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My point is that it is NOT legal to circulate claims to gold in storage as money, that’s why it doesn’t exist. GLD is not the same as a gold backed currency be

My point is that it is NOT legal to circulate claims to gold in storage as money, that’s why it doesn’t exist. GLD is not the same as a gold backed currency because you cannot use GLD as money in everyday transactions, it is literally illegal to compete with fiat currency. If hard money is non-threatening, why not let the two standards compete and see who wins?

arcticbull 8y ago
Right, you exchange gold (or GLD shares) for money, then you trade that money for goods and services. The recipient is free to obtain new shares of GLD if that's what they want, or anything else they'd prefer to invest in. That's kind of the definition of a medium of exchange (compare to: an asset). A medium of exchange need not be an asset. You're again describing the intention of the system: this is how it's designed. By standardizing on USD (or any other currency) as your medium of exchange it dramatically simplifies accounting. If one person trades a few dozen eggs for a hat, then a hat for some gold, then that gold for a few dozen eggs, how can you possibly determine taxes due? And in what 'currency' are they due? Eggs? Or even just how a business is doing? By making every transaction happen using a common intermediate (USD, etc) the whole system is just so much simpler. It all really only works if everyone is doing it, though, for every transaction. Mixing and matching is inefficient. At the risk of sounding like a broken record... You still haven't explained how you're any worse off by buying literal gold, or if you don't want to carry it around yourself, shares in a gold ETF like GLD. Why are you trying to force everyone to invest in gold for some reason, instead of whatever they want, through a neutral medium of exchange?
- sbenitoj 8y ago
  “Why are you trying to force everyone to invest in gold for some reason, instead of whatever they want, through a neutral medium of exchange?” We are working with wildly different definitions of “forcing” — the market (millions of people acting voluntarily over thousands of years) settled on gold at the world’s medium of exchange, store of value, and unit of account (aka money). Governments using coercion made it illegal to transact with gold as money. Explain how this is me “forcing” people to invest in gold? The history is exactly opposite of your claim, governments have forced people to use fiat. If it were otherwise, it would be legal to use gold as money, which it is not.
  - arcticbull 8y ago
    You keep completely ignoring my core point. You still haven't explained how you're any worse off by buying literal gold, or if you don't want to carry it around yourself, shares in a gold ETF like GLD. I'll happily engage the other aspects of the conversation once you address this. It's not different, though, is it -- it's literally the same thing. The modern economy decouples store of value from medium of exchange, the old economy coupled the two, that's the only thing that's changed from a practical perspective.
    - sbenitoj 8y ago
      Fair’s fair — I’m not trying to ignore what you’re saying, I just don’t think it’s particularly important. Regarding buying shares of an ETF like GLD, I have my concerns regarding the ETF actually holding what they claim to hold — so I believe you’re taking on additional risk by holding GLD vs actual gold. As far as holding regular gold, my claim is you are worse off for a number of reasons — (1) you cannot seamlessly transact with it (2) because it’s illegal to transact in gold, and you’re required to transact in fiat, savers are being stolen from every time they print dollars, just like savers are stolen from when someone counterfeits money (3) it’s WAY more costly to attempt to live by some gold standard by buying/selling real gold every time you earn money/spend money (imagine trying to sell an equivalent $ amount of gold every time you buy a cup of coffee or buy an equivalent $ amount of gold every time you receive a paycheck) (4) you’re worse off because fiat causes us to live in a much more volatile world, the ability to print $ at will and hold only a fraction of it in reserves (fractional reserve banking) greatly exacerbated financial crises, to the detriment of everyone who isn’t a large bank which can get bailed out through political connections.
      - arcticbull 8y ago
        Re: GLD, it's an SEC regulated security. It's government regulated, just as much as the gold in Fort Knox would be regulated if your dollar bills gave you claim to it. If you trust the government to hold gold, you should by extension trust a government-regulated security to. Let's keep conspiracy theories out of this. (2) I'm not sure where you get the idea that it's illegal to transact in gold. It's definitely legal, and it's done all the time, it's called barter. You're still going to have to recognize the transaction in US dollars and pay any capital gains associated (or deduct capital losses, if applicable). There's even some cases where bartering can allow you to defer capital gains such as a 1031 exchange (which was wrongly applied to cryptocurrencies as they're securities). (1&3) I'm not sure you're really trying to make it work. You could easily do monthly net settlement, where you use a credit card to make all your usual payments (an interest-free loan), then at the end of the month, sell GLD shares to cover any shortfall from your salary, or buy GLD shares with the excess of your salary. If inflation is as crazy as you say, this would give you an advantage as your gold value would go up while your debt is denominated in fiat "funny-money" inflating away. (4) The intrinsic lack of connection between bills and physical goods isn't what leads to volatility. The bulk of gold's value is just because people find it shiny, it's actual industrial or useful application is tiny in comparison. You're believing in the value of gold is the same as my believing in the value of the dollar. Yes it's been used for thousands of years, but so what? We used rocks to represent money for thousands of years on islands, but nobody's suggesting a rock-backed dollar. Backing is inefficient and unnecessary. Each of the things you say lead to volatility (fractional reserve banking, increasing the money supply, etc) is social policy built on top of monetary policy. Rolling back Glass-Steagall causes volatility. You can just outlaw those things and achieve the exact same results without having gold backing your currency. I have faith I can exchange my dollar for a half a loaf. You have to have faith that you can exchange your dollar for a fraction of an ounce of gold from a locker and that someone else will exchange your shiny fraction of an ounce for a half a loaf. It's one extra, unnecessary layer. Here's a writeup from a gold-standard man like you for why inflation is a bad argument for the gold standard, and you'll find it very largely mirrors what I've been saying to you: https://www.forbes.com/sites/keithweiner/2014/03/11/inflation-is-a-weak-argument-for-the-gold-standard/#6982e4644f06 https://www.forbes.com/sites/keithweiner/2014/03/11/inflatio...

