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> Central banks could burst this bubble easily by selling off their gold reserves. Maybe the bubble is in fiat currency? Imagine in 1933 you had locked one ou

> Central banks could burst this bubble easily by selling off their gold reserves. Maybe the bubble is in fiat currency? Imagine in 1933 you had locked one ounce of gold in a box, and 35 dollar bills in another box (that year, the gov valued gold at $35/oz, see: http://en.wikipedia.org/wiki/Executive_Order_6102 http://en.wikipedia.org/wiki/Executive_Order_6102). Unlock the box today. What would you rather have? 35 dollar bills or an ounce of gold which is currently trading at $1,680 ? Gold has been a store of value for thousands of years, while during that time, paper currencies have come and gone.

jbooth 14y ago
The only way fiat currency fails is if the global economy goes so far down the tubes that gold isn't worth anything either, compared to nonperishable food and bullets. Take a look at a GDP graph of the 75 years prior to fiat currency and then the 75 years afterwards. It goes from a severe jigsaw into much smaller oscillations. This is because fiat currency allows for counter-cyclical monetary policy, which was universally understood to be a good thing until Obama was inaugurated, and will once again be a universally good thing as soon as we have a different president.
- danenania 14y ago
  "The only way fiat currency fails is if the global economy goes so far down the tubes that gold isn't worth anything either, compared to nonperishable food and bullets." There are countless examples of fiat currencies collapsing throughout history. It doesn't imply the collapse of civilization, just the collapse of an overburdened government. Governments and banks would like us to believe that civilization will collapse alongside them if we let them fail. It's very convenient for them--they can get away with anything. But civilization has bounced back from much, much worse.
  - jbooth 14y ago
    Sorry, I meant US dollars (the default reserve currency of the world), not Argentinian pesos. The occasional collapse of various small government currencies isn't really a statement on fiat currency, it's a statement on those particular small economies. For fiat currency to fail as a concept, the international reserve currency (USD for now) would have to fail.
  - bitcartel 14y ago
    Looks like the USD is on its second iteration. Originally there were the United States Notes (aka Greenback) which were replaced with Federal Reserve Notes. (The Birth of U.S. Fiat Currency - http://www.bloomberg.com/news/2012-04-02/the-birth-of-u-s-fiat-currency.html http://www.bloomberg.com/news/2012-04-02/the-birth-of-u-s-fi...)
craigyk 14y ago
I'd rather have invested that $35 into the stock market. Going by the dow jones from 1933 to today, that $35 would be worth over $9,000. That's the proper comparison to gold.
- jbooth 14y ago
  Heck, CPI inflation gets you from $35 to $600.
- bitcartel 14y ago
  The Dow Jones index changes over time, so to track the index properly you have to buy and sell stocks all the time, just like index tracking funds do. As a passive investment locked in a box, you would have had to purchase $35 worth of stock in 1933 and kept the stock certificate(s). Maybe there was a mutual fund around at the time that tracked the Dow Jones. Opening the box today, most of those companies (or funds) probably don't exist anymore, so you wouldn't actually be able to sell your stocks for cash.
  - jbooth 14y ago
    When you start adding conditions for what "counts" and "doesn't count", you're probably not being impartial. $35 turns into $600 from 1933-now, just from inflation. Invested in gold, it gets double that, and in stocks, it gets 15X that. Those are the statistics on the matter.
    - bitcartel 14y ago
      If you put 35 dollar bills in a box in 1933 and open it up today in 2013, you still only have 35 dollar bills, physically in your hand. You can look at the purchasing power of $35 in 1933 vs 2013, but you don't have $600 physically in your hands to spend. If anything, the purchasing power shows that paper bills have lost value whereas gold has gained value. In 1933, $35 could buy you 1 ounce of gold, whereas today's equivalent of $600 only buys you ~1/3 ounce. My original post specifically talked about locking $35 in a box, so conditions haven't changed. Also I'm not claiming that gold is the best investment over time.

jbooth 14y ago

The only way fiat currency fails is if the global economy goes so far down the tubes that gold isn't worth anything either, compared to nonperishable food and bullets. Take a look at a GDP graph of the 75 years prior to fiat currency and then the 75 years afterwards. It goes from a severe jigsaw into much smaller oscillations. This is because fiat currency allows for counter-cyclical monetary policy, which was universally understood to be a good thing until Obama was inaugurated, and will once again be a universally good thing as soon as we have a different president.

danenania 14y ago
"The only way fiat currency fails is if the global economy goes so far down the tubes that gold isn't worth anything either, compared to nonperishable food and bullets." There are countless examples of fiat currencies collapsing throughout history. It doesn't imply the collapse of civilization, just the collapse of an overburdened government. Governments and banks would like us to believe that civilization will collapse alongside them if we let them fail. It's very convenient for them--they can get away with anything. But civilization has bounced back from much, much worse.
- jbooth 14y ago
  Sorry, I meant US dollars (the default reserve currency of the world), not Argentinian pesos. The occasional collapse of various small government currencies isn't really a statement on fiat currency, it's a statement on those particular small economies. For fiat currency to fail as a concept, the international reserve currency (USD for now) would have to fail.
- bitcartel 14y ago
  Looks like the USD is on its second iteration. Originally there were the United States Notes (aka Greenback) which were replaced with Federal Reserve Notes. (The Birth of U.S. Fiat Currency - http://www.bloomberg.com/news/2012-04-02/the-birth-of-u-s-fiat-currency.html http://www.bloomberg.com/news/2012-04-02/the-birth-of-u-s-fi...)

craigyk 14y ago

I'd rather have invested that $35 into the stock market. Going by the dow jones from 1933 to today, that $35 would be worth over $9,000. That's the proper comparison to gold.

jbooth 14y ago
Heck, CPI inflation gets you from $35 to $600.
bitcartel 14y ago
The Dow Jones index changes over time, so to track the index properly you have to buy and sell stocks all the time, just like index tracking funds do. As a passive investment locked in a box, you would have had to purchase $35 worth of stock in 1933 and kept the stock certificate(s). Maybe there was a mutual fund around at the time that tracked the Dow Jones. Opening the box today, most of those companies (or funds) probably don't exist anymore, so you wouldn't actually be able to sell your stocks for cash.
- jbooth 14y ago
  When you start adding conditions for what "counts" and "doesn't count", you're probably not being impartial. $35 turns into $600 from 1933-now, just from inflation. Invested in gold, it gets double that, and in stocks, it gets 15X that. Those are the statistics on the matter.
  - bitcartel 14y ago
    If you put 35 dollar bills in a box in 1933 and open it up today in 2013, you still only have 35 dollar bills, physically in your hand. You can look at the purchasing power of $35 in 1933 vs 2013, but you don't have $600 physically in your hands to spend. If anything, the purchasing power shows that paper bills have lost value whereas gold has gained value. In 1933, $35 could buy you 1 ounce of gold, whereas today's equivalent of $600 only buys you ~1/3 ounce. My original post specifically talked about locking $35 in a box, so conditions haven't changed. Also I'm not claiming that gold is the best investment over time.