There Is No Gold

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Thu Mar 26, 2020 3:02 pm

Unladen_Swallow wrote:
Thu Mar 26, 2020 2:55 pm
We are trying to buy a bit of gold each year. My spouse takes care of it. Last time we paid $1570 I think in January.

Unless our lives change significantly, we will buy gold again sometime late this year or early next yr. Regardless of price. We do not buy gold for appreciation or as an investment in the traditional sense. We buy it for security/just in case.
Good plan. Stay the course!
In theory, theory and practice are identical. In practice, they often differ.

james22
Posts: 1654
Joined: Tue Aug 21, 2007 2:22 pm

Re: There Is No Gold

Post by james22 » Thu Mar 26, 2020 3:12 pm

Maverick3320 wrote:
Thu Mar 26, 2020 1:37 pm
james22 wrote:
Thu Mar 26, 2020 1:30 pm
If you own gold, you likely own lead too.
Good quote, but you're going to need a lot of lead (and training) if it ever comes to that point.
Who do you believe is more likely to have stockpiled and trained, the one who prepared by owning gold or the one who did not?

User avatar
Watty
Posts: 18722
Joined: Wed Oct 10, 2007 3:55 pm

Re: There Is No Gold

Post by Watty » Thu Mar 26, 2020 3:58 pm

Maverick3320 wrote:
Thu Mar 26, 2020 11:37 am
Someone explain the gold hoarding to me.

From what I understand, if the world has come to the point where gold is being used as THE currency, someone bigger and badder is just going to come along and kill you and take it.
I do not own any gold but in prior posts people have posted about;

1) Relatives using gold to bribe their way out of Vietnam when it was collapsing at the end of the Vietnam war and also to get out of Nazi Germany at the beginning of World War II.

2) Gold being a store of value in countries like India and China where the future of the local currency and stocks is less clear.

Unladen_Swallow
Posts: 737
Joined: Tue Dec 10, 2019 6:12 pm

Re: There Is No Gold

Post by Unladen_Swallow » Thu Mar 26, 2020 4:14 pm

nigel_ht wrote:
Thu Mar 26, 2020 2:25 pm

I have a little gold just in case its like the 1970s again. I sure wouldn't want to go back to the 70s. Bellbottoms....brrr...
I love 70s fashion! :D
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

Unladen_Swallow
Posts: 737
Joined: Tue Dec 10, 2019 6:12 pm

Re: There Is No Gold

Post by Unladen_Swallow » Thu Mar 26, 2020 4:16 pm

Watty wrote:
Thu Mar 26, 2020 3:58 pm

I do not own any gold but in prior posts people have posted about;

1) Relatives using gold to bribe their way out of Vietnam when it was collapsing at the end of the Vietnam war and also to get out of Nazi Germany at the beginning of World War II.

2) Gold being a store of value in countries like India and China where the future of the local currency and stocks is less clear.
All true.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

surfstar
Posts: 2062
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: There Is No Gold

Post by surfstar » Thu Mar 26, 2020 4:22 pm

james22 wrote:
Thu Mar 26, 2020 3:12 pm
Maverick3320 wrote:
Thu Mar 26, 2020 1:37 pm
james22 wrote:
Thu Mar 26, 2020 1:30 pm
If you own gold, you likely own lead too.
Good quote, but you're going to need a lot of lead (and training) if it ever comes to that point.
Who do you believe is more likely to have stockpiled and trained, the one who prepared by owning gold or the one who did not?
Well, for the current crises, you should have stockpiled TP and sanitizer to be properly prepped.

Mickstick
Posts: 47
Joined: Thu Nov 02, 2017 8:16 am

Re: There Is No Gold

Post by Mickstick » Thu Mar 26, 2020 4:27 pm

watchnerd wrote:
Wed Mar 25, 2020 11:32 pm
mroe800 wrote:
Wed Mar 25, 2020 11:20 pm
watchnerd wrote:
Wed Mar 25, 2020 11:18 pm
luckyducky99 wrote:
Wed Mar 25, 2020 10:21 pm
The zombie-apocalypse goldbugs don't want to buy useless promises written on paper.

They want the real deal, and they're willing to pay for it.
Fascinating.
The common saying in those circles is “if you can’t hold it, you don’t own it” or something similar.
It's not their desire to own they physical stuff that I find too surprising.

It's that they're willing to pay an extra 10% to own it right now, as opposed to at some point in the future.

They must think this really is the end...right now.
Part of it is the belief that there is a disconnect between the paper price and the physical price. Premiums are rising further above spot, but maybe the "true spot price" in somewhere in between the official spot price and the premiums being charged.
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design" - F.A. Hayek, The Fatal Conceit

saintsfan342000
Posts: 122
Joined: Wed Apr 04, 2018 9:46 pm

Re: There Is No Gold

Post by saintsfan342000 » Thu Mar 26, 2020 4:46 pm

Silver is about to sky-rocket and I'm going all in on it. Not only is it another precious metal that, along with gold and cigarettes, will serve as a post-apocalyptic currency, it also has these amazing anti-microbial properties i"m always hearing about. Given the cause of the current crisis I think that makes it most desireable.

User avatar
Phineas J. Whoopee
Posts: 9460
Joined: Sun Dec 18, 2011 6:18 pm

Re: There Is No Gold

Post by Phineas J. Whoopee » Thu Mar 26, 2020 6:17 pm

fredflinstone wrote:
Thu Mar 26, 2020 8:04 am
IAU, SGOL, OUNZ, and GLD are trusts backed by physical gold. In the long term their value should reflect their underlying assets. If the ETFs are trading at a ~10 percent discount to physical gold, it likely reflects a short-term preference for physical bullion vis-a-vis non-physical bullion that will soon dissipate.

This seems like one of those weird glitches in the matrix that likely won't last long. If anyone owns physical gold bullion, I think it would be a good time to sell it and replace it with one of the ETFs.
Of course, ETFs have expenses, which are taken out of the ETF NAVs. Maybe individual investors ignore it, I don't know, but the authorized participants continue filling their role and they aren't fooled.

