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Banking 17: What happened to the gold?

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Getting off the gold standard. A short discussion of the meaning of wealth. More free lessons at: http://www.khanacademy.org/video?v=NFDMXwwzyIM
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Text Comments (258)
Barry Soetoro (6 months ago)
This is what a college lecture should be....not answering questions left and right. Well done
Josip Miller (9 months ago)
In my country big scale gold purchase started couple of years ago done by possibly hundreds of small go!dsmith and new opened purchase shops. Could it be that some kind of large scale accumulation was happening ? I remembered that even panels with "gold purchasing" were looking the same: black letters on yellow background.
medrano m (10 months ago)
Fiat currency => military/welfare state industrial complex.
Raj Krishna (1 year ago)
Wow! this video is like an enlightenment for me, I always wondered about why we admire gold so much and I got the answer of this question after like ages. Thanks Sal!
Dave Parkinson (1 year ago)
U.S Goverment does'nt control the money supply, federal reserve does and the FR is a BANK
mehfoos (1 year ago)
Wow, people have this idea of money in the world being constant ingrained into their heads, which could be why they're upset at this video. Money is just a means to an end, and even with gold, it's based off trust in its value(despite it just being shiny and corrosion free, but by no means indestructible by nuclear reaction). Gold is a limited resource, but human population is increasing, human endeavours are increasing, human inventions and services are increasing. Gold is the biggest mass delusion in the history of the world and a 6000 year old bubble that will truly burst once cryptocurrencies take over.
Muhammad M (2 years ago)
Sometimes Sal just gets thing wrong.
mehfoos (1 year ago)
Yes, but not this time.
John Richardson (2 years ago)
Also, what people are missing is that it really is not obligated by the government, it is obligated by us, the citizens. We owe this money if Fed become insolvent. Thats what make it more wealthy than gold. We are the wealth that backs our own currency.
John Richardson (2 years ago)
Gold is just another type of money. Money is defined as access to future goods and services, fiat currency and gold both do that. Gold is not wealth, wealth is the ability to provide future goods and services. Lebron James as a kid was extremely wealthy, the money in his account reflects that wealth, and that is his access to future goods and services by other wealthy individuals.
Taset90 (2 years ago)
Ohhhh Sall U disappointed me so much, I recommend U to read (probably again) "rothbard what has government done to our money"
artsYedITs (2 years ago)
You always reduce gold to it's nice appearance. Isn't a huge part why gold was/is used as a measure for wealth its rareness? The amount of gold on earth is pretty limited in comparison to wood/paper for notes..
Mister Chartreuse (2 years ago)
Ron Paul would crash land on the gold island
Cesar Sosa (2 years ago)
LOL, i doubt it. He loves the gold standard because it limits the government's ability to print it.
NileThe146 (3 years ago)
People could survive on the island of gold for awhile cuz gold is edible.
Dan Garwood (3 years ago)
and it also allows the federal Reserve to print s much money as they want and every time they do it DEVALUES our currency further which is why 1$ has lost nearly 100% of its purchasing power compared to when we were on the gold standard
Dan Garwood (3 years ago)
this guy's an idiot. On the gld standard you actually have something REDEEMABLE backing your notes. Meaning you can take the hard earned cash you earned and go to a bank and tell them you want to exchange the cash for the gold. With the fiat system we live under the paper money is non redeemable meaning it's worthless toilet paper....
mehfoos (1 year ago)
Well, history has had many things wrong, but more importantly, it's a bit like land: over several generations, few families will have most of it, with no opportunities for new generations from other families. Having finite amount of currency in a world where population increases and services increases is restricting the human potential. Fiat currency system views Money is a means to an end, and did not constraint human development like gold standard did.
Cesar Sosa (2 years ago)
+Dan Garwood Yes, that is where its power lies. Because is limited, it cannot be created out of nothing and cannot drive inflation up. There is a really good video on khan academy on how you can have a multiplier effect even with gold so you can increase your wealth even with a fixed amount of gold.
Dan Garwood (2 years ago)
+Cesar Sosa gold is a LIMITED natural resource which is why throughout all history it has been the go to currency. Fiat currency is basically currency backed by trees. Unlimited.
