Gold - Commodity or currency?

[Atilla]

LOL Atilla, I'm starting to think you haven't paid attention to anything that has been said in this thread. If money is a commodity simply because a country has declared it legal tender then you have to ask yourself why there are poor countries. An ounce of gold that Zimbabwe digs out of the ground has the same purchasing power as an ounce of gold that the USA digs out of the ground but you can't say the same for the 'money' they each print. What is the difference between the intrinsic value of a $1 note and a $10 note?

Allow me to explain with another question if I may.

Money is a commodity. If it wasn't it wouldn't have a price.

What is the price of money?

or

What is the cost of money?

You could say a Rembrandt's a piece of paper too with some paint thrown on it... No?

 

[counter_violent]

Technically speaking with my expert hat on... :smart:


The commodity called money is used to price all other commodities. However, people can print this as much as they like and so with Supply and Demand it loses value.
Simple really.

This is where i've been going wrong. What I should have done was just print some money right! Actually more money than the next bod and then i'd be richer! Well, richer than the next bod who didn't print so much of it.

Hmm hang on, isn't printing money illegal ? Theres always a catch eh.
Hmm hang on, bankers can print money, nah it must be fine then!

 

[Atilla]

This is where i've been going wrong. What I should have done was just print some money right! Actually more money than the next bod and then i'd be richer! Well, richer than the next bod who didn't print so much of it.

Isn't this exactly what we are arguing about?

The US printing money and other countries joining the party...

Where do you draw the line?

You can't play poker by raising the bet when ever it's your call - can you... Sooner or later your bluff will be called and hands revealed.

 

[counter_violent]

Isn't this exactly what we are arguing about?

The US printing money and other countries joining the party...

Where do you draw the line?

You can't play poker by raising the bet when ever it's your call - can you... Sooner or later your bluff will be called and hands revealed.

All of this has nothing to do with anyone returning to a gold standard either.
What's this thread all about anyway

 

[new_trader]

Allow me to explain with another question if I may.

Money is a commodity. If it wasn't it wouldn't have a price.

What is the price of money?

or

What is the cost of money?

You could say a Rembrandt's a piece of paper too with some paint thrown on it... No?

Paper money doesn't have a price, it has a face 'value' that bears no relationship to its intrinsic value. Two ounces of gold has twice the purchasing power as one ounce of gold because it contains twice as much gold, that is measurable and tangible. The value of a Rembrandt is determined by the free market not by the Government stamping a number on it.

The cost of money is ZERO, Ben Bernanke said so himself, and I quote: "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."

 

[Atilla]

Paper money doesn't have a price, it has a face 'value' that bears no relationship to its intrinsic value. Two ounces of gold has twice the purchasing power as one ounce of gold because it contains twice as much gold, that is measurable and tangible. The value of a Rembrandt is determined by the free market not by the Government stamping a number on it.

The cost of money is ZERO, Ben Bernanke said so himself, and I quote: "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."

I hear what you are saying and agree but the value of money is also determined in the same way as gold or a Rembrandt.

If people do not wish to lend to the US because they see no value in the green dollar - it will be the case.

I think a diamond has no intrinsic value or gold for that matter. To me clean water has far more value. Paradox of man in desert - water or diamonds? Water is essential to life yet virtually free and diamonds pretty useless but costs the world. Time and place and usage.

Remember if people see anything as having a store of value and can act as a unit of exchange then it does have real value.

Intrinsic value is derived from the use one puts paper money to. It is determined by the free market.

One can apply the properties of supply and demand equally to money to price it. This happens everyday.

Money is a commodity and does have a price determined by the market.

This is precisely why the dollar is falling. That is the price of the dollar commodity with respect to all other commodities.

I think the intrinsic value of paper money is the fact that it is universally accepted. The more it is accepted greater the value it has. Pure economics - supply and demand is what values paper money.

I still hold the view currencies backed by gold is a better system for global world trade to be conducted.

