This could be FUN in Utah !

[coolpix9]

http://www.theblaze.com/stories/gold-silver-coins-to-be-legal-currency-in-utah/

 

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[Generic_Lad]

My favorite quote is “We’d be going backward in financial development, [if we went on the gold standard]” said Carlos Sanchez, director of Commodities Management for The CPM Group in New York. “What backs currency is confidence in a government’s ability to pay debt, its government system and its economy.”

It seems like no mainstream economists seem to understand that currency needs to be backed up with something that people desire to be worthwhile. And how can you pay your debts with nothing? I really see no logic why people want to accept or work for worthless pieces of paper. Gold is something that is universally admired and has a known rarity, making it ideal as a medium of exchange. Plus, when more gold is mined, the standard of living goes up a bit, not down. When more paper money is printed, the standard of living goes down universally. A return to commodity based currency is the only thing that makes sense, our current system makes about as much sense as me issuing pieces of paper signed Generic_Lad by the trillions and people trying to acquire them despite them not being rare, attractive or backed by anything.

 

[mts]

My favorite quote is “We’d be going backward in financial development, [if we went on the gold standard]” said Carlos Sanchez, director of Commodities Management for The CPM Group in New York. “What backs currency is confidence in a government’s ability to pay debt, its government system and its economy.”

It seems like no mainstream economists seem to understand that currency needs to be backed up with something that people desire to be worthwhile. And how can you pay your debts with nothing? I really see no logic why people want to accept or work for worthless pieces of paper. Gold is something that is universally admired and has a known rarity, making it ideal as a medium of exchange. Plus, when more gold is mined, the standard of living goes up a bit, not down. When more paper money is printed, the standard of living goes down universally. A return to commodity based currency is the only thing that makes sense, our current system makes about as much sense as me issuing pieces of paper signed Generic_Lad by the trillions and people trying to acquire them despite them not being rare, attractive or backed by anything.

I think that both Sanchez and you are wrong. Sanchez is wrong by stating that it is only backed by confidence in the government's ability to pay debt. It is backed by much more than that. It is backed by the vast resources that this country owns. We have oil, gold, silver, wheat, technology, war machines, brain power, computers, pork bellies, water, land, and all kinds of other resources that back up our currency. Not directly though. And that's why you are wrong as well.

We went off of the gold standard for many reasons. An important reason is that there is not enough gold in the world (and there never will be) to back the growing economies of the world. Another important reason is that the US is rich beyond its gold reserves. It makes no sense whatsoever to handcuff yourself by proclaiming that your currency is backed by a single (or small group of) commodities. Why ignore our other vast resources for the sake of gold?

Gold itself is a form of fiat currency. You cannot eat it. You do not need it to live. And other than the fact that it looks nice, it has very few other uses. The main reason why it is considered to be of value is because governments of old declared it to be legal currency much like current governments have declared paper to be legal currency. In other words, governments took this otherwise worthless metal/paper and declared that it was worth something (with no other backing). Although it is currently considered valuable by many people throughout the world, that may not always be the case. Keep in mind that in very recent history, many people considered shells to be highly valuable. Of course, you and I would think that is ridiculous. But it wasn't to them. Some day our ancestors may look back and consider our gold obsession to be no less ridiculous.

There is no reason to back a currency with anything other than all of the riches that the country contains. This includes oil, gas, gold, silver, lumber, technology, and on and on. Why pick only one thing since doing so handcuffs your country?

 

[phrostie]

mts,

That's where you are wrong on gold's 'uses.' Gold conducts electricity, does not tarnish and is very easy to work with. It's used in many applications from medicine, aerospace and fillings for teeth to name a few.

While I agree with pretty much the rest of your statement, I disagree with gold has no other uses.

~phrostie

 

[mts]

mts,

That's where you are wrong on gold's 'uses.' Gold conducts electricity, does not tarnish and is very easy to work with. It's used in many applications from medicine, aerospace and fillings for teeth to name a few.

While I agree with pretty much the rest of your statement, I disagree with gold has no other uses.

