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

[Travlyr]

Scarcity is only objective insofar as it is relative to our subjective psychological goal of consumption. Silver is only "scarce" if by getting more of it, we get more of what we want.

I don't disagree. The only other thing I add is: "we get more of what we want", or need. In other words, food scarcity would be more problematic than silver scarcity.

 

[eric_cartman]

Do you think that the US has ever had a true 100% gold standard?
We have never successfully avoided double digit inflation for a long period- maybe briefly in the late 1800's.

http://en.wikipedia.org/wiki/File:US_Historical_Inflation_Ancient.svg

this chart is very misleading. when they say "inflation", they just mean prices. but a long time ago, prices would fluctuate for a variety of different reasons. things were not as mobile, so there was not one price for everything all around the country... certain things would be cheaper or more expensive in different parts of the country and at different times of years. but as you can sort of see from the misleading chart you posted is that prices tended to balance themselves out prior to WWII when we were on a better version of the gold standard than we had post WWII until 1971, and then no gold standard until the present. The green and the blue more or less balanced each other out when we were on a gold standard.

if you were to just look at a graph of the general price level, you would see that prices were either stable or falling up until after WWII, then they started going up, and then went way up in the 1970s and continued upwards until present day.

so you were posting that trying to make the false argument that there was a lot of inflation when we were on the gold standard and that's just not true. just look at the gold price... it was stable at around $20 an ounce until we got the Federal Reserve.

it's shocking that you would even try to make this argument. other than some isolated cases of inflation (like the fiat continental dollar)... prices were quite stable and actually declined slightly over the long run until the Fed came in. And since the Fed came in, the US dollar has lost 95% of its value. So for hundreds of years, the dollar maintained all its value on a gold standard... but over the last 100 years, the Fed came in and we went off a gold standard and the dollar lost 95% of its value... and you come in here with some chart trying to tell us that there was a comparable amount of inflation when we were on the gold standard in comparison to the last 40 years or 100 years? there's no comparison at all. It's clear the dollar held its value and prices were stable under a gold standard, and the dollar lost most of its value and the general price level went up in the long run when the dollar was not backed by gold.

 

[not.your.average.joe]

One thing nobody is mentioning is, when you have a sound currency similar to what we had pre-federal reserve, is that when your productivity increased you worked less hours to get the same purchasing power... but you need to have a stable currency to do that.

Think of our situation, we could easily employ everyone in our country if everyone started working say 25-30 hour work weeks.. The reason that we cant do that is because our increased productivity that we gain through technology is robbed from us through our inflating currency.

We went through the industrial revolution on a much more sound and limited form of money, all while taking in heaps of people from around the world. People used to work for 75 to 80 hours per week to make ends meet. But as we became more productive, and worked less hours to make ends meet, we opened up opportunity for new people to join the workforce, without loosing purchasing power to less hours worked.. You could work less in 1900, and get more than you could in 1800 for that same amount of work... This is how sound money works in a growing economy..

Stable currency + increased production = fewer man hours to do the same job
this in turn opens the door for more people to join the workforce.

But now we are experiencing an inflating currency that is depreciating in value. This puts pressure on the wages and hours people need to work in order to make ends meet. So they cannot work less, but now must work more, and if we must continue to work more, that keeps new (population growth) people from joining the workforce.

The answers put forth only make problems worth, and we have traveled a long path to get to where we are today. So many people dependent on a depreciating, or inflating currency that in turn eats away at our productivity, forcing us to continue working longer hours while we are robbed of our increases in productivity.

Here is a historical chart of average hours worked per week. Also keep in mind that people lived relatively debt free by todays standards prior to the 1900's.( hell even until the 1950's or so)
Also, mothers have had to not only maintain the workload of being a mom, but take on another job too.

Also that chart on inflation is very misleading

 

[Zippyjuan]

so you were posting that trying to make the false argument that there was a lot of inflation when we were on the gold standard and that's just not true. just look at the gold price... it was stable at around $20 an ounce until we got the Federal Reserve

The dollar was defined as a certain amount of gold. That meant that gold was $20 an ounce. It was a controlled price. That is why the price of gold did not change so you cannot use that to claim that price inflation did not occur.