 

[JahDave]

I agree that paper money backed by gold would be the way to go.............Paper currency is just like any other commodity..............The more there is, then the less it is worth.............This is a very simple concept that is true.

 

[market_bull]

I agree that paper money backed by gold would be the way to go.............Paper currency is just like any other commodity..............The more there is, then the less it is worth.............This is a very simple concept that is true.

This is how all fiat currency works; money that isn't backed by something real/tangible/measurable eventually goes the way of the do-do bird.

 

[Atilla]

Ron Paul (the gold standard in politics) makes Ben Bernanke look like the clueless shill that he is.

Gold is a commodity.
Money is a commodity.
Any commodity can be exchanged for any other once exchange rate agreed.
Any commodity can be used as a unit of exchange if acceptable by various parties (this is why cigarrettes were once used). This depends on if the commodity has attributes of a good unit of exchange like easy to carry, divisable and store of value, non-perishable etc etc.

Technically his answer was correct gold is not money but no reason why it could not be used as money. As above - gold fits all the required properties and attributes of money better than printed money - as it is scarce and maintains store of value.


However, I raised the same question as to why the problem - liquidity in the markets, were not resolved by helping out all the people who could not meet their mortgages.

This way Banks would have continued receiving payments and not had write downs on bad loans. I could never understand how or why you would give money to the banks who not only made collosal bonuses but also repossesed the houses of people who could not meet mortgages. The system is trully bent and well effed up by the elite.

I mean why did banks get the bail out and reposses homes of people who could not meet their mortgage payments.

Let's also remember the bail out still has to be paid back - via taxes, by the American people who have had their properties ceased.

The enemy is within. Always said great powers are not destroyed from the outside but from within. Wake up call imho.

 

[market_bull]

Gold is a commodity.
Money is a commodity.
Any commodity can be exchanged for any other once exchange rate agreed.
Any commodity can be used as a unit of exchange if acceptable by various parties (this is why cigarrettes were once used). This depends on if the commodity has attributes of a good unit of exchange like easy to carry, divisable and store of value, non-perishable etc etc.

Technically his answer was correct gold is not money but no reason why it could not be used as money. As above - gold fits all the required properties and attributes of money better than printed money - as it is scarce and maintains store of value.


However, I raised the same question as to why the problem - liquidity in the markets, were not resolved by helping out all the people who could not meet their mortgages.

This way Banks would have continued receiving payments and not had write downs on bad loans. I could never understand how or why you would give money to the banks who not only made collosal bonuses but also repossesed the houses of people who could not meet mortgages. The system is trully bent and well effed up by the elite.

I mean why did banks get the bail out and reposses homes of people who could not meet their mortgage payments.

Let's also remember the bail out still has to be paid back - via taxes, by the American people who have had their properties ceased.

The enemy is within. Always said great powers are not destroyed from the outside but from within. Wake up call imho.

Well said, almost seems like it's some sort of strategy to get all the land/home ownership under one roof of some sorts...

 

[new_trader]

Gold is a commodity.
Money is a commodity.
Any commodity can be exchanged for any other once exchange rate agreed.
Any commodity can be used as a unit of exchange if acceptable by various parties (this is why cigarrettes were once used). This depends on if the commodity has attributes of a good unit of exchange like easy to carry, divisable and store of value, non-perishable etc etc.

Technically his answer was correct gold is not money but no reason why it could not be used as money. As above - gold fits all the required properties and attributes of money better than printed money - as it is scarce and maintains store of value.

Atilla, not only are you trying to rewrite history, you also want to redefine the meaning of a commodity. Barter came first, don't forget that. Anyway, this is just another circular argument that I can't be bothered with. Sorry.

 

[Atilla]

Atilla, not only are you trying to rewrite history, you also want to redefine the meaning of a commodity. Barter came first, don't forget that. Anyway, this is just another circular argument that I can't be bothered with. Sorry.

I am agree with you though. Not disagreeing.

Economics and economists came after bartering so fair dos.


Somebody once said if you can teach supply and demand to a parrot you'd make an economist out of him.


No problems that's fine matey.

