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How does Gold work?


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I see a guy is asking "How does cryptocurrency work?".

It must work the same way as how gold works.       No?  

You think gold is a precious metal and unlike the cryptocurrency it is material; you can actually weigh it and hold it in your hand.  It has been around and valued high through the history of mankind, BUT.......

IT IS EQUALLY USELESS    :o

Well of course you can make jewelry out of it, but whether you put a piece of rock, steel, wood, whatever; a jewelry is a piece of decoration which is practically useless.

You can also use gold in the hi-tech industry in very limited quantities; not that you can put all of what comes out of the ground in any practical use.

But , finally, gold is a symbol of status. Kings had gold crowns and cutlery and the metal has been valued high through our history.

No doubt gold plays a role in growing our capitalist society. My guess is that the richest of the rich are amassing gold as there is nothing more they can take.

So we have huge mining operations in pristine natural habitat on top of glaciers in the mountains.   Those produce tons and tons of toxic emissions and destroy the lands of grizzlies and the spawning habitat of salmon; the homes of many other species.  They produce green house gasses and threaten the lives of all of us.

All for the sake of digging the useless shit out of the ground.

A cryptocurrency, although equally useless, would at least be more environmentally friendly.

You might have different views than mine and sharing them here and defending them would help me a lot.;)

 

 

Edited by cougar
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6 minutes ago, Dougie93 said:

Yes, crypto currency is similar to gold, in that value is in the scarcity, there is a finite amount of any crypto currency and they have to "mine" it electronically.

Really anything can be a currency, gold is simply the most universally accepted.

Why not use tigers and elephants as a currency then? 

Those are so scarce that no one will be able to pay for them any more.

But the bottom line is a currency stores value!  Value is material and labor you can buy.   Material is more or less useless if you have no labor.

Labor cannot exist without food and proper conditions to life (clean air, water, quality of life)

So logically the most important currency is FOOD and whatever else keeps labor available.  But food is perishable.

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11 minutes ago, cougar said:

Why not use tigers and elephants as a currency then? 

Those are so scarce that no one will be able to pay for them any more.

But the bottom line is a currency stores value!  Value is material and labor you can buy.   Material is more or less useless if you have no labor.

Labor cannot exist without food and proper conditions to life (clean air, water, quality of life)

So logically the most important currency is FOOD and whatever else keeps labor available.  But food is perishable.

Just think of currency as an IOU from the issuer of that currency.

The more widely accepted currencies are the ones where the value of the IOU is the most and the security that it can be redeemed is not in question.

So for example US Dollars are IOU's to spend in the American economy, which is so large and dynamic that everyone on earth wants to hold those IOU's and American freedom and national security makes them a safe bet that they can be redeemed.

The value of gold and the dollar dance together, because gold is a hedge against inflation, so when the value of the dollar goes down, people buy more gold to hedge, when the value of the dollar rises people cash their gold in.

To your why not elephants question is the other aspect is transfer ability, how easily can this currency be moved around in order use it.

US dollars are more transferable than gold because dollars can be electronic whereas gold is heavy and hard to move, however gold is physical, so it's the ultimate safety, because gold in your safe cannot be seized by electronic means for example.

Edited by Dougie93
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9 minutes ago, Dougie93 said:

US dollars are more transferable than gold because dollars can be electronic whereas gold is heavy and hard to move, however gold is physical, so it's the ultimate safety, because gold in your safe cannot be seized by electronic means for example.

Good points.  

So what happens when after digging all the gold out of the ground we damage the environment to the point where it can produce no food for all of us.  Or what happens when population growth makes it impossible to feed everyone with the remaining capacities?     I think the value of gold then will have to hit rock bottom, because no matter how much gold one has it may not be enough to buy him a chicken.   And people do not eat or breath gold.

So whatever the answer is, gold still remains useless in my view, and a cryptocurrency or whatever IOU would be better.  At least producing those does no damage to the environment.

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6 minutes ago, cougar said:

Good points.  

So what happens when after digging all the gold out of the ground we damage the environment to the point where it can produce no food for all of us.  Or what happens when population growth makes it impossible to feed everyone with the remaining capacities?     I think the value of gold then will have to hit rock bottom, because no matter how much gold one has it may not be enough to buy him a chicken.   And people do not eat or breath gold.