Cesar Sosa (2 years ago)
You are missing the point. When you say "redeemable" you are assuming gold is wealth, but it isn't. Gold is nothing more than money. It's only advantage is that it cannot be created out of nowhere like digital money can. Sal did a very good job explaining gold's role in the economy, but my only issue is that i think he is over estimating the government's ability to manage it.
Alaa Raad (3 years ago)
I like the part when he said the reason why gold is money its because it is pretty..... oh and it doesn't corrode, which is the most important reason why gold is the real money in this world, but unfortunately paper money now is not backed by gold, and we say it is better, go figure. I like you khan, and of course you are allowed to share your opinion, but I know many people would disagree, especially when you try to make gold sound like a cute little nothing next to paper money and try to let people think it is better for our advancement in technology. The world for thousands of years were using gold, but now we are told that we are better off with paper money, and then we will be told we are better off with electronic money, money you can't see or touch and it is not in your own home, it is with a stranger who allows you to use it under restrictions and some other strange laws that we the general public accepted. I just hope we are not enslaving ourselves by allowing our money to be stored with the strangers (the bankers) who are extremely nice people by the way, um wait I don't remember I'm so into my own life that I don't know if they are good or bad people, I don't know I guess that requires a discussion by itself, but first let us ask our minds maybe we will get somewhere.
medrano m (10 months ago)
mehfoos Enslavement or serfdom has occurred regardless of what type of currency, or without currency altogether. It only requires people who are willing to abuse others for their own gain.
mehfoos (1 year ago)
Gold can undergo chemical and nuclear reaction. Paper/Cotton/Polymer currencies can be replaced by Central banks, and more importantly, in a cashless economy like we are increasingly becoming with electronic transactions or even cryptographers, it's all the more better. You talk about enslavement: if there's a limited amount of gold in the world, it will all be owned by the richest countries of today, and newer developing countries will stuggle for economic transaction and in turn development; that would be the real enslavement.
Cyrus Siin (3 years ago)
if people's work  land resources and taxes are supporting assets behind the money in these banks,why the profits of all these loans do not go back to people and bankers get all the benefits of this system, because people and government are bailing out these banks as they ve done in the past , there should not be any private banks anymore
Trollygag (4 years ago)
So many angry gold-bugs upset when faced with the truth... gold is more harmful and more of an illusion than fiat currency.
yermomrhot (4 years ago)
you must be blind sir... the fiat with all this bogus economic and international monetary system allow US to do what they did.... printing more and more money, devalueing(stealing value) people currencies, funding unjust war, forcing population to their world order, etc.... Destruction will be upon America probably in the hands of nuclear... 
Chris (4 years ago)
Terrible comparison with the islands at the end.  Of course anybody would want to land on an island with food and water instead of an island full of gold. Gold haters love using this comparison. It is comparing apples to oranges. The real comparison needs to be this: Would you rather land on an island with piles of gold bars or piles of paper currency. I'm tired of people thinking gold bugs don't want to own productive assets. That's not true. Pro gold people are just saying that gold is better than paper over the long term. You can't eat a stock either. Internet stocks crashed with most losing 99% and most went bankrupt with real estate yet gold that is up 600% in that time is somehow bad. Terrible video. Keynsian colleges definitely propagandized this guy. Warren Buffet was right. The more degrees you have from fancy colleges the worse of an investor you are. 
kylec1193 (4 years ago)
I don't understand. Are you telling me the government stole all of our gold? And that everybody is okay with that? And that you truly believe gold has no value?  Watch in a few thousand years we'll end up killing all the blue avatar people trying to get more gold. 
tslechta (5 years ago)
I thought FDR took us off the gold standard in 1933?? Not Nixon...
ListWritingMachine (5 years ago)
He did for the most part, but Nixon finalized it.
Mr Speciest (5 years ago)
Instead we would have unstable prices, deflation and a lower overall GDP (even with a recession).
Mr Speciest (5 years ago)
But how close does that value of wealth reflect the true value of wealth in the economy? That's what Sal is trying point out
Mr Speciest (5 years ago)
If you actually watched the video - the Gold Standard is not a guarantee against inflation.