 

[counter_violent]

Gold is a commodity.
Money is a commodity.
Any commodity can be exchanged for any other once exchange rate agreed.
Any commodity can be used as a unit of exchange if acceptable by various parties (this is why cigarrettes were once used). This depends on if the commodity has attributes of a good unit of exchange like easy to carry, divisable and store of value, non-perishable etc etc.

Technically his answer was correct gold is not money but no reason why it could not be used as money. As above - gold fits all the required properties and attributes of money better than printed money - as it is scarce and maintains store of value.


However, I raised the same question as to why the problem - liquidity in the markets, were not resolved by helping out all the people who could not meet their mortgages.

This way Banks would have continued receiving payments and not had write downs on bad loans. I could never understand how or why you would give money to the banks who not only made collosal bonuses but also repossesed the houses of people who could not meet mortgages. The system is trully bent and well effed up by the elite.

I mean why did banks get the bail out and reposses homes of people who could not meet their mortgage payments.

Let's also remember the bail out still has to be paid back - via taxes, by the American people who have had their properties ceased.

The enemy is within. Always said great powers are not destroyed from the outside but from within. Wake up call imho.

The enemy is the state, always has been. It's interesting that if I didn't know you better, i'd almost say you have now come full circle...bring back Thatcher type principles...more money in the pockets of the people and allow them to decide where they spend it. Which you know is the correct way. But anyhow, keep pretending thats not what you think.

 

[new_trader]

I am agree with you though. Not disagreeing.

Economics and economists came after bartering so fair dos.


Somebody once said if you can teach supply and demand to a parrot you'd make an economist out of him.


No problems that's fine matey.

If you are agreeing with me I don't understand why you call money a commodity. Money is only a commodity if it actually is physically a commodity, eg/ Gold or Silver. Paper money is merely a stand-in for actual value. It provides a unit of measurement that allows us to compare the cost of goods, services, or assets.

 

[new_trader]

A good article on why the USA should abolish the FED and bring back the gold standard.

http://www.businessinsider.com/made-in-usa-wealth-inequality-2011-7

 

[Atilla]

If you are agreeing with me I don't understand why you call money a commodity. Money is only a commodity if it actually is physically a commodity, eg/ Gold or Silver. Paper money is merely a stand-in for actual value. It provides a unit of measurement that allows us to compare the cost of goods, services, or assets.

You could use any other commodity as a unit of measure also, ie Cigarettes. However, every other commodity doesn't quite have the attributes and properties that make up money or even better gold.

For economic modelling and theory everything is a commodity. You say you studied economics but perhaps they teach it different these days.

The key point about paper money being a poor substitute is primarily because the scarcity and store of value attribute - controlled/diluted by governments printing it at will.


I understand the point you are making but money is a commodity - by virtue of the fact governments control its supply and circulation and it is accepted by people. It essentially becomes a commodity.

Let's apply your approach to a Rembrandt. It's intrinsic value is cost of wood, paper and paint. How can anyone value it in millions? It too is merely a stand-in for actual perceived value to the holder. Because it is scarce its supply is inelastic. Because people have infinite amounts of money it's price goes up and up as people see it as storing value and as an investment. We are talking about the same thing here - a commodity paper with paint on it. I guess one could frame the dollar too.

How about product differentiation. Has no value other than one of perception. When buying a company one is buying the brands it holds. There is no intrinsic value in a brand other than one of perception and supply & demand. But those brand values are traded as assets the company holds.

How about 2nd life world. Players trade fictitious cyber-world items as commodities.

How about derivatives and so forth.

You can say zero doesn't exist why have it. What is the point of giving nothing a name if it doesn't exist. Because with zero numbers fall into place. Same with money as a commodity.

You need to consider money as a commodity. Same as gold.

When you see it as a commodity you can then price it. The price of that commodity is then determined by the market by supply and demand. It is not just an arbitary unit of measure created by governments as to what their money is worth. You can see this all around us as people switch commodities.