So whatever the answer is, gold still remains useless in my view, and a cryptocurrency or whatever IOU would better.  At least producing those does no damage to the environment.

Well this is why so many wars were incited by the pursuit of gold.  Kings and nations would resort to force to get the gold in extremis.

An example is the war between the Lakota Sioux and the United States government.

The Americans had spent a tremendous amount of gold fighting the Civil War and essentially they were running out.

It was discovered that there were huge gold deposits in the Black Hills of the Lakota Sioux and so the Americans ordered them to move out.

The Black Hill being sacred to all the Indians and the Lakota Sioux having defeated all the other Indians to get it, of course refused.

And thus the Americans went to war to displace the Lakota in order to get the gold to pay for American wars of expansion.

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2 minutes ago, Dougie93 said:

Well this is why so many wars were incited by the pursuit of gold.  Kings and nations would resort to force to get the gold in extremis.

 

Now this gets me even more confused.   Burning oceans of gas to extract the gold is one thing, going on war for gold is another.

Were those people so brainwashed to kill one another over the useless metal, or am I going crazy? :D

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7 minutes ago, cougar said:

Now this gets me even more confused.   Burning oceans of gas to extract the gold is one thing, going on war for gold is another.

Were those people so brainwashed to kill one another over the useless metal, or am I going crazy? :D

The material itself is simply something finite and transferable to use as an IOU which is as widely accepted as possible.

What happened was currency essentially abandoned that material tether and instead the IOU became based on the total value of your economy and peoples want to participate in it.

This is called Fiat Currency,   The US dollar was once pegged to the value of gold but the Americans abandoned that because the sheer value of doing business in America surpassed even the value of gold.

This is how the Americans can essentially print money without the value going down much, because of the confidence of people all around the word that the American economy will continue to thrive, be a safe haven, and profitable, so people accept US dollars without it being pegged to any solid material at all.

Untethered to any finite material, the American money supply has expanded and yet people still want the IOU's,  so as of this time, the Americans have not reached the upper level of confidence which would, by inflation,  curtail them from printing more without it losing significant value.

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3 minutes ago, Dougie93 said:

This is how the Americans can essentially print money without the value going down much, because of the confidence of people all around the word that the American economy will continue to thrive, be a safe haven, and profitable, so people accept US dollars without it being pegged to any solid material at all.

I think I got myself drunk beyond the point of being able to comprehend economic concepts, all one sip at a time.

I like the word "confidence".  I think this is all that a currency is based on.   Confidence there is going to be food in the store tomorrow.

I , however have no confidence in gold and no confidence that the way things are going, I will find food in the store tomorrow.    Well, ,not exactly tomorrow, but....5 years from now......

 

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Currency is really about perception, in broad strokes the IOU's value has much to do with how people view who is offering them an IOU.

In the currency Foregn Exchange markets (FOREX) people hold different currency IOU's for different reasons.

So for example the Swiss franc is valued as a safe haven, why?

Because Switzerland is so stable, well run, fiscally responsible, and they are neutral so not subject to world powers, even in terms of war, because Switzerland is a mountain fortress which was too tough to invade for even the likes of the Nazis, although Hitler wanted to invade because the Swiss made of fun of him, but his generals talked him out of it.

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13 minutes ago, cougar said:

I think I got myself drunk beyond the point of being able to comprehend economic concepts, all one sip at a time.

I like the word "confidence".  I think this is all that a currency is based on.   Confidence there is going to be food in the store tomorrow.

I , however have no confidence in gold and no confidence that the way things are going, I will find food in the store tomorrow.    Well, ,not exactly tomorrow, but....5 years from now......

Perception is reality,  but to live in fear is to defeat yourself, better to simply walk tall and put your faith in the Lord, then you can just kick back, relax, and enjoy life.

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Currently a Canadian company digging around in some parts of Turkiye for gold. In the areas where they received license more than 15 years ago.  Western backed Turkish opposition parties are protesting it claiming why current govt is allowing them to search for gold in foresty areas Lmafoasfknsakjnda :lol:

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14 hours ago, Dougie93 said:

Perception is reality,  but to live in fear is to defeat yourself, better to simply walk tall and put your faith in the Lord, then you can just kick back, relax, and enjoy life.

