[Page 5] Pertaining to the gold standard and the President Nixon discussion, is it clear as to what exactly the gold standard is and why its abandonment in 1971 has profoundly impacted our current economic condition on a global basis?
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Seems to me that because the supply of gold is limited the supply of currency that could be printed was limited until the United States was taken off the gold standard.
So, the gold standard limited the amount of currency that could be printed because there was a limited supply of the gold that was required to back any currency that was printed. When the United States went off the gold standard limitless amounts of currency could be printed with only the taxpayer as the backing for that currency.
This extravagant printing of currency decreases the value of the currency already in circulation and puts the taxpayer in a place of involuntary servitude. In effect reducing the taxpayer from the position of an equal and valuable member of society to a commodity or source of income for the money printers and their beneficiaries.
Personally, I believe that the gold standard was done away with to manipulate the economies of other countries vis a vis the world.
When paper currencies are used they are traded...this means that if one currency is traded more than another then brokers have an upper-hand over other nation's currencies. The gold standard was a far better system which meant that it was not easily manipulated.
I hope my take on this was well received. However, I am willing to learn more or analyse other points of view, given the facts of course.
To me, the gold standard prevented our government from living beyond it's means. More importantly, it kept government programs and spending in check. If it got out of wack, investors in our government bonds would convert their investments into gold and deplete the US gold reserves to nothing (essentially driving the country into bankruptcy). However, since our politicians for years have been unable to balance our national budget, the only way to postpone bankruptcy was to go off the gold standard. This allowed the government to pay off their dates with the new money they just printed. This had the effect of unleashing inflation on the US citizen. But, what the heck, at least the politicians could continue on with their free-spending ways with almost no consequences.
This is something that has just never made sense to me in any way. When I first learned about money, we had a gold standard, and we all learned, through our weekly reader, that the gold was in Fort Knox. Of course it wouldn't necessarily have to be gold, but something that holds value. Some cultures use other things of value to them, like yams, but you couldn't hoard them for years - they would rot. The point is that gold is tangible - rather than just paper value.
Our money system has grown so complex, that the right hand doesn't know what the left hand is doing, and our market is open and vulnerable to manipulation - as the supposed typo in entry proved for the stock market, twice.
I am not sure what the answer is. I love the freedom our country was founded on, but the laws are supposed to be there to protect us from people who abuse the freedoms. We need to examine our whole system.
It has had a great impact in the global economy because now printed money has to backup and it is much easier to manipulate it, of course the rich and powerful are the ones who can manipulate it.
Once we left the gold standard behind it was like saying, "We can't be out of money...we still have checks!" Followed by the mind thought that it will be okay, because all tax paying American's will help make the deposits to put the checking account back in balance.
I just completed an Intermediate Macroeconomics class as part of my Econ major. I think it is concerning that we were taught the US came off the gold standard in 1933; that the world's nations were only able to overcome the great depression after they left the gold standard - in the 1930s. The text stressed this. I am not disagreeing but, rather highlighting yet another point of weakness of our financial education.
That said, the abandonment of the Gold Standard skews the reality of how are economy is progressing. It appears that if you look at the DOW, GDP and real GDP the economy has been going up since 2001. However, when you chart $GDP/$Gold you see each is crashing relative to gold.
The problem with the goldstand dard is we don't know who manipulates the standard. Gold and silver should be much more expensive then it is now. The ultimate way to the top is by opening up your own business, but keep your day job until your income from your business go beyond your day job income. www.HowMoneyReallyWorks.com is a great site to understand this information.
the value of dollar has declined dramatically,and America has become the biggest debtor.furthermore,due to the theory 'bigger,bigger and disappear',what's coming next!how about the size of the effect of the perfect storm.People will come back gold standard?and what we can do to prepare for this storm?
To be honest, I don't know exactly about gold standard since 1971 until today. After re-read again, it forced me to re-read again your book 'Increase Your Financial IQ'.. and you have highlighted to make more money and move from currency into real assets.
Gold standard were removed, because in 1971 US reached it's internal peak of oil production. US treasury run of gold. The president were forced to remove gold standard to facilitate the import of cheap oil from Saudi Arabia. Of course on the expense of Saudi Arabia people.
In year 2004 the whole world reached it's peak of oil.