You pretty much asked the same question re:Zimbabwe printing money. However, US money and Zimbabwe's money is not the same. Because they are currencies. Currencies are commodities too. Because they are commodities they can be priced accordingly. Because we are exchanging commodities against each other their rate of exchange is different based on supply and demand.


Hope it makes sense.

 

[new_trader]

I understand the point you are making but money is a commodity - by virtue of the fact governments control its supply and circulation and it is accepted by people. It essentially becomes a commodity.

Well then, according to this theory, toilet paper would suddenly be edible and have nutritional value if the government declared it was food and controlled its supply. Governments cannot create value out of thin air by law, this notion is absurd. A commodity must at least have inherent utility and it must at least be an economic good. Money on the other hand is a unit of account and a medium of exchange. Original money was a commodity that everyone engaging in commerce accepted as a medium of exchange. The gold standard used representitive money because it was exchangeable for the underlying commodity but that was abandoned in 1971 and what is left is pure fiat money.

I simply cannot fathom why you think fiat paper money is a commodity because if you do then I can't understand why you favour a gold standard. That would almost be a contradiction because all you would be doing is backing a commodity with yet another commodity!

 

[Atilla]

Well then, according to this theory, toilet paper would suddenly be edible and have nutritional value if the government declared it was food and controlled its supply. You not being sensible here.

Governments cannot create value out of thin air by law, this notion is absurd. No it is not. Happens all the time. If they were to pass a law stating all new houses must have solar power and be connected to the grid - what is likely to happen to share valuation of solar panel producers? You are being very narrow minded. Hate to say it.

A commodity must at least have inherent utility and it must at least be an economic good. You denying paper money is not useful? I assume by utility you mean usefulness.


Money on the other hand is a unit of account and a medium of exchange. Original money was a commodity that everyone engaging in commerce accepted as a medium of exchange. The gold standard used representitive money because it was exchangeable for the underlying commodity but that was abandoned in 1971 and what is left is pure fiat money.

I simply cannot fathom why you think fiat paper money is a commodity because if you do then I can't understand why you favour a gold standard. That would almost be a contradiction because all you would be doing is backing a commodity with yet another commodity!

No you are not backing a commodity with another commodity. You are exchanging one commodity for another based on an agreed exchange rate called price. Same as any other transactions.

I favour reverting back to the gold backed currency standard because I feel pegged and floating exchange rates have failed. People like the US are not playing by the rules and then accusing other countries like China of currency manipulations. You know the rest.

Inflation and uncertainty are other factors which have not been helped by various government's printing presses. Like a druggie dealing in dope simply doesn't work as temptation for any country holding the universal currency standard is intoxicating to people in power.

Finally, if the Senate were to have increased the borrowing debt ceiling I think gold will have gone well above $1600+.

You've got to keep a broad open mind. I also feel you are getting too hang up about fiat money. Money is only a label. It is the Dollar, Sterling or the Euro that is the commodity. It is not the governments who set their value. It is purely supply and demand. Governments try and manipulate it but we all know where that leads. Can you not see that Dollar and Yuan are two different commodities. Both called money yes but two different commodities which you can exchange against each other. This stuff is pure economics.

They are not the same. We can refer to them as money. Similarly cars but within cars there are many different types of model cars. They are not all the same and they are pretty much all valued differently. Another 2000 years if we have digitial money you may well find gold to be of zero value. Keep an open mind.


You are thinking of money like meters or kilograms. You can't exchange meters for kg! Price as in the number is unit of measure. Money is the commodity.

Once again - you are not backing a commodity with another commodity. You are exchanging one commodity for another based on an agreed exchange rate called price.

 

[new_trader]

Atilla, you have invented a whole new kind of economics that I don't understand. I'll leave you to it.

 

[Atilla]

Atilla, you have invented a whole new kind of economics that I don't understand. I'll leave you to it.

Give it time - if it is first you are hearing it put in these terms - it may still sink in. Otherwise our views not too far apart other than words and symantics.

I didn't invent it to be honest - it's how we were taught or perhaps how I understood it back in the 80s.