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

For a long period, the United States government set the value of the US dollar so that one troy ounce was equal to $20.67 ($664.56/kg), but in 1934 the dollar was devalued to $35.00 per troy ounce ($1125.27/kg). By 1961, it was becoming hard to maintain this price, and a pool of US and European banks agreed to manipulate the market to prevent further currency devaluation against increased gold demand.

if you were to just look at a graph of the general price level, you would see that prices were either stable or falling up until after WWII

Perhaps you could explain for me what occured in the 1920's and 1930's.

Here is a historical chart of average hours worked per week. Also keep in mind that people lived relatively debt free by todays standards prior to the 1900's.( hell even until the 1950's or so)
Also, mothers have had to not only maintain the workload of being a mom, but take on another job too.

Average hours worked in a week is not a very good measure of productivity or the value of your currency. You are right that if productivity increases that you can get the same output in fewer work hours. If you are happy with the same level of consumption, you may be happy to work fewer hours too. But people like to have more things. Today we have bigger houses than they did 100 years ago. They didn't have computers, cell phones, televisions (few even had radios 100 years ago), indoor plumbing, electricity, automobiles. People work more and want more money because they want more stuff. Laor unions came along and established the 40 hour work week. Before that, you had little say if your boss wanted you to work ten hours a day.

If you really want a better measure of purchasing power, do use hours- but instead look at how many hours somebody has to work to get something. Say a car or a house. Or an ounce of gold. You hint at this in your post:

You could work less in 1900, and get more than you could in 1800 for that same amount of work...

Pick something and see how long you would have had to work to get it and compare that to how long you would have to work to get the same thing today. Since I have already mentioned that the price of gold was fixed back then, this would be a poor choice. Accoring to this, the average income was $750 a year in 1910 http://kclibrary.lonestar.edu/decade10.html It is not easy for me to determine what an average work week was on your graph so I am using this source http://eh.net/encyclopedia/article/whaples.work.hours.us which says an average manufacturing worker put in about 55 hours a week. Since that says average week, I am assuming that it includes any time off during the year say for vacations if they got any. That comes out to 2,860 hours a week and at $750 a year an hourly wage of $0.26.

To keep things consistant, I will use a average work week for 1988 (the most recent one they list) of 42 hours a week for today (2100 hours a year). Seeking Alpha lists a current median income of $50,300 or $24 an hour. http://seekingalpha.com/article/161271-u-s-median-income-from-1999-2009-no-gain-much-pain That is getting close to being 100 times more over 100 years.

OK- so we have our hourly wages. Now we need some prices. This is difficult since things change. People don't buy the same things they did 100 years ago.
Came across a few prices to compare here http://www.foodtimeline.org/foodfaq5.html

Kellogs Cornflakes- just says "large size". 1910- 10 cents. If you had to work the same amout of time to buy that box today, it would be almost $10. So in terms of cornflakes, we are better off. Hershey Bar 9/16 ounce for 2 cents. I think the basic bar today is closer to two ounces- that would be about 3.5 times more or 7 cents. If we had to work the same amount of time today to buy that bar we would be paying about 7 dollars. Just a couple examples (pick anything you want to compare yourself). Are we working more hours because it takes us more time to buy the same things we used to? No. We are working more hours to buy more stuff.

Think of our situation, we could easily employ everyone in our country if everyone started working say 25-30 hour work weeks..

Would you be willing to go from working 40 hours a week to 30 hours a week to help with the unemployment situation? This would be at the same hourly pay you currently receive. It would really help the economy out.

By the way, that eh.net.encyclopedia article has some great information about how come hours worked declined over time. As one would expect, there were many factors at work. The link again: http://eh.net/encyclopedia/article/whaples.work.hours.us

 

[LibForestPaul]

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.

blah blah blah
I will ignore history, yap yap yap
central banks, gold repository, blah blah,
imf, gold subscriptions, yaddah yaddah

 

[not.your.average.joe]

The dollar was defined as a certain amount of gold. That meant that gold was $20 an ounce. It was a controlled price. That is why the price of gold did not change so you cannot use that to claim that price inflation did not occur.