In your recent update you mention no to buy gold based on roubini's predictions for 2010 and the gold and/or precious metals bubble..
Your stance with Mike Maloney was the opposite and I understand that "money" can change over night...
Can you post a updated stance on how you feel about Mike Maloney's predictions and Roubini's..
To me I am seeing that you are aligning with Roubini over Maloney at this time but I would like to hear it directly from you. I do not want to assume but rather hear from you, what you think about what Mike Maloney is saying and why you think Roubini is right.
The update you posted cleary states your posistion but I want to see why and what changed from your point of veiw on "money", b/c there were fundamentals that you and Maloney speak of that do not make sense to me now. If silver/gold are a gauge to the printing press, we are printing more money then ever.. So how is silver/gold in a buble if this is the part where we are not seeing the effects of all this extra money.
The Gold Standard is a measure of value as gold is a valuable commodity that is universal around the world. Money is a paper promise that can be printed as fast as we want to make promises to make good on the payments. Money has No real hard value that can be melted down and used for jewelry. If it burns up, it's gone. The value is ZERO.
Dear, Robert,
In your August 20, 2007 Yahoo finance article "A silver lining for nervous investors" you recomend Silver ETF's as good option for general public to own silver. Nevertheless Michael Maloney in his book "guide to investing in gold and silver" places ETF's in one line with precious metals pool accounts, certificates etc - what he calls "paper gold" and "paper silver". the main reason (as I understand) is because "paper gold & silver" are actualy securities not the real precious metals, they are part if financial system (which is in a mess not), so if real currency crisis comes, I won't be able to get phisical gold & silver "out of" them. Whom should I believe in this question - you or Michale Maloney?
Arturs
To my understanding the gold standard meant that there was enough gold to match the dollars. Now that we're off of that standard, the govn't can just print as many dollar bills as it wants, but there is nothing to back it up. As you stated in another "money is an agreement". Once there is no agreement that these pieces of paper have value, paper money is worthless. That is why the price of gold is so high, because the dollars aren't worth much
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I understand that the USA had to back up the supply of currency with hard assets/commodities like gold & silver. This was to "guarantee" the solvency of the country to our creditors. By removing the standard, the governement could then print money without concern about having anything to back it up other than their word.
It is kind of like this. If I worked hard and earned money and saved it, eventually I could buy a home and make a substantial down payment say of 20%. This was what the mortgage companies required at one time because they wanted to limit their risk of exposure to me defaulting on my loan.
In todays market, most times we can buy homes for little or nothing down and not even anything more than a measly stream of income to back our purchase. This is essentially what the governement is doing and at some point in the future, this house of cards will crash down.
The section pertaining to the gold standard is clear to those of us who lived through it, witnessed it, and later studied about it, but it could use another example or two of the exchange of cash for gold that was going on. What's not so clear is why a standard existed at all, and what its absence means. What is meant by the "full faith and credit of the United States"? Do people undersand slavery, indenture, etc.?
Right now tulips, chocolate and lead nickles are looking pretty good.
This cannot be understated: Value is dictated by perception.
If you base your currency on any one resource, whether it's gold, silver, corn or oil it will fail. If you base it on a combination of resources it will also eventually fail. Resources are finite and difficult to control. Our currency would be finite if it were wholly dependent upon resources. But currency is really just a representation of value and managing value is managing perception. Fiat currency is just that, backed by PERCEPTION. It doesn't matter whether or not fed notes have real worth as long as everyone believes they do (At the least our trading partners). If you can manage information you can inform perception. Influence and authority (PERCEPTION) are the basis of "wealth". That's how con-artists exist. Yes, scarcity, productivity, inflation and consumption all affect value but perception and information management ALSO dictate all of these things. The problem is we still think of the dollar as representing something tangeable. Instead, think of it as a brand. And not just A brand, it is THE brand of America. The economy went bust because of poor brand management (CONGRESS!!!). Nixon, the fed, they're just brand managers. Be your own brand manager, get the information, use it carefully and remember, YOUR brand is always appreciating in value or depreciating in value. You can control this. :)
I know this is all supposed to be common sense, but I still don't get it. Why does gold have to be the standard? Why can't it be diamonds for example, or silver or platinum or fur or a piece of bread for that matter? After all, the only use of gold is to wear it as a piece of jewelery and some industrial use. (Silver and copper are more useful for industrial use, I hear).
