Skip to comments.What would happen with the private ownership of gold if the $ returns to the Gold Standard?
Posted on 08/21/2011 2:05:25 PM PDT by DaveinOK54
What would happen with the private ownership of gold coins/bullion if the $ returns to the Gold Standard?
Would the price be artificially fixed? Would it be confiscated? What about the ability to buy, sell or trade it? (I guess if confiscation happens, the last question is moot)
I hear a lot about the need to return to the Gold Standard, but have not seen anything about the affect on private ownership.
Thanks in advance wise ones...........
Confiscated?? I wouldn’t want to be one of jackboots walking my driveway for that!
Not gonna happen. There isn’t enough gold in the world to back what the US alone has in cash floating around.
Nationalizing gold is always a possibility. Make it illegal to sell it. Wouldn’t put anything past the kenyan.
IMO they don’t need to confiscate anything to deprive owners. They can simply assess up to 100% tax on any transactions involving precious metals & impose outrageous prison sentences for any caught avoiding their patriotic duty.
Why in the world would “ they” engineer the collapse of fiat globally but allow escape pods via precious metals. They want it all and have a plan to get it. By all means hold physical but be prepared for it to be a potential liability too.
ivedone the math in the past... there is something like $70 trillion between M1, M2, and M3 supplies (of the top of my head)
using only gold as a standard, and not a commodity basket, gold would be just under $9500 / ounce
A gray area where people can just speculate, but for the point about the price being artificially fixed, it would have to be initially to say all dollars are worth x ounces of gold. You would also require some sort of centralized funnel to keep outside influences from messing with your currency, something like a Gold Reserve Bank. (Example, a country decides they don't like us, just flood the market with gold or withhold it depending on how they want to affect prices- just like what is done sometimes with oil.) You would also need to somehow re-start the gold industry in the US as most of the major suppliers are other countries, many of which aren't always the most politically stable. You would need to have a domestic lock on the sources if your currency is backed by it. There is a lot to consider.
I’ve heard that Obama has made clear his plans for gold somewhere around July 15 while we were all focused on the debt ceiling vote, according to Townhall Spotlight. I’ve also heard that the banks have been instructed to check all safety deposit boxes for gold or any other valuables; the same goes for storage rental units. Google Obama’s stance on gold.
“ivedone the math in the past... there is something like $70 trillion between M1, M2, and M3 supplies (of the top of my head)
using only gold as a standard, and not a commodity basket, gold would be just under $9500 / ounce”
That’s about 5 years out...so your point is?
Private ownership of gold is the normal state of affairs when currencies operate on a gold standard. It doesn’t make much sense otherwise, since the whole point of a gold standard is to make the currency unit fully and freely redeemable for a fixed amount of gold.
And that answers your second question. It’s not the price of gold that is fixed under a gold standard, it’s the amount of gold for which the currency is guaranteed to be redeemable. It only works well when the issuer of the currency has enough gold to redeem all the issued currency. The many failures of which you will hear happen almost exclusively because the currency issuer doesn’t have enough gold to redeem all the issued currency. The only other failure mode is for the issuer to have the gold, but refuse to redeem his currency for it.
Under an international gold standard, each currency unit is really just a different amount of gold, and any fluctuations in the exchange rates occur solely as a reflection of the market’s attitude regarding the risk that the issuer doesn’t have enough gold to back the currency, or might choose not to redeem the currency for the stated amount of gold for some other reason.
Depends on where you set the price of gold.
Disclaimer: Reader must vet source.
I would bet that even f you set it at $10,0000/oz, there still wouldn’t be enough.
Why wouldn`t they then fractionalize it, say 1 USD = 1/8 or ounce Au ?
1 USD = 1/8 ounce Au *
using only gold as a standard, and not a commodity basket, gold would be just under $9500 / ounce
Which is the point of a gold standard: to keep the government from inflating the currency to the point that it becomes attractive to trade the handy dollars for cumbersome but more profitable gold.
At ten million dollars an ounce there is. It depends on how much inflation one can tolerate.
I'd agree that it's not going to happen, but for other reasons.
The main (and sufficient) reason is that nobody among leaders of governments that matter wants the gold standard. They benefit from fiat monies that they print themselves. They can't print gold. As the US dollar crumbles, the second-tier currencies are waiting in the wings to be picked for "currency baskets," global or regional.
With regard to the "not enough gold to back debts that had been made." Several processes will follow. First, it is possible and natural for the price of gold to increase a hundredfold to match those debts. But then there will be a huge incentive to mine gold from sources that today are not economically viable. There is still plenty of gold in California; there is a huge amount of gold in ocean water; there are many other locations where gold is present but mining it today is too expensive. As result, the volume of gold on the market will be increasing, and after a few years (5 to 10) the gold price will start dropping slightly. Still, it will be in the ionosphere and above, compared to what we have today.
