A Store Of Value.

[roman holiday]

I'm going to side with facts.

I agree that gold is held in high esteem by many.

Would you also agree that there is no rational basis for doing so, nothing special about gold itself?

It's just a tradition.

I am not a rationalist. As far as discussing on a theoretical basis what money is and which is the best form of it, we will only end up going in circles.

Best to look at money as something practical and which performs certain functions. That way you can pragmatically look to the real world and see what works. The classical definitions of money [notice they are functional] suit gold well.

Gold has proved to function well as money and what interests me most about it is the historical role it has played in international trade. I wonder if international trade would ever have been possible without it. I also wonder if the imbalances in trade that have built up are due primarily to the loss of a gold exchange standard. I think it acted as a ballast of sorts which managed to cut across all cultures and keep consumption and production on a level.

Yes, a good tradition I think, and one the world may be constrained to go back to in the end. Perhaps SDRs backed by gold are in order.

Edited August 19, 2009 by roman holiday

[punter]

gold is a precious metal and has been considered a store of value for thouands of years. Holding gold preserves wealth when governments are hellbent on destroying their currencies, owning something physical, portable and precious is worthwhile despite what the stupid critics on here say, they're allowed their opinion of course but they're ignorant and wrong

[Injin]

gold is a precious metal and has been considered a store of value for thouands of years. Holding gold preserves wealth when governments are hellbent on destroying their currencies, owning something physical, portable and precious is worthwhile despite what the stupid critics on here say, they're allowed their opinion of course but they're ignorant and wrong

none of this changes the fact that no one has any actual use for gold, nor wants it for itself.

Everyone wants it as a "store of wealth" (more or less) just because other people want it. Mass hysteria isn't rational, m'kay.

Using others hysteria to look after yourself and your family might be a rational choice but don't join in, for gods sake.

[punter]

Average house price July 1992: £80,000

Gold in 1992 $350 (1.64 exchange rate) = £216

80,000/216 = 370 ounces

370 ounces of gold in 2009 ($940 or £590 per ounce) = £218,300

Average house price in 2009 £154,000

-

so even after a massive house price boom during the 90's gold is still worth more. fascinating

Edited August 19, 2009 by punter

[punter]

none of this changes the fact that no one has any actual use for gold, nor wants it for itself.

Everyone wants it as a "store of wealth" (more or less) just because other people want it. Mass hysteria isn't rational, m'kay.

Using others hysteria to look after yourself and your family might be a rational choice but don't join in, for gods sake.

it's up to humans what they do with their savings right? if they want to buy gold and gold has shown itself to be a store of wealth than that's what they will do. If they want to buy stocks then that is what they will do, if they want to speculate in property then that's what they will do but still gold keeps pace or outperforms a lot more risky forms of storing people's wealth and will continue to do so. nobody says be 100% in gold!

[Injin]

it's up to humans what they do with their savings right? if they want to buy gold and gold has shown itself to be a store of wealth than that's what they will do. If they want to buy stocks then that is what they will do, if they want to speculate in property then that's what they will do but still gold keeps pace or outperforms a lot more risky forms of storing people's wealth and will continue to do so. nobody says be 100% in gold!

Sure.

I;'m just debunking the "store of value" stuff.

I accept completely that people buy, trade sell and like gold.

I just can't see any reason why and whenever anyone offers any they seem philosophically muddled or based on nothing at all. I can understand the reason for acquiring smokes, or porn, food or booze.

Gold?

Hmmm.

[punter]

Sure.

I;'m just debunking the "store of value" stuff.

I accept completely that people buy, trade sell and like gold.

I just can't see any reason why and whenever anyone offers any they seem philosophically muddled or based on nothing at all. I can understand the reason for acquiring smokes, or porn, food or booze.

Gold?

Hmmm.

you don't see any reason why it happens but despite this billions of dollars in gold are traded every year, so obviously there is a demand for gold, there are thriving markets in gold and there has been for hundreds and thousands of years, even central banks own it and trade it every week, they must do it for a reason after all they haven't yet abandoned all pretence of having nothing in their vaults.

it's about wealth and savings, you think we should just SPEND everything? what is the point in investing in stocks or anything else? it's about building wealth over the long term, gold is also about getting out of the fiat currency manipulated by governments and cashing it in when and if you need it, or passing it on to your dependents.

[Injin]

you don't see any reason why it happens but despite this billions of dollars in gold are traded every year, so obviously there is a demand for gold, there are thriving markets in gold and there has been for hundreds and thousands of years, even central banks own it and trade it every week, they must do it for a reason after all they haven't yet abandoned all pretence of having nothing in their vaults.

it's about wealth and savings, you think we should just SPEND everything? what is the point in investing in stocks or anything else? it's about building wealth over the long term, gold is also about getting out of the fiat currency manipulated by governments and cashing it in when and if you need it, or passing it on to your dependents.

I can understand gold being used (for example) as a conductor in a PC or whatever.

But the majority of the gold market is just folks thinking gold has value, then passing it around. Pure bubble stuff.