Beyond the fact that it glitters and it's yellow, why is gold supposed to have an intrinsic value? Is it not the fact that everything has a contextual value? For example, if I am in the middle of a desert and dying of thirst, no amount of gold is going to help. Water at that time is more valuable to me than gold. Same thing with large populations.
One thing I know about it is that it's extremely tedious to manufacture. So it's scarce to come by, no matter how hard we try to make more if it. So its supply is self regulated. The other is that it has a psychological value as gold has been associated with prosperity for ages.
It seems that by taking the dollar off of the gold standard, it opened the door for our current credit crisis. How nice for uneducated americans to borrow at an aalrming right without consenquence. Just print more money it will fix everything
In 1968 I worked for a man with a degree in economics and he subscribed to Business Week. He had me read an article in one of them that said the dollar at that time was worth about 36 cents and was going down by about 3.9 cents each year. About the time the dollar was worth nothing we went off the gold standard. Amazing!!!
It seems to me what is more important is the relative value of the $USD against the major global curriencies, and to hard assets/commodities/metals.
If all other countries are being forced to undertake similar inflationary measures to prop up asset values in their countries, and keep the debt flowing to consumers so they can continue to purchase, then the $USD may hold its position RELATIVE to the other currencies.
This relative currency valuation will be adjusted via international trade, ie. if $USD gets too low relative to its trading partners, the trade balance will shift in favor of the $US, there by increasing GDP/GNP and bring more in income to pay off debt.
However, if a country has abundant natural resources that will be required over the next 50 years, and they are scarce, then these country currencies should increase in relative value to the $USD, assuming consumer demand in Asia and Emerging Markets fills the gaps left by the US and UK/EU consumer. No demand = no value, so someone has to fill the consumption gap left by the US or else commodities may not appreciate as much as Robert is speculating.
On the other hand, regardless of what the economic fundamentals are, if the masses suddenly precieve that oil, silver and gold are the only "safe" store of value, then those commodity prices inflate to bubbles and one could close the "hedge" position. Whi
Robert, if you are reading this, I would like your comments on the applicability for the average Rich Dad/ PD reader of an investment strategy consisting of owning high dividend paying equity in the highest quality (business model, managment, strategy, etc), debt free businesses that dominate the metals, oil, gas and agri-business, as well as holding them in $CND and $AUS or hedged against the $USD, combined with exposure Brazil, Korea, China, India, primarily in commodities, but also health care, real estate and banking. Obviously this could be leveraged, since the sustainable dividend yeild is about 6%-8%, which could be used to fund the debt costs.
Thanks
A Candian reader from the Calgary, Oil and Gas Center of Canada, and owner of Oil and Gas wells,
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I do not any more understand the standard and worth of gold than before. What i do understand is that as long as gold and paper are dependent on each other, their worth will be as much as the actual dollars the Federal Reserve physically holds in its account, which I understand is zero, hence one's ability to make its own money. Maybe I continue to see this incorrectly, yet Mr. K would not have this website to talk about this particular book.
Something funny that I often say to my friends and family regarding currency: "Back in the day, paper (dollars) was valuable because you could trade it in for gold; nowadays, gold is valuable because you can trade it in for paper!"
Take a handful of gold dollars and a handful of paper dollars and light them both on fire... where has the value gone when the smoke clears? What are they each worth now?
I sort of understand this and sort of don't. I understand that when Nixon separated paper money from gold that allowed the government to print paper willy nilly w/o really having good backing to it right? Otherwise, I am completely lost!
It is of supreme importance to understand that the first agency of the newly formed eighteenth century government of America was the bureau of weights and measures. The reason for this is simple; they had to know what money was going to be.
It didn't take long to realize that the standard had to be weight, purity and durability. That's why congress chose gold and silver coin, not paper!
Paper doesn;t meet the three criteria listed above. To put it simply a one hundred dollar bill cannot have the same value as one hundred single dollar bills according to the weight standard one hundred singles weigh more.
It is of supreme importance to understand that the first agency of the newly formed eighteenth century government of America was the bureau of weights and measures. The reason for this is simple; they had to know what money was going to be.
It didn't take long to realize that the standard had to be weight, purity and durability. That's why congress chose gold and silver coin, not paper!