But if the price of gold is allowed to rise (unavoidably, if the gold standard is returned to) then industrial uses of gold will be curtailed. And that would mean that electronic products will become unaffordable for yet another reason. Practically all ICs contain gold - it is used to connect the die (the silicon crystal) to the pads of the package. It's not much - micrograms - but there are many of those ICs in each computer, and there are many computers around, and telephones, and other essential stuff.
At this day the price of gold is close to the cost of mining the gold, as it is set automatically by the market. Speculation affects the price somewhat, but still it matches (in the order of magnitude) the labor that goes into mining it. Gold is relatively scarce, and it is an important metal in the industry. We don't really want to rock that boat.
The desire for gold standard (or any other precious metal standard) is coming from the fact that those metals are hard to mine, and the supply therefore is limited. Inflation under the gold standard is small; but it still exists because the volume of gold in circulation is growing as more gold is mined. Very little gold is "destroyed," though some is lost through scrap of products that contain too little gold to bother recovering, and through wear of jewelry.
The gold serves as a physical barrier to infinite printing of money. But there are other methods to achieve the same. We already know of the Bitcoin. It is a fraud, as it is implemented, but the idea makes sense. You can today create a math-based currency that can't be forged. For example, just "print" a billion of numbers, from 0 to 109-1. Replace USD with those, in whatever ratio. If you want to pay, just transfer one of your individually numbered credit "bills" to the other guy. Now he has them, and you don't. Ownership can be traced by a number of methods that I won't be mentioning here for brevity.
To summarize, it would be ill-advised to use gold as money today, and it is relatively easy to introduce a currency (country-specific or global) that is unforgeable and unemittable (or emittable at a certain rate.) All it takes is good people in political offices. But you already see where the catch is.
I think this whole thing of feeling secure because I gave gold to replace the paper dollar is kind of spooky and unreliable. In other words, hopeless.
I don’t think you want to be on a gold standard where you have to pay all your bills in gold.
They are not going to make dollars redeemable in gold, everyone would hoard the gold esp. foreigners.
Maybe a two tier monetary system, one currency based on some gold and other things to satisfy international debts and trades. The second currency for the little people to carry on with their daily lives.
Doesn’t much matter until spending is under control, the more debt incurred the lower the US$ will be worth and the higher the spot price of gold will be until the dollar is no longer the world’s reserve currency.
I would use it to pay some $$$ on my now worthless home.
for the world's money supply to be gold based... gold would have to be:
$46,500,000,000,000 / 5,300,000,000 = $ 8,774 / oz
if the money supply were to be based off a commodity basket where gold was 25-35%, then the value per ounce would be lower.
technically, it's already based on some relationship with the various commodities.. the ratios are just not set
Thanks all for the great insights. I knew there would be some constructive and insightful comments here. I’m not advocating it at this point, just have been hearing chatter about it here and there and was wondering what the impact would be. I’m more worried right now about our IRA’s, 401K’s, etc. Theres a lot of $$$$ sitting there right now and I’m afraid that fruit may be too tempting to avaid taking.
And how do you dare reveal to the butcher, the baker, or the candlestick maker that you have a supply?
The problem, under the Mad Max scenario, won't be using it.
It will be keeping it.
Shortly after taking office sixteen years later, Franklin Delano Roosevelt signed Executive Order 6102 into law, prohibiting the hoarding of gold. Under this executive order, Americans were prohibited from owning more than $100 worth of gold coins, and all hoarders (i.e. people who owned more than $100 worth of gold) were forced, by law, to sell their excess gold to the government at the prevailing price of $20.67 per ounce.
Then, once the government had all the gold, FDR revalued the dollar relative to gold so that gold was now worth $35 an ounce. By simple decree, the government had thereby robbed millions of American citizens at a rate of $14.33 per ounce of confiscated gold, which is why most historians agree that the Gold Confiscation of 1933 is the single most draconian economic act in the history of the United States.
I've seen estimates that a gold price of $7500/oz. would be the magic number. We may be there before long.
The worldwide average cost to produce an ounce of gold is somewhere around $500/ounce...some producers are in the $400/oz range, some near the $1,000/oz. No one is going to commit CAPEX to a new project based on production costs greater than $1k/oz...investors won't and are not going for it because of the obvious risk.
Two thirds of the people never turned in their gold.
It doesn’t matter how much fiat money is out there. There will be a complete revaluation of the currency and the current dollar will cease to exist. What value is actually assigned to gold will have nothing to do with the number of fiat currency units floating around.
The ideal situation is to get government out of the money business all together and allow free money to occur as a result of what people want to use. Silver will also be an integral part of the money system as well. The system could very well gravitate to digital gold and silver currencies, like goldmoney.com.
The point is that not only is gold possible to use, it is really the only thing that can be used to prevent the political class from using the money supply to buy votes and keep power.
