your government is a credible steward of the money supply, you don't need it; and if it isn't, it won't be able to stay on it long anyway. (See Argentina's dollar peg). Meanwhile, the limitations on the government's ability to respond to fiscal crises, the necessity of defending against speculative attacks in times of crises, and the possibility of independent changes in the relative price of gold, make your economy more unstable. It's a terrible idea, which is why there are so few economists willing to raise their voices in support of it.posted by TheophileEscargot at 12:16 PM on January 16, 2012 [13 favorites]
So now someone who purchased an ounce of gold yesterday at $1600 suddenly finds himself with an ounce of gold worth a small fraction of that, whereas someone with a $1600 in greenbacks still has $1600?Isn't that backwards? Today, the U.S. has 8,000 tons of gold, worth about $400 billion. There is $1.2 trillion of currency outstanding (I have no idea if this is the right measure of money for this purpose, because I don't really understand exactly what would be backed by gold, but I don't think it matters for this purpose). If all the currency becomes exchangeable for all the gold, that means each ounce of gold would be exchangeable for about $4700 (or $1,200,000,000,000 / (8,000 tons of gold * 2,000 pounds in a ton * 16 ounces in a pound)).
So wouldn't the people who held gold become super rich? I think we just figured out why the goldbugs want to do this.
posted by planet at 12:16 PM on January 16, 2012
(or $1,200,000,000,000 / (8,000 tons of gold * 2,000 pounds in a ton * 16 ounces in a pound)).
You've got it backwards --
If you've got 10 people, and everyone pitches in $10 for pizza, figuring whatever's left over goes as the tip, that's $100 on pizza.
If only $40 in pizza shows up and is divided equally between each contributor, each of those ten people only get $4 worth of pizza for their $10 in the pot.
So you divide the pizza (gold) by the contributors (dollars in the economy) to get the value of each piece (gold value of a dollar).
So 256,000,000 ounces of gold divided by $1,200,000,000,000 is something like two one hundredths of a penny per ounce.
posted by AzraelBrown at 12:25 PM on January 16, 2012
You've got it backwards --
If you've got 10 people, and everyone pitches in $10 for pizza, figuring whatever's left over goes as the tip, that's $100 on pizza.
If only $40 in pizza shows up and is divided equally between each contributor, each of those ten people only get $4 worth of pizza for their $10 in the pot.
So you divide the pizza (gold) by the contributors (dollars in the economy) to get the value of each piece (gold value of a dollar).
So 256,000,000 ounces of gold divided by $1,200,000,000,000 is something like two one hundredths of a penny per ounce.
posted by AzraelBrown at 12:25 PM on January 16, 2012
I pictured this one...
I don't know, but there's at least one person on that show who's getting pretty close to this...
posted by TheWhiteSkull at 12:27 PM on January 16, 2012
I don't know, but there's at least one person on that show who's getting pretty close to this...
posted by TheWhiteSkull at 12:27 PM on January 16, 2012
So 256,000,000 ounces of gold divided by $1,200,000,000,000 is something like two one hundredths of a penny per ounce.But look at your units. Dividing ounces by dollars gives ounces per dollars, not dollars per ounce. Just like dividing miles driven by hours elapsed gives miles per hour.
posted by planet at 12:29 PM on January 16, 2012 [1 favorite]
Eh I retract my math; I think I may be looking at it totally wonk-sided.
posted by AzraelBrown at 12:29 PM on January 16, 2012
posted by AzraelBrown at 12:29 PM on January 16, 2012
I think I may be looking at it totally wonk-sided.
And isn't there also that thing about troy weights for precious metals where there are 12 ounces in a pound and the ounces are not the same as avoirdupois ounces?
posted by Anitanola at 12:39 PM on January 16, 2012
And isn't there also that thing about troy weights for precious metals where there are 12 ounces in a pound and the ounces are not the same as avoirdupois ounces?
posted by Anitanola at 12:39 PM on January 16, 2012
And isn't there also that thing about troy weights...
I said I was sorry! *weeps at my computer desk*
posted by AzraelBrown at 12:41 PM on January 16, 2012 [11 favorites]
I said I was sorry! *weeps at my computer desk*
posted by AzraelBrown at 12:41 PM on January 16, 2012 [11 favorites]
What's heavier: a pound of gold or the realization of one's mortality?
posted by planet at 12:43 PM on January 16, 2012 [4 favorites]
posted by planet at 12:43 PM on January 16, 2012 [4 favorites]
And isn't there also that thing about troy weights for precious metals where there are 12 ounces in a pound and the ounces are not the same as avoirdupois ounces?
I think that's less important than the thing where people who are terrified of change make dumb financial decisions that benefit the people stoking those fears.
posted by mhoye at 12:44 PM on January 16, 2012 [3 favorites]
I think that's less important than the thing where people who are terrified of change make dumb financial decisions that benefit the people stoking those fears.
posted by mhoye at 12:44 PM on January 16, 2012 [3 favorites]
Maybe the most interesting and approachable take on the topic was Pratchett's Making Money. It takes, head on, the idea that money has to be backed up with anything other than the understanding that it actually does has value.
posted by Deathalicious at 12:47 PM on January 16, 2012 [3 favorites]
posted by Deathalicious at 12:47 PM on January 16, 2012 [3 favorites]
someone with $1600 in greenbacks will have $1600, but someone with $1600 in gold will have $50000 (or whatever) in gold.
I think you have the answer to your question there. People who want the gold standard have gold. They want the force of government to help over value it.
posted by dgran at 12:49 PM on January 16, 2012 [3 favorites]
I think you have the answer to your question there. People who want the gold standard have gold. They want the force of government to help over value it.
posted by dgran at 12:49 PM on January 16, 2012 [3 favorites]
Freakin' troy ounces. Let's all agree to quote gold prices in grams and be done with it.
$52/g. That's a lot. Used to be $20 in just 2007, and $9 in 2002, but before then it was flat for a decade.
Now that you've got a handle on it, let us never speak of avoirdu-bullshit again.
posted by alexei at 12:50 PM on January 16, 2012 [5 favorites]
$52/g. That's a lot. Used to be $20 in just 2007, and $9 in 2002, but before then it was flat for a decade.
Now that you've got a handle on it, let us never speak of avoirdu-bullshit again.
posted by alexei at 12:50 PM on January 16, 2012 [5 favorites]
They want the force of government to help over value it.