PJW

mroe800
Posts: 124
Joined: Mon Jan 27, 2020 1:37 am

Re: There Is No Gold

Post by mroe800 » Fri Mar 27, 2020 12:26 am

saintsfan342000 wrote:
Thu Mar 26, 2020 4:46 pm
Silver is about to sky-rocket and I'm going all in on it. Not only is it another precious metal that, along with gold and cigarettes, will serve as a post-apocalyptic currency, it also has these amazing anti-microbial properties i"m always hearing about. Given the cause of the current crisis I think that makes it most desireable.
Silver’s primary usage is industrial. I keep hearing about silver moon-shots, but outside of 2011 it silver really hasn’t appreciated much.

User avatar
oneleaf
Posts: 2440
Joined: Mon Feb 19, 2007 5:48 pm

Re: There Is No Gold

Post by oneleaf » Fri Mar 27, 2020 1:18 am

saintsfan342000 wrote:
Thu Mar 26, 2020 4:46 pm
Silver is about to sky-rocket and I'm going all in on it. Not only is it another precious metal that, along with gold and cigarettes, will serve as a post-apocalyptic currency, it also has these amazing anti-microbial properties i"m always hearing about. Given the cause of the current crisis I think that makes it most desireable.
I've been trying to buy Silver for a couple weeks now. Seems impossible to buy at anything close to spot price.

manatee2005
Posts: 552
Joined: Wed Dec 18, 2019 9:17 pm

Re: There Is No Gold

Post by manatee2005 » Fri Mar 27, 2020 3:12 am

Watty wrote:
Thu Mar 26, 2020 3:58 pm
Maverick3320 wrote:
Thu Mar 26, 2020 11:37 am
Someone explain the gold hoarding to me.

From what I understand, if the world has come to the point where gold is being used as THE currency, someone bigger and badder is just going to come along and kill you and take it.
I do not own any gold but in prior posts people have posted about;

1) Relatives using gold to bribe their way out of Vietnam when it was collapsing at the end of the Vietnam war and also to get out of Nazi Germany at the beginning of World War II.

2) Gold being a store of value in countries like India and China where the future of the local currency and stocks is less clear.
Hopefully we won’t have to use gold to be allowed to go into Mexico

manatee2005
Posts: 552
Joined: Wed Dec 18, 2019 9:17 pm

Re: There Is No Gold

Post by manatee2005 » Fri Mar 27, 2020 3:14 am

saintsfan342000 wrote:
Thu Mar 26, 2020 4:46 pm
Silver is about to sky-rocket and I'm going all in on it. Not only is it another precious metal that, along with gold and cigarettes, will serve as a post-apocalyptic currency, it also has these amazing anti-microbial properties i"m always hearing about. Given the cause of the current crisis I think that makes it most desireable.
I take baths in silver coins, I am safe from corona!

Swivelguy
Posts: 320
Joined: Sun Jan 18, 2009 11:37 pm

Re: There Is No Gold

Post by Swivelguy » Fri Mar 27, 2020 3:23 am

Chip wrote:
Thu Mar 26, 2020 8:26 am
fredflinstone wrote:
Thu Mar 26, 2020 7:54 am
Gold is considered a collectible and is subject to a different (higher) tax rate than capital gains. I may be mistaken, but I do not think you can use gold profits to offset capital losses.
I believe you're mistaken. Collectibles are taxed as capital gains, but ordinary income rates apply, up to a maximum tax rate of 28%. As a result, capital losses can offset capital gains from collectibles. It's similar to the way depreciation recapture is taxed.
If this is correct, then I'm surprised Investopedia, a rather prominent information source for many, is so wrong.

https://www.investopedia.com/articles/p ... -taxed.asp
Investopedia wrote:Collectibles and Capital Gains

Collectibles are taxed pretty heavily. The capital gains tax on your net gain from selling a collectible is 28%. Provided you hold the piece for more than one year, you won't pay more than that amount – even if you're in a high tax bracket. However, this level of tax is considerably higher than the tax rate on most net capital gains, which is an average of 15% for most taxpayers, according to the IRS.1

All the same, the 28% rate is advantageous for those in the higher tax brackets compared to taxes on ordinary income – although, by the same measure, those in brackets below 28% will take an extra hit.

james22
Posts: 1654
Joined: Tue Aug 21, 2007 2:22 pm

Re: There Is No Gold

Post by james22 » Fri Mar 27, 2020 4:09 am

surfstar wrote:
Thu Mar 26, 2020 4:22 pm
james22 wrote:
Thu Mar 26, 2020 3:12 pm
Maverick3320 wrote:
Thu Mar 26, 2020 1:37 pm
james22 wrote:
Thu Mar 26, 2020 1:30 pm
If you own gold, you likely own lead too.
Good quote, but you're going to need a lot of lead (and training) if it ever comes to that point.
Who do you believe is more likely to have stockpiled and trained, the one who prepared by owning gold or the one who did not?
Well, for the current crises, you should have stockpiled TP and sanitizer to be properly prepped.
Hopefully the gold will distract the thieves from the better hidden TP and sanitizer.

halfnine
Posts: 1136
Joined: Tue Dec 21, 2010 1:48 pm

Re: There Is No Gold

Post by halfnine » Fri Mar 27, 2020 6:14 am

Swivelguy wrote:
Fri Mar 27, 2020 3:23 am
Chip wrote:
Thu Mar 26, 2020 8:26 am
fredflinstone wrote:
Thu Mar 26, 2020 7:54 am
Gold is considered a collectible and is subject to a different (higher) tax rate than capital gains. I may be mistaken, but I do not think you can use gold profits to offset capital losses.
I believe you're mistaken. Collectibles are taxed as capital gains, but ordinary income rates apply, up to a maximum tax rate of 28%. As a result, capital losses can offset capital gains from collectibles. It's similar to the way depreciation recapture is taxed.
If this is correct, then I'm surprised Investopedia, a rather prominent information source for many, is so wrong.

https://www.investopedia.com/articles/p ... -taxed.asp
Investopedia wrote:Collectibles and Capital Gains

Collectibles are taxed pretty heavily. The capital gains tax on your net gain from selling a collectible is 28%. Provided you hold the piece for more than one year, you won't pay more than that amount – even if you're in a high tax bracket. However, this level of tax is considerably higher than the tax rate on most net capital gains, which is an average of 15% for most taxpayers, according to the IRS.1

All the same, the 28% rate is advantageous for those in the higher tax brackets compared to taxes on ordinary income – although, by the same measure, those in brackets below 28% will take an extra hit.
We go through this every few months. There are many ways to own gold that won't result in excessive taxation. Investopedia is an incomplete resource on this subject.

