Jim Rickards Tweet "Get ready for new German-Russian currency backed by gold & oil"

[ctiger2]

Jim Rickards Tweet "Get ready for new German-Russian currency backed by gold & oil"

JamesGRickards

Get ready for new German-Russian currency backed by #gold & #oil. First bloc going to gold wins world. Leaves U.S. & China in back seat.

Speculation I'm sure, but interesting nonetheless.

 

[Austrian Econ Disciple]

Why would anyone back their currency with oil? It is horrendous as a monetary unit....It doesn't have any redeeming monetary characteristics. Anyways, I doubt any Government is going to accept a commodity currency anytime in the near future unless they destroy their fiat money first. It just isn't in the bureaurocrats interest.

 

[Acala]

exactly

Why would anyone back their currency with oil? It is horrendous as a monetary unit....It doesn't have any redeeming monetary characteristics. Anyways, I doubt any Government is going to accept a commodity currency anytime in the near future unless they destroy their fiat money first. It just isn't in the bureaurocrats interest.

Because what they are talking about, if they are even talking about this, is not a "backed" currency. For a currency to truly be backed by a commodity, you and I would need to be able to go into a convenient location and exchange the currency for the specified amount of whatever they claim is backing it. What they are talking about, if anything, is an international currency that is redeemable BY BANKS AND GOVERNMENTS Among THEMSELVES for the commodity. Like Bretton Woods.

 

[ctiger2]

Why would anyone back their currency with oil? It is horrendous as a monetary unit....It doesn't have any redeeming monetary characteristics. Anyways, I doubt any Government is going to accept a commodity currency anytime in the near future unless they destroy their fiat money first. It just isn't in the bureaurocrats interest.

Ever heard the term Petrodollar? Original wealth comes out of the ground. Gold, Silver, Oil...

http://en.wikipedia.org/wiki/Petrodollar

A petrodollar is a United States dollar earned by a country through the sale of petroleum.[1] The term was coined by Ibrahim Oweiss, a professor of economics at Georgetown University, in 1973. Oweiss felt there was a need for a word to describe the situation then occurring in oil producing, OPEC countries which were earning large amounts of money, in dollars, from oil production.

The term should not be confused with petrocurrency which refers to the currencies of petroleum exporting nations. However Canada's currency, the Canadian dollar, is sometimes referred to as a petrodollar in this context, as Canada is the largest oil exporter to use the term "dollar" for its currency.

 

[Zippyjuan]

The petrodollar was not a currency backed by petroleum. It was merely the dollars paid for the purchase of oil from producing countries. There are also Eurodollars which are not dollars backed by the Euro but US dollar denominated accounts held in Europe. This is a component of the M3 money supply measure. http://www.investopedia.com/terms/e/eurodollar.asp They are both just dollars.

OPEC countries which were earning large amounts of money, in dollars, from oil production.

 

[Working Poor]

Be real our currency is backed by oil otherwise you would not be able to buy gasoline with dollars...

 

[Zippyjuan]

The dollar is backed by everything the country produces.

 

[The Grinning Maniac]

Thus, our currency is backed by guns, liquor, porno, video games and feature films.

 

[georgiaboy]

"Yes, I'd like my currency redeemed in oil, please. My tanker's out front..."

 

[Jordan]

The petrodollar was not a currency backed by petroleum. It was merely the dollars paid for the purchase of oil from producing countries. There are also Eurodollars which are not dollars backed by the Euro but US dollar denominated accounts held in Europe. This is a component of the M3 money supply measure. http://www.investopedia.com/terms/e/eurodollar.asp They are both just dollars.

Well, the dollar earns at least some of its worth from the ability to trade it for oil. Can't get that through the goldbugs head that yes, you can actually create value with the option to buy something.

 

[Jordan]

Gold's real value comes only from its use in the production of things, just like oil.

