ok I get what you're saying but your use of 'fiat' to describe gold is not the right word to use. fiat means by government decree. gold is valued by people as a wealth asset - and I agree it's value only comes from the knowledge that other people will trade something in the future for it - but the mona lisa is just a bit of cloth with some paint. pretty useless yet priceless - because there are many in line would would gladly exchange their vast excess of fiat currency for it.
I'm not arguing fiat currency will disappear, it obviously won't. It's just not the correct vehicle for saving. You must not save in the same instrument of the debtors. It leads to you being wiped out when the debtors default as the credit system grows beyond the ability for it to be paid back (eg: see China's trillions of US Treasuries - those are claims that the US economy cannot and will not service).
re: Spain: It was silver that was debased not gold I think.
re: gold failed: Physical gold didn't fail. Gold backed currency failed. Governments always print more tickets to gold than they own. The last big paper gold failure was Nixon in 1974 after they overspent on the Vietnam war.
I wouldn't recommend getting into paper gold to escape a currency collapse. Physical, unambiguously owned metal is the insurance, the vehicle that will transition you through to the otherside.
> China's trillions of US Treasuries - those are claims that the US economy cannot and will not service
The biggest holder of US debt is...the US. But ok, what choice did China have? If they kept the money at home, it would have collapsed the economy, investing in US treasuries at an effective -3% was the best they could achieve and have some degree of safety. Whatever you think of the US economy, foreigners still have a lot of faith in it. Only libertarians and republicans running for office think this faith is misplaced.
Now, who gets wiped out in a US default? We do the most, actually, but maybe the Chinese and Japanese hurt a bit also. No one is expecting that to happen, and US debt levels are not particularly high compared to the rest of the world.
> Physical, unambiguously owned metal is the insurance, the vehicle that will transition you through to the otherside.
You can't take gold with you to heaven. Ah, you meant the otherside of a collapse. If the economy completely collapses, no one is producing anything of value that they can spare for trade; your metals are still worthless. The law of supply and demand remains, and you just get screwed on supply.
If you really believe in metals, however, I strongly recommend that you move to Australia if you aren't there already. They have the largest reserves, take whatever we have out of the ground now and multiply it by 10. You can just become a miner and become rich, because of course, we can eat gold can't we?
ok - won't get into US default / debt argument as we are too far apart on that. I'll just say that it is a lot more than 'no one' expecting and preparing for a failure there. It is not a mainstream view - though mainstream didn't predict the GFC either.
Yes I meant the otherside of a currency failure. They are not as rare as you imply.
If the economy collapses completely then a lot of people will die...likely me included...as I am not a farmer. So I am assuming the economy will not collapse completely. Things will muddle through. Some will fair better than others depending on their understanding of the real nature of money, trade and its history.
We can't eat gold no...but I presume most of your assets are non edible too?
PS: It wasn't me that downvoted your last comment.
If I bought land, I could develop it and make it productive, I could also invest in science to grow more food, or whatever. If we want to hedge against economic collapse, I could invest in assets that are likely to survive the collapse, or better yet, are useful in helping a recovery along. So machinery, tools, a factory, a bakery? Or just upgrade my skills a bit.
But gold just sits there and does nothing, you are at the mercy of how others value it, since it doesn't have any productive value otherwise. Just like money actually.
The fact that gold is so useless is what makes it so perfect as a sink for deferred wealth.
Savers do not infringe on anyone else. If savers decided to hoard farm land...then farm produce would go up. Bakeries...same effect. Note I'm not arguing against investment but there is a difference between investment and saving. Saving is trying to maintain purchasing power that you have earned today and want to spend in the future. Investment is the deployment of your capital at some risk in order to possibly earn a return. Your prescriptions are all investments. I'm not a skilled businessman/investor - I'm a coder that just wants to defer my purchasing power that I earned today
.
What the savers currently do is hoard currency. The thirst for currency encourages and enables large amounts of debt to be written (as debt is the largest producer of currency via bank loans) which leads to cheap credit which leads to malinvestment.
In my comment history you will see a rather long entry I reposted from ZeroHedge. It's worth a read if you want to understand this argument some more.
> The fact that gold is so useless is what makes it so perfect as a sink for deferred wealth. Savers do not infringe on anyone else. If savers decided to hoard farm land...then farm produce would go up.
True, this is also why the Chinese continue to lend to us at basically a negative interest rate. Turns out gold doesn't really work that well for sovereigns (though China is #1 or #2 in gold mining).
> What the savers currently do is hoard currency.
Or they buy treasury notes, which is a bit better on returns (but not much).
> which leads to cheap credit which leads to malinvestment.
Definitely that's what we've seen so far. In that case, we are only arguing about the validity of gold as a store of value vs. other investments (including straight currency holds). There is nothing particularly special about gold, the only difference is that mining companies can decide the rate of inflation vs. governments (but Australia...).
BitCoin is much more fair in this case as the rate of mining is basically fixed by complexity. There is not much difference between accepting someone's bitcoin vs. their gold, in either case its about trust that you can exchange the currency down the line for something else.
I'm not arguing fiat currency will disappear, it obviously won't. It's just not the correct vehicle for saving. You must not save in the same instrument of the debtors. It leads to you being wiped out when the debtors default as the credit system grows beyond the ability for it to be paid back (eg: see China's trillions of US Treasuries - those are claims that the US economy cannot and will not service).
re: Spain: It was silver that was debased not gold I think.
re: gold failed: Physical gold didn't fail. Gold backed currency failed. Governments always print more tickets to gold than they own. The last big paper gold failure was Nixon in 1974 after they overspent on the Vietnam war.
I wouldn't recommend getting into paper gold to escape a currency collapse. Physical, unambiguously owned metal is the insurance, the vehicle that will transition you through to the otherside.