Paper doesn;t meet the three criteria listed above. To put it simply a one hundred dollar bill cannot have the same value as one hundred single dollar bills according to the weight standard one hundred singles weigh more.
What do I know about the Gold Rush...and the gold game
You know Robert, I am already learning more about things than I learned in 70 years..."of fish, and ships and sealing wax, and if pigs really have wings"?
In my short years I remember that gold was artifically pegged at $20, then $35, and then I was counseled [in about 1961] to buy a St.Gauden's $20 gold piece for $61. Ouch!.
Subsequent to that, Ian Flemings' "Goldfinger" convinced me that there is no gold in Fort Knox. I think that is a writer's prophesy, explaning why the gold was to be rendered radioactive, as a reason to not handle it, count and weigh it, and that we guard it though it may not be "it" any longer.
Your teaching also reminded me that well before President Nixon, [in fact, prior to 1955], the S.F. Mint had stacks of gold bars [I saw them]. Thousands of bags of silver dollars; yet, people stood in line around the Mint to cash in thier silver paper certificates, gleening real silver.
Gold broke a thousand a few days ago, the St. Gauden's is easily worth a thousand dollars, and not because of its numismatic value, but because the Gold is as you say, not our standard; rather ink is our standard, and the rags it is printed on which we call Federal Reserve Notes.
You also taught me that there is no National Bank, and it certainly has no money. Scary, not unlike Germany devaluing the Mark.
I recall in the News Reels in the movies when I was a child, a Chinese woman going into a market with a wheel barrow full of paper money, in order to bring out a scant load of food.
My owner's manual tells of a time when it will take a day's wages to buy a loaf of bread. And that one World order will cause it to be necessary to be "marked" for identification.
With no standard, not much oil, no industry, and even our new Pesident printing money by the bushel, er, ah, pardon me, by the Billions and Trillions....
I am not sure we can blame Tricky Dick, however, since our coins don't even contain silver, and shortly the copper will continue to be replaced with a form of plastic, what do we have to offer the World?
Like yourself, I love this Country, worked for Uncle in the Pacific and the Atlantic, but I do not trust my Government as they are still practicing "Pork Barrel Politics", and as you have eloquently stated, "War is good business"; invest your son.
Let's not vilify the Federal Reserve nor glorify the gold standard.
There is one major problem in economics which has never been fully addressed and that is that: MONEY OR BETTER WEALTH CONCENTRATES OVER TIME IN THE HANDS OF THE MOST CAPABLE AND/OR THE MOST RUTHLESS!
Compounding of interest and debt expedites the problem. Once a monetary system goes exponential because of the compounding effect there will be a problem! This concentration of wealth has always caused big problems up to revolutions and wars. Under a gold standard and no central bank this concentration of wealth is very pronounced, very fast. Central banks and a fiat monetary system are a counterbalance to this concentration of wealth as the monetary base can be diluted to keep the system going. Inheritance taxes are also a regulatory instrument to level the playing field. That's why we came this far under a fiat monetary system. The real problem is mismanagement of the possibilities of a fiat monetary system. It lets politicians do what they could not get away with under a gold standard. Like war and a lot of waste! I think the following article (link provided) sums up many of the mistakes that were made but the Federal Reserve is not the real reason and a gold standard has only limited advantages in a very complex dynamic economic system! http://www.kitco.com/ind/Karn/sep032009.html
Greetings!!! Stefan
Its clear,by being on the gold standard the government could only print the dollars comparable to the gold reserves.Now being off the gold standard the government can print until their out of breathe thus creating a statist welfare society with those unbacked notes.
Is it that our dollar has no value? If it can't be measured against anything such as the Gold standard it just becomes printed currency that we've valued because the US has has the biggest economy which has truly been slipping away into the hands of China?
I'm not clear if you are saying that Nixon made a mistake in taking us off the gold standard or not. I've never heard the argument that it was a bad thing -- allowing private ownership of gold seems like a good thing to me.
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Can someone please tell me how much is needed to start using adwords? I have Clickbank Code (plan to return it after this review) and it suggests $500 per day! Using his worksheets I did Google estimator at $100/day but wonder if that is enough…or if the Clickbank Blueprint uses some other type of criteria for adwords. If I really need money NOW, is it better to do Money Mavericks or Clickbank Blueprint. I have recently purchased an inexpensive program which is basically article marketing and requires a ton of hours to learn and implement.