TimesNuRoman (5 years ago)
in the end, gold does not have any value either. It does not benefit a person like any other resource or service does. If you were on an island, things like water, food, building materials etc have value. Gold does not have intrinsic benefit. It is only to exchange for an actual resource or service. Just like..........dum dum dum, fiat money. Gold is fiat money.
Jacob Clifton (5 years ago)
Wait, fiat currency is directly related to a island rich with resources, while gold-backed currency is related to a gold-only island. The analogy makes no sense.
rick969696 (5 years ago)
Khan is totally missing the point of gold backing. When a currency is backed by gold, it prevents the money supply from being severely inflated because there is a finite amount of gold in the world. Having a currency "backed" by the federal government does not do the same thing.
cicamaca66 (5 years ago)
but I would argue that the Fiat currency has some intrinsic value, even if its intrinsic value is very very low, you can use it for example, to whip your *** off with it
cicamaca66 (5 years ago)
Yes but I think you missed a point (if I understood you right) --> Paper money has also an intrinsic value (for example we can use the paper to write something on it or for anything else) So every subject has an intrinsic value and an exchange value, even green paper money
Spencer (5 years ago)
Everyone commenting here is completely idiotic. You are all literally too stupid to correct, or insult.
Matthew Segreto (5 years ago)
They have debased the currency if savers because the gift prints the money and is first to use it. Therefore it is an inflation tax on savers. Only the govt benefits from fiat currency.
Matthew Segreto (5 years ago)
Sal would you rather have an oz of gold from 1935 or 35 dollars. Gold!!! Asset of kings now worthless... Yea right.
Aleksandar Petrović (5 years ago)
Citisens should restrained goverments, not some piese of metal!
ColdWarWarriors (5 years ago)
A Gold standard acts like an anchor, it restrains government and bankers using the fractional reserve system. If we were still on the gold standard we would never had the explosion in the money supply and the debt that goes with it.
gold = money fiat = (a sneaky way to tax us) money
luchis117 (6 years ago)
I don't trust the U.S. government. Gold for me please. At least it's pretty and won't fade and wrinkle if I accidentally wash it
80s Kid (6 years ago)
Fiat Currency has no intrinsic value aka ZERO and it is based solely on faith to the Government, thus you as its citizen has/forced to trust our government to do the right thing. If the Fed prints enough paper currencies, the numbers in your bank accounts will be useless because of debasement. Gold has intrinsic value and keep its value because it can't never be turned to ZERO, fiat can. As long as it not oversupplied like in the Spanish empire days, we are good as gold if you have the stuffs.
Grovrolf (6 years ago)
He talks about it in the next video (18). They have notes outstanding where people or banks that are in possession of these cash, can come to the FED and "get something" as Khan says! The cash actually end up in an account for the bank that function as a reserve, i.e. base from which you can borrow money from. This is how it works to my understanding. Search for: "Richard Werner: Banking & the economy" good luck
Qing Zhang (6 years ago)
such great videos to understand the basics, one question I want to ask though is that when the FED prints notes, it adds to asset side, but how come it has liability as well. The money is from the printing machine, not from the market. Appreciated if someone can explain that , thanks!
loled123 (6 years ago)
MrIKnowNADA: Another point with Spain: 70-80% of the countries Artisans was Jews. A lot of Jews was educated Scholars. So at some point, they kicked them out. So they have all these talented people, who has attached themselves to the top of the system... And they get kicked out. So suddenly, there was a extreme shortage of Scholars, Artisans was almost extincted, etc. So why was things expensive? Because they had to hire external labour, if it even was possible, due large distances.
loled123 (6 years ago)
So why do the M0 corrolate with how much conjucture the marked is in? Its a logical fallancy unless explained.
steelpanther88 (6 years ago)
Utah and Arizona apparently have already passed bills to seize federals lands inside their respective states AWAY from the FEDERAL Govt. Way to troll the Federal Government, seize their lands! xD
steelpanther88 (6 years ago)
US Government does not have full ownership of labor, land, resources, and ideas. They can't force you to work, that would be slavery (well they cant force you unless you're in prison, or the conscription for war happens) Can they really force you to give up land, resources or ideas? Certain legislation exists to steal land from private owners, but it falls under eminent domain law doesn't. And that eminent domain law differs state by state. Federal govt is more restricted in eminent domain?
steelpanther88 (6 years ago)
In a perfect world, with just and democratic government, where the government obeys the law, the right choice would obviously be that you have gold backed currency. Gold has been a strong currency for many hundreds of years. Even the paper bank notes and checques were redeemable in precious metals. take a look at the gold confiscation by F.D.R during 30s. Or Nixon Shock in 1971.