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




Perhaps you could explain for me what occured in the 1920's and 1930's.



Average hours worked in a week is not a very good measure of productivity or the value of your currency. You are right that if productivity increases that you can get the same output in fewer work hours. If you are happy with the same level of consumption, you may be happy to work fewer hours too. But people like to have more things. Today we have bigger houses than they did 100 years ago. They didn't have computers, cell phones, televisions (few even had radios 100 years ago), indoor plumbing, electricity, automobiles. People work more and want more money because they want more stuff. Laor unions came along and established the 40 hour work week. Before that, you had little say if your boss wanted you to work ten hours a day.

If you really want a better measure of purchasing power, do use hours- but instead look at how many hours somebody has to work to get something. Say a car or a house. Or an ounce of gold. You hint at this in your post:


Pick something and see how long you would have had to work to get it and compare that to how long you would have to work to get the same thing today. Since I have already mentioned that the price of gold was fixed back then, this would be a poor choice. Accoring to this, the average income was $750 a year in 1910 http://kclibrary.lonestar.edu/decade10.html It is not easy for me to determine what an average work week was on your graph so I am using this source http://eh.net/encyclopedia/article/whaples.work.hours.us which says an average manufacturing worker put in about 55 hours a week. Since that says average week, I am assuming that it includes any time off during the year say for vacations if they got any. That comes out to 2,860 hours a week and at $750 a year an hourly wage of $0.26.

To keep things consistant, I will use a average work week for 1988 (the most recent one they list) of 42 hours a week for today (2100 hours a year). Seeking Alpha lists a current median income of $50,300 or $24 an hour. http://seekingalpha.com/article/161271-u-s-median-income-from-1999-2009-no-gain-much-pain That is getting close to being 100 times more over 100 years.

OK- so we have our hourly wages. Now we need some prices. This is difficult since things change. People don't buy the same things they did 100 years ago.
Came across a few prices to compare here http://www.foodtimeline.org/foodfaq5.html

Kellogs Cornflakes- just says "large size". 1910- 10 cents. If you had to work the same amout of time to buy that box today, it would be almost $10. So in terms of cornflakes, we are better off. Hershey Bar 9/16 ounce for 2 cents. I think the basic bar today is closer to two ounces- that would be about 3.5 times more or 7 cents. If we had to work the same amount of time today to buy that bar we would be paying about 7 dollars. Just a couple examples (pick anything you want to compare yourself). Are we working more hours because it takes us more time to buy the same things we used to? No. We are working more hours to buy more stuff.




Would you be willing to go from working 40 hours a week to 30 hours a week to help with the unemployment situation? This would be at the same hourly pay you currently receive. It would really help the economy out.

By the way, that eh.net.encyclopedia article has some great information about how come hours worked declined over time. As one would expect, there were many factors at work. The link again: http://eh.net/encyclopedia/article/whaples.work.hours.us

Too much misinformation for me... Maybe if i get the time down the road i could try and counter.. but i have gone through the process with people that have your mindset, and its just a waste of time to be honest.

In short, everything you described for the past 110 (1900- today)years can also be said about the previous 100 years before that (1800-1900), bigger nicer houses, more technology, had auto in the early 1900's, on and on... We lived way better in 1913 than we did in 1800.. We bought way more in 1900 than in 1800. BUT we also worked a lot less in 1900 than we did in 1800 ALL WHILE being able to buy more 'stuff' in general, and better things that made life easier.

You mention things like household income.. Well we now have two full time incomes rather than one during the sound money era... And i really dont see how that is an apples to apples comparison, especially when you throw in the tax burden of today as compared to pre-1900. The average wage today cant be $24/ hour.(even though i know you used median) We also have a lifetime of debt to pay off after student loans>get married buy a house>new car>credit card.