[Stars]

it's about wealth and savings, you think we should just SPEND everything? what is the point in investing in stocks or anything else? it's about building wealth over the long term, gold is also about getting out of the fiat currency manipulated by governments and cashing it in when and if you need it, or passing it on to your dependents.

The point i would make is that it isn't as if your investment is actually doing anything to build more wealth

If ya want to build wealth, why not add some more of it yourself?

[punter]

I can understand gold being used (for example) as a conductor in a PC or whatever.

But the majority of the gold market is just folks thinking gold has value, then passing it around. Pure bubble stuff.

and central banks, financial institutions etc. are large buyers and holders of gold. China is buying a lot of gold. it's not pure bubble stuff, it does have intrinsic value because it costs money and effort to mine and produce (unlike FIAT paper money) , the final price you see quoted on the open market is the consensus between buyers and sellers and yes, the price can be manipulated but not for long as you will see over the long term it eventually rises and keeps pace or outperforms everything else

[punter]

The point i would make is that it isn't as if your investment is actually doing anything to build more wealth

If ya want to build wealth, why not add some more of it yourself?

it's really up to each individual, if they want to invest in stocks or a business then they should, nobody is saying be 100% in gold but to have it part of their portfolio as it is an excellent hedge against inflation and also has other benefits like being portable, easily cashed in, not subject to some financial institution crashing (ask those people storing their cash in icelandic banks if they prefer gold now )

[Injin]

and central banks, financial institutions etc. are large buyers and holders of gold. China is buying a lot of gold. it's not pure bubble stuff, it does have intrinsic value because it costs money and effort to mine and produce (unlike FIAT paper money) , the final price you see quoted on the open market is the consensus between buyers and sellers and yes, the price can be manipulated but not for long as you will see over the long term it eventually rises and keeps pace or outperforms everything else

This is the sort of thing I mean.

Theres no such thing as intrinsic value. People have value for things, things don't have value independently all on their own.

Gold seems to have value largely because a lot of people who don't understand economics or philosophy particularly well think it's special. Now, I have no expectation of them suddenly becoming interested in either subject and learning enough to stop the prejudice any time soon, but I'm not going to join in.

I call tulipism!

[DiggerUK]

I have a question for the gold types.

If a way of cheaply producing gold was discovered, would there be more wealth in the world as a result, or less?

If gold could be produced cheaper, and the increased supply was on a massive scale then market laws would trend the price of gold down.

If their was no substantial increase in supply, then it would just mean the mining company would make more profit.

That being said I'll answer your question.

It would not make a jot of difference to wealth increases or decreases on a world scale.

Gold does not produce anything, it can't of itself increase wealth, only labour produces wealth.

Gold is a lump of metal, not holy water.

[wren]

Gold is a proxy for energy.

[roman holiday]

This is the sort of thing I mean.

Theres no such thing as intrinsic value. People have value for things, things don't have value independently all on their own.

Gold seems to have value largely because a lot of people who don't understand economics or philosophy particularly well think it's special. Now, I have no expectation of them suddenly becoming interested in either subject and learning enough to stop the prejudice any time soon, but I'm not going to join in.

I call tulipism!

Or,.... don't understand economics or philosophy as according to Injin.

News flash! There are plenty who understand economics and philosophy and still appreciate the role gold plays in human affairs. You really need to get out more often.

Edited August 19, 2009 by roman holiday

[Injin]

Or,.... don't understand economics or philosophy as according to Injin.

News flash! There are plenty who understand economics and philosophy and still appreciate the role gold plays in human affairs. You really need to get out more often.

Great. Explain it to me.

What's special about gold?

[DiggerUK]

What's special about gold?

It's a lump of metal, an element that doesn't degrade, it's pretty and shiny.

It has become special by empirically finding out it performs useful functions over hundreds of years.

Functions it still performs today.

One of those empirical findings is that although money isn't always gold, gold is always money.

Which part of history have you missed, what part of understanding how the most beneficial human practices survive, and the practices that are of no value disappear.

OK I accept that past performance is no guide........... and after a few thousand years it could be too early to call, but for now the store of value is the most powerful argument going.

[Injin]

It's a lump of metal, an element that doesn't degrade, it's pretty and shiny.

Righto.

It has become special by empirically finding out it performs useful functions over hundreds of years.

Functions it still performs today.

One of those empirical findings is that although money isn't always gold, gold is always money.

No it isn't, obviously. Right now hardly anyone at all is using gold as money. In times gone by hardly anyone used money but the aristocracy, everyone else got by on other stuff.

Which part of history have you missed, what part of understanding how the most beneficial human practices survive, and the practices that are of no value disappear.

Like religion, statism, monarchy, slavery, wife beating etc?

Seems to me the useless things disappear when we logically and rationally eamine them. Doesn't look too good for gold then, does it?

OK I accept that past performance is no guide........... and after a few thousand years it could be too early to call, but for now the store of value is the most powerful argument going.

You can't store value - it exists in peoples heads.

Now, bearing in mind I've already accepted several times that people will use gold, do you have any reasons why?