Oh, I enjoy life as much as my means allow me to, don't get me wrong.

What I have a problem with is why we destroyed a major salmon lake and the deepest fjord in BC - Quesnel Lake for the sake of mining for gold.  Imperial Metals were never even fined!

But you get what I mean.  I cannot afford to buy any gold myself as personally I do not need it for anything.   I do have a few small pieces of gold - family stuff and what not, but those are tokens.  

The bottom line is, if tomorrow everyone says , sorry, gold is worth nothing to me, its value will be exactly that - nothing.

But I cannot say, sorry, food, water and air are worth nothing to me.  I cannot say bears, eagles, salmon, whales, moose, cougars, elk, caribou, forests, lakes, peace and quiet are worth nothing to me.

I can get along without gold just fine as I have been for half a century, but some of the other items I mentioned, I need every second of the day.

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2 minutes ago, cougar said:

Oh, I enjoy life as much as my means allow me to, don't get me wrong.

What I have a problem with is why we destroyed a major salmon lake and the deepest fjord in BC - Quesnel Lake for the sake of mining for gold.  Imperial Metals were never even fined!

But you get what I mean.  I cannot afford to buy any gold myself as personally I do not need it for anything.   I do have a few small pieces of gold - family stuff and what not, but those are tokens.  

The bottom line is, if tomorrow everyone says , sorry, gold is worth nothing to me, its value will be exactly that - nothing.

But I cannot say, sorry, food, water and air are worth nothing to me.  I cannot say bears, eagles, salmon, whales, moose, cougars, elk, caribou, forests, lakes, peace and quiet are worth nothing to me.

I can get along without gold just fine as I have been for half a century, but some of the other items I mentioned, I need every second of the day.

I value those things too, but I can't save them with a nanny socialist police state upon my neck, the government is the one protecting Imperial mines, the way to take Imperial mines down is to charge them the price of the externalities dumped into the lake, then the market will creatively destroy them as that fee gets taken out of their share price.

But it is the socialists who are preventing that, because they are all about propping up corporate welfare make work fake jobs, and that makes them the partners of these corporations, the unions need the corptocracy to prop them up too, only a free market allows choice and that choice is the thing which empowers you against the entrenched interests who run this company town, including the mining industry.

In terms of gold, you can buy it in small quantities, just think of it as a hedge, if everything else goes tits up, if the check doesn't come in the mail, if the cash isn't coming out of the bank machines because the banking system itself is in a crisis, that's where gold comes in, your last line of defense.

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Also bear in mind, gold avoids surveillance, cash is electronic, they have controls over how much you can move around, they are monitoring what you are doing with your cash, gold however they cannot see, and you can move a lot of money around in the form of a relatively small amount of gold; one gold bar is worth $500,000 USD

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32 minutes ago, Dougie93 said:

In terms of gold, you can buy it in small quantities, just think of it as a hedge, if everything else goes tits up, if the check doesn't come in the mail, if the cash isn't coming out of the bank machines because the banking system itself is in a crisis, that's where gold comes in, your last line of defense.

No, my last line of defense is my freezer.  Hopefully there is enough salmon, mushrooms and berries in it.  

If electricity is no longer available, my last line of defense will be my fishing gear.

Gold.......I can leave where it is.

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4 minutes ago, cougar said:

No, my last line of defense is my freezer.  Hopefully there is enough salmon, mushrooms and berries in it.  

If electricity is no longer available, my last line of defense will be my fishing gear.

Gold.......I can leave where it is.

Gold is all part of the survivalist package, gold is the currency of the survivalist,  I am prepared for all contingencies, including break down of civil order.

None the less,  odds are it's not going to be a doomsday but rather just a Depression.   The sun comes up the next day, business goes on, gold is simply a hedge against inflation, in extremis hyperinflation.

It's not likely to be Cormac McCarthy's The Road, but it will likely resemble what you see in Venezuela.

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Bear in mind that many people made out like bandits in the Great Depression and the Long Depression before it.

It's not the end of the world, the markets carry on.

Wasn't even the market crash which caused the Depression

It was the Hawley-Smoot Tariff Act and global beggar thy neighbor trade war which ensued, grinding everything to a halt.

None the less, the rich were still rich, sitting on their gold.

