Swiss Gold Rejection Deals Blow

[pmaitra]

You've always wanted the gold standard versus fiat money.

Make up your mind.

You want to talk about Gold Standard vs Fiat or Gold Standard vs Hybrid?

I am willing to discuss both, but I am absolutely in no mood to conflate the two.

 

[asianobserve]

Make up your mind.

You want to talk about Gold Standard vs Fiat or Gold Standard vs Hybrid?

I am willing to discuss both, but I am absolutely in no mood to conflate the two.

All along you were saying gold standard is better. Then in your later post you said that gold + other resources and products should be better to which I asked you are you now proposing a hybrid gold+other products alternative to valuing currency? It is you who should make up your mind. I dont have to make up my mind since I have been consistently supportive of fiat money system (Dollar dominated).

 

[pmaitra]

All along you were saying gold standard is better.

I never said that.

Better than what? Your sentence makes no sense at all.

I said Gold Standard is better than Fiat Currency.

Then in your later post you said that gold + other resources and products should be better . . .

Quote the post.

 

[asianobserve]

I never said that.

Better than what? Your sentence makes no sense at all.

I said Gold Standard is better than Fiat Currency.

Exactly.

Quote the post.

Here:

Yes, if we have gold standard, then the value of the currency purely depends upon its gold reserves. Yes, in a way you are correct as to how much gold resources a country has determines how rich it is, but the value of the currency purely depends upon how much gold bullion its central bank has in its vaults, and this does not include the unmined gold.

Now, we come back to what I mentioned before - can we eat gold if we are hungry?

Like I mentioned CPI and WPI, it is more practical to peg the value of the currency to not only precious metals, but also to things that are necessary for our survival [ref], such as energy, food, etc.. The advantage of using gold is it is more preservable than grain or oil.

Gold, silver, platinum, all are preservable. There is platinum bullion as well.

 

[pmaitra]

Exactly.




Here:

Thank you.

This is what you quoted:

Yes, if we have gold standard, then the value of the currency purely depends upon its gold reserves. Yes, in a way you are correct as to how much gold resources a country has determines how rich it is, but the value of the currency purely depends upon how much gold bullion its central bank has in its vaults, and this does not include the unmined gold.

Now, we come back to what I mentioned before - can we eat gold if we are hungry?

Like I mentioned CPI and WPI, it is more practical to peg the value of the currency to not only precious metals, but also to things that are necessary for our survival [ref], such as energy, food, etc.. The advantage of using gold is it is more preservable than grain or oil.

Gold, silver, platinum, all are preservable. There is platinum bullion as well.

Now, compare:

Yes, if we have gold standard, then the value of the currency purely depends upon its gold reserves. Yes, in a way you are correct as to how much gold resources a country has determines how rich it is, but the value of the currency purely depends upon how much gold bullion its central bank has in its vaults, and this does not include the unmined gold.

Now, we come back to what I mentioned before - can we eat gold if we are hungry?

Like I mentioned CPI and WPI, it is more practical to peg the value of the currency to not only precious metals, but also to things that are necessary for our survival [ref], such as energy, food, etc.. The advantage of using gold is it is more preservable than grain or oil.

Gold, silver, platinum, all are preservable. There is platinum bullion as well.

 

[asianobserve]

Thank you.

This is what you quoted:



Now, compare:

I construed the reference to gold in your post as singling out gold from among the various precious metals that can be used as basis for valuing currency. In anyway, you should be more clear in your statements as you seem to be throwing in contradictory premises:

1) it is more practical to peg the value of the currency to not only precious metals, but also to things that are necessary for our survival [ref], such as energy, food, etc..
2) The advantage of using gold is it is more preservable than grain or oil.
3)Gold, silver, platinum, all are preservable. There is platinum bullion as well(?)

You leave it to the reader to harmonize your confusing post.

 

[sgarg]

@sgarg
It is no wonder that since ancient times, Indians have always hedged their financial security in gold (and silver). There is only one reason for it - in gold, we trust.

The Vedic currency was gold and silver coins. The coins with a hole are from Vedic period. There was no stamp on Vedic coins. The hole was used for stringing as money was carried on the string tied to the waist in the fold of dhoti.

Coins are no longer convenient. The use of money has increased considerably. The "amount" of money in circulation is massive.