To say that gold has some kind of intrinsic awesomeness that makes it valuable is just silly. Even if investors are willing to pay $5000 an ounce, that doesn't mean it is worth $5000 an ounce in production, where it is actually worth something.

Just like paper, which can be worth as much as $100 when turned into a paper bill, is only really worth about .02. But since you can actually trade paper for real goods, goods that are worth more than the actual physical value of paper, the paper earns that value. No, obviously a piece of paper isn't worth $100, but it doesn't need to be if it can be traded for that much.

It's a goddamn currency. Currencies work just fine if they have no "intrinsic awesomeness value." They don't have to. They can be worth nothing, as long as people agree to accept them.

"So what happens if SHTF? You'll want metals!!!! Paper will be worth nothing"

That assumption is old and tired. Why would you want metals? You can't eat them, you can't burn them for energy, you can't do shit with them but watch them sit there. In a true SHTF scenario food, energy, and the necessities of life will be currency in barter. As will services. (Or the right/option to receive services.) In a SHTF scenario, paper and gold will have virtually the same worth. Paper might even have more, since at least you can burn it.

 

[Wolverine302]

so, if i buy this currency, i can cash it in for oil?
is this what you're believing?

 

[Acala]

simple

Here is a simple test to determine if a currency is "backed" by a commodity or not. Does the quantity of the commodity that can be exchanged for one unit of the currency change over time? If the answer is yes, then the currency is not "backed" by that commodity. When a currency is backed by a commodity, the exchange rate is fixed. You can exchange one unit of the currency for a specific, unchanging quantity of the commodity.

So, the dollar has never been backed by oil, by the gross national product, by the labor of the people, or any commodity, good, or service OTHER than metals. And as of this moment, the dollar is not backed by anything because there is nothing for which it can be exchanged at a fixed rate.

 

[Anti Federalist]

Thus, our currency is backed by guns, liquor, porno, video games and feature films.

Classic.

Thread winner.

 

[eric_cartman]

I think Jim Rickards did an interview with Eric King (from king world news) this weekend. it should be released soon i think... so it will be interesting to hear what he has to say

 

[AmericasLastHope]

"So what happens if SHTF? You'll want metals!!!! Paper will be worth nothing"

That assumption is old and tired. Why would you want metals? You can't eat them, you can't burn them for energy, you can't do shit with them but watch them sit there. In a true SHTF scenario food, energy, and the necessities of life will be currency in barter. As will services. (Or the right/option to receive services.) In a SHTF scenario, paper and gold will have virtually the same worth. Paper might even have more, since at least you can burn it.

Please provide some examples throughout history when precious metals were worthless.

You can't eat them,

You can't eat FRN's either.

 

[eric_cartman]

I think Jim Rickards did an interview with Eric King (from king world news) this weekend. it should be released soon i think... so it will be interesting to hear what he has to say

it's up

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/6/14_Jim_Rickards.html

 

[Austrian Virginian]

Gold's real value comes only from its use in the production of things, just like oil.

To say that gold has some kind of intrinsic awesomeness that makes it valuable is just silly. Even if investors are willing to pay $5000 an ounce, that doesn't mean it is worth $5000 an ounce in production, where it is actually worth something.

Just like paper, which can be worth as much as $100 when turned into a paper bill, is only really worth about .02. But since you can actually trade paper for real goods, goods that are worth more than the actual physical value of paper, the paper earns that value. No, obviously a piece of paper isn't worth $100, but it doesn't need to be if it can be traded for that much.

It's a goddamn currency. Currencies work just fine if they have no "intrinsic awesomeness value." They don't have to. They can be worth nothing, as long as people agree to accept them.