And they're using the fear of the collapse of government to push that agenda. Ignore the man behind the curtain!
posted by mhoye at 12:50 PM on January 16, 2012 [2 favorites]
And they're using the fear of the collapse of government to push that agenda. Ignore the man behind the curtain!
posted by mhoye at 12:50 PM on January 16, 2012 [2 favorites]
No doubt you've discovered that loyalty is no longer the currency of the realm... I'm afraid currency is the currency of the realm.
posted by Foosnark at 12:59 PM on January 16, 2012
posted by Foosnark at 12:59 PM on January 16, 2012
I was given 3 gold coins as a gift in 1979. I sold in the early 2000s and AAPL. The gold had lost some money.
posted by humanfont at 1:10 PM on January 16, 2012 [1 favorite]
posted by humanfont at 1:10 PM on January 16, 2012 [1 favorite]
I own a single US Gold Dollar, made in 1850. I had to exchange 75 "Dollars" to pay for it. In the past, a dollar was a weight of gold equal to 1/20th of an ounce.
FDR stole approximately 40% of the savings of US Citizens when he confiscated gold at $20/ounce, and then devalued the dollar to 1/35th of a theoretical ounce. Further changes eventually pushed it to 1/42 of a theoretical ounce. (I say Theoretical Ounce because it became effectively illegal to hold gold or silver in monetarily useful quantities)
When the French and others called into question the backing of the dollar, Nixon ended the theoretical part, and changed it to NO ounces. So we now have a few generations who conflate money (specie coin such as gold, silver, platinum, etc) and currency (a paper representation of money).
Those generations (of which I am a member) mostly think that because paper money hasn't collapsed (well, more than the 90% since Nixon)... we figure that gold really is a barbaric relic. It's very easy to believe that.
I happen to believe that currency and money are only interchangeable in the short run, and that only money should be used to store long term wealth, along with commodities of value and skills that are in demand.
Call me crazy, fine... I'll keep stacking a little bit at a time... building up something that is either a depreciating asset, or a very effective insurance policy against inflation... we all will find out eventually who is right.
I respect your right to disagree with me, but I'm standing firm.
posted by MikeWarot at 1:11 PM on January 16, 2012
FDR stole approximately 40% of the savings of US Citizens when he confiscated gold at $20/ounce, and then devalued the dollar to 1/35th of a theoretical ounce. Further changes eventually pushed it to 1/42 of a theoretical ounce. (I say Theoretical Ounce because it became effectively illegal to hold gold or silver in monetarily useful quantities)
When the French and others called into question the backing of the dollar, Nixon ended the theoretical part, and changed it to NO ounces. So we now have a few generations who conflate money (specie coin such as gold, silver, platinum, etc) and currency (a paper representation of money).
Those generations (of which I am a member) mostly think that because paper money hasn't collapsed (well, more than the 90% since Nixon)... we figure that gold really is a barbaric relic. It's very easy to believe that.
I happen to believe that currency and money are only interchangeable in the short run, and that only money should be used to store long term wealth, along with commodities of value and skills that are in demand.
Call me crazy, fine... I'll keep stacking a little bit at a time... building up something that is either a depreciating asset, or a very effective insurance policy against inflation... we all will find out eventually who is right.
I respect your right to disagree with me, but I'm standing firm.
posted by MikeWarot at 1:11 PM on January 16, 2012
The World Gold Council is a non-profit association of the world's leading gold mining companies, established in 1987 to promote the use of gold. It aims to stimulate demand for gold from industry, consumers, and investors. The Council's Chief Executive Officer is Aram Shishmanian,[1] former head of global financial markets practice at Accenture. Its Chairman is Ian Telfer.[2]
http://en.wikipedia.org/wiki/World_Gold_Council
posted by 3mendo at 1:15 PM on January 16, 2012
http://en.wikipedia.org/wiki/World_Gold_Council
posted by 3mendo at 1:15 PM on January 16, 2012
You'll probably have better luck panning the streets of NY for gold than some random spot in Alaska or Yukon.
posted by ymgve at 1:24 PM on January 16, 2012 [1 favorite]
posted by ymgve at 1:24 PM on January 16, 2012 [1 favorite]
bubbles that never pop don't seem very healthy.
This makes me think we should stop to them as bubbles, and start calling them boils or pimples, or infections. Seems more appropriate. ;)
posted by usagizero at 1:28 PM on January 16, 2012 [1 favorite]
This makes me think we should stop to them as bubbles, and start calling them boils or pimples, or infections. Seems more appropriate. ;)
posted by usagizero at 1:28 PM on January 16, 2012 [1 favorite]
A friend of mine worked for a gold mining company last summer up in the Yukon collecting soil samples. He described it as walking around in the woods all day getting paid a flat day-rate (250$ I think) to smoke pot and follow a gps to certain coordinates, then sticking some dirt in a little baggie.
But it was his description of the camps that really stuck with me. Giant tent-cities with multiple supply plains flying in daily, drillers, scientists, camp staff, and his fellow lowly samplers eating as much as they could for free, everyone getting drunk every night (also for free), and the ability to request almost anything he could want (within reason I suppose) from the outside world and having it brought in on one of the planes within a couple days. He said each of these camps would be set-up for max. 3 weeks, and if nothing was found, they moved everything to a new location. He was sure the entire camp must have been costing half a million per day of operation, and in the 3 months he was with them, they didn't find anything.
But, I suppose, if they're willing to foot the bill on all that, the payoff must be huge.
posted by mannequito at 1:31 PM on January 16, 2012 [1 favorite]
But it was his description of the camps that really stuck with me. Giant tent-cities with multiple supply plains flying in daily, drillers, scientists, camp staff, and his fellow lowly samplers eating as much as they could for free, everyone getting drunk every night (also for free), and the ability to request almost anything he could want (within reason I suppose) from the outside world and having it brought in on one of the planes within a couple days. He said each of these camps would be set-up for max. 3 weeks, and if nothing was found, they moved everything to a new location. He was sure the entire camp must have been costing half a million per day of operation, and in the 3 months he was with them, they didn't find anything.
But, I suppose, if they're willing to foot the bill on all that, the payoff must be huge.
posted by mannequito at 1:31 PM on January 16, 2012 [1 favorite]
The Federal Reserve is a for-profit association of the nations leading bankers, established in 1913 to promote the use of paper money to meet the Congressional objectives of maximum employment and stable prices.