Hedging is a financial strategy. Hedging with real assets like gold, land, real estate, productive assets etc. are part of the game.

The creation of money by an international agency based on certain well-accepted criteria is needed. As I said earlier, the creation of money by national governments is a problem and this encourages massive wastage.

 

[pmaitra]

Answered inline in red because I am getting tired:

I construed the reference to gold in your post as singling out gold from among the various precious metals that can be used as basis for valuing currency. In anyway, you should be more clear in your statements as you seem to be throwing in contradictory premises:

1) it is more practical to peg the value of the currency to not only precious metals, but also to things that are necessary for our survival [ref], such as energy, food, etc..
Yes, Consumer Price Index is practical, because, people need food on a daily basis. I did not make it up. It is used by the Indian Government. Okay?
2) The advantage of using gold is it is more preservable than grain or oil.
Yes, feral rats can eat up grain, even if you hoard it. Gold is very unlikely to be eaten by rats, unless it disappears if there is an Uncle Sam sponsored Nazi Fascist coup and the gold gets stolen out to New York by some idiot called Arsenic.
3)Gold, silver, platinum, all are preservable. There is platinum bullion as well(?)
Yes.

You leave it to the reader to harmonize your confusing post.

You will always be confused, if that is your objective.

If I were acting like you when I was in school, I'd be made to bend over and then get caned in the posterior. Just telling you the honest truth.

 

[sgarg]

In a true globalized economy, the concept of nation-state is not relevant.

As long a politics adhers to nation-state, a true globalized economy is not possible.

The globalized economy has created massive wealth, but massive imbalances as well at the same time.

The distributed self-sustaining regional economies are destroyed. This has resulted in migration of people on a massive scale, and serious concentration of economic assets.

Today's world has big problems. As I said, imbalances always lead to war.

 

[asianobserve]

In a true globalized economy, the concept of nation-state is not relevant.

As long a politics adhers to nation-state, a true globalized economy is not possible.

The globalized economy has created massive wealth, but massive imbalances as well at the same time.

The distributed self-sustaining regional economies are destroyed. This has resulted in migration of people on a massive scale, and serious concentration of economic assets.

Today's world has big problems. As I said, imbalances always lead to war.

I think it's safe to say that with globalization the World has entered a new epoch in history, one that countries are still grappling with in terms of understanding and how to best approach it. More or less we are facing the same challenges as during previous historical shifts, initial confusion. But I'm confident soon we will learn how to best approach it (it will never be perfect).

 

[asianobserve]

Here's how fiat money value is determined:

Determinants of Exchange Rates

Numerous factors determine exchange rates, and all are related to the trading relationship between two countries. Remember, exchange rates are relative, and are expressed as a comparison of the currencies of two countries. The following are some of the principal determinants of the exchange rate between two countries. Note that these factors are in no particular order; like many aspects of economics, the relative importance of these factors is subject to much debate.

1. Differentials in Inflation

As a general rule, a country with a consistently lower inflation rate exhibits a rising currency value, as its purchasing power increases relative to other currencies. During the last half of the twentieth century, the countries with low inflation included Japan, Germany and Switzerland, while the U.S. and Canada achieved low inflation only later. Those countries with higher inflation typically see depreciation in their currency in relation to the currencies of their trading partners. This is also usually accompanied by higher interest rates. (To learn more, see Cost-Push Inflation Versus Demand-Pull Inflation.)

2. Differentials in Interest Rates

Interest rates, inflation and exchange rates are all highly correlated. By manipulating interest rates, central banks exert influence over both inflation and exchange rates, and changing interest rates impact inflation and currency values. Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise. The impact of higher interest rates is mitigated, however, if inflation in the country is much higher than in others, or if additional factors serve to drive the currency down. The opposite relationship exists for decreasing interest rates - that is, lower interest rates tend to decrease exchange rates. (For further reading, see What Is Fiscal Policy?)

3. Current-Account Deficits

The current account is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services, interest and dividends. A deficit in the current account shows the country is spending more on foreign trade than it is earning, and that it is borrowing capital from foreign sources to make up the deficit. In other words, the country requires more foreign currency than it receives through sales of exports, and it supplies more of its own currency than foreigners demand for its products. The excess demand for foreign currency lowers the country's exchange rate until domestic goods and services are cheap enough for foreigners, and foreign assets are too expensive to generate sales for domestic interests. (For more, see Understanding The Current Account In The Balance Of Payments.)