Chip
Posts: 2781
Joined: Wed Feb 21, 2007 4:57 am

Re: There Is No Gold

Post by Chip » Fri Mar 27, 2020 6:19 am

Swivelguy wrote:
Fri Mar 27, 2020 3:23 am
If this is correct, then I'm surprised Investopedia, a rather prominent information source for many, is so wrong.
Investopedia wrote:Collectibles and Capital Gains
Collectibles are taxed pretty heavily. The capital gains tax on your net gain from selling a collectible is 28%. Provided you hold the piece for more than one year, you won't pay more than that amount – even if you're in a high tax bracket. However, this level of tax is considerably higher than the tax rate on most net capital gains, which is an average of 15% for most taxpayers, according to the IRS.1

All the same, the 28% rate is advantageous for those in the higher tax brackets compared to taxes on ordinary income – although, by the same measure, those in brackets below 28% will take an extra hit.
I'm not surprised at all that it is wrong. The maximum capital gain rate is 28%. The failure to use the word maximum is common for both this rate and the maximum rate for unrecaptured depreciation (25%). These failures are repeated all over the internet, uncorrected.

I know that it is a fool's errand to look for logic in the tax code, but does anyone really believe that someone who is otherwise in the 12% bracket would pay 28% tax on the capital gain from a collectible?

I suggest you look at IRS Pub 550. Go to page 68 of the pdf (67 is the IRS page number). Note the words in the tip on that page:
IRS Pub 550 wrote:If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular tax computation applies.
Capital gains from collectibles are also preferentially netted against capital losses. This means that if you have 20k of long term gains, 20k of long term collectibles gains and 20k of long term losses, you only pay tax on the 20k of regular long term gains. See page 13 of the Schedule D instructions. The "28% rate gain" worksheet there shows that long term losses are netted against collectibles gains first, before the collectibles gains even get to Schedule D.

If you want to delve into this deeper, work through the Schedule D tax worksheet on page 16 in that same set of instructions. It's nearly impossible for a human to follow, but it shows that the rate on long term collectibles gains is the lesser of 28% or the ordinary income tax rate.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 7:15 am

Chip wrote:
Fri Mar 27, 2020 6:19 am
Swivelguy wrote:
Fri Mar 27, 2020 3:23 am
If this is correct, then I'm surprised Investopedia, a rather prominent information source for many, is so wrong.
Investopedia wrote:Collectibles and Capital Gains
Collectibles are taxed pretty heavily. The capital gains tax on your net gain from selling a collectible is 28%. Provided you hold the piece for more than one year, you won't pay more than that amount – even if you're in a high tax bracket. However, this level of tax is considerably higher than the tax rate on most net capital gains, which is an average of 15% for most taxpayers, according to the IRS.1

All the same, the 28% rate is advantageous for those in the higher tax brackets compared to taxes on ordinary income – although, by the same measure, those in brackets below 28% will take an extra hit.
I'm not surprised at all that it is wrong. The maximum capital gain rate is 28%. The failure to use the word maximum is common for both this rate and the maximum rate for unrecaptured depreciation (25%). These failures are repeated all over the internet, uncorrected.

I know that it is a fool's errand to look for logic in the tax code, but does anyone really believe that someone who is otherwise in the 12% bracket would pay 28% tax on the capital gain from a collectible?

I suggest you look at IRS Pub 550. Go to page 68 of the pdf (67 is the IRS page number). Note the words in the tip on that page:
IRS Pub 550 wrote:If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular tax computation applies.
Capital gains from collectibles are also preferentially netted against capital losses. This means that if you have 20k of long term gains, 20k of long term collectibles gains and 20k of long term losses, you only pay tax on the 20k of regular long term gains. See page 13 of the Schedule D instructions. The "28% rate gain" worksheet there shows that long term losses are netted against collectibles gains first, before the collectibles gains even get to Schedule D.

If you want to delve into this deeper, work through the Schedule D tax worksheet on page 16 in that same set of instructions. It's nearly impossible for a human to follow, but it shows that the rate on long term collectibles gains is the lesser of 28% or the ordinary income tax rate.
I'm not a tax lawyer, so take this for what it's worth.

Yes, the maximum rate is 28% but that won't apply if your normal tax rate is lower.

In every other way, taxation of capital gains on gold is the same as the taxation of other capital gains.
The 0% capital gains rate applies for those below whatever the income level is.
You can write off up to the maximum $3k from a collectible loss against ordinary income, as you could with a non-collectible loss.
Any unrealized collectibles gain is written off at death as with other unrealized capital gains.
So if you keep your gold until you die, the tax is never paid.
Fortunately, H&R Block's tax software gets this right. I assume the other tax software firms do too.

For most people, the main drawback is still that you can't eat it. :oops:
In theory, theory and practice are identical. In practice, they often differ.

spectec
Posts: 1452
Joined: Mon Jul 14, 2014 8:00 am

Re: There Is No Gold

Post by spectec » Fri Mar 27, 2020 7:26 am

So what is the proper Gold/Lead asset ratio? Should it be about 50-50, or would it be wise to be more heavily weighted in Lead if the apocalypse arrives? Maybe 80-20 would be appropriate (4 ounces of Lead for every ounce of Gold).
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

Jags4186
Posts: 4357
Joined: Wed Jun 18, 2014 7:12 pm

Re: There Is No Gold

Post by Jags4186 » Fri Mar 27, 2020 7:29 am

watchnerd wrote:
Thu Mar 26, 2020 12:50 am
3504PIR wrote:
Thu Mar 26, 2020 12:42 am
And you can’t even eat gold, at least with any nutritional value.
But you can use it as a TP substitute.
I imagine the process is similar to the way one uses the 3 seashells?

Chip
Posts: 2781
Joined: Wed Feb 21, 2007 4:57 am

Re: There Is No Gold

Post by Chip » Fri Mar 27, 2020 7:32 am

technovelist wrote:
Fri Mar 27, 2020 7:15 am
I'm not a tax lawyer, so take this for what it's worth.

Yes, the maximum rate is 28% but that won't apply if your normal tax rate is lower.