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Seems to me that because the supply of gold is limited the supply of currency that could be printed was limited until the United States was taken off the gold standard.
So, the gold standard limited the amount of currency that could be printed because there was a limited supply of the gold that was required to back any currency that was printed. When the United States went off the gold standard limitless amounts of currency could be printed with only the taxpayer as the backing for that currency.
This extravagant printing of currency decreases the value of the currency already in circulation and puts the taxpayer in a place of involuntary servitude. In effect reducing the taxpayer from the position of an equal and valuable member of society to a commodity or source of income for the money printers and their beneficiaries.
Personally, I believe that the gold standard was done away with to manipulate the economies of other countries vis a vis the world.
When paper currencies are used they are traded...this means that if one currency is traded more than another then brokers have an upper-hand over other nation's currencies. The gold standard was a far better system which meant that it was not easily manipulated.
I hope my take on this was well received. However, I am willing to learn more or analyse other points of view, given the facts of course.
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To me, the gold standard prevented our government from living beyond it's means. More importantly, it kept government programs and spending in check. If it got out of wack, investors in our government bonds would convert their investments into gold and deplete the US gold reserves to nothing (essentially driving the country into bankruptcy). However, since our politicians for years have been unable to balance our national budget, the only way to postpone bankruptcy was to go off the gold standard. This allowed the government to pay off their dates with the new money they just printed. This had the effect of unleashing inflation on the US citizen. But, what the heck, at least the politicians could continue on with their free-spending ways with almost no consequences.
This is something that has just never made sense to me in any way. When I first learned about money, we had a gold standard, and we all learned, through our weekly reader, that the gold was in Fort Knox. Of course it wouldn't necessarily have to be gold, but something that holds value. Some cultures use other things of value to them, like yams, but you couldn't hoard them for years - they would rot. The point is that gold is tangible - rather than just paper value.
Our money system has grown so complex, that the right hand doesn't know what the left hand is doing, and our market is open and vulnerable to manipulation - as the supposed typo in entry proved for the stock market, twice.
I am not sure what the answer is. I love the freedom our country was founded on, but the laws are supposed to be there to protect us from people who abuse the freedoms. We need to examine our whole system.
It has had a great impact in the global economy because now printed money has to backup and it is much easier to manipulate it, of course the rich and powerful are the ones who can manipulate it.
Once we left the gold standard behind it was like saying, "We can't be out of money...we still have checks!" Followed by the mind thought that it will be okay, because all tax paying American's will help make the deposits to put the checking account back in balance.
I just completed an Intermediate Macroeconomics class as part of my Econ major. I think it is concerning that we were taught the US came off the gold standard in 1933; that the world's nations were only able to overcome the great depression after they left the gold standard - in the 1930s. The text stressed this. I am not disagreeing but, rather highlighting yet another point of weakness of our financial education.
That said, the abandonment of the Gold Standard skews the reality of how are economy is progressing. It appears that if you look at the DOW, GDP and real GDP the economy has been going up since 2001. However, when you chart $GDP/$Gold you see each is crashing relative to gold.
The problem with the goldstand dard is we don't know who manipulates the standard. Gold and silver should be much more expensive then it is now. The ultimate way to the top is by opening up your own business, but keep your day job until your income from your business go beyond your day job income. www.HowMoneyReallyWorks.com is a great site to understand this information.
the value of dollar has declined dramatically,and America has become the biggest debtor.furthermore,due to the theory 'bigger,bigger and disappear',what's coming next!how about the size of the effect of the perfect storm.People will come back gold standard?and what we can do to prepare for this storm?
To be honest, I don't know exactly about gold standard since 1971 until today. After re-read again, it forced me to re-read again your book 'Increase Your Financial IQ'.. and you have highlighted to make more money and move from currency into real assets.
Gold standard were removed, because in 1971 US reached it's internal peak of oil production. US treasury run of gold. The president were forced to remove gold standard to facilitate the import of cheap oil from Saudi Arabia. Of course on the expense of Saudi Arabia people.
In year 2004 the whole world reached it's peak of oil.