Since its inception, the value of that paper money has fallen approximately 96%, and unemployment is now at 15.2% according to the Fed's own U6 report.
posted by MikeWarot at 1:31 PM on January 16, 2012
Since its inception, the value of that paper money has fallen approximately 96%, and unemployment is now at 15.2% according to the Fed's own U6 report.
posted by MikeWarot at 1:31 PM on January 16, 2012
If the US returns to the Gold Standard, the price of Gold will skyrocket.
This is the hook opportunists like Glenn Beck use to sell gold at an insane markup to a carefully crafted audience of gullible rubes.
The US will never, ever return to the Gold Standard.
posted by Sys Rq at 1:40 PM on January 16, 2012 [1 favorite]
This is the hook opportunists like Glenn Beck use to sell gold at an insane markup to a carefully crafted audience of gullible rubes.
The US will never, ever return to the Gold Standard.
posted by Sys Rq at 1:40 PM on January 16, 2012 [1 favorite]
Ron Paul and other Austrians aren't really for the gold-standard, per se, they're against the US Federal Reserve guaranteeing fractional-reserve banking. The gold standard is just the favoured tool for accomplishing this. Granted, the fact that fractional-reserve banking has historically existed alongside the gold standard doesn't seem to really matter to their arguments.
The Federal Reserve is a for-profit association... that pays all of its profits, minus a 6 per cent dividend on the stock banks hold in the regional Federal Reserve Banks, back to the US Government.
posted by kithrater at 1:46 PM on January 16, 2012 [3 favorites]
The Federal Reserve is a for-profit association... that pays all of its profits, minus a 6 per cent dividend on the stock banks hold in the regional Federal Reserve Banks, back to the US Government.
posted by kithrater at 1:46 PM on January 16, 2012 [3 favorites]
MikeWarot: Since its inception, the value of that paper money has fallen approximately 96%, and unemployment is now at 15.2% according to the Fed's own U6 report.
As you can see, there is a statistically significant inverse relationship between pirates and global temperature.
posted by Orange Pamplemousse at 2:05 PM on January 16, 2012 [3 favorites]
As you can see, there is a statistically significant inverse relationship between pirates and global temperature.
posted by Orange Pamplemousse at 2:05 PM on January 16, 2012 [3 favorites]
The number of pirates who trawl the seas is making an uptick... but the amount of treasure the take is but a mere drop in the ocean compared to profits from renting the world to itself as done daily by the pirates of finance.
Thus there is a POSITIVE trend between global warming and Greed.
posted by MikeWarot at 2:21 PM on January 16, 2012 [1 favorite]
Thus there is a POSITIVE trend between global warming and Greed.
posted by MikeWarot at 2:21 PM on January 16, 2012 [1 favorite]
If you look here (assuming the chart is right), you can see that the money supply was highly volatile prior to the forming of the Federal Reserve. That is not good. Also, a lot of the inflation happened in chunks, notably prior to the Great Depression, WWII and the stagflation of the 1970's. Things which the Fed cannot control. Predictable, low inflation isn't going to hurt anyone.
(Thought experiment: after 2008, the Fed created trillions, only to maintain the inflation rate barely positive. And things were still pretty awful. Can you imagine what would have happened if the money supply had been allowed to deflate? Prices drop, buying disappears because you don't spend money that is getting more valuable the longer you hold it, jobs disappear, you have to pay back loans with more expensive money, and the spread between the haves and the have-nots gets even worse.)
And U6 unemployment is high, but not terribly high. It seems to fluctuate between 10 and 20%.
posted by gjc at 2:28 PM on January 16, 2012 [1 favorite]
(Thought experiment: after 2008, the Fed created trillions, only to maintain the inflation rate barely positive. And things were still pretty awful. Can you imagine what would have happened if the money supply had been allowed to deflate? Prices drop, buying disappears because you don't spend money that is getting more valuable the longer you hold it, jobs disappear, you have to pay back loans with more expensive money, and the spread between the haves and the have-nots gets even worse.)
And U6 unemployment is high, but not terribly high. It seems to fluctuate between 10 and 20%.
posted by gjc at 2:28 PM on January 16, 2012 [1 favorite]
Let's say 1 in 5 adults who want to work can't... welfare was gutted during the Clinton administration. What keeps them from starving in the streets?
posted by MikeWarot at 2:30 PM on January 16, 2012
posted by MikeWarot at 2:30 PM on January 16, 2012
What are you trying to say with all this? You're hopping around topics every single post.
There's no relation between the inflation since 1913 and the current unemployment rate, the point I was trying to make. "[P]irates of finance" don't have much to do with the gold standard either; presuming you're talking about (real estate) speculators, and they existed long before the 1910's.
And greed's a pretty constant quality, I'm afraid.
posted by Orange Pamplemousse at 2:48 PM on January 16, 2012
There's no relation between the inflation since 1913 and the current unemployment rate, the point I was trying to make. "[P]irates of finance" don't have much to do with the gold standard either; presuming you're talking about (real estate) speculators, and they existed long before the 1910's.
And greed's a pretty constant quality, I'm afraid.
posted by Orange Pamplemousse at 2:48 PM on January 16, 2012
If the Zombie Apocalypse ever hits for real, my 5 year supply of bottled water and toilet paper will be selling for over $1,600 per oz.
posted by randomkeystrike at 2:56 PM on January 16, 2012 [1 favorite]
posted by randomkeystrike at 2:56 PM on January 16, 2012 [1 favorite]
Wonder when the gold bubble is going to pop? t must only have another 5 or so years left in it, it seems to be at the "everyone beginning to invest" part of curve.
posted by rodgerd at 2:57 PM on January 16, 2012
posted by rodgerd at 2:57 PM on January 16, 2012
It almost popped a few months ago when it almost hit $2000 an ounce. Maybe it won't pop so much as just stay flat and wait for currency inflation to catch up. I don't envision the gold nuts jumping into a selloff, since they believe that it will always go up. But I kind of hope for a crash, since the schadenfreude would be delicious.