4. Public Debt

Countries will engage in large-scale deficit financing to pay for public sector projects and governmental funding. While such activity stimulates the domestic economy, nations with large public deficits and debts are less attractive to foreign investors. The reason? A large debt encourages inflation, and if inflation is high, the debt will be serviced and ultimately paid off with cheaper real dollars in the future.

In the worst case scenario, a government may print money to pay part of a large debt, but increasing the money supply inevitably causes inflation. Moreover, if a government is not able to service its deficit through domestic means (selling domestic bonds, increasing the money supply), then it must increase the supply of securities for sale to foreigners, thereby lowering their prices. Finally, a large debt may prove worrisome to foreigners if they believe the country risks defaulting on its obligations. Foreigners will be less willing to own securities denominated in that currency if the risk of default is great. For this reason, the country's debt rating (as determined by Moody's or Standard & Poor's, for example) is a crucial determinant of its exchange rate.

5. Terms of Trade

A ratio comparing export prices to import prices, the terms of trade is related to current accounts and the balance of payments. If the price of a country's exports rises by a greater rate than that of its imports, its terms of trade have favorably improved. Increasing terms of trade shows greater demand for the country's exports. This, in turn, results in rising revenues from exports, which provides increased demand for the country's currency (and an increase in the currency's value). If the price of exports rises by a smaller rate than that of its imports, the currency's value will decrease in relation to its trading partners.

6. Political Stability and Economic Performance

Foreign investors inevitably seek out stable countries with strong economic performance in which to invest their capital. A country with such positive attributes will draw investment funds away from other countries perceived to have more political and economic risk. Political turmoil, for example, can cause a loss of confidence in a currency and a movement of capital to the currencies of more stable countries.

6 Factors That Influence Exchange Rates

 

[pmaitra]

The Vedic currency was gold and silver coins. The coins with a hole are from Vedic period. There was no stamp on Vedic coins. The hole was used for stringing as money was carried on the string tied to the waist in the fold of dhoti.

Coins are no longer convenient. The use of money has increased considerably. The "amount" of money in circulation is massive.

Hedging is a financial strategy. Hedging with real assets like gold, land, real estate, productive assets etc. are part of the game.

The creation of money by an international agency based on certain well-accepted criteria is needed. As I said earlier, the creation of money by national governments is a problem and this encourages massive wastage.

I agree with you.

Yes, it is not practical to carry gold coins around.

People need a currency that they can trust.

Indians for centuries have been hoarding gold, because, it serves as a hedge against financial woes that may occur due to reasons beyond their control. Has it prevented famines due to food shortage? No. Has it saved lived at times of plagues? No. But, it has served as a safety net for millions of families when they were able to sell their gold to look out for an ailing family member. There are plenty of real life cases where a woman might sell her gold to pay for her husband's expensive medical care. Just one example. Money saved in bank doesn't work.

I recall a nice witty conversation between two elderly gentlemen at The Telegraph, UK, which was something like as follows:

Commentator 1: I worked all my life, and used up all my money for wine and women. Today I have almost no savings.
Commentator 2: You haven't lost anything. I did not party or have fun in my youth, and I saved money, but today, my money isn't worth anything.

 

[sgarg]

I think it's safe to say that with globalization the World has entered a new epoch in history, one that countries are still grappling with in terms of understanding and how to best approach it. More or less we are facing the same challenges as during previous historical shifts, initial confusion. But I'm confident soon we will learn how to best approach it (it will never be perfect).

The globalists have to first win war against "religion", then win war against "nation states".

The war against "religion" still proves to be a tough one.

I have a prediction for you - and the prediction is that globalization is doomed. The force of religion brought Roman empire to its knees.

 

[asianobserve]

The globalists have to first win war against "religion", then win war against "nation states".

The war against "religion" still proves to be a tough one.

I have a prediction for you - and the prediction is that globalization is doomed. The force of religion brought Roman empire to its knees.

We are now in globalization, albeit early stages. I think we are going to have a stateless World under globalization, that's uthopian, much like how Marxists envisioned a "class-less World." It's simply never going to happen. What we'll have is a more interconnected World in all facets of life.

I think there were be pushbacks from reactionaries from conservatives. We are seeing this now in Islamic fundamentalism. But I'm confident that over time they will be neutralized over time.