I think all of you should take a look at
www.chrismartenson.com/crashcourse/chapter-1-three-beliefs
In your recent update you mention no to buy gold based on roubini's predictions for 2010 and the gold and/or precious metals bubble..
Your stance with Mike Maloney was the opposite and I understand that "money" can change over night...
Can you post a updated stance on how you feel about Mike Maloney's predictions and Roubini's..
To me I am seeing that you are aligning with Roubini over Maloney at this time but I would like to hear it directly from you. I do not want to assume but rather hear from you, what you think about what Mike Maloney is saying and why you think Roubini is right.
The update you posted cleary states your posistion but I want to see why and what changed from your point of veiw on "money", b/c there were fundamentals that you and Maloney speak of that do not make sense to me now. If silver/gold are a gauge to the printing press, we are printing more money then ever.. So how is silver/gold in a buble if this is the part where we are not seeing the effects of all this extra money.
PLEASE REPLY TO THIS TOPIC!
As a gold buyer, this took an effect to the market. It definitely impacted the balance of the economy.
The Gold Standard is a measure of value as gold is a valuable commodity that is universal around the world. Money is a paper promise that can be printed as fast as we want to make promises to make good on the payments. Money has No real hard value that can be melted down and used for jewelry. If it burns up, it's gone. The value is ZERO.
Dear, Robert,
In your August 20, 2007 Yahoo finance article "A silver lining for nervous investors" you recomend Silver ETF's as good option for general public to own silver. Nevertheless Michael Maloney in his book "guide to investing in gold and silver" places ETF's in one line with precious metals pool accounts, certificates etc - what he calls "paper gold" and "paper silver". the main reason (as I understand) is because "paper gold & silver" are actualy securities not the real precious metals, they are part if financial system (which is in a mess not), so if real currency crisis comes, I won't be able to get phisical gold & silver "out of" them. Whom should I believe in this question - you or Michale Maloney?
Arturs
To my understanding the gold standard meant that there was enough gold to match the dollars. Now that we're off of that standard, the govn't can just print as many dollar bills as it wants, but there is nothing to back it up. As you stated in another "money is an agreement". Once there is no agreement that these pieces of paper have value, paper money is worthless. That is why the price of gold is so high, because the dollars aren't worth much
Are you willing to get out of all the competition?
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I understand that the USA had to back up the supply of currency with hard assets/commodities like gold & silver. This was to "guarantee" the solvency of the country to our creditors. By removing the standard, the governement could then print money without concern about having anything to back it up other than their word.
It is kind of like this. If I worked hard and earned money and saved it, eventually I could buy a home and make a substantial down payment say of 20%. This was what the mortgage companies required at one time because they wanted to limit their risk of exposure to me defaulting on my loan.
In todays market, most times we can buy homes for little or nothing down and not even anything more than a measly stream of income to back our purchase. This is essentially what the governement is doing and at some point in the future, this house of cards will crash down.
Robert I don't understand what you mean by the gold standard. Could you please explain it again?
The section pertaining to the gold standard is clear to those of us who lived through it, witnessed it, and later studied about it, but it could use another example or two of the exchange of cash for gold that was going on. What's not so clear is why a standard existed at all, and what its absence means. What is meant by the "full faith and credit of the United States"? Do people undersand slavery, indenture, etc.?
Right now tulips, chocolate and lead nickles are looking pretty good.
This cannot be understated: Value is dictated by perception.
If you base your currency on any one resource, whether it's gold, silver, corn or oil it will fail. If you base it on a combination of resources it will also eventually fail. Resources are finite and difficult to control. Our currency would be finite if it were wholly dependent upon resources. But currency is really just a representation of value and managing value is managing perception. Fiat currency is just that, backed by PERCEPTION. It doesn't matter whether or not fed notes have real worth as long as everyone believes they do (At the least our trading partners). If you can manage information you can inform perception. Influence and authority (PERCEPTION) are the basis of "wealth". That's how con-artists exist. Yes, scarcity, productivity, inflation and consumption all affect value but perception and information management ALSO dictate all of these things. The problem is we still think of the dollar as representing something tangeable. Instead, think of it as a brand. And not just A brand, it is THE brand of America. The economy went bust because of poor brand management (CONGRESS!!!). Nixon, the fed, they're just brand managers. Be your own brand manager, get the information, use it carefully and remember, YOUR brand is always appreciating in value or depreciating in value. You can control this. :)
I know this is all supposed to be common sense, but I still don't get it. Why does gold have to be the standard? Why can't it be diamonds for example, or silver or platinum or fur or a piece of bread for that matter? After all, the only use of gold is to wear it as a piece of jewelery and some industrial use. (Silver and copper are more useful for industrial use, I hear).