arcticbull 8y ago

Right, you exchange gold (or GLD shares) for money, then you trade that money for goods and services. The recipient is free to obtain new shares of GLD if that's what they want, or anything else they'd prefer to invest in. That's kind of the definition of a medium of exchange (compare to: an asset). A medium of exchange need not be an asset. You're again describing the intention of the system: this is how it's designed. By standardizing on USD (or any other currency) as your medium of exchange it dramatically simplifies accounting. If one person trades a few dozen eggs for a hat, then a hat for some gold, then that gold for a few dozen eggs, how can you possibly determine taxes due? And in what 'currency' are they due? Eggs? Or even just how a business is doing? By making every transaction happen using a common intermediate (USD, etc) the whole system is just so much simpler. It all really only works if everyone is doing it, though, for every transaction. Mixing and matching is inefficient. At the risk of sounding like a broken record... You still haven't explained how you're any worse off by buying literal gold, or if you don't want to carry it around yourself, shares in a gold ETF like GLD. Why are you trying to force everyone to invest in gold for some reason, instead of whatever they want, through a neutral medium of exchange?

sbenitoj 8y ago
“Why are you trying to force everyone to invest in gold for some reason, instead of whatever they want, through a neutral medium of exchange?” We are working with wildly different definitions of “forcing” — the market (millions of people acting voluntarily over thousands of years) settled on gold at the world’s medium of exchange, store of value, and unit of account (aka money). Governments using coercion made it illegal to transact with gold as money. Explain how this is me “forcing” people to invest in gold? The history is exactly opposite of your claim, governments have forced people to use fiat. If it were otherwise, it would be legal to use gold as money, which it is not.
- arcticbull 8y ago
  You keep completely ignoring my core point. You still haven't explained how you're any worse off by buying literal gold, or if you don't want to carry it around yourself, shares in a gold ETF like GLD. I'll happily engage the other aspects of the conversation once you address this. It's not different, though, is it -- it's literally the same thing. The modern economy decouples store of value from medium of exchange, the old economy coupled the two, that's the only thing that's changed from a practical perspective.
  - sbenitoj 8y ago
    Fair’s fair — I’m not trying to ignore what you’re saying, I just don’t think it’s particularly important. Regarding buying shares of an ETF like GLD, I have my concerns regarding the ETF actually holding what they claim to hold — so I believe you’re taking on additional risk by holding GLD vs actual gold. As far as holding regular gold, my claim is you are worse off for a number of reasons — (1) you cannot seamlessly transact with it (2) because it’s illegal to transact in gold, and you’re required to transact in fiat, savers are being stolen from every time they print dollars, just like savers are stolen from when someone counterfeits money (3) it’s WAY more costly to attempt to live by some gold standard by buying/selling real gold every time you earn money/spend money (imagine trying to sell an equivalent $ amount of gold every time you buy a cup of coffee or buy an equivalent $ amount of gold every time you receive a paycheck) (4) you’re worse off because fiat causes us to live in a much more volatile world, the ability to print $ at will and hold only a fraction of it in reserves (fractional reserve banking) greatly exacerbated financial crises, to the detriment of everyone who isn’t a large bank which can get bailed out through political connections.
    - arcticbull 8y ago
      Re: GLD, it's an SEC regulated security. It's government regulated, just as much as the gold in Fort Knox would be regulated if your dollar bills gave you claim to it. If you trust the government to hold gold, you should by extension trust a government-regulated security to. Let's keep conspiracy theories out of this. (2) I'm not sure where you get the idea that it's illegal to transact in gold. It's definitely legal, and it's done all the time, it's called barter. You're still going to have to recognize the transaction in US dollars and pay any capital gains associated (or deduct capital losses, if applicable). There's even some cases where bartering can allow you to defer capital gains such as a 1031 exchange (which was wrongly applied to cryptocurrencies as they're securities). (1&3) I'm not sure you're really trying to make it work. You could easily do monthly net settlement, where you use a credit card to make all your usual payments (an interest-free loan), then at the end of the month, sell GLD shares to cover any shortfall from your salary, or buy GLD shares with the excess of your salary. If inflation is as crazy as you say, this would give you an advantage as your gold value would go up while your debt is denominated in fiat "funny-money" inflating away. (4) The intrinsic lack of connection between bills and physical goods isn't what leads to volatility. The bulk of gold's value is just because people find it shiny, it's actual industrial or useful application is tiny in comparison. You're believing in the value of gold is the same as my believing in the value of the dollar. Yes it's been used for thousands of years, but so what? We used rocks to represent money for thousands of years on islands, but nobody's suggesting a rock-backed dollar. Backing is inefficient and unnecessary. Each of the things you say lead to volatility (fractional reserve banking, increasing the money supply, etc) is social policy built on top of monetary policy. Rolling back Glass-Steagall causes volatility. You can just outlaw those things and achieve the exact same results without having gold backing your currency. I have faith I can exchange my dollar for a half a loaf. You have to have faith that you can exchange your dollar for a fraction of an ounce of gold from a locker and that someone else will exchange your shiny fraction of an ounce for a half a loaf. It's one extra, unnecessary layer. Here's a writeup from a gold-standard man like you for why inflation is a bad argument for the gold standard, and you'll find it very largely mirrors what I've been saying to you: https://www.forbes.com/sites/keithweiner/2014/03/11/inflation-is-a-weak-argument-for-the-gold-standard/#6982e4644f06 https://www.forbes.com/sites/keithweiner/2014/03/11/inflatio...