Pericles,

I thought of you when I watched this exchange between Ron Paul and Ben Bernanke

http://www.silverseek.com/article/ron-paul-assaults-ben-bernanke-parallel-currencies-video

You might be interested to watch it

Good of you to think of me, snake, I appreciate that.

>>I thought of you when I watched this exchange between Ron Paul and Ben Bernanke<<

But I think "exchange" is too generous a word, for what was essentially a one-way transaction. It came across to me as little more than Ron Paul stating part of his election manifesto, in what, it has to be said, was a rather emotional and ungracious manner.

Tell me, what did you take away from the session? Did any of it actually make sense to you, or were you in the same position as Bernanke, sitting and watching Paul take somewhat uncoordinated free hits?

Whatever, it might be useful for you to take a look through a relatively calm article, that talks about the reality of gold-backed currency.

http://blogs.ft.com/martin-wolf-exchange/2010/11/01/could-the-world-go-back-to-the-gold-standard/#axzz1noGcvsLv

Let me know what you think after you've read it.

Pericles,

Thanks for drawing my attention to the article. I too think it is a well balanced comment and I tend to be a bit ambivalent over a gold standard. There are pros and cons on both sides and I have read similar criticisms on most of those points. It also draws attention to the fact that economics on an international scale is extremely complicated and plagued by political as well as financial consideration and whole treatise have been written on the subject. I should dust off a volume on my shelf at the moment by Friedman. However there seems to be an acceptance of keynesianism rather than that of Ludwic Von Mises and the Austrian school which I think has more relevance in the current global mess.

I am NOT an economist. It's just that I have more than a passing interest in the subject and I see no real effort to take any pain in the present circumstances to try and solve this problem of debt. The only course as I see it is to either deflate the currency or default (Like Iceland) and then introduce some system to back the currency so that it can't be manipulated.

Politics demands that the former is unacceptable so, as the press are so fond of saying, "kicking the can down the road" is the only option and continue to "print" money which will inevitably create massive inflation. This of course brings me back to the fact that Gold along with other physical assets is a form of wealth storage, because saving paper money is the road to the poor house at the moment. Interest rates are not even keeping up with inflation.

I foresee increasing social upheaval over the coming years as adjustments are made, but I also wish the main-stream press would reprint some of the very articulate and well informed comment I am reading on-line with some facts and figures that belie the actual facts.

good to talk to you.

Pericles

Sorry I forgot to answer your question.

I am in the Ron Paul camp as I think Bernanke is doing his country and the world a disservice, but then you get back to the political conundrum. I understand what he is trying to do but he is caught between a rock and hard place. I would be surprised if it will work.

It all boils down to the fact that so many people thought the party would go on forever.... Just borrow money for consumption and make a fortune from derivatives with Wall Street manipulation.

There's one fundamental mathematical problem that you might care to re-visit, snake.

>>Gold along with other physical assets is a form of wealth storage, because saving paper money is the road to the poor house at the moment<<

If we discard for the moment the possibility that we will ever return to a gold-backed currency, your concept of "storage of wealth" using gold suffers from the very simple problem that in order to buy anything, it will need to be re-translated into the currency of the day - i.e. dollars. Which brings us back to your opening point: "the value in purchasing power of gold largely remains the same and has for the last few hundred years"

So, if you expect gold just to keep pace with the purchasing power of the dollar, then holding it is pointless for that very reason.

If on the other hand you expect its purchasing power to rise faster than the dollar, then you are simply a gold speculator, alongside professional traders (and the odd university) around the world.

Good luck with that.

Pericles.

Actually I think we are more or less on the same page here as you just may misunderstand me.

When I said "the value in purchasing power of gold largely remains the same and has for the last few hundred years" I stick by the statement. However, as I said before it does usually have to be converted to the currency being used to make a purchase. Although not always as Iran is accepting gold for oil following the sanctions. The value of gold is recognised in practically every country of the world and there is no one anywhere I can think of that would not give you an exchange if you carried some on you. Try doing this with paper money and there would only be a select few that would be recognised.

Bullion keeps pace with inflation by and large although silver in particular is a more volatile commodity, particularly when the price is manipulated in such an extreme way as it has been in the last 10 years by the banks. The population reverts to commodities especially gold in uncertain and financially unstable times because the value doesn't get debased. I would rather put 10,000 dollars worth of gold in a box than 10,000 dollars of paper money because in 30 years when I open the box the gold will still "buy" the same as it did previously whether it is a suit of clothes or a meal (in rough terms)

Having said that there is of course the lost "investment return" of the paper money if you didn't touch it (like the gold) If inflation is running at 10% per annum and you could only invest at 2% (treasury rate)your paper money would have lost 8% in real terms annually. That means over that 10 year period your paper money would have lost over half its value in terms of buying power. But the gold would not.

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