Beyond the fact that it glitters and it's yellow, why is gold supposed to have an intrinsic value? Is it not the fact that everything has a contextual value? For example, if I am in the middle of a desert and dying of thirst, no amount of gold is going to help. Water at that time is more valuable to me than gold. Same thing with large populations.
One thing I know about it is that it's extremely tedious to manufacture. So it's scarce to come by, no matter how hard we try to make more if it. So its supply is self regulated. The other is that it has a psychological value as gold has been associated with prosperity for ages.
What else? Why gold?
It seems that by taking the dollar off of the gold standard, it opened the door for our current credit crisis. How nice for uneducated americans to borrow at an aalrming right without consenquence. Just print more money it will fix everything
In 1968 I worked for a man with a degree in economics and he subscribed to Business Week. He had me read an article in one of them that said the dollar at that time was worth about 36 cents and was going down by about 3.9 cents each year. About the time the dollar was worth nothing we went off the gold standard. Amazing!!!
It seems to me what is more important is the relative value of the $USD against the major global curriencies, and to hard assets/commodities/metals.
If all other countries are being forced to undertake similar inflationary measures to prop up asset values in their countries, and keep the debt flowing to consumers so they can continue to purchase, then the $USD may hold its position RELATIVE to the other currencies.
This relative currency valuation will be adjusted via international trade, ie. if $USD gets too low relative to its trading partners, the trade balance will shift in favor of the $US, there by increasing GDP/GNP and bring more in income to pay off debt.
However, if a country has abundant natural resources that will be required over the next 50 years, and they are scarce, then these country currencies should increase in relative value to the $USD, assuming consumer demand in Asia and Emerging Markets fills the gaps left by the US and UK/EU consumer. No demand = no value, so someone has to fill the consumption gap left by the US or else commodities may not appreciate as much as Robert is speculating.
On the other hand, regardless of what the economic fundamentals are, if the masses suddenly precieve that oil, silver and gold are the only "safe" store of value, then those commodity prices inflate to bubbles and one could close the "hedge" position. Whi
Robert, if you are reading this, I would like your comments on the applicability for the average Rich Dad/ PD reader of an investment strategy consisting of owning high dividend paying equity in the highest quality (business model, managment, strategy, etc), debt free businesses that dominate the metals, oil, gas and agri-business, as well as holding them in $CND and $AUS or hedged against the $USD, combined with exposure Brazil, Korea, China, India, primarily in commodities, but also health care, real estate and banking. Obviously this could be leveraged, since the sustainable dividend yeild is about 6%-8%, which could be used to fund the debt costs.
Thanks
A Candian reader from the Calgary, Oil and Gas Center of Canada, and owner of Oil and Gas wells,
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Clear as wather
I do not any more understand the standard and worth of gold than before. What i do understand is that as long as gold and paper are dependent on each other, their worth will be as much as the actual dollars the Federal Reserve physically holds in its account, which I understand is zero, hence one's ability to make its own money. Maybe I continue to see this incorrectly, yet Mr. K would not have this website to talk about this particular book.
Something funny that I often say to my friends and family regarding currency: "Back in the day, paper (dollars) was valuable because you could trade it in for gold; nowadays, gold is valuable because you can trade it in for paper!"
Take a handful of gold dollars and a handful of paper dollars and light them both on fire... where has the value gone when the smoke clears? What are they each worth now?
I sort of understand this and sort of don't. I understand that when Nixon separated paper money from gold that allowed the government to print paper willy nilly w/o really having good backing to it right? Otherwise, I am completely lost!
It is of supreme importance to understand that the first agency of the newly formed eighteenth century government of America was the bureau of weights and measures. The reason for this is simple; they had to know what money was going to be.
It didn't take long to realize that the standard had to be weight, purity and durability. That's why congress chose gold and silver coin, not paper!
Paper doesn;t meet the three criteria listed above. To put it simply a one hundred dollar bill cannot have the same value as one hundred single dollar bills according to the weight standard one hundred singles weigh more.