Ridiculous chart.
posted by gjc at 3:06 PM on January 16, 2012 [3 favorites]
Ridiculous chart.
posted by gjc at 3:06 PM on January 16, 2012 [3 favorites]
It seems to me that the elephant in the room is that, unlike real estate or tech stocks, there's an explicitly political aspect to the gold bubble. Only right-wing people, particularly libertarians and world-is-going-to-Hell types, are investing in it. Amirite?
So, hey, what happens then when the bubble finally pops (as all bubbles must)?
posted by newdaddy at 4:00 PM on January 16, 2012
So, hey, what happens then when the bubble finally pops (as all bubbles must)?
posted by newdaddy at 4:00 PM on January 16, 2012
symbioid wrote: I think we need Gold, man.... Sacks of it.
I couldn't tell, are you advocating for more gold or more man sacks?
posted by wierdo at 4:15 PM on January 16, 2012 [2 favorites]
I couldn't tell, are you advocating for more gold or more man sacks?
posted by wierdo at 4:15 PM on January 16, 2012 [2 favorites]
ymgve: "You'll probably have better luck panning the streets of NY for gold than some random spot in Alaska or Yukon."
Here's a pic of my grandpa panning for gold (1983, me and my sister nearby).
He was a mountain man kinda guy, loved that shit. It was fun watching him pan... I used to have a few tiny nuggets he got for me, don't know whatever happened to that, though.
posted by symbioid at 4:20 PM on January 16, 2012
Here's a pic of my grandpa panning for gold (1983, me and my sister nearby).
He was a mountain man kinda guy, loved that shit. It was fun watching him pan... I used to have a few tiny nuggets he got for me, don't know whatever happened to that, though.
posted by symbioid at 4:20 PM on January 16, 2012
Anitanola wrote: And isn't there also that thing about troy weights for precious metals where there are 12 ounces in a pound and the ounces are not the same as avoirdupois ounces
As usual, the answer is at our fingertips.
Too bad it doesn't know how much gold we have.
posted by wierdo at 4:28 PM on January 16, 2012
As usual, the answer is at our fingertips.
Too bad it doesn't know how much gold we have.
posted by wierdo at 4:28 PM on January 16, 2012
The price of gold has been going down for the past few months.
posted by delmoi at 4:44 PM on January 16, 2012
Ron Paul is a prominent politician in the same way that Tim Tebow is a prominent quarterback. While he may meet the dictionary definition...Other then Michael Vick he's probably the only quarterback I could even name.
Not to get too Californian on you, but some energy is definitely vibing off this thing. Until now the idea of holding gold as an investment or otherwise hasn't offered the faintest allure, but now I am tuning something in, an unheard, insistent bleating that says, "Gather up a bunch of me and you will be safe from a bad and uncertain world."They always say, when the 'average person' now thinks an investment is hot, it's over. Just look at the attitude towards housing in 2007.
If you've got 10 people, and everyone pitches in $10 for pizza, figuring whatever's left over goes as the tip, that's $100 on pizza.Other then the math, you have the metaphor backwards. The people with the gold are the pizza stand in your metaphor. They already have the gold. Now what they want is a law that forces the government to buy it from them.
posted by delmoi at 4:44 PM on January 16, 2012
MikeWarot wrote: Let's say 1 in 5 adults who want to work can't... welfare was gutted during the Clinton administration. What keeps them from starving in the streets?
Yeah, there was none of that while we were on the gold standard.
Also, I should note that the previous wolfram link is a gross underestimation. It only counts actual currency, not all the electronic dollars. this would be a more accurate number. (north of $41000 per troy ounce, if you don't want to click the link)
If we could somehow magically get our hands on all the gold ever mined, it would be a more reasonable $2,000 per troy ounce.
More realistically, but still ridiculous, if we managed to force the rest of the world to hand over all their gold reserves and added them to ours, we'd have 30,807.6 metric tons of gold. So the price of gold would have to be $10956 per troy ounce to keep the same amount of money in circulation.
Clearly, anybody who wants to go back on the gold standard is either an idiot or has a lot of gold.
posted by wierdo at 4:52 PM on January 16, 2012 [3 favorites]
Yeah, there was none of that while we were on the gold standard.
Also, I should note that the previous wolfram link is a gross underestimation. It only counts actual currency, not all the electronic dollars. this would be a more accurate number. (north of $41000 per troy ounce, if you don't want to click the link)
If we could somehow magically get our hands on all the gold ever mined, it would be a more reasonable $2,000 per troy ounce.
More realistically, but still ridiculous, if we managed to force the rest of the world to hand over all their gold reserves and added them to ours, we'd have 30,807.6 metric tons of gold. So the price of gold would have to be $10956 per troy ounce to keep the same amount of money in circulation.
Clearly, anybody who wants to go back on the gold standard is either an idiot or has a lot of gold.
posted by wierdo at 4:52 PM on January 16, 2012 [3 favorites]
Gold as currency seems as much an exercise in shared delusion as paper currency. Aside from industrial purposes, gold has no more intrinsic value to me than paper[1] that has been blessed by the Treasury Wizards. This strikes me as particularly the case in apocalyptic scenarios. GOLD, IN CASE THE CURRENCIES COLLAPSE. What good will gold be? It's only valuable because people claim it's valuable. If you want to tie your currency to something that's hard to duplicate and fixed in value, okay, I guess gold works for that, but you could just as easily use lithium (HOARD YOUR BATTERIES AND CRAZY PEOPLE MEDS).
[1] linen, technically, iirc.
posted by rmd1023 at 5:00 PM on January 16, 2012 [3 favorites]
[1] linen, technically, iirc.
posted by rmd1023 at 5:00 PM on January 16, 2012 [3 favorites]
this would be a more accurate number
MZM isn't the best measure, at least according to the standard "return to gold standard" scenario. My understanding of that argument is that the creation of new reserves must be backed by gold, coupled with the elimination of fractional-reserve banking (because if you still let the Fed set the reserve requirement then the evils of Government-controlled money still occur because it can just alter bank's reserve requirement to increase or decrease the money supply as required).
Use of the monetary base gives us a $10k per troy ounce figure, and then the inevitable amusement of setting the reserve requirement ratio to 1 and destroying modern finance.
posted by kithrater at 5:11 PM on January 16, 2012
MZM isn't the best measure, at least according to the standard "return to gold standard" scenario. My understanding of that argument is that the creation of new reserves must be backed by gold, coupled with the elimination of fractional-reserve banking (because if you still let the Fed set the reserve requirement then the evils of Government-controlled money still occur because it can just alter bank's reserve requirement to increase or decrease the money supply as required).
