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Industrial demand is only half the story. The value of gold also lies within the fact that unlike fiat currency, it cannot be created out of thin air. Global st

by mopsi 7y ago

Industrial demand is only half the story. The value of gold also lies within the fact that unlike fiat currency, it cannot be created out of thin air. Global stockpiles of gold are well known, annual production is small and predictable. This means that if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. Fiat money does not offer such assurance, it can lose most of its value almost overnight if government turns on printing presses or fucks up in some other way (see Turkish lira or Venezuelan bolivar). Cryptocurrencies mimick the same properties of gold. Their "base value" comes from the speed/ease of transactions and other useful features (eg cannot be confiscated). Their supply is algorithmically limited and well-known in advance.

pmiller2 7y ago
Industrial demand isn’t the entire source of gold’s value, that’s true. I was more referring to it’s usefuln being the source of its value 2700 years ago when people started making coins out of it. I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation. > ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/us-house-to-silver-ratio-us-home-to-gold-ratio/ https://www.jmbullion.com/investing-guide/pricing-payments/u... Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-has-seized-nearly-200000-bitcoins-to-date-global-confiscations-are-up-to-453000/ https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...
- mopsi 7y ago
  > What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? No. I am aware that the value of gold fluctuates, but it is safer than many national currencies, stocks of failing companies or overvalued real-estate. The amount of gold in the world is known and stable and there's no way to massively "print" gold to crash its value. This stable supply is mimicked by algorithms built into cryptocurrencies. As long as there is demand for a something, and there is limited supply of it, it will be worth >0. Cryptocurrencies satisfy both requirements: they are limited in supply and have demand because of their usefulness (fast & cheap transactions). > Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. No need for hypotheticals. The government of Cyprus confiscated 47.5% of all holdings above 100 000 EUR in 2013 during its banking crisis. https://eu.usatoday.com/story/money/business/2013/07/29/bank-of-cyprus-depositors-lose-savings/2595837/ https://eu.usatoday.com/story/money/business/2013/07/29/bank... Cyprus is full member of the EU and Eurozone, so these risks are not limited to corrupt and failing third-world countries. > Oh, and if you think BTC can’t be confiscated, I have news for you: Most cryptocurrencies cannot be confiscated by network nodes like traditional banking institutions can freeze or rewrite payments and accounts (see Cyprus above). Only the one who has private keys controls the assets. This is a major feature.
  - pmiller2 7y ago
    Can you spot the effect of the Cyprus bailout on the value of the EUR in this chart? https://www.fx-exchange.com/currencyimages/2013/eur/the-year-of-2013-eur-usd-exchange-rates-history-graph.png https://www.fx-exchange.com/currencyimages/2013/eur/the-year... What happened immediately after that?
    - mopsi 7y ago
      If you sold a house for 300k the month before and then government confiscated a third of it, I doubt the value of EUR was of much consolation. Had the 300k been held in cryptocurrencies, the government would've been powerless to seize a part of it.

by mopsi 7y ago

pmiller2 7y ago

Industrial demand isn’t the entire source of gold’s value, that’s true. I was more referring to it’s usefuln being the source of its value 2700 years ago when people started making coins out of it. I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation. > ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/us-house-to-silver-ratio-us-home-to-gold-ratio/ https://www.jmbullion.com/investing-guide/pricing-payments/u... Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-has-seized-nearly-200000-bitcoins-to-date-global-confiscations-are-up-to-453000/ https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...

mopsi 7y ago
> What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? No. I am aware that the value of gold fluctuates, but it is safer than many national currencies, stocks of failing companies or overvalued real-estate. The amount of gold in the world is known and stable and there's no way to massively "print" gold to crash its value. This stable supply is mimicked by algorithms built into cryptocurrencies. As long as there is demand for a something, and there is limited supply of it, it will be worth >0. Cryptocurrencies satisfy both requirements: they are limited in supply and have demand because of their usefulness (fast & cheap transactions). > Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. No need for hypotheticals. The government of Cyprus confiscated 47.5% of all holdings above 100 000 EUR in 2013 during its banking crisis. https://eu.usatoday.com/story/money/business/2013/07/29/bank-of-cyprus-depositors-lose-savings/2595837/ https://eu.usatoday.com/story/money/business/2013/07/29/bank... Cyprus is full member of the EU and Eurozone, so these risks are not limited to corrupt and failing third-world countries. > Oh, and if you think BTC can’t be confiscated, I have news for you: Most cryptocurrencies cannot be confiscated by network nodes like traditional banking institutions can freeze or rewrite payments and accounts (see Cyprus above). Only the one who has private keys controls the assets. This is a major feature.
- pmiller2 7y ago
  Can you spot the effect of the Cyprus bailout on the value of the EUR in this chart? https://www.fx-exchange.com/currencyimages/2013/eur/the-year-of-2013-eur-usd-exchange-rates-history-graph.png https://www.fx-exchange.com/currencyimages/2013/eur/the-year... What happened immediately after that?
  - mopsi 7y ago
    If you sold a house for 300k the month before and then government confiscated a third of it, I doubt the value of EUR was of much consolation. Had the 300k been held in cryptocurrencies, the government would've been powerless to seize a part of it.