So far you've just done the usual "people value it because it's valuable therefore it's valuable to people and then it has value" chicken/egg schizophrenic loop. Which I accept happens, but makes no sense.

[roman holiday]

Great. Explain it to me.

What's special about gold?

Do solipsists require explanation?

What's special about the kind of hyper-rationalism you subscribe to? How can you prove anything? But see, that's the problem, you do not need to prove something in order to believe in it. If you did, you would have no beliefs.

Coherent beliefs is a much better model than rational axioms... somehow clearly and distinctly perceived by the pure light of reason.

Edited August 19, 2009 by roman holiday

[Stars]

If gold could be produced cheaper, and the increased supply was on a massive scale then market laws would trend the price of gold down.

If their was no substantial increase in supply, then it would just mean the mining company would make more profit.

That being said I'll answer your question.

It would not make a jot of difference to wealth increases or decreases on a world scale.

Gold does not produce anything, it can't of itself increase wealth, only labour produces wealth.

Gold is a lump of metal, not holy water.

I agree

[Injin]

Do solipsists require explanation?

What's special about the kind of hyper-rationalism you subscribe to? How can you prove anything? But see, that's the problem, you do not need to prove something in order to believe in it. If you did, you would have no beliefs.

Coherent beliefs is a much better model than rational axioms... somehow clearly and distinctly perceived by the pure light of reason.

Right.

So rather than any empriciism, rationality or actual answer, you've decided to attack philosophy itself. And then ramble a bit.

Oh, and you put forward a rational axiom as the highest standard for finding out that coherent beliefs are the way to go, which was nice. Mental, but nice.

Fancy having a go at answering the question now?

[Minos]

Great. Explain it to me.

What's special about gold?

It annoys RB.

[roman holiday]

Right.

So rather than any empriciism, rationality or actual answer, you've decided to attack philosophy itself. And then ramble a bit.

Oh, and you put forward a rational axiom as the highest standard for finding out that coherent beliefs are the way to go, which was nice. Mental, but nice.

Fancy having a go at answering the question now?

Didn't attack philosophy... just dry rationalism. I am a skeptic fwiw.

As I said, get outside your head and read some history. Vico, the Italian philospher talked of an imaginative quality of mind called "fantasia" by which you can get beyond your own confined habit of thinking and appreciate another ages way of looking at things. You should try it some time.

As for answering your questions. I just know it would be a waste of time. No offence intended. You just seem to have your mind pretty made up.... but then for some reason want to argue.

Edited August 19, 2009 by roman holiday

[DiggerUK]

Injin,

You make such a dogs breakfast of your replies.

Gold is always money.

Take gold anywhere on the planet and you can exchange it for money.

Empirical practice is the basis of all reasoning, common sense tells people what works at the end of the day, further examination reveals the how's and why's.

Your comment was a non sequitur, your favourite response, usually involving a butter wouldn't melt in your mouth approach, by pretending not to read what was posted. What I posted is on the record.

Nothing exists in peoples heads other than knowledge and thought processes.

Some can be substantiated with reasoning and examination. That was the great legacy of scientific analysis bequeathed to us from the C17th., you should study it sometime.

All your arguments are pulled out of thin air, such mysticism has been ignored for a long time along with much of religious thought.

Gold is a store of value because that is what it demonstrates it does, not because people decide it should do so.

A process that means you look at the real world with scientific discipline, not mystical rubbish.

[Injin]

Injin,

You make such a dogs breakfast of your replies.

Interestingly I;'m usualy accused of being terse.

Gold is always money.

Go to tesco with some gold.

When you find you are wrong, come back to me.

Take gold anywhere on the planet and you can exchange it for money.

Wtf man! You just said it was money. Make yer mind up!

Empirical practice is the basis of all reasoning, common sense tells people what works at the end of the day, further examination reveals the how's and why's.

Your comment was a non sequitur, your favourite response, usually involving a butter wouldn't melt in your mouth approach, by pretending not to read what was posted. What I posted is on the record.

You obviously don't read what you write. Why do you value gold?

So far the sum total of why gold is valuable is "because other people value it" which is pure bubblevision.

Nothing exists in peoples heads other than knowledge and thought processes.

Some can be substantiated with reasoning and examination. That was the great legacy of scientific analysis bequeathed to us from the C17th., you should study it sometime.

All your arguments are pulled out of thin air, such mysticism has been ignored for a long time along with much of religious thought.

I haven't got any arguments. I've got nothing and am trying to fill it in with something more than the 4 winds.

Gold is a store of value because that is what it demonstrates it does, not because people decide it should do so.

A process that means you look at the real world with scientific discipline, not mystical rubbish.

I am doing.

No one I know uses, wants or needs gold. It's useless as far as my entire life is concerned, bar one or two mumbo jumbo mystical semi religious ceremonies that I didn't believe in when I did them and wouldnt ever do again.

Yet I'm being told that this stuff is money!

And isn't money, in the next breath.

And is valuable because it just is!!!1111

Have you got anything more than schizophrenic self referential loop bobbins to throw at this question?