Use of the monetary base gives us a $10k per troy ounce figure, and then the inevitable amusement of setting the reserve requirement ratio to 1 and destroying modern finance.
posted by kithrater at 5:11 PM on January 16, 2012
Don't buy gold. Like every commodity, there are people that will always know more about the actual supply of gold than you do. They're just waiting to punk you.
posted by Cool Papa Bell at 6:27 PM on January 16, 2012
posted by Cool Papa Bell at 6:27 PM on January 16, 2012
demand for gold for practical applications like jewelry.
Jewelry is a "practical application"?
(as long as "we" are seeking to replace the FRN with something else why not look at what was suggested during the last depression? Energy as money. Yet another energy as money version.)
other ideas as money.
posted by rough ashlar at 7:15 PM on January 16, 2012
Jewelry is a "practical application"?
(as long as "we" are seeking to replace the FRN with something else why not look at what was suggested during the last depression? Energy as money. Yet another energy as money version.)
other ideas as money.
posted by rough ashlar at 7:15 PM on January 16, 2012
I happen to believe that currency and money are only interchangeable in the short run
It's entirely possible that you're right — heck, let's just stipulate that you are. Even so, it doesn't necessarily follow that bringing back the gold standard is a good thing.
As others have pointed out, having a gold-backed currency is only any good if you can trust the entity printing the currency to actually have the gold on hand, exchange it on demand for the slips of paper, not debase it when it's convenient to do so, etc. Basically, the entity issuing the currency needs to be trustworthy. But why would anybody who doesn't trust the Fed (or even the Treasury) today, trust them to do that? The current system — where you can buy actual gold specie, or notes redeemable for actual gold, from any number of suppliers competing in the open market — seems better on its face.
Also, it's not apparent that 'currency' (short-term medium of exchange) and 'money' (long-term store of value) need to be the same thing. As long as you can easily convert from one to the other, who cares? Just don't keep your savings in 'currency', and you're fine.
The current system provides for a currency (fiat / paper dollars) which are almost universally accepted and highly liquid, but suffer from continuous slow inflation. But you can easily trade them in for any number of products, including metals, equities, promissory notes (bonds), etc., which are resistant to inflation. When you include retirement savings, this is probably the dominant form in which Americans keep personal savings right now — it might appear to someone looking at the statement that they're holding dollars (because that's how the account statements are printed), but in reality they're holding equities or bonds. They could just as easily be holding metal specie in a vault; there are some products around that offer this, in fact.
Obviously, there have been missteps in the evolution of this system. The confiscation of privately-held metals was arguably one of them (I am of this opinion), but the risk of anything similar happening today seems very low — and one of the reasons it's unlikely to happen is because of the disconnection of the common currency from precious-metal value stores. (I.e., by allowing the currency to float, it removes the pressure to confiscate and corner the market on the backing commodity in order to debase the currency.) But the current system avoids the need for everyone to agree on a single backing commodity (or some bimetallic or commodity-basket hack), and allows everyone to buy whatever commodity they prefer as savings.
I'm sympathetic to some Austrian-school arguments about the role of government/central-bank stimulus in creating overheating and the preconditions for bubbles, but the demand that central banks issue notes which are simultaneously a highly-liquid medium of exchange and a stable long-term value store seems unreasonable and unnecessary in the modern financial environment.
posted by Kadin2048 at 7:22 PM on January 16, 2012 [1 favorite]
It's entirely possible that you're right — heck, let's just stipulate that you are. Even so, it doesn't necessarily follow that bringing back the gold standard is a good thing.
As others have pointed out, having a gold-backed currency is only any good if you can trust the entity printing the currency to actually have the gold on hand, exchange it on demand for the slips of paper, not debase it when it's convenient to do so, etc. Basically, the entity issuing the currency needs to be trustworthy. But why would anybody who doesn't trust the Fed (or even the Treasury) today, trust them to do that? The current system — where you can buy actual gold specie, or notes redeemable for actual gold, from any number of suppliers competing in the open market — seems better on its face.
Also, it's not apparent that 'currency' (short-term medium of exchange) and 'money' (long-term store of value) need to be the same thing. As long as you can easily convert from one to the other, who cares? Just don't keep your savings in 'currency', and you're fine.
The current system provides for a currency (fiat / paper dollars) which are almost universally accepted and highly liquid, but suffer from continuous slow inflation. But you can easily trade them in for any number of products, including metals, equities, promissory notes (bonds), etc., which are resistant to inflation. When you include retirement savings, this is probably the dominant form in which Americans keep personal savings right now — it might appear to someone looking at the statement that they're holding dollars (because that's how the account statements are printed), but in reality they're holding equities or bonds. They could just as easily be holding metal specie in a vault; there are some products around that offer this, in fact.
Obviously, there have been missteps in the evolution of this system. The confiscation of privately-held metals was arguably one of them (I am of this opinion), but the risk of anything similar happening today seems very low — and one of the reasons it's unlikely to happen is because of the disconnection of the common currency from precious-metal value stores. (I.e., by allowing the currency to float, it removes the pressure to confiscate and corner the market on the backing commodity in order to debase the currency.) But the current system avoids the need for everyone to agree on a single backing commodity (or some bimetallic or commodity-basket hack), and allows everyone to buy whatever commodity they prefer as savings.
I'm sympathetic to some Austrian-school arguments about the role of government/central-bank stimulus in creating overheating and the preconditions for bubbles, but the demand that central banks issue notes which are simultaneously a highly-liquid medium of exchange and a stable long-term value store seems unreasonable and unnecessary in the modern financial environment.
posted by Kadin2048 at 7:22 PM on January 16, 2012 [1 favorite]
Energy as money is a very very very very very very very bad idea.
Assuming you magically resolve the storage problem, there are way too many risks. It will overly reward low-cost dirty fuel such as coal. You cannot accurately price long-dated debt (such as home mortgages), due to risks of supply-shocks/discoveries. It encourages hoarding of energy.
... and that's just the beginning. The list is ridiculously long on why energy shouldn't be a transactional currency.
posted by amuseDetachment at 7:23 PM on January 16, 2012 [1 favorite]
Assuming you magically resolve the storage problem, there are way too many risks. It will overly reward low-cost dirty fuel such as coal. You cannot accurately price long-dated debt (such as home mortgages), due to risks of supply-shocks/discoveries. It encourages hoarding of energy.