There will be a G-20 treaty outlawing the conversion of gold to any G-20 currency.
You will need an export license to board an aircraft with gold, and, although you will still be able to sell gold for Thai bhat, getting it there will be a problem.
Yeah there is no way they could adjust the price of gold (say 25,000 an ounce for example) to meet with the money supply I mean that is just impossible!
The dollar would be defined as a weight of gold. For example, if implemented today, the dollar would be defined as 1/1800 oz. of gold.
Gold's value could fluctuate, but the dollar would always maintain its purchasing power vs. gold.
Would it be confiscated?
If gold were confiscated, it wouldn't be a true gold standard. The genius of the gold standard was that anyone could redeem his paper dollars for the defined weight in gold. It was this condition that kept banks (and governments) from over-inflating the currency.
If people started to doubt the soundness of the paper bills, they would redeem them for gold. Too many gold withdrawals would result in bankruptcy and economic collapse.
Numbers were posted in the thread. 9500/oz would be sufficient.
It can be done, there’s no question about that, the only question is whether it would, or should.
Yeah, if the cost to mine the stuff were the same as or more than the market price, the mines would simply shut down. It's a commodity. The miners want to make money, too.
Some people wonder what would happen if the gold supply remained stagnant in such a case. Would there be enough gold? Yes. Any amount of gold can work to back the currency of any nation.
It would become more valuable with the higher demand, but that would only mean that its purchasing power would increase -- or, in other words, that the prices of goods would drop.
We can’t tolerate that much inflation. It would literally destroy the dollar and all the life savings of most people.
You start you premise with - the dollar is worthless. So in that case, what can you do with dollars beside use them as toilet paper ? At least gold will retain its value. Worse case scenario, you sell a gold coin for paypal credits. Then go down to the local grocer and slide your paypal debit card for payment. My guess is we will have a gold or silver backed online service. How about paygold or paysilver ? Eventually you will be able to buy groceries with silver eagles. Otherwise known as, real money.
It sounds like a fantasy but when the dollar was backed by gold we had no inflation for decades at a time, and unprecedented economic growth
What an idiotic thing to write. The free-market clearing price for gold is $1,876 per ounce. Yes, that indicates massive inflation since we left the gold standard and gold was $32 /oz. But there's a price for everything. There is a price for gold that would make the gold standard work again. Seemingly, though, there isn't the political will to keep that price stable. That's why the gold standard is a non-starter in today's environment.
Your question implies a collapse of government currency. In such an apocalyptic case (which will not happen), you arrange for the gold to be held as collateral in a credit account with whomever. Exchanges would spring up in no time, probably organized by banking institutions. Local scrip would replace the dollar for small purchases, as it did during the Great Depression, only now based on gold held in trust by third parties rather than on full faith and credit of the goobermint.
There is an extra premium but there is also greater flexibility.
Also look at silver, especially junk silver. A mercury dime is worth about $3 in meltdown value of the metal at silver $40 an oz, a silver quarter (pre 1964) is worth about $7. That is maybe worth a loaf of bread or a gallon of gas or a bottle of aspirin.
Even pure copper coins are heating up- copper is $4 a pound but who gets to buy and hold industrial copper and who wants to try to trade in big bars of metal? Coins are $1- $2, have the chance to become the poor man's silver (as silver is the poor man's gold)
Our society is used to seeing gold silver and copper (esp coinage) as money and as having value.
Think of it this way. M3 includes checking accounts, money market accounts and the like. In order for someone to convert currency into gold, he'll have to take the money out of his checking account. When that currency shows up at the central bank and is exchanged for gold, it is taken out of the money supply. Merely withdrawing that cash from the bank reduces M3 by a factor of 5 or so. So please consider the reverse process of money creation you learned about in your Money & Banking class.
Nationalizing gold is always a possibility.
Uhh. Yeah you can. It's called the gold standard.
Uhh. Yeah you can. It's called the gold standard.
Name one that actually has worked in recorded history.
The problem with digital currency is that some central body needs to keep track of who has what. That's way too much centralized power.
And the value of the dollar would be less than a tenth of what it is now. You want hyper inflation?
If you want to hyperinflate the dollar, yes there will be enough.
You have a way with words. You've summed up (in a single paragraph) a point that would have taken me an hour to explain. Brevity man, you got it. :)
I heard that anyone caught leaving the country with more than five ounces of gold will be fined $10,000, serve a year in prison and have h8is/her gold confiscated.
NO I said you CAN’T adjust the price of gold to meet the monetary supply which ,of course ,would hyper-inflate the monetary supply (somehow) NOT something like the printing of the monetary supply by the FED. That’s how it works right? I am agreeing with you. And Gold is definitely not adjusting itself as we speak week by week day by day. It is just a bubble that will pop!