In every other way, taxation of capital gains on gold is the same as the taxation of other capital gains.
The 0% capital gains rate applies for those below whatever the income level is.
You can write off up to the maximum $3k from a collectible loss against ordinary income, as you could with a non-collectible loss.
Any unrealized collectibles gain is written off at death as with other unrealized capital gains.
So if you keep your gold until you die, the tax is never paid.
Sorry, but some of this is wrong. Specifically:

The 0% LTCG rate. Your tax rate on long term collectible gains is 0% only if your tax rate on ordinary income is also 0%.
Not all losses from collectibles can be claimed. It depends on the collectible. Losses from gold can be claimed.
It's more accurate to say that the cost basis is stepped up (or down) at death, rather than "gain is written off".
Income tax won't be paid on the portion of the gain that receives step-up, but estate taxes may apply with large estates.

Here's my take at a statement that covers the taxation of collectible sales that receive capital gain treatment:

Long term gains on collectibles are treated as other long term gains for gain/loss netting purposes. However, they are preferentially netted against losses, before other long term gains. Long term gains remaining after netting are taxed as ordinary income, with a maximum tax rate of 28%.

Swivelguy
Posts: 320
Joined: Sun Jan 18, 2009 11:37 pm

Re: There Is No Gold

Post by Swivelguy » Fri Mar 27, 2020 7:44 am

spectec wrote:
Fri Mar 27, 2020 7:26 am
So what is the proper Gold/Lead asset ratio? Should it be about 50-50, or would it be wise to be more heavily weighted in Lead if the apocalypse arrives? Maybe 80-20 would be appropriate (4 ounces of Lead for every ounce of Gold).
Per wikipedia, there are 190,000 metric tons of gold that have been mined. That's roughly 1 ounce per person on the planet. Yearly lead production is approximately 5 million metric tons per year, or about 25 ounces per person per year.

So if you want to hold "market weight" then for each ounce of gold you own, you should accumulate 25 ounces of lead per year, which happens to be about 200 * 55 grains.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 8:02 am

Chip wrote:
Fri Mar 27, 2020 7:32 am
technovelist wrote:
Fri Mar 27, 2020 7:15 am
I'm not a tax lawyer, so take this for what it's worth.

Yes, the maximum rate is 28% but that won't apply if your normal tax rate is lower.

In every other way, taxation of capital gains on gold is the same as the taxation of other capital gains.
The 0% capital gains rate applies for those below whatever the income level is.
You can write off up to the maximum $3k from a collectible loss against ordinary income, as you could with a non-collectible loss.
Any unrealized collectibles gain is written off at death as with other unrealized capital gains.
So if you keep your gold until you die, the tax is never paid.
Sorry, but some of this is wrong. Specifically:

The 0% LTCG rate. Your tax rate on long term collectible gains is 0% only if your tax rate on ordinary income is also 0%.
Not all losses from collectibles can be claimed. It depends on the collectible. Losses from gold can be claimed.
It's more accurate to say that the cost basis is stepped up (or down) at death, rather than "gain is written off".
Income tax won't be paid on the portion of the gain that receives step-up, but estate taxes may apply with large estates.

Here's my take at a statement that covers the taxation of collectible sales that receive capital gain treatment:

Long term gains on collectibles are treated as other long term gains for gain/loss netting purposes. However, they are preferentially netted against losses, before other long term gains. Long term gains remaining after netting are taxed as ordinary income, with a maximum tax rate of 28%.
Thanks for the clarification. But I wonder about the "taxed as ordinary income" part. Shouldn't that be "taxed as capital gains at the ordinary income tax rate with a maximum rate of 28%"? I say this because I suspect there are other provisions in the code that refer to capital gains as distinct from ordinary income regardless of the rate.

As an historical note, I believe that the reason for the 28% rate is that this was the original capital gains rate in the Kennedy tax cuts, which had a maximum income tax rate of 70% but excluded 60% of capital gains from taxation, resulting in a 28% effective rate. When other capital gains taxation tax cuts were enacted later, collectibles gains were excluded from those reductions, so they kept the 28% maximum rate.
In theory, theory and practice are identical. In practice, they often differ.

jajlrajrf
Posts: 30
Joined: Sun Feb 09, 2020 6:15 pm

Re: There Is No Gold

Post by jajlrajrf » Fri Mar 27, 2020 8:28 am

Can someone explain to me the mindset of the "I need physical gold" people?

I've never viewed gold in the abstract as a great investment, but I'm willing to wave my hands and assume I'm wrong about that: so for purposes of my question, let's say gold is a good investment or hedge in a numerical sense. In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

-The banking system collapses such that it's difficult for my depositoried gold to be useful to me
-and yet this yellow metal i'm holding in bar form(*) is still negotiable and useful in the post-apocalyptic landscape.
-In this new world without rules, men with guns won't somehow take my gold bars from me.

Walk me through the logic, please!

I am definitely prejudiced here because of my Jewish heritage. In WWII, you hear lots of stories about how some Jews used gold to escape Germany. It definitely happened sometimes! But in the vast majority of cases what actually happened was: the Nazis took the gold.

(*) I guess i could imagine it being useful as barter if you held all your gold in the form of quarter-eagles.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 8:42 am

jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?

I've never viewed gold in the abstract as a great investment, but I'm willing to wave my hands and assume I'm wrong about that: so for purposes of my question, let's say gold is a good investment or hedge in a numerical sense. In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

-The banking system collapses such that it's difficult for my depositoried gold to be useful to me
-and yet this yellow metal i'm holding in bar form(*) is still negotiable and useful in the post-apocalyptic landscape.
-In this new world without rules, men with guns won't somehow take my gold bars from me.

Walk me through the logic, please!

(*) I guess i could imagine it being useful as barter if you held all your gold in the form of quarter-eagles.
Gold isn't very useful for barter. Even a 1/20th ounce coin is too valuable to be used for day-to-day purchases, at $80 or so, and how would anyone make change? Junk silver coins would be much more useful for that in extremis.

Gold is money that does not depend on anyone else's promise and is valuable enough to be able to represent a significant amount of wealth in a portable form.

In many cases of European hyperinflation in just the 20th century, those with physical gold in their possession were able to retain some of their wealth.