... and that's just the beginning. The list is ridiculously long on why energy shouldn't be a transactional currency.
posted by amuseDetachment at 7:23 PM on January 16, 2012 [1 favorite]
I happen to believe that currency and money are only interchangeable in the short run, and that only money should be used to store long term wealth, along with commodities of value and skills that are in demand.
Why should a commodity like gold have any fixed value relative to skills and other commodities? It isn't' like the gold supply has historically grown at a fixed rate and often it has grown at the wrong time to manage fiscal policy. Look at what the discovery of gold in the new world did to Spain. For that matter why should skills be of any particular fixed value. There isn't much demand for elevator operators these days.
Gold has barely touched its price per gram value that it hit in the late 1970s. In fact if we use your alternate calculations for inflation instead of the current ones we would see that it is actually worth substantially less today than it was during much of its peak.
posted by humanfont at 7:27 PM on January 16, 2012 [1 favorite]
Why should a commodity like gold have any fixed value relative to skills and other commodities? It isn't' like the gold supply has historically grown at a fixed rate and often it has grown at the wrong time to manage fiscal policy. Look at what the discovery of gold in the new world did to Spain. For that matter why should skills be of any particular fixed value. There isn't much demand for elevator operators these days.
Gold has barely touched its price per gram value that it hit in the late 1970s. In fact if we use your alternate calculations for inflation instead of the current ones we would see that it is actually worth substantially less today than it was during much of its peak.
posted by humanfont at 7:27 PM on January 16, 2012 [1 favorite]
Energy as money is a great idea, because Sid Meier's Alpha Centauri. if anyone says otherwise I'll sabotage their network node.
posted by You Can't Tip a Buick at 7:37 PM on January 16, 2012 [4 favorites]
posted by You Can't Tip a Buick at 7:37 PM on January 16, 2012 [4 favorites]
Assuming you magically resolve the storage problem, there are way too many risks. It will overly reward low-cost dirty fuel such as coal. You cannot accurately price long-dated debt (such as home mortgages), due to risks of supply-shocks/discoveries. It encourages hoarding of energy.It wouldn't reward dirty fuel any more then the current regime. It would have to be some kind of derivative, like an energy future. You'd get "300kj delivered on June 17th 2024" and you could trade that for products -- people who use power would need to acquire the contracts in order to get energy that month.
And anyway, it's actually a good idea if you want to stimulate spending, because you can't store it. You have to spend it so you don't get people accumulating wealth on it's own, rather, they would be accumulating the means to generate wealth, meaning economically productive assets.
Global warming is a problem, but capping carbon wouldn't be any more difficult then today. You could make carbon credits another tradable currency.
---
Actually, now that I think about it: I just came up with an idea to get people interested in greenhouse gas emissions. Just distribute carbon credits to everyone in America (or at least people who vote). Make it so they can trade them on line or get them in the form of paper currency.
Now, since there are no carbon caps, the credits won't be worth much: no one will need to buy them. So suddenly, people would have an economic interest in capping carbon.
posted by delmoi at 8:38 PM on January 16, 2012
If you can't store it, then it can't be used as money, so we get into this weird tautological situation...
W.r.t. derivative, it would be a bond (which is lending money to pay back money). Treasury bonds are time-risk of money itself, i.e. ex-ante demand for money over multiple future periods. If your money is energy, 30-year interest rates are effectively the 30-year risk of oil demand. The 30-year volatility of something like oil sounds expensive. There's no reason to hedge for oil demand if you don't have to. You're tying energy volatility for things that may not be 100% dependent on energy as an input (even at 50% energy input for a good it's a rip off). Why bundle this cost when you can separate it out?
Giving everyone carbon credits so the interests align sounds like a great idea, it'd also legitimize the idea of a basic salary.
posted by amuseDetachment at 8:46 PM on January 16, 2012
W.r.t. derivative, it would be a bond (which is lending money to pay back money). Treasury bonds are time-risk of money itself, i.e. ex-ante demand for money over multiple future periods. If your money is energy, 30-year interest rates are effectively the 30-year risk of oil demand. The 30-year volatility of something like oil sounds expensive. There's no reason to hedge for oil demand if you don't have to. You're tying energy volatility for things that may not be 100% dependent on energy as an input (even at 50% energy input for a good it's a rip off). Why bundle this cost when you can separate it out?
Giving everyone carbon credits so the interests align sounds like a great idea, it'd also legitimize the idea of a basic salary.
posted by amuseDetachment at 8:46 PM on January 16, 2012
Commodity, schmomoddity: Jean-Paul Gaultier is now selling "designer gold bars" for a mere 10% premium.
posted by argonauta at 9:12 PM on January 16, 2012
posted by argonauta at 9:12 PM on January 16, 2012
Ok, so maybe a Gold standard isn't the best idea, but freely printing streams of money doesn't seem to be working either, and destroys savings along the way.
At least with Gold, you could hoard it.
Wow, this has been educational. Thanks everyone!.
posted by MikeWarot at 11:41 PM on January 16, 2012
At least with Gold, you could hoard it.
Wow, this has been educational. Thanks everyone!.
posted by MikeWarot at 11:41 PM on January 16, 2012
Regarding energy as money: wouldn't it be a problem if the value of your currency depended on the time of day, the time of year, geographic location, and other variables, as the cost of electricity does?
posted by alexei at 1:20 AM on January 17, 2012
posted by alexei at 1:20 AM on January 17, 2012
The problem with energy as money is that the Decepticons will drink all the profits.
posted by XMLicious at 1:51 AM on January 17, 2012 [3 favorites]
posted by XMLicious at 1:51 AM on January 17, 2012 [3 favorites]
It encourages hoarding of energy.
Duh. Of course it would. That's the whole point. Discouraging energy consumption would be a feature, not a bug, of any energy-based currency scheme. In fact, since we need to conserve energy more than any other finite natural resource to preserve modern life and continue most modern forms of economic activity (energy ultimately being the most basic real resource human economies depend on), some might view that "problem" as the whole point of switching to such a standard...
posted by saulgoodman at 11:18 AM on January 17, 2012
Duh. Of course it would. That's the whole point. Discouraging energy consumption would be a feature, not a bug, of any energy-based currency scheme. In fact, since we need to conserve energy more than any other finite natural resource to preserve modern life and continue most modern forms of economic activity (energy ultimately being the most basic real resource human economies depend on), some might view that "problem" as the whole point of switching to such a standard...
posted by saulgoodman at 11:18 AM on January 17, 2012
Regarding energy as money: wouldn't it be a problem if the value of your currency depended on the time of day, the time of year, geographic location, and other variables, as the cost of electricity does?