"So what happens if SHTF? You'll want metals!!!! Paper will be worth nothing"

That assumption is old and tired. Why would you want metals? You can't eat them, you can't burn them for energy, you can't do shit with them but watch them sit there. In a true SHTF scenario food, energy, and the necessities of life will be currency in barter. As will services. (Or the right/option to receive services.) In a SHTF scenario, paper and gold will have virtually the same worth. Paper might even have more, since at least you can burn it.

the simple fact remains that people have accepted gold and silver in exchange for goods or services for a far longer period of time than any paper currency has been accepted. the more the fed prints greenbacks coupled with a US economy in a downward spiral the more people (read: investors and governments) see their inherent worthlessness

 

[Acala]

Wrong

Gold's real value comes only from its use in the production of things, just like oil..

Wrong. Gold's value comes from its superior qualities as money. Money is in itself one of the most useful inventions in history. It is unsurpassed in the amount of productivity and wealth it has added to the human economy by making trade more efficient. And gold is the best money ever discovered. Good money is extremely useful. Bad money is a disaster waiting to happen. So gold derives value from its extreme usefulness as money.

To say that gold has some kind of intrinsic awesomeness that makes it valuable is just silly. .

The monetary value of gold is inherent in its elemental nature. You cannot destroy the monetary value of gold. Take a gold coin and smash it, its value is the same. Melt it, its value is the same. There is nothing you can do to a piece of gold to cause it to lose its value. Try the same thing with FRNs. As soon as you disrupt its symbolic content, it becomes valueless. The value of gold money is intrinsic to the gold itself. The value of fiat money is symbolic. So, while you may not think it matters, there IS a significant difference between gold (or any other commodity money) and symbolic money like FRNs. Gold money has inherent value, paper money has symbolic value.

Even if investors are willing to pay $5000 an ounce, that doesn't mean it is worth $5000 an ounce in production, where it is actually worth something. .

Wrong. Value is subjective. If someone pays $5000 for an ounce that is EXACTLY what it is worth to that person in that moment regardless of what YOU might think its utility is. And besides, as stated above, gold's highest historical utility has been as money.

Just like paper, which can be worth as much as $100 when turned into a paper bill, is only really worth about .02. But since you can actually trade paper for real goods, goods that are worth more than the actual physical value of paper, the paper earns that value. No, obviously a piece of paper isn't worth $100, but it doesn't need to be if it can be traded for that much..

Paper money has symbolic value. That's fine . . . while it lasts. But don't expect it to last. The very reason for forcing people to use paper money is to allow bankers and government to constantly skim value off of it. And that process has a limited lifespan.

It's a goddamn currency. Currencies work just fine if they have no "intrinsic awesomeness value." They don't have to. They can be worth nothing, as long as people agree to accept them. .

One of the necessary qualities of stable currency is limited supply. Because the supply of paper money is limited only by the self-restraint of bankers and politicians, it always fails. The supply of money with intrinsic rather than symbolic value is limited by forces of nature.

Oh, and by the way, you might want to check how the American people "agreed" to accept FRNs instead of gold. Here's a hint - it involved government force.

"So what happens if SHTF? You'll want metals!!!! Paper will be worth nothing"

That assumption is old and tired. Why would you want metals? You can't eat them, you can't burn them for energy, you can't do shit with them but watch them sit there. In a true SHTF scenario food, energy, and the necessities of life will be currency in barter. As will services. (Or the right/option to receive services.) In a SHTF scenario, paper and gold will have virtually the same worth. Paper might even have more, since at least you can burn it.

Got any history to back that up? I can cite numerous occasions when paper money became worthless. Can you cite a single example where gold or silver became worthless?

[sound of crickets]

I happen to think there are better ways to prepare for the economic meltdown than hording precious metals. I think it is more important to acquire tools and skills that will allow you to make a living in the post-meltdown economy. But the argument that commodity money has no advantage over fiat paper money is weak.

 

[Jordan]

I worry too that basing a currency on gold creates a scenario in which we don't have very much control over the money supply.

The United States produces just 10% of the world's gold but makes up 25% of the productivity of the entire planet. Are we really going to leave our money supply up to South Africa, China, Australia? All of those countries produce more gold than we do.

Moving to a gold standard would create a transfer of wealth of a magnitude we have never seen.