TheSmokinApples (6 years ago)
you asked the question if I trust the government with my money? WELL DO I TRUST A DRUG ADDICT WITH MY MONEY? same question pretty much.
UmTheMuse (6 years ago)
I suppose that you've moved on to other topics by now, but if you ever decide to come back to this, I'd be interested to hear your take on internet currencies like Bitcoin. Seems on the face of things to give you the advantages of both worlds, as long as everybody is willing to trust the currency. Then again, what are the odds that they can get the rate of money creation perfectly? Besides, how do they make money?
Aslam Zulkiflee (6 years ago)
I'm afraid we would see hyperinflation one day sal. The way money is created need an exponential amount of new currencies. Plus, it's susceptible to boom and bust due to the loan cycle
Uebagi (6 years ago)
Do you need your laptop to live? Now you may have a value to that laptop, but that is apart from saying that you need it.
MisterTutor2010 (6 years ago)
The laptop I'm typing this comment on is psychological? It's neither food or water.
Uebagi (6 years ago)
At the end of the day, the value of everything that isn't food and or water is psychological.
MisterTutor2010 (6 years ago)
Companies like Goldline, say that the dollar is about to become worthless and gold will hold it's value. It does seem odd that such bussiness are willing to trade their valuable gold for your soon to be worthless paper money. Something does not seem quite right.
MisterTutor2010 (6 years ago)
It seems like the purpose of gold was psychological.
ListWritingMachine (6 years ago)
Gold has held its value since basically the beginning of time. Paper is just paper. Also you can't make more gold. If there was a proper gold standard there wouldn't be fake gold anyways. I don't think your theory would be happen. Perhaps there could be 2 currencies. One backed by gold and other precious metals and one like the Greenbacks that were debt free. Also if you ask someone if they would want $50 bill or $50 worth of gold to put in a box and open in 10 years most people would pick gold.
Pradeep DJ (6 years ago)
/if we treat Gold as money...humans will begin hoarding it and will start allocating valuable resources to make/find more of it...for no good reason. At one point Aluminium was one of the costliest metal on earth... that's why the Washington monument top was Aluminium plated. And then the Hall–Héroult proces came along and we could make more of it cheaply and now we dont value it anymore.
ListWritingMachine (6 years ago)
The Dollar has been crashing since being took off a gold standard. Also what makes paper any more valuable then gold? Gold has had historical value. I do agree it is a debatable issue, but I personally think gold wins.
Dark Side (6 years ago)
Money must has something with 'intrinsic value', not just blind trust to any government. Government itself is govern by greedy peoples. They show only their good side, on the back, they just sitting, eating, drinking, smoking, laughing with the richers. Never care about the poors. Then we must trust them.
Gonçalo Aguiar (6 years ago)
"there hasn't been hyperinflation" What about in the 80's? What about the dinar? What about Zimbabwe? What about the current situation where we're clearly headed into such an event?
Gonçalo Aguiar (6 years ago)
@MrIKnowNADA Not to mention that it is very unlikely for us to suddenly find El Dorado 2.0 now. But I do understand his point that inflation starts being more like a natural unpredictable phenomenon, rather than an orchestrated action like it currently is.
Justin Porteus (6 years ago)
He mentioned that getting off gold is good if you trust the gov't to do a good job. He said it was a big if. He never answered the other part of the if - I don't trust the gov't to do a good job.