It is of supreme importance to understand that the first agency of the newly formed eighteenth century government of America was the bureau of weights and measures. The reason for this is simple; they had to know what money was going to be.
It didn't take long to realize that the standard had to be weight, purity and durability. That's why congress chose gold and silver coin, not paper!
Paper doesn;t meet the three criteria listed above. To put it simply a one hundred dollar bill cannot have the same value as one hundred single dollar bills according to the weight standard one hundred singles weigh more.
You know Robert, I am already learning more about things than I learned in 70 years..."of fish, and ships and sealing wax, and if pigs really have wings"?
In my short years I remember that gold was artifically pegged at $20, then $35, and then I was counseled [in about 1961] to buy a St.Gauden's $20 gold piece for $61. Ouch!.
Subsequent to that, Ian Flemings' "Goldfinger" convinced me that there is no gold in Fort Knox. I think that is a writer's prophesy, explaning why the gold was to be rendered radioactive, as a reason to not handle it, count and weigh it, and that we guard it though it may not be "it" any longer.
Your teaching also reminded me that well before President Nixon, [in fact, prior to 1955], the S.F. Mint had stacks of gold bars [I saw them]. Thousands of bags of silver dollars; yet, people stood in line around the Mint to cash in thier silver paper certificates, gleening real silver.
Gold broke a thousand a few days ago, the St. Gauden's is easily worth a thousand dollars, and not because of its numismatic value, but because the Gold is as you say, not our standard; rather ink is our standard, and the rags it is printed on which we call Federal Reserve Notes.
You also taught me that there is no National Bank, and it certainly has no money. Scary, not unlike Germany devaluing the Mark.
I recall in the News Reels in the movies when I was a child, a Chinese woman going into a market with a wheel barrow full of paper money, in order to bring out a scant load of food.
My owner's manual tells of a time when it will take a day's wages to buy a loaf of bread. And that one World order will cause it to be necessary to be "marked" for identification.
With no standard, not much oil, no industry, and even our new Pesident printing money by the bushel, er, ah, pardon me, by the Billions and Trillions....
I am not sure we can blame Tricky Dick, however, since our coins don't even contain silver, and shortly the copper will continue to be replaced with a form of plastic, what do we have to offer the World?
Like yourself, I love this Country, worked for Uncle in the Pacific and the Atlantic, but I do not trust my Government as they are still practicing "Pork Barrel Politics", and as you have eloquently stated, "War is good business"; invest your son.
Let's not vilify the Federal Reserve nor glorify the gold standard.
There is one major problem in economics which has never been fully addressed and that is that: MONEY OR BETTER WEALTH CONCENTRATES OVER TIME IN THE HANDS OF THE MOST CAPABLE AND/OR THE MOST RUTHLESS!
Compounding of interest and debt expedites the problem. Once a monetary system goes exponential because of the compounding effect there will be a problem! This concentration of wealth has always caused big problems up to revolutions and wars. Under a gold standard and no central bank this concentration of wealth is very pronounced, very fast. Central banks and a fiat monetary system are a counterbalance to this concentration of wealth as the monetary base can be diluted to keep the system going. Inheritance taxes are also a regulatory instrument to level the playing field. That's why we came this far under a fiat monetary system. The real problem is mismanagement of the possibilities of a fiat monetary system. It lets politicians do what they could not get away with under a gold standard. Like war and a lot of waste! I think the following article (link provided) sums up many of the mistakes that were made but the Federal Reserve is not the real reason and a gold standard has only limited advantages in a very complex dynamic economic system!
http://www.kitco.com/ind/Karn/sep032009.html
Greetings!!! Stefan
Its clear,by being on the gold standard the government could only print the dollars comparable to the gold reserves.Now being off the gold standard the government can print until their out of breathe thus creating a statist welfare society with those unbacked notes.
Is it that our dollar has no value? If it can't be measured against anything such as the Gold standard it just becomes printed currency that we've valued because the US has has the biggest economy which has truly been slipping away into the hands of China?
I'm not clear if you are saying that Nixon made a mistake in taking us off the gold standard or not. I've never heard the argument that it was a bad thing -- allowing private ownership of gold seems like a good thing to me.
i really do nt understand hw this work.pls someone explain