Free Gold
Posted by PeterAsher 9 years, 9 months ago to Economics
Originally Posted April 2000
Look not at the price of gold in terms of things, look at the
price of things in terms of gold.
I view all the current mechanisms of POG determination (Discovery) as being
sourced by the primary fact that gold must be SOLD for currency in order to
become legal tender.
The currencies of the major nations absorb massive quantities of conversion
before one losses much value re another, whereas an equivalent value of
gold being converted would literally panic the markets.
It's akin to the phenomena that Bill Gates would experience if he wanted to make
a multi-billion dollar purchase with his stock shares. The "Value" of the shares
would be sharply reduced by the act of having to convert them to money. So it is
with Gold.
Presented as money, it nevertheless must be 'converted 'to some legal tender by
the payee or payer in order to be a monetary vehicle with which to go about
purchasing the wares of others.
This was the 'Trick' played on gold by freeing it up to 'Trade'. That made it in
effect, a commodity. Certainly the optimum monetary commodity, but dependent on
the supply/demand equation for its 'value.'
Now if Gold were truly "Free", it would be another international currency,
backed not by an economy, but by what it would buy. It would seem then, that a
true gold standard could only exist if all things were priced in gold. Rather
then gold being an asset form of money substitute, money would be a form of gold
substitute.
There would need to be a global agreement to the fact of ‘gold as money’ in order
for this to occur; perhaps an international treaty declaring gold to be legal
tender. There would be no such thing as the POG, only a rate of exchange between
it and other currencies. No 'Value' could be 'Set' by any regulatory body. The
exchange rate would be a result of the trade activities of each nations internal
price structure for goods and services.
True, this exchange rate for gold could fluctuate as do currencies but it would
be tethered, by market forces, to the respective economies rather than a Gold
Market.
The catch is, the holding of gold for buy low/sell high profit would be an
extinct game!!
Using your tape deck, CD player or your mind, put on John Lennon singing
"Imagine all the people" thinking- like- we do; woo-hoo, hoo! ---
Imagine real estate adds saying Beautiful Waterfront Home, 5000 square ft. of
luxury; 4000, oz, .999 au: firm. Or '99 Mecedes SLXXX, mint, 200 oz au, hard
metal only!
It would actually be a powerful market positioning action. It would get your
sale and Gold talked about, It would make Gold popular! It wouldn't cost
anything. It would just be a decision of gold advocates to practice what they
preach. Imagine the buyer, calling on the ad, saying "what do I do if gold goes
up before we close," You say, "maybe you should acquire it now and lock in the
value of the purchase."
If this became a trend, gold would be in high demand. If the only way people
could obtain certain things was to pay in gold, the people who wanted those
things would become 'liquid' in gold. Think about it! Is it weird; or really
feasible?
An argument could be brought forth that there will always be a commodity 'take off' of gold as a currency; for jewelry or industrial uses, and numismatic coins would trade externally to 'Free-Gold." Of course, but at what percentage of above ground inventory and so what? On a small scale analogy, I recall, in the fifties, (In the Army, I think it was) guys would go around for days with a silver half (or full) dollar, constantly hammering around the edge with the handle end of a table knife until they pounded the flange into the size of a finger ring, then they'd drill out the center and wear it. 50 cents, out of circulation!
When Robin read my "Rather then gold being an asset form of money substitute,
money would be a form of gold substitute." she instantly said "like it
originally was!" Of course; but I had missed that.
Look not at the price of gold in terms of things, look at the
price of things in terms of gold.
I view all the current mechanisms of POG determination (Discovery) as being
sourced by the primary fact that gold must be SOLD for currency in order to
become legal tender.
The currencies of the major nations absorb massive quantities of conversion
before one losses much value re another, whereas an equivalent value of
gold being converted would literally panic the markets.
It's akin to the phenomena that Bill Gates would experience if he wanted to make
a multi-billion dollar purchase with his stock shares. The "Value" of the shares
would be sharply reduced by the act of having to convert them to money. So it is
with Gold.
Presented as money, it nevertheless must be 'converted 'to some legal tender by
the payee or payer in order to be a monetary vehicle with which to go about
purchasing the wares of others.
This was the 'Trick' played on gold by freeing it up to 'Trade'. That made it in
effect, a commodity. Certainly the optimum monetary commodity, but dependent on
the supply/demand equation for its 'value.'
Now if Gold were truly "Free", it would be another international currency,
backed not by an economy, but by what it would buy. It would seem then, that a
true gold standard could only exist if all things were priced in gold. Rather
then gold being an asset form of money substitute, money would be a form of gold
substitute.
There would need to be a global agreement to the fact of ‘gold as money’ in order
for this to occur; perhaps an international treaty declaring gold to be legal
tender. There would be no such thing as the POG, only a rate of exchange between
it and other currencies. No 'Value' could be 'Set' by any regulatory body. The
exchange rate would be a result of the trade activities of each nations internal
price structure for goods and services.
True, this exchange rate for gold could fluctuate as do currencies but it would
be tethered, by market forces, to the respective economies rather than a Gold
Market.
The catch is, the holding of gold for buy low/sell high profit would be an
extinct game!!
Using your tape deck, CD player or your mind, put on John Lennon singing
"Imagine all the people" thinking- like- we do; woo-hoo, hoo! ---
Imagine real estate adds saying Beautiful Waterfront Home, 5000 square ft. of
luxury; 4000, oz, .999 au: firm. Or '99 Mecedes SLXXX, mint, 200 oz au, hard
metal only!
It would actually be a powerful market positioning action. It would get your
sale and Gold talked about, It would make Gold popular! It wouldn't cost
anything. It would just be a decision of gold advocates to practice what they
preach. Imagine the buyer, calling on the ad, saying "what do I do if gold goes
up before we close," You say, "maybe you should acquire it now and lock in the
value of the purchase."
If this became a trend, gold would be in high demand. If the only way people
could obtain certain things was to pay in gold, the people who wanted those
things would become 'liquid' in gold. Think about it! Is it weird; or really
feasible?
An argument could be brought forth that there will always be a commodity 'take off' of gold as a currency; for jewelry or industrial uses, and numismatic coins would trade externally to 'Free-Gold." Of course, but at what percentage of above ground inventory and so what? On a small scale analogy, I recall, in the fifties, (In the Army, I think it was) guys would go around for days with a silver half (or full) dollar, constantly hammering around the edge with the handle end of a table knife until they pounded the flange into the size of a finger ring, then they'd drill out the center and wear it. 50 cents, out of circulation!
When Robin read my "Rather then gold being an asset form of money substitute,
money would be a form of gold substitute." she instantly said "like it
originally was!" Of course; but I had missed that.
It's not that the economy, i.e. stuff we make and buy, backs a medium of exchange such as gold or fiat money. The medium of exchange is just a convenient way to trade the stuff we make without mutual coincidence of wants/needs.