~phrostie

I should have said that gold has no "unique" uses. Silver and copper also conduct electricity and are easy to work with. Gold does not tarnish, but it's non-tarnish capabilities can be accomplished for other metals as well. Silver is also used in medicine, aerospace, and fillings for teeth. The bottom line is that although gold has "uses", none of them are so critical that you couldn't find alternatives. At the very least, the uses for gold are not what causes it to command the price that it does. The uses are secondary.

 

[jim4silver]

mts,

That's where you are wrong on gold's 'uses.' Gold conducts electricity, does not tarnish and is very easy to work with. It's used in many applications from medicine, aerospace and fillings for teeth to name a few.

While I agree with pretty much the rest of your statement, I disagree with gold has no other uses.

~phrostie

I should have said that gold has no "unique" uses. Silver and copper also conduct electricity and are easy to work with. Gold does not tarnish, but it's non-tarnish capabilities can be accomplished for other metals as well. Silver is also used in medicine, aerospace, and fillings for teeth. The bottom line is that although gold has "uses", none of them are so critical that you couldn't find alternatives. At the very least, the uses for gold are not what causes it to command the price that it does. The uses are secondary.

MTS,

Anything that is called "money" generally has limited use. You say you cannot eat gold, but you cannot spend beef, pork or chicken as money (except in a very limited barter situation). The FACT is that gold has been considered valuable and as "money" for thousands of years. You cannot deny that. Who can say why gold initially became known to be valuable and worthwhile to hold thousands of years ago--a belief that still holds today mostly in countries besides the US? Some interesting reading on a side note is found in the translations from Sumerian cuneiform tablets that discuss why the ancient "gods" coveted gold.

Many central banks are starting to load up on tons of gold now at these "high" prices after years of selling it at rock bottom prices. What do they know/believe is going to happen to make holding such gold important now when it was not so important 5 to 10 years ago?

When you mention all the "vast resources that our country owns" that back the dollar, that is not accurate. The vast majority of assets in our country are owned by individuals or corporations--not the government. So are you saying that if the dollar crashes it would be appropriate for the gov to confiscate all such things to back up the dollar? That could very well happen the way things stand now, but that is definitely not the ideal way for things to go. If the dollar was backed by some percentage of gov held gold or other PMs, that would then not require citizens' commodities/property to back up anything in the event of a default. Your own reason why we don't need gold backing actually proves why the dollar needs to be backed with PMs, so that the gov won't need to take private citizens' or corporations' property in the event of a default. When such things happen in third world type countries they call that "nationalization", which happens to gold mining operations and such.

In my opinion the dollar will default someday. What happens after that who knows? I believe some new currency or currencies will be created that have some commodity backing; gold, silver, platinum maybe oil? At some point it will be clear that fiat currencies do not work well forever and there will be a demand for sound money that cannot be printed at will. Our dollar is worth less then 7 cents compared to a 1913 dollar. I don't see anything like that happening though unless/until there is a major fiat currency that crashes and leaves people with a valueless pieces of paper, which will in turn lead to a demand for a backed currency someplace in the world. Once one is created there will need to be more, because no fiat currency will be able to compete with a truly backed currency.

All above is just my opinion.

Jim

 

[mts]

Jim,

I will have to refrain from answering all of your questions because doing so would continue to hijack this thread. I didn't mean for this to turn into a debate about fiat currencies. Perhaps we should start a new thread to discuss it.

I don't disagree that the world currently sees gold as a form of currency. Keep in mind though that major parts of the world have at times seen shells as a widely accepted form of currency too. And I don't disagree that the current situation in the US has gotten bad. What I do disagree with is the idea that fiat currencies can't work because they "aren't backed with anything". I believe that going to a gold standard would be economic suicide for the US for many reasons. Our "country" is rich beyond its gold reserves. And that includes our government.

 

[mts]

Getting back on topic, I do wonder how this development in Utah will affect silver coin prices and supplies. How exactly do they plan on putting a value on these silver and gold coins? In the past, the only way to use PM as coinage was to have fixed exchange rates. Will Utah attempt to fix the rates or will they let them float? If it is the latter, how will the common man know what his coins are even worth at any given time? If silver jumps 20% in one week, how in the heck will you be able to adjust values on common junk silver coins to reflect the increase?

Something tells me they haven't thought this thing through very well...

Update: Actually, watching the video I see that the commentators have the exact same questions I have.