Another example is the boat people who came here from Viet Nam. Their paper currency wasn't worth anything in the US but their gold was.

Would it have done any good to have gold in a depository in any of those cases? Probably not unless it was in Switzerland, which the US government has made extremely inconvenient for US residents.

Throughout history, when one monetary system collapses, another one replaces it after significant turmoil. In many of these cases, gold has been useful as a bridge between the systems.
In theory, theory and practice are identical. In practice, they often differ.

User avatar
Kenkat
Posts: 5895
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: There Is No Gold

Post by Kenkat » Fri Mar 27, 2020 9:07 am

oneleaf wrote:
Fri Mar 27, 2020 1:18 am
saintsfan342000 wrote:
Thu Mar 26, 2020 4:46 pm
Silver is about to sky-rocket and I'm going all in on it. Not only is it another precious metal that, along with gold and cigarettes, will serve as a post-apocalyptic currency, it also has these amazing anti-microbial properties i"m always hearing about. Given the cause of the current crisis I think that makes it most desireable.
I've been trying to buy Silver for a couple weeks now. Seems impossible to buy at anything close to spot price.
Everything is going for a premium right now. Pre-64 US silver is going for 14x-17x face amount on eBay right now; American Eagle rolls are going for around $480 / $24-25 per coin. Spot prices would be around 11x and $15.

On the coin forum I post on, there is a guy selling pre-64 for 11x right now (which is really good) and another selling American Eagles for $425/roll or $21/ea. I feel like I have enough silver at this point but I mainly have it because I like the coins.

Chip
Posts: 2781
Joined: Wed Feb 21, 2007 4:57 am

Re: There Is No Gold

Post by Chip » Fri Mar 27, 2020 9:07 am

technovelist wrote:
Fri Mar 27, 2020 8:02 am
But I wonder about the "taxed as ordinary income" part. Shouldn't that be "taxed as capital gains at the ordinary income tax rate with a maximum rate of 28%"? I say this because I suspect there are other provisions in the code that refer to capital gains as distinct from ordinary income regardless of the rate.
Fair enough. Modified statement:

Long term gains on collectibles are treated as other long term gains for gain/loss netting purposes. However, they are preferentially netted against losses, before other long term gains. Long term gains remaining after netting are taxed at ordinary income tax rates, with a maximum tax rate of 28%.

Unladen_Swallow
Posts: 737
Joined: Tue Dec 10, 2019 6:12 pm

Re: There Is No Gold

Post by Unladen_Swallow » Fri Mar 27, 2020 9:09 am

jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?
I thought physical gold people bought the metal versus those buying it as an ETF or what have you.

Many people keep high value things in bank deposit boxes, no?
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 9:20 am

Unladen_Swallow wrote:
Fri Mar 27, 2020 9:09 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?
I thought physical gold people bought the metal versus those buying it as an ETF or what have you.

Many people keep high value things in bank deposit boxes, no?
Yes, although at least some banks prohibit storing gold or other precious metals in their deposit boxes. I'm not sure how they would know what is in them, but if there was a bank robbery they would almost certainly disclaim responsibility for your loss.

But if the banks are closed, a safe deposit box probably wouldn't be accessible.
In theory, theory and practice are identical. In practice, they often differ.

GCD
Posts: 1097
Joined: Tue Sep 26, 2017 7:11 pm

Re: There Is No Gold

Post by GCD » Fri Mar 27, 2020 9:24 am

jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?

In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

Walk me through the logic, please!
You walked through the logic just fine. Some people believe that. I don't, but I know people who do.

User avatar
firebirdparts
Posts: 1105
Joined: Thu Jun 13, 2019 4:21 pm

Re: There Is No Gold

Post by firebirdparts » Fri Mar 27, 2020 9:27 am

I don't think it would be too stunning for gold stored at my house to be free of any fees. That's not stunning, and it's one of the BH core principles.

I am not saying that I did it, but it's not stunning. I guess most people have a local guy they could trade with, but I don't know much about that. I don't do it. But all my life I've known a few old guys here and there that had a few "investment" watches and jewelry items in a cigar box, and I didn't think they were crazy weirdos or anything.

I do collect cars, though, and they are at my house. It just seems so natural to have them here.
Last edited by firebirdparts on Fri Mar 27, 2020 9:29 am, edited 1 time in total.
A fool and your money are soon partners

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 9:29 am

firebirdparts wrote:
Fri Mar 27, 2020 9:27 am
I don't think it would be too stunning for gold stored at my house to be free of any fees. That's not stunning, and it's one of the BH core principles.

I am not saying that I did it, but it's not stunning.
Yes, I agree. After all, even most gold bugs don't have enough gold to ski down!
In theory, theory and practice are identical. In practice, they often differ.

Unladen_Swallow
Posts: 737
Joined: Tue Dec 10, 2019 6:12 pm

Re: There Is No Gold

Post by Unladen_Swallow » Fri Mar 27, 2020 9:36 am

technovelist wrote:
Fri Mar 27, 2020 9:20 am
Unladen_Swallow wrote:
Fri Mar 27, 2020 9:09 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?
I thought physical gold people bought the metal versus those buying it as an ETF or what have you.

Many people keep high value things in bank deposit boxes, no?
Yes, although at least some banks prohibit storing gold or other precious metals in their deposit boxes. I'm not sure how they would know what is in them, but if there was a bank robbery they would almost certainly disclaim responsibility for your loss.

But if the banks are closed, a safe deposit box probably wouldn't be accessible.
I haven't heard of a bank policy on contents of safe deposit boxes. Is it a policy or a recommendation? Agree....how would they know what's in it? Contents are not insured by the banks, perhaps that is why they recommend against storing things like gold?

That reminds me. Bank heist movies are excellent self isolation entertainment. But most focus on vault thievery (except Inside Man).
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

User avatar
lock.that.stock
Posts: 135
Joined: Sun Apr 28, 2019 2:01 pm

Re: There Is No Gold

Post by lock.that.stock » Fri Mar 27, 2020 9:45 am

My parents always owned physical gold for "security". When I asked them the question of how that security will come to the rescue in the down times they say they're not sure how, or if they can even sell it.