Can it be done without a lifetime of debt? Sure, but it has become extremely difficult and you usually must sacrafice many of the benefits that you think we have today based on our fiat money system. No new car, not a nice big house, no new computer-flat screen tv-i pad/iphones.. etc and so on. You must work hard and even then your savings is being robbed through inflation, because if i saved $10,000, I sure as heck cant buy as much with it today as i could 15 years ago.

Also, they have not robbed us of ALL OF our increases in productivity. Which is convenient for you. Yes, we have been able to reduce the work required to buy certain things the last 100 years, that is exactly how capitalism is supposed to work; but how do you know that the hours worked to purchase goods shouldnt be even lower today than what they are?

Would you be willing to go from working 40 hours a week to 30 hours a week to help with the unemployment situation? This would be at the same hourly pay you currently receive. It would really help the economy out.

and here you take this out of context.. I absolutely would if our money maintained its purchasing power, but it has not and does not. I would not have to take a "cut" because it would already be reality. Just like the time from 1800-1913. They did not look at it as a cut, but rather an increase in standard of living, because as i already stated, they were living better with better technology and buying more things while working less hours. They were very pleased that they only had to work 45 hours instead of 55 hours. Why would you disagree with that?

I really dont understand how you can see an increase in your purchasing power by decreasing the value of money over time...

 

[tmosley]

blah blah blah
I will ignore history, yap yap yap
central banks, gold repository, blah blah,
imf, gold subscriptions, yaddah yaddah

See why I ignore this joker?

It's like he wants to be robbed of purchasing power. He wants you to be robbed too.

 

[Jordan]

See why I ignore this joker?

It's like he wants to be robbed of purchasing power. He wants you to be robbed too.

I don't like inflation either.

My point is that a currency backed by metals would create a scenario in which the price of these metals would rise to a point at which they're too expensive for actual production.

As noted earlier, the price of gold would have to rise to $357 a gram (assuming we can find all gold ever mined) to return the world to a gold standard. At that price/weight ratio, the utility of the "security" value of gold would be virtually the same of that of paper. Also, gold would be to expensive to be used in manufacturing, where it actually serves a practical purpose.

 

[not.your.average.joe]

I don't like inflation either.

My point is that a currency backed by metals would create a scenario in which the price of these metals would rise to a point at which they're too expensive for actual production.

As noted earlier, the price of gold would have to rise to $357 a gram (assuming we can find all gold ever mined) to return the world to a gold standard. At that price/weight ratio, the utility of the "security" value of gold would be virtually the same of that of paper. Also, gold would be to expensive to be used in manufacturing, where it actually serves a practical purpose.

You are also assuming current price structure.... which has been inflated for over 100 years.

 

[Jordan]

You are also assuming current price structure.... which has been inflated for over 100 years.

Prices are all relative.

What that calculation shows is how small the gold market is in comparison to everything else in existence. About $97 billion of gold is produced each year. GNI, on the other hand, is about $70 trillion.

The gold market is tiny, it is so tiny that to base a currency on gold would (for the millionth time) send gold to a price at which it would be inefficient for use in virtually any good.

Also (as I noted earlier) a shift to a currency backed by gold would bring about the biggest transfer of wealth ever.

 

[ctiger2]

http://kingworldnews.com/kingworldn...Jim_Rickards_-_G20_&_Revaluation_of_Gold.html

Jim Rickards - G20 & Revaluation of Gold

June 21, 2010

There's a growing sense that the current global economic "Plan A", i.e. substitute public debt for private debt and use fiscal stimulus to keep economies afloat until private demand kicks in, has failed. Not surprising to many of us; it was destined to fail, but now the reality of that is becoming undeniable so leaders are scrambling for Plan B. For the U.S., Plan B is to double-down on Plan A. Others are not so sure. One problem is timing. There are several Plan B's, but they all take 5-7 years to implement, e.g. yuan as reserve asset, SDR's as a new liquidity source, etc. The two-tier Euro plan is just another Plan B although it might possibly be implemented in 2-3 years rather than 5-7.