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You'll note that while silly delusional states like Canada have gotten rid of all their gold, to pay for socialism, the Hegemons are not doing that.

The Americans for instance are sitting on over 8,000 metric tons, which is $400 billion worth of gold, half of that at Fort Knox protected by the US Army.

In the event of inflationary spiral, the value of that gold would go up exponentially.

So even the Pentagon is holding gold in its back pocket, just in case.

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53 minutes ago, Dougie93 said:

So even the Pentagon is holding gold in its back pocket, just in case.

Should I shoot them an e-mail to tell them what they have in there is worthless?:P

Again, their presumption is that someone will BUY it.  In other words, someone will promise to supply them with labor, food, energy, whatever they need in exchange for the gold.

But if all of those commodities are in greater demand who will be stupid to trade them for gold????   I am not going to be the one.

Surprised there are no other forum members willing to join this discussion.

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6 hours ago, cougar said:

Should I shoot them an e-mail to tell them what they have in there is worthless?:P

Again, their presumption is that someone will BUY it.  In other words, someone will promise to supply them with labor, food, energy, whatever they need in exchange for the gold.

But if all of those commodities are in greater demand who will be stupid to trade them for gold????   I am not going to be the one.

Surprised there are no other forum members willing to join this discussion.

That's not really how currency works,

It's not so much that you buy the currency in of itself, what you are actually doing is converting one currency to another to access different markets.

Gold is the universal currency accepted by all, so when you covert to gold you are taking an open position to buy anything in any market.

The currency is just the IOU, what you trade that IOU in for is another story.

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So once you understand that currency is just an IOU, root of "currency" being "generally accepted or in use", then you see that the currency is not the product in of itself, but merely a medium which you can trade for products and services because the person you are trading it to knows that he can trade it himself for something else.

Then you look to FOREX, which is holding different currencies for different purposes in different markets,  Dollar, Euro, Franc, RMB, Yen, etcetera.

Gold is the currency of last resort, you are holding gold as the backstop currency, hedge against inflation of other currencies, universally accepted last resort in case other currencies become less widely accepted

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Think about it this way, do you accept cash?

If I hand you $100 USD are you going to refuse it? 

No, you'll take it because you know that someone else will take it from you.

But it's just paper with some numbers on it, so how is it worth more than gold?

It's not.

That's why gold is the last resort when people start refusing to take those paper IOU's with numbers on them and demanding an IOU which is more current, more currently accepted.

As paper currency becomes less accepted because people are less confident that they will be able to redeem it at the same value, that's when gold kicks in

The stable currency which cannot just be made up out of thin air by taking paper and printing some numbers on it.

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30 minutes ago, Dougie93 said:

That's not really how currency works,

It's not so much that you buy the currency in of itself, what you are actually doing is converting one currency to another to access different markets.

Gold is the universal currency accepted by all, so when you covert to gold you are taking an open position to buy anything in any market.

The currency is just the IOU, what you trade that IOU in for is another story.

OK, I agree this is the case with promissory notes, bonds, cash of different currencies, but not gold.   Gold is supposedly a commodity by itself that has a value.

But I do not understand that value.  Let's say I have a dog of 15kg and someone offers me 15kg of gold for it.  Would I trade my dog for 15kg of metal?  No.  Nobody would unless they expect to turn around and sell the 15kg of gold to another person for $1,000,000 (about the market price today).   The 15kg of metal does not bark, run, smile, wag a tail, follow you as a friend all over the place in all seasons.  It is , sorry to repeat myself, useless.

So the same point remains; if everyone decides to devalue gold and state its value is only equal to what it is worth for the hi-tech industry, it value would indeed drop down to that of copper, silver or whatever the market dictates, but no way it will be $2,000/oz

 

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To explain the value of gold, lets look at another precious metal which is also a currency, that being silver.

Silver however, is worth less than gold, why?

Silver is more plentiful, if you go to mine silver, it's easier to find and there's more of it.

Gold is valuable as currency, because it is so scarce.

It's hard to find, and even when you do find it, it's scarce. 

And you can't just print more of it. 

You have to find it and mine it and that in of itself is tough.

So that makes gold valuable.  

Can't be faked, tough to find, scarce when you find it, ergo; value as a transferable medium.

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