Yonatan Ovadia (6 years ago)
The spain example why the gold standard did not work is a horrible example. 1. Spain at that time was a monarchy. People did not have freedom and more gold (plundered from the americas) actually made Spain poorer not wealthy. It like when a poor person wins the lottery. most of the time those people go back being poor bc they did not know how to manage their own personal finances correctly. Same goes with Spain.
rothkoaintdead (7 years ago)
He said it! metals never lie, steal, cheat etc. + people DO want to return to markets based on metals, commodities + barter. Quick History lesson: South american gold + silver didn't enrich spain because a. more than half went on venture capital repayments to banks of london + amsterdam. b. spanish aristocracy's cowardly system of favours meant that the remainder wasn't properly accounted for + was squandered. c. london is STILL the bankster capital of europe. metals ARE the standard.
Zoe Jane (7 years ago)
You made me think of 'Money is not Wealth' again. I like the example you used in this video. In the past,I thought money is important (actually,it is), but now I know that the wealth is more important. We all chase for money, but sometimes we can only see the money but ignore something that deep inside. What is money for? It is for our real life, not just the number in our deposit accounts. And I think inflation made us know that money is not that important, because the wealth is shrinking...
lugankid (7 years ago)
@IvanAndreevich 1.Can you please tell me where you got this 5%+ number and what metric was used to calculate it? 2. The economy is not shrinking in real terms because there is RGDP growth. 3. 10% inflation rates would hurt the hoarders and the creditors more than the savers.
AdversusHaereses (7 years ago)
@IvanAndreevich ...cont. The US dollar can be purely paper and backed by the US government if the people had the right to own it. Unfortunately that is not the case today due to the fractional reserve system which is the machinery of inflation and not the fact that the dollar itself is paper. The Spanish Empire had a major crisis in the new world when they discovered gold because its intrinsic value slumped. So the price of gold will always be based mostly on global uncertainties.
AdversusHaereses (7 years ago)
@IvanAndreevich The reason that Nixon took the US off the gold standard was that one British Ambassador appeared in the US treasury with the amount of money to purchase a third of the physical gold held. If the 1929 depression was caused by the contraction of only 3% of gold in the money supply, imagine what removing 33% would cause. The gold standard does lead to growth or else it would never be used. But the question is whether it is worth it when the currency is so volatile. cont...
IvanAndreevich (7 years ago)
@AdversusHaereses Are you saying there was no economic growth before fractional reserve banking was invented? LOL. Nonetheless, even with your flawed understanding you just admitted that inflation is not necessary for economic growth.
IvanAndreevich (7 years ago)
@lugankid Out of nowhere? Google "real inflation rate". The CPI is a fucking scam of an index twisted to lie. Now with the real inflation rate of over 5%, the economy is shrinking in real terms. Look around, people are worse off than they used to be in real terms. Yeah, sure it can. It can give you a 10% inflation rate which will wipe out the savings of everyone and rape the elderly and the poor who are on fixed incomes.
lugankid (7 years ago)
@IvanAndreevich the gold standard comment wasnt me
lugankid (7 years ago)
@IvanAndreevich Stop throwing numbers out of nowhere.We have 3.5% inflation (completely normal) and roughly 1.5% rgdp growth. I made a mistake in my preivouse post. 5% rgdp growth+5% inflation is actaully great because rgdp is already inflation adjusted. 5%NGDP +5% infaltion is neutral. The economy was in a horrible state in the past two yeaars becasue we had no inflation. Inflation keeps the economy rolling along and can induce production. I'd look at Keynesian model
IvanAndreevich (7 years ago)
@lugankid And right now we have 5% inflation and 2% NGDP growth. Amazing shit right there. When blowing up bombs results or destroying perfectly usable goods (cash for clunkers) is seen as "economic growth" you can tell how much good that is - none at all. Also, you forgot to explain how there was good economic growth on the gold standard. So how?
lugankid (7 years ago)
@IvanAndreevich 5% RGDP growth +5% inflation wouldnt be terrible. It wouldn't be awesome either. Essentially it would expand the pie and keep your purchasing power constant. 5% NGDP growth and 5% inflation would be terrible because that would mean no real growth and a decrease in your purchasing power.
AdversusHaereses (7 years ago)
@IvanAndreevich There indeed was, but this was due to the fractional reserve system which had to inflate the actual amount of gold.
