4 ms·

So … like $12,000,000,000,000 of gold? I'm not sure if that's more or less than I'd expect.

by gffrd 4y ago

TacticalCoder 4y ago
> I'm not sure if that's more or less than I'd expect. Most people "owning" gold in the world hold paper gold that isn't backed by physical gold. And the paper gold volume traded on a daily basis is several orders of magnitude higher than the physical one. So even if it's less physical gold than one would expect (I didn't check you maths btw), there's "more" to it than just the physical gold.
- deltree7 4y ago
  This is a conspiracy, QAnonish take on securities
- DoingIsLearning 4y ago
  Perhaps a stupid question from a non-economics laymen: If people are holding 'paper' gold that isn't backed by physical gold, then doesn't that mean that gold as a product is more scarce than the market demand? Wouldn't it mean that by increase the volume of 'paper' gold assets we are artificially pricing gold incorrectly?
  - jrumbut 4y ago
    But the market is for paper gold, so the price is for paper gold. Realistically, if you want some actual gold a lot of that price is going to be about delivery, storage, verification, etc, etc. The paper gold probably helps divert people who just want to bet on the price of gold away from the people who actually gold to do work (though inevitably the two groups will affect the price the other pays).
  - homeland221 4y ago
    Bingo! We are artificially pricing gold incorrectly! USA has very little gold compare to others like Russia and China. Nixon realized this in the 70s and then we have fiat dollars. Most people don't know the price of gold other than what is being advertised on the market which is based on paper gold mostly. Having gold as valuable can undermine USA petroldollar dominance and bad for America in general as gold commodity USA has very little to influence worldwide order.
- thesumofall 4y ago
  Do you have a source for that? At least the major ETFs seem physically backed? And just because trading volumes exceed available gold, this doesn’t necessarily imply that this is just “paper gold”
  - MerelyMortal 4y ago
    The term is 'rehypothecation'. This is just the first result in an internet search for gold rehypothecation: https://goldsilver.com/blog/what-is-gold-hypothecation-and-rehypothecation/ https://goldsilver.com/blog/what-is-gold-hypothecation-and-r...
yabones 4y ago
It's definitely less than the world's total GDP, considering that China and the USA are both at or above that. So, it would not be possible for every country to have a gold-backed currency without a major decline in wealth. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... (Disclaimer, I am in no way an economist :) )
- machina_ex_deus 4y ago
  This is circular reasoning, because if the currencies were backed by gold, its price would skyrocket to fit the GDP. You can't compare price of gold as a speculative investment to price of gold backing an entire financial system.
  - yabones 4y ago
    That does make sense... Is there any estimation for how much gold _would_ be required to for every country on the planet to have a gold-backed currency?
  - imtringued 4y ago
    What if gold creates needless friction that prevents a higher GDP? For example, in a global gold reserve system it is possible for individual countries to run out of gold, possibly reducing their GDP to nothing. This happened way more often than you think and for many wildly different reasons. For example, the famous Weimar Republic hyperinflation was caused by an outflow of gold due to forced reparation payments that go way beyond what a destroyed post war economy could bear. The moment there was no gold in the country, the currency became worthless. Soon after that, just six or seven years later the great depression happened. People argue that gold solved the inflation problem but all it did was swing violently from inflation to deflation and back. Only people who have too much money and don't need more money benefited from this, a bonafide market failure. One would expect a market economy to allocate money to those who need it most but instead our economy allocates money to those who don't need it. Nobody seems to be aware of this contradiction.
    - 4y ago

So … like $12,000,000,000,000 of gold? I'm not sure if that's more or less than I'd expect.

by gffrd 4y ago

So … like $12,000,000,000,000 of gold? I'm not sure if that's more or less than I'd expect.

> I'm not sure if that's more or less than I'd expect. Most people "owning" gold in the world hold paper gold that isn't backed by physical gold. And the paper gold volume traded on a daily basis is several orders of magnitude higher than the physical one. So even if it's less physical gold than one would expect (I didn't check you maths btw), there's "more" to it than just the physical gold.

deltree7 4y ago
This is a conspiracy, QAnonish take on securities
DoingIsLearning 4y ago
Perhaps a stupid question from a non-economics laymen: If people are holding 'paper' gold that isn't backed by physical gold, then doesn't that mean that gold as a product is more scarce than the market demand? Wouldn't it mean that by increase the volume of 'paper' gold assets we are artificially pricing gold incorrectly?
- jrumbut 4y ago
  But the market is for paper gold, so the price is for paper gold. Realistically, if you want some actual gold a lot of that price is going to be about delivery, storage, verification, etc, etc. The paper gold probably helps divert people who just want to bet on the price of gold away from the people who actually gold to do work (though inevitably the two groups will affect the price the other pays).
- homeland221 4y ago
  Bingo! We are artificially pricing gold incorrectly! USA has very little gold compare to others like Russia and China. Nixon realized this in the 70s and then we have fiat dollars. Most people don't know the price of gold other than what is being advertised on the market which is based on paper gold mostly. Having gold as valuable can undermine USA petroldollar dominance and bad for America in general as gold commodity USA has very little to influence worldwide order.
thesumofall 4y ago
Do you have a source for that? At least the major ETFs seem physically backed? And just because trading volumes exceed available gold, this doesn’t necessarily imply that this is just “paper gold”
- MerelyMortal 4y ago
  The term is 'rehypothecation'. This is just the first result in an internet search for gold rehypothecation: https://goldsilver.com/blog/what-is-gold-hypothecation-and-rehypothecation/ https://goldsilver.com/blog/what-is-gold-hypothecation-and-r...

yabones 4y ago

It's definitely less than the world's total GDP, considering that China and the USA are both at or above that. So, it would not be possible for every country to have a gold-backed currency without a major decline in wealth. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... (Disclaimer, I am in no way an economist :) )

machina_ex_deus 4y ago
This is circular reasoning, because if the currencies were backed by gold, its price would skyrocket to fit the GDP. You can't compare price of gold as a speculative investment to price of gold backing an entire financial system.
- yabones 4y ago
  That does make sense... Is there any estimation for how much gold _would_ be required to for every country on the planet to have a gold-backed currency?
- imtringued 4y ago
  What if gold creates needless friction that prevents a higher GDP? For example, in a global gold reserve system it is possible for individual countries to run out of gold, possibly reducing their GDP to nothing. This happened way more often than you think and for many wildly different reasons. For example, the famous Weimar Republic hyperinflation was caused by an outflow of gold due to forced reparation payments that go way beyond what a destroyed post war economy could bear. The moment there was no gold in the country, the currency became worthless. Soon after that, just six or seven years later the great depression happened. People argue that gold solved the inflation problem but all it did was swing violently from inflation to deflation and back. Only people who have too much money and don't need more money benefited from this, a bonafide market failure. One would expect a market economy to allocate money to those who need it most but instead our economy allocates money to those who don't need it. Nobody seems to be aware of this contradiction.
  - 4y ago