None of these plans is totally ridiculous, but they all suffer from the same weakness which is that they depend on continued faith in paper money in a world where that faith is rapidly eroding. So the meta-political question becomes: can one or more of these plans be implemented faster than the paper currencies collapse? My spot estimate is "no". The avalanche has already started; there is no way to push the snow back uphill; it's just a matter of time before the paper money village below gets buried. Plan A and the the system it represents will collapse before there's time for Plan B.

This brings us to Plan C of which there are several: (x) chaos, autarky, neomercantilism and heavy-duty protectionism; i.e. playing to win a negative sum game, (y) draconian policy responses including seizure, delegitimization and/or taxation of private gold and forced use of paper money, or (z) gold and commodity backed currencies and a gradual return to stability (albeit with a depression between here and there). Options (x) and (y) more or less speak for themselves. Option (z) is the most interesting because it involves a host of policy choices and political considerations such as: what is the non-deflationary price at which the gold standard should be reestablished (probably $5,000/oz or higher); and who gets to participate and at what levels, (and this is where the true weakness of players like China, India and Brazil comes into sharp relief). Russia is the most interesting case because although it has a relatively small GDP (less than 3% of world GDP) it is a natural resource powerhouse which could play with the big boys in a world of commodity backed currencies. Italy is another interesting case because it is a true gold power (over 2,400 tonnes) although it is frequently lumped in with the Club Med miscreants.

Given the dynamics and cross currents, a likely scenario consists of elements of all of the above. The U.S. and China will continue to lead the world to a new regime of dollars and yuan as reserve currencies and SDR's plus IMF leverage as the key instrument for increasing world liquidity and settling international payments imbalances. As the system breaks down anyway (because of private demand for gold due to lack of faith in official solutions) one political response will be protectionism (to appease local populations) and efforts at confiscation (to put the gold genie back in the bottle). At that point, and amid the chaos, one or more countries will "go for gold" on their own to preserve wealth and the purchasing power of export income; the most likely axis here is Germany-Russia with Austria, the Netherlands, France and possibly Italy joining in. The German-Russian axis is the most natural in the world because each has what the other needs; technology and manufacturing in the case of Germany and energy and other natural resources in the case of Russia. At that point, the U.S. may have to give up its alternative paper plans and join the gold rush leaving China heavily exposed to collapse because of its shortage of gold relative to GDP. It seems likely that China sees the same scenario which explains its own rush to gold, albeit mostly from captive domestic production in the short run.

The end result is a chaotic, ad hoc, but nevertheless eventual return to a global gold standard. It would be far better for G20 to set up the processes, study groups and other mechanisms to make this an organized and efficient transition. That is the one thing I do not expect to happen this weekend.

 

[Fox McCloud]

So what is the benefit to me to pay you in silver? How am I better off than using dollars?

because the value is going to be relatively more stable than using a paper currency that can be inflated to any length or deflated to any length at the whims of a board of governors. It also would allow you to earn the market interest rate on all your money and not some arbitrary rate that's also set by the same said board.

Same question to Fox McCloud. How is your currency better for me as a consumer to use than dollars or to me if I was a business owner compared to using dollars? If I want to handle both, my costs will be higher so I need to have an incentive to use it. What is that incentive?

See above.

We already have a substitute. It is called dollars- both paper and electronic. You can convert them into gold or any other precious metal at any time you like. So perhaps you can explain for me how this would be better than using dollars? Again, I face an additional cost if I decide to use your currency in addition to dollars. Will you pay me to use your currency? I am still not seeing any incentive to change from what I presently use.

So far, your competiting currencies are not competing very well.

Again, see arguments above. Lastly, we don't have freely competing currencies; there's a heavy capital gains tax on gold which prevents it from being readily exchanged from one to the other. On top of this are legal tender laws which force any and all businesses to accept the dollar as payments of debts...and last, but certainly not least, is how taxes are paid. Currently, the only way to pay your taxes is with the dollar; this enough is a de facto legal tender law (as a matter of fact, this is what happened during the civil war; the greenback never had legal tender backing, but all taxes had to be paid for with greenbacks, so there might as well have been).


If you remove all those things, then we can talk about how well (or not) competing currencies will do.