I'm really not sure how such schemes are envisioned to work in practice, but in real terms no matter what you might think of these ideas, everything has an energy cost: every good produced/service rendered = some total number of joules in production cost. That's a feature of reality, not some fashionable cultural thing, like the whims that drive the value of gold. No matter how the markets price a widget, if it takes X joules of energy to make that widget, the world's short-term energy balance is down exactly X joules of available energy.
I think the idea is to try to find some new currency standard that will tie the costs of goods and services directly to those implicit (and often incorrectly priced) physical realities. I don't know if anyone's proposed a specific model for doing this that would work, but if it could be done, it could at least put economics on a scientifically-sound footing, with verifiable and quantifiable metrics as a sort of baseline for determining real economic value, instead of all the voodoo and magical thinking that are currently the name of the game.
posted by saulgoodman at 11:35 AM on January 17, 2012
I'm really not sure how such schemes are envisioned to work in practice, but in real terms no matter what you might think of these ideas, everything has an energy cost: every good produced/service rendered = some total number of joules in production cost. That's a feature of reality, not some fashionable cultural thing, like the whims that drive the value of gold. No matter how the markets price a widget, if it takes X joules of energy to make that widget, the world's short-term energy balance is down exactly X joules of available energy.
I think the idea is to try to find some new currency standard that will tie the costs of goods and services directly to those implicit (and often incorrectly priced) physical realities. I don't know if anyone's proposed a specific model for doing this that would work, but if it could be done, it could at least put economics on a scientifically-sound footing, with verifiable and quantifiable metrics as a sort of baseline for determining real economic value, instead of all the voodoo and magical thinking that are currently the name of the game.
posted by saulgoodman at 11:35 AM on January 17, 2012
Permant stores of wealth are impossible in this universe as a result of entropy.
posted by humanfont at 3:57 PM on January 17, 2012
posted by humanfont at 3:57 PM on January 17, 2012
saulgoodman: The problem is that few things are 100% energy input. When you bundle them together, you're going to raise the cost of everything. This bundling will shift the balance of power between labor and capital. Let's say your business is 40% energy input, you're fully hedging against energy input (100%), so you're pre-paying for energy hedging, it's in your best interest to balance your inputs and outputs to energy risk because you're already paying for it. This encourages you to decrease other risks, e.g. human capital.
There's a lot of weird repercussions of an energy backed currency.
Encouraging hoarding of energy may make energy conservation an issue, but it'd also encourage energy discovery of CHEAP ENERGY. This creates a unfavorable Nash Equilibrium for energy discovery. All the focus would be on coal generation, because there's a direct line of profitability, there's no incentive to develop alternative energy sources until the coal runs out. That's a really uncomfortable proposition. In my opinion, we're going to see solar cheaper than coal in our lifetime, but we can't reach it unless we have the economic incentives to artificially build up the market before then, an energy currency doesn't support this. If the Kyoto treaty had the kinds of trouble passing that it did, imagine if there was a direct relationship with wealth if they did not adhere to the treaty.
So you would see a combination of cheap/unclean energy generation and energy deflation, which is a terrible combination.
Ultimately, I think the issue of contention is an understanding of the nature of money itself. Money is a unit of account, it's technically not a store of wealth. Money's value from stable pricing comes from stable long-term pricing of debts, not in long term holding of cash. Nobody holds cash. Ignoring the past couple years, holding cash is a terrible proposition (as it should be). You can store wealth by buying commodities, such as energy, with money. if you think the risks are within reason. If you're holding something long term, it's probably a commodity and not money as we understand it today (debt), which has a lot of implications for the way the economy runs (good and bad, but energy as money has a little bit more bad).
posted by amuseDetachment at 6:24 PM on January 17, 2012
There's a lot of weird repercussions of an energy backed currency.
Encouraging hoarding of energy may make energy conservation an issue, but it'd also encourage energy discovery of CHEAP ENERGY. This creates a unfavorable Nash Equilibrium for energy discovery. All the focus would be on coal generation, because there's a direct line of profitability, there's no incentive to develop alternative energy sources until the coal runs out. That's a really uncomfortable proposition. In my opinion, we're going to see solar cheaper than coal in our lifetime, but we can't reach it unless we have the economic incentives to artificially build up the market before then, an energy currency doesn't support this. If the Kyoto treaty had the kinds of trouble passing that it did, imagine if there was a direct relationship with wealth if they did not adhere to the treaty.
So you would see a combination of cheap/unclean energy generation and energy deflation, which is a terrible combination.
Ultimately, I think the issue of contention is an understanding of the nature of money itself. Money is a unit of account, it's technically not a store of wealth. Money's value from stable pricing comes from stable long-term pricing of debts, not in long term holding of cash. Nobody holds cash. Ignoring the past couple years, holding cash is a terrible proposition (as it should be). You can store wealth by buying commodities, such as energy, with money. if you think the risks are within reason. If you're holding something long term, it's probably a commodity and not money as we understand it today (debt), which has a lot of implications for the way the economy runs (good and bad, but energy as money has a little bit more bad).
posted by amuseDetachment at 6:24 PM on January 17, 2012
Good points, amuseDetachment. Like I say, I can't imagine how it could be done in practice, but it seems to me, the underlying motivations/reasoning behind wanting to somehow relate currency to energy seem sensible to me, though the follow-on consequences of such a reorientation might make such proposals unworkable.
Energy-based currencies seem like such a tempting avenue for exploration/innovation because, ultimately, everything is reducible to energy. There's potential energy stored up in physical materials; physical labor expends biological energy; etc. And we already have common units for measuring all these various kinds of energy. I'll admit, I don't see how to connect currency to energy without the problems you describe, but energy is in a certain sense ultimately what we're trading around anyway whenever we engage in economic activity.