IvanAndreevich (7 years ago)
@lugankid It's a transfer of wealth. Increase in the GDP is not the end goal of existence, and it's not necessarily a good thing either. It could be, but not through inflation. If you have a 5% growth with 5% inflation that's just terrible.
IvanAndreevich (7 years ago)
@AdversusHaereses Are you saying there was no economic growth until the US left the gold standard? LOL
lugankid (7 years ago)
@IvanAndreevich moderate inflation helps the economy expand and grow
lugankid (7 years ago)
@IvanAndreevich No inflation is the increase in prices. Long term inflation can only be caused by an increase in the money supply
AdversusHaereses (7 years ago)
@IvanAndreevich That depends. An economy naturally is inflated in order to grow. The gold standard doesn't allow an economy to expand because the amount of actual gold in an economy is finite and based on external factors on the price of gold.
GoLoudProductions (7 years ago)
i mean technology
GoLoudProductions (7 years ago)
gold is used in technolody so it does have a use
IvanAndreevich (7 years ago)
@ybulldog14 Wrong. Inflation is in the increase in money supply. That usually leads to an increase in prices, but prices can rise and fall independent of the money supply. Read about how the CPI is "calculated" and you'll see what I mean. It's no secret, just look into it.
Louis Raskin (7 years ago)
I'm watching this video because of Ron Paul.
Equity213 (7 years ago)
How did I know this video would stir up a ton of controversy. I did like the quick explanation of why we went off the gold standard. Convenience? lol no. It was a way for America to welch on its obligations.
Matthew Grainger (5 months ago)
Did you even watch the video? Forcing the growth of your national ecenomoy to be tied to how much of some arbitrary mineral that you are able to amass, by digging it out of the ground, is a completely absurd and flawed system. Hence why every other country on earth chose to abandon it too.. it just doesn’t work in today’s world.
IvanAndreevich (7 years ago)
@DaniFazeres Not for ordinary people. It's good for those who get to create the money out of thin air and use it at its original value first. Also, the way that CPI is calculated is a massive fraud. All that should be considered is the money supply, and then you see that the real inflation (inflation is the increase in MONEY SUPPLY) is like >5% per year.
IvanAndreevich (7 years ago)
As I watch this whole series, I am starting to think that it's useless because it doesn't address the most important question of all: INFLATION which diverts resources and is a tax. Inflation is a big problem (even not hyperinflation) because it compounds wildly. Gold did not become more expensive. The $ became cheaper.
E.L.Dorado (7 years ago)
Who the heck would trust the government today,especially with 15 trillion in debt? Gold and silver are honest means of exchanges(money). Paper is not honest,it's counterfeiting.
j0hnc00 (7 years ago)
@quantumG You've dropped to ad hominem attacks and straw man arguments thus ending any rational emphasis in the argument. I'm sure we all know that holding a professorship title or writing a book won't make your argument hold water, especially since words can be deceptive. But Regardless I'm actually interested in learning understanding various theories (the hard part is separating the utopian bias, especially with radical alternatives) and eventually testing my own one I've been developing.
j0hnc00 (7 years ago)
@quantumG BTW, I'm not oblivious to the gold standard (the modern variant is the 100% reserve system) currency since I used to be a supporter of it. It all seemed perfect and basically the desire for stable/static prices was sole reason for the heavy attachment to it. And no doubt, I still have this desire in me, but a little rationality & knowledge has lead me to accept that these alternatives are all utopia & even PHD students fall victim to the reality.
j0hnc00 (7 years ago)
@quantumG the economy of 200 years ago isn't like today and can grow as aggressively as today. Plus the gold isn't enough to cover the population today...(hence the deflationary spiral argument AKA the nightmarish "low prices miracle". your "I'm coming from reality" statement kind of means you haven't understood the Zietgiest because they say exactly what you are supporting. And of cause they have fancy vids explaining it.