I wonder if this is just a generational thing. Baby boomers loving gold because of a general belief it holds its value or appreciates vs. millennials who don't think its worth anything.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 10:00 am

Unladen_Swallow wrote:
Fri Mar 27, 2020 9:36 am
technovelist wrote:
Fri Mar 27, 2020 9:20 am
Unladen_Swallow wrote:
Fri Mar 27, 2020 9:09 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?
I thought physical gold people bought the metal versus those buying it as an ETF or what have you.

Many people keep high value things in bank deposit boxes, no?
Yes, although at least some banks prohibit storing gold or other precious metals in their deposit boxes. I'm not sure how they would know what is in them, but if there was a bank robbery they would almost certainly disclaim responsibility for your loss.

But if the banks are closed, a safe deposit box probably wouldn't be accessible.
I haven't heard of a bank policy on contents of safe deposit boxes. Is it a policy or a recommendation? Agree....how would they know what's in it? Contents are not insured by the banks, perhaps that is why they recommend against storing things like gold?
Different banks have different rules. There are reports that Chase has forbidden precious metals other than collectible coins in safe deposit boxes: https://safedepositboxinsurance.com/201 ... x-holders/. I don't know the reason.
In theory, theory and practice are identical. In practice, they often differ.

Unladen_Swallow
Posts: 737
Joined: Tue Dec 10, 2019 6:12 pm

Re: There Is No Gold

Post by Unladen_Swallow » Fri Mar 27, 2020 10:03 am

lock.that.stock wrote:
Fri Mar 27, 2020 9:45 am
My parents always owned physical gold for "security". When I asked them the question of how that security will come to the rescue in the down times they say they're not sure how, or if they can even sell it.

I wonder if this is just a generational thing. Baby boomers loving gold because of a general belief it holds its value or appreciates vs. millennials who don't think its worth anything.
Some is generational for sure. Other is cultural (common in many countries to value gold). And a segment that buys it for diversification or security (not sure many millennials do this though).
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

alfaspider
Posts: 2458
Joined: Wed Sep 09, 2015 4:44 pm

Re: There Is No Gold

Post by alfaspider » Fri Mar 27, 2020 10:04 am

technovelist wrote:
Fri Mar 27, 2020 8:42 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?

I've never viewed gold in the abstract as a great investment, but I'm willing to wave my hands and assume I'm wrong about that: so for purposes of my question, let's say gold is a good investment or hedge in a numerical sense. In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

-The banking system collapses such that it's difficult for my depositoried gold to be useful to me
-and yet this yellow metal i'm holding in bar form(*) is still negotiable and useful in the post-apocalyptic landscape.
-In this new world without rules, men with guns won't somehow take my gold bars from me.

Walk me through the logic, please!

(*) I guess i could imagine it being useful as barter if you held all your gold in the form of quarter-eagles.

Gold is money that does not depend on anyone else's promise and is valuable enough to be able to represent a significant amount of wealth in a portable form.

Paper currency doesn't really depend on anybody's promise either. Both gold and paper currency are only worth something because someone else will accept it in exchange for something else of value. For example, a $500 confederate dollar in good condition is worth nearly $500 even though the government that backed the currency has not existed for over 150 years.

I also disagree that gold is money. It is a commodity. If it were money, you could go to the grocery store and pay in gold dust.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 10:06 am

lock.that.stock wrote:
Fri Mar 27, 2020 9:45 am
My parents always owned physical gold for "security". When I asked them the question of how that security will come to the rescue in the down times they say they're not sure how, or if they can even sell it.

I wonder if this is just a generational thing. Baby boomers loving gold because of a general belief it holds its value or appreciates vs. millennials who don't think its worth anything.
If I had to guess, I would say 99% of Baby Boomers think gold is for wedding rings.
Their parents might have different ideas about it.
In theory, theory and practice are identical. In practice, they often differ.

Unladen_Swallow
Posts: 737
Joined: Tue Dec 10, 2019 6:12 pm

Re: There Is No Gold

Post by Unladen_Swallow » Fri Mar 27, 2020 10:12 am

technovelist wrote:
Fri Mar 27, 2020 10:00 am
Different banks have different rules. There are reports that Chase has forbidden precious metals other than collectible coins in safe deposit boxes: https://safedepositboxinsurance.com/201 ... x-holders/. I don't know the reason.
Interesting. Thanks! I can't imagine how it is enforceable.

I might just have to sleep on my gold brick bed then.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 10:14 am

alfaspider wrote:
Fri Mar 27, 2020 10:04 am
technovelist wrote:
Fri Mar 27, 2020 8:42 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?

I've never viewed gold in the abstract as a great investment, but I'm willing to wave my hands and assume I'm wrong about that: so for purposes of my question, let's say gold is a good investment or hedge in a numerical sense. In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

-The banking system collapses such that it's difficult for my depositoried gold to be useful to me
-and yet this yellow metal i'm holding in bar form(*) is still negotiable and useful in the post-apocalyptic landscape.
-In this new world without rules, men with guns won't somehow take my gold bars from me.

Walk me through the logic, please!

(*) I guess i could imagine it being useful as barter if you held all your gold in the form of quarter-eagles.

Gold is money that does not depend on anyone else's promise and is valuable enough to be able to represent a significant amount of wealth in a portable form.

Paper currency doesn't really depend on anybody's promise either. Both gold and paper currency are only worth something because someone else will accept it in exchange for something else of value. For example, a $500 confederate dollar in good condition is worth nearly $500 even though the government that backed the currency has not existed for over 150 years.

I also disagree that gold is money. It is a commodity. If it were money, you could go to the grocery store and pay in gold dust.
Okay, I'll be more precise.

You can't pay your grocery bill with a confederate bill. Is it money?
You can't pay your grocery bill with Swiss Francs if you live in the US. Does that mean that Swiss Francs aren't money?

Gold is money independent of any government. Yes, governments can and do mint coins out of gold, but the value of such coins is based primarily on the gold content rather than what the government stamps on them.

Many countries have declared that their existing paper money will become valueless if not exchanged for a new version within a specified time limit. This cannot happen with gold.
In theory, theory and practice are identical. In practice, they often differ.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 10:17 am

Unladen_Swallow wrote:
Fri Mar 27, 2020 10:12 am
technovelist wrote:
Fri Mar 27, 2020 10:00 am
Different banks have different rules. There are reports that Chase has forbidden precious metals other than collectible coins in safe deposit boxes: https://safedepositboxinsurance.com/201 ... x-holders/. I don't know the reason.
Interesting. Thanks! I can't imagine how it is enforceable.