It would be nice if accounting for energy use were somehow built into how we account for and describe economic activity, rather than being only, at best, a remote afterthought. To me, connecting economics to the hard, physical science of energy use offers the best hope for anything approaching a truly scientific practice of economics.
posted by saulgoodman at 7:42 AM on January 18, 2012
Energy-based currencies seem like such a tempting avenue for exploration/innovation because, ultimately, everything is reducible to energy. There's potential energy stored up in physical materials; physical labor expends biological energy; etc. And we already have common units for measuring all these various kinds of energy. I'll admit, I don't see how to connect currency to energy without the problems you describe, but energy is in a certain sense ultimately what we're trading around anyway whenever we engage in economic activity.
It would be nice if accounting for energy use were somehow built into how we account for and describe economic activity, rather than being only, at best, a remote afterthought. To me, connecting economics to the hard, physical science of energy use offers the best hope for anything approaching a truly scientific practice of economics.
posted by saulgoodman at 7:42 AM on January 18, 2012
There's really no reason to try and tie currency to energy, any more than there's a reason to try to tie currency to gold or beaver pelts.
What you really need out of a currency is liquidity -- you want to be able to exchange it for other stuff (be it energy or gold or beaver pelts). That's the big thing. Short term price stability is also nice. But long-term price stability via redemption for a fixed quantity of a particular good really isn't that important, as long as you can convert from commodities into and out of the currency on demand.
Currency doesn't need to be pegged to anything so long as everyone basically agrees to act like it has some nominal value for the purpose of exchanging stuff. (The extreme end of this is Bitcoins, where there's not only no underlying asset peg but no central bank offering its "full faith and credit"; you are dealing purely with the psychology of other market participants to give the currency value.)
If you wanted to store your savings in energy, you could just convert your incoming paychecks immediately into some sort of energy futures upon deposit into your bank (i.e. you could have a deposit account, similar to a money market account, that was actually buying and selling energy futures on the backend as you deposited and withdrew currency). But if I prefer to keep my savings in gold, I could do that as well. Since these products already exist for Treasury securities, it wouldn't be terribly hard to extend them to other easily-traded commodities. I don't see any reason why just about anything that you can create an ETF of, couldn't also be used for a money-market-style demand account.
This avoids the pitfalls of having to choose a single commodity to back the currency, which tends to focus a lot of resources on the extraction/production of that commodity by artificially inflating its value. The only real downside is that the currency might be a poor long-term store of value, but as long as it is liquid enough for basically-frictionless transfers back and forth between commodities that are good long-term value stores, then it's a pretty minimal drawback.
posted by Kadin2048 at 11:35 AM on January 18, 2012
What you really need out of a currency is liquidity -- you want to be able to exchange it for other stuff (be it energy or gold or beaver pelts). That's the big thing. Short term price stability is also nice. But long-term price stability via redemption for a fixed quantity of a particular good really isn't that important, as long as you can convert from commodities into and out of the currency on demand.
Currency doesn't need to be pegged to anything so long as everyone basically agrees to act like it has some nominal value for the purpose of exchanging stuff. (The extreme end of this is Bitcoins, where there's not only no underlying asset peg but no central bank offering its "full faith and credit"; you are dealing purely with the psychology of other market participants to give the currency value.)
If you wanted to store your savings in energy, you could just convert your incoming paychecks immediately into some sort of energy futures upon deposit into your bank (i.e. you could have a deposit account, similar to a money market account, that was actually buying and selling energy futures on the backend as you deposited and withdrew currency). But if I prefer to keep my savings in gold, I could do that as well. Since these products already exist for Treasury securities, it wouldn't be terribly hard to extend them to other easily-traded commodities. I don't see any reason why just about anything that you can create an ETF of, couldn't also be used for a money-market-style demand account.
This avoids the pitfalls of having to choose a single commodity to back the currency, which tends to focus a lot of resources on the extraction/production of that commodity by artificially inflating its value. The only real downside is that the currency might be a poor long-term store of value, but as long as it is liquid enough for basically-frictionless transfers back and forth between commodities that are good long-term value stores, then it's a pretty minimal drawback.
posted by Kadin2048 at 11:35 AM on January 18, 2012
Burhanistan: "I've said it before, but if people want to go back to a specie-based currency, why choose boring old gold? The true measure of a nation's money should be in their ability to manufacture and store trace heavy radioactive elements. The USD should be moved to the Fermium Standard forthwith."
You mean the Roentgen Standard.
posted by Chrysostom at 3:47 PM on January 18, 2012
You mean the Roentgen Standard.
posted by Chrysostom at 3:47 PM on January 18, 2012
There's really no reason to try and tie currency to energy, any more than there's a reason to try to tie currency to gold or beaver pelts.
Except that energy is common to gold and beaver pelts. It's the common connection between all physical things.
posted by saulgoodman at 7:59 AM on January 19, 2012
Except that energy is common to gold and beaver pelts. It's the common connection between all physical things.
posted by saulgoodman at 7:59 AM on January 19, 2012
Sorry, my point is that both gold and beaver pelts and any other thing you care to mention at a certain level just are energy--stored potential energy. It's possible to calculate a definite description of the potential energy tied up in a unit of gold, just as it's possible to calculate a define description of the potential energy tied up in a beaver pelt. I'm not just talking about immediately usable industrial power here, you understand--I'm talking about energy in the abstract, not just in terms of industrial power. If there's any rational, common currency that actually exists and has inherent economic value it's the energy expended when we work, that's locked up in the physical materials that make up a product, etc.
Energy is not nearly as arbitrary a common base for currency as "gold" or "beaver pelts," because both of those and all other objects of economic scrutiny are inherently describable in terms of energy use and storage. There's nothing about "beaver pelts" that inherently connects them in some real way to gold, but both are stores of potential energy and both take energy to produce and move around, and the same is true for every other arbitrary cultural practice or artifact the dismal science pretends to make a science of analyzing.
posted by saulgoodman at 8:08 AM on January 19, 2012
Energy is not nearly as arbitrary a common base for currency as "gold" or "beaver pelts," because both of those and all other objects of economic scrutiny are inherently describable in terms of energy use and storage. There's nothing about "beaver pelts" that inherently connects them in some real way to gold, but both are stores of potential energy and both take energy to produce and move around, and the same is true for every other arbitrary cultural practice or artifact the dismal science pretends to make a science of analyzing.
posted by saulgoodman at 8:08 AM on January 19, 2012
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