j0hnc00 (7 years ago)
@quantumG Are you coming from those Zietgiest videos that "expose the government for the crooks they are"? Just a word of advice, I used to be hooked on those guys, but a little rationality/skepticism is important, I mean very important. But regardless, you can't have the best of both worlds, you either get "Immalleable /open currencies" (weak to no government) and the side effects... Or one which attempts to adjust the money supply to productivity & "the dishonesty".
j0hnc00 (7 years ago)
@quantumG Gold isn't a good currency because it can't expand to suit growing productivity (due to science & population growth). That scarcity will cause a deflationary spiral in this age... (see the inflation, deflationary spiral, stagflation vids). Anyway what you are hoping for a system where productivity can always match money supply but gold doesn't do that.
j0hnc00 (7 years ago)
@thegoldislanders I'll tell you a simple paradox, if gold, platinum...(the rearrest materials) are money, then why is Africa the poorest continent yet its blessed in abundance of this yet its poor? And that is reality (& yes Im aware of the political factors that hinder it), but have you thought that? @thetruth Anyway, the meaning of money (be it anything), is what someone is willing to work for it. Besides that it has no value. **That's the meaning of the gold island paradox**
Enter.a.name.here (7 years ago)
@AlainGTO You sound like an inteligent, educated young man who knows what he's talking about. I think the bold letters really help to.
Therrydicule (7 years ago)
@limey36 Gold is more often an asset, - a very liquid one, a very safe one, one which take a lot of interest, but, most of the time, it's still use like a bond. Just look the language: to protect against devaluation of $, this is the same as collecting interest rate due to a double negation (not not B -> B). This said, it could act as money sens some place will accept to trade goods against gold, but I can't go to starbuck&McDonald with a bullion without a "Sorry, dollar or credit only".
ehmcheng (7 years ago)
obviously the gold island
limey36 (7 years ago)
Sal is wrong #6 Gold is money. Money is not wealth. Money is a commodity like any other commodity. We save gold/money so we can exchange for other commodities that we desire; or invest in businesses that would earn us more money and get more stuff that we might want. That's why you don't want that pile of gold in the island. You want food, clothes, tools etc. Bottom line is, no one can mess with gold like they can mess with paper.
limey36 (7 years ago)
Sal is wrong #5 It is a VERY big deal when Nixon finally cut off our last link to gold. It is tantamount to declaring US bankruptcy - we cannot fulfill our obligation of redeeming US dollars with gold like we promised. Trust me, Nixon wouldn't do it if he has a choice. He was cornered by France who called our bluff! Please read Rothbard, and even your friend Mish's recommendation. Apparently, he is a libertarian.
limey36 (7 years ago)
Sals is wrong #4: We haven't seen hyperinflation despite the fiat money and excess credits, exactly because of what Sal said: innovations and productivity! They keeps prices down !!! (BTW, definition of inflation is not rising prices, it is the increase in money supply!) Just imagine if we don't have govt fooling around with our money supply, like Peter Schiff said, we have to look to another solar system to find any places that can equal our living standards!
limey36 (7 years ago)
Sal is wrong also on: Three: Taxation is at best a redistribution of wealth and at worst outright theft. Printing is a form of invisible tax which you will realize when you can only buy half of what you used to. Borrowing is to steal from the future generation to gratify your present wants. If gold is just sitting there doing nth, how about we use oil as money? Who can store oil in their basement? Gold is the most time-tested commodity to be used as money because of its unique qualities.
limey36 (7 years ago)
Sal is wrong also on: Two: true, gold is pretty and is just sitting there doing nothing. But so are the pieces of paper. They are not even pretty! Gold is scare. It has intrinsic value. It has all the qualities that make it the most desirable commodity to use for transaction. Govt hates gold because they can't print gold. We are so used to the paper that we even condemn gold or "goldbugs" as Keynes said: "barbarous relic". It is the product of 100 years of brainwashing in govt schools.
limey36 (7 years ago)
Sal is wrong on a at least 2 things: One, with all the inventions and increase in productivity, if we are still on the gold standard, the prices of goods will drop accordingly. You don't need to discover more gold because every dollar that you get will keep getting you more stuff as prices drop. Are you afraid of the prices of iphone and ipad dropping so you will wait out and not buy it? Eventually, you will buy it even though you are well aware that you will be losing money.

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