I might just have to sleep on my gold brick bed then.
Wow, you must have a lot of gold! :moneybag

To be a bit more serious, I like the Texas Bullion Depository for off-site storage.
Their fees aren't ridiculous and they have pretty good customer service.
They even have a couple of bullion dealers onsite so you can buy or sell readily.
In theory, theory and practice are identical. In practice, they often differ.

User avatar
nisiprius
Advisory Board
Posts: 40239
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: There Is No Gold

Post by nisiprius » Fri Mar 27, 2020 10:26 am

technovelist wrote:
Fri Mar 27, 2020 10:14 am
Gold is money independent of any government. Yes, governments can and do mint coins out of gold, but the value of such coins is based primarily on the gold content rather than what the government stamps on them.
"Primarily" hedges your statement, so OK.

But it is worth remembering the historical example of Dionysus of Syracuse, circa 400 BCE, who had borrowed from his subjects in the form of promissory notes, issued a decree that all money in circulation was to be turned over to the government, with those refusing subject to the pain of death. After he collected all the coins, he stamped each one-drachma coin with a two-drachma mark and used the proceeds to pay off his debt. The value of the gold coins was determined by what the government stamped on them.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

alfaspider
Posts: 2458
Joined: Wed Sep 09, 2015 4:44 pm

Re: There Is No Gold

Post by alfaspider » Fri Mar 27, 2020 10:29 am

technovelist wrote:
Fri Mar 27, 2020 10:14 am
alfaspider wrote:
Fri Mar 27, 2020 10:04 am
technovelist wrote:
Fri Mar 27, 2020 8:42 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?

I've never viewed gold in the abstract as a great investment, but I'm willing to wave my hands and assume I'm wrong about that: so for purposes of my question, let's say gold is a good investment or hedge in a numerical sense. In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

-The banking system collapses such that it's difficult for my depositoried gold to be useful to me
-and yet this yellow metal i'm holding in bar form(*) is still negotiable and useful in the post-apocalyptic landscape.
-In this new world without rules, men with guns won't somehow take my gold bars from me.

Walk me through the logic, please!

(*) I guess i could imagine it being useful as barter if you held all your gold in the form of quarter-eagles.

Gold is money that does not depend on anyone else's promise and is valuable enough to be able to represent a significant amount of wealth in a portable form.

Paper currency doesn't really depend on anybody's promise either. Both gold and paper currency are only worth something because someone else will accept it in exchange for something else of value. For example, a $500 confederate dollar in good condition is worth nearly $500 even though the government that backed the currency has not existed for over 150 years.

I also disagree that gold is money. It is a commodity. If it were money, you could go to the grocery store and pay in gold dust.
Okay, I'll be more precise.

You can't pay your grocery bill with a confederate bill. Is it money?
You can't pay your grocery bill with Swiss Francs if you live in the US. Does that mean that Swiss Francs aren't money?

Gold is money independent of any government. Yes, governments can and do mint coins out of gold, but the value of such coins is based primarily on the gold content rather than what the government stamps on them.

Many countries have declared that their existing paper money will become valueless if not exchanged for a new version within a specified time limit. This cannot happen with gold.
My point is that none of that depends on a government promise. If the government says you have to turn in your French Francs for Euros or they will become worthless, the reason is not because the government has gone back on any promise, but because French society has agreed with the government that the currency will no longer have value. It's hypothetically possible that a weak government could make such a pronouncement and the population could ignore it and continue to transact in the old currency. There are some developing countries where formally defunct currencies have continued to trade.

Currencies are bound by location only because local populations have collectively agreed to only trade in certain currencies. I can go to Honduras and they will gladly accept my U.S. dollars. But I can't pay in Honduran Lempira in the U.S. Why? Because Hondurans have collectively agreed to accept dollars but Americans have not made a similar determination with respect to Lempiras.

A sovereign could theoretically declare gold valuless, but society wouldn't agree with such a proclamation and it would continue to hold value due to tradition and because the metal has industrial and scientific uses. Likewise, if the U.S. government declared the US dollar valueless today without issuing a suitable replacement, it would almost certainly continue to trade regardless.

Gold is not money because there is effectively no location where it is in wide circulation as a primary means of exchange. You have to sell your gold in exchange for money before purchasing anything with it effectively everywhere. Every other currency in active use has some location where it is a primary or at least secondary means of exchange. It's no difference from barrels of oil. Yes, there are in-kind oil transactions. But in no location is crude oil used as a primary means of exchange.

User avatar
firebirdparts
Posts: 1105
Joined: Thu Jun 13, 2019 4:21 pm

Re: There Is No Gold

Post by firebirdparts » Fri Mar 27, 2020 10:34 am

I think semantic arguments about all the many things gold *is not* really just miss the point entirely. I would really kick myself if I got involved in one. Maybe if I was retired *and* quanrantined at the same time.

Gold is collectible. That's good enough. You ought to expect it to behave like gold behaves. That's good enough. In times like these, you might expect a lot of people to buy some, and they did. Will they be glad they bought it? Maybe.

You can certainly call people idiots, but there's no percentage in that.
A fool and your money are soon partners

GCD
Posts: 1097
Joined: Tue Sep 26, 2017 7:11 pm

Re: There Is No Gold

Post by GCD » Fri Mar 27, 2020 10:37 am

lock.that.stock wrote:
Fri Mar 27, 2020 9:45 am
My parents always owned physical gold for "security". When I asked them the question of how that security will come to the rescue in the down times they say they're not sure how, or if they can even sell it.

I wonder if this is just a generational thing. Baby boomers loving gold because of a general belief it holds its value or appreciates vs. millennials who don't think its worth anything.
I think for people of a certain age who lived through the Jews fleeing Europe, instead of learning about it in a history book, there may be an allure to having something portable with near universal value.

But for me, if I think I may have to flee the country, it raises questions like:

Why not buy a $500,000 sailboat and move to the coast? In the meantime I can enjoy the sailboat and if I have to flee the country I have something of value I can sell where I end up and use that to fund my new beginning.

So physical gold just doesn't work for me.

User avatar
Topic Author
watchnerd
Posts: 5168
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: There Is No Gold

Post by watchnerd » Fri Mar 27, 2020 10:43 am

firebirdparts wrote:
Fri Mar 27, 2020 10:34 am
I think semantic arguments about all the many things gold *is not* really just miss the point entirely. I would really kick myself if I got involved in one. Maybe if I was retired *and* quanrantined at the same time.

Gold is collectible. That's good enough. You ought to expect it to behave like gold behaves. That's good enough. In times like these, you might expect a lot of people to buy some, and they did. Will they be glad they bought it? Maybe.

You can certainly call people idiots, but there's no percentage in that.
Yeah, I have zero interest in re-litigating the gold pros vs cons.

What I do find interesting is that the spike in physical gold vs electronic is happening right now.

There may be an interesting general sentiment indicator in there if one tracks it.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

User avatar
Kenkat
Posts: 5895
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: There Is No Gold

Post by Kenkat » Fri Mar 27, 2020 10:52 am

technovelist wrote:
Fri Mar 27, 2020 10:14 am
alfaspider wrote:
Fri Mar 27, 2020 10:04 am
technovelist wrote:
Fri Mar 27, 2020 8:42 am
jajlrajrf wrote:
Fri Mar 27, 2020 8:28 am
Can someone explain to me the mindset of the "I need physical gold" people?

I've never viewed gold in the abstract as a great investment, but I'm willing to wave my hands and assume I'm wrong about that: so for purposes of my question, let's say gold is a good investment or hedge in a numerical sense. In order for physical gold (by which I mean: gold I'm keeping AT MY HOUSE) to be a better investment than, say, gold held in a depository, you have to assume a stunning number of things, don't you?

-The banking system collapses such that it's difficult for my depositoried gold to be useful to me
-and yet this yellow metal i'm holding in bar form(*) is still negotiable and useful in the post-apocalyptic landscape.
-In this new world without rules, men with guns won't somehow take my gold bars from me.

Walk me through the logic, please!

(*) I guess i could imagine it being useful as barter if you held all your gold in the form of quarter-eagles.

Gold is money that does not depend on anyone else's promise and is valuable enough to be able to represent a significant amount of wealth in a portable form.

Paper currency doesn't really depend on anybody's promise either. Both gold and paper currency are only worth something because someone else will accept it in exchange for something else of value. For example, a $500 confederate dollar in good condition is worth nearly $500 even though the government that backed the currency has not existed for over 150 years.

I also disagree that gold is money. It is a commodity. If it were money, you could go to the grocery store and pay in gold dust.
Okay, I'll be more precise.

You can't pay your grocery bill with a confederate bill. Is it money?
You can't pay your grocery bill with Swiss Francs if you live in the US. Does that mean that Swiss Francs aren't money?

Gold is money independent of any government. Yes, governments can and do mint coins out of gold, but the value of such coins is based primarily on the gold content rather than what the government stamps on them.

Many countries have declared that their existing paper money will become valueless if not exchanged for a new version within a specified time limit. This cannot happen with gold.
A primary reason that governments mint gold and silver coins is because it is a way to certify that a coin is of a specific composition and weight, is genuine and has not been tampered with. For example, have you ever wondered why coins are “reeded” on the edge? That is an anti-tamper technique to keep someone from shaving the edge and then passing the coin off as a regular coin. The intricate engraving is to identify the coin and prevent counterfeits (although they are out there).

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 10:57 am

nisiprius wrote:
Fri Mar 27, 2020 10:26 am
technovelist wrote:
Fri Mar 27, 2020 10:14 am
Gold is money independent of any government. Yes, governments can and do mint coins out of gold, but the value of such coins is based primarily on the gold content rather than what the government stamps on them.
"Primarily" hedges your statement, so OK.

But it is worth remembering the historical example of Dionysus of Syracuse, circa 400 BCE, who had borrowed from his subjects in the form of promissory notes, issued a decree that all money in circulation was to be turned over to the government, with those refusing subject to the pain of death. After he collected all the coins, he stamped each one-drachma coin with a two-drachma mark and used the proceeds to pay off his debt. The value of the gold coins was determined by what the government stamped on them.
That did not affect the value of gold, which remained the same. It affected the value of the drachma, which was cut in half by his decree.

Of course this example is a good illustration of one major difference between gold and paper currencies.
Many times throughout history, governments have forced people to accept paper currencies as payments for debt, including debt incurred by those same governments with a promise to repay in gold (https://en.wikipedia.org/wiki/Gold_Clause_Cases).
No government has ever forced people to accept gold in payment for debts.
Last edited by technovelist on Fri Mar 27, 2020 10:59 am, edited 1 time in total.
In theory, theory and practice are identical. In practice, they often differ.

technovelist
Posts: 3160
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: There Is No Gold

Post by technovelist » Fri Mar 27, 2020 10:59 am

GCD wrote:
Fri Mar 27, 2020 10:37 am
lock.that.stock wrote:
Fri Mar 27, 2020 9:45 am
My parents always owned physical gold for "security". When I asked them the question of how that security will come to the rescue in the down times they say they're not sure how, or if they can even sell it.

I wonder if this is just a generational thing. Baby boomers loving gold because of a general belief it holds its value or appreciates vs. millennials who don't think its worth anything.
I think for people of a certain age who lived through the Jews fleeing Europe, instead of learning about it in a history book, there may be an allure to having something portable with near universal value.

But for me, if I think I may have to flee the country, it raises questions like:

Why not buy a $500,000 sailboat and move to the coast? In the meantime I can enjoy the sailboat and if I have to flee the country I have something of value I can sell where I end up and use that to fund my new beginning.

So physical gold just doesn't work for me.
It's probably pretty hard to get change for a 1/20th ounce gold coin during an economic disaster.
I would imagine that it would be even harder to get change for a sailboat.
In theory, theory and practice are identical. In practice, they often differ.

User avatar
willthrill81
Posts: 17355
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: There Is No Gold

Post by willthrill81 » Fri Mar 27, 2020 11:00 am

3504PIR wrote:
Thu Mar 26, 2020 12:42 am
And you can’t even eat gold, at least with any nutritional value.
You can't eat dollar bills either.

An item being inedible doesn't mean that it's not valuable in some other way.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Post Reply