I am reading this discussion with fascination. I just have to add my own bits from time to time.

Regarding "money" and trade, barter: If I have the last bucket of water, beans, eggs, whatever necessity in the world and you have an ounce of gold... am I going to keep the water or take the gold. That is obviously an extreme example, but my point (i hope) is clear: As Bischoff has said, any means of exchange are fine--even FRNs--but if you are looking for a store of value, you must be cautious. (Ingo, hope I'm not misrepresenting your view here!) So a commodity can have value, but not necessarily be a store of value.

Gold definitely qualifies and in my opinion, so does silver.

Thanks to DB for providing the forum and especially to Clark and Bishoff for contributions to this discussion.

Reply from The Daily Bell

Thanks to you, too ...

Ingo, thanks for your several posts on this topic. I am still thinking about silver not being money.

I am particularly interested in your statement:

"... Instead, try to get a hold of the number of "naked" gold contracts trading on the markets... ."

Can you enlighten us? Can you tell us how many naked gold contracts are currently in the market?

The fear that I have is that the thugs are so adept that they are able to create a downdraft using naked shorts, then cover at the lower prices--eliminating the chance that they may get trapped into paying higher prices. It is a volatile market and "they" are always able to drive it lower--even if only temporarily. Surely they know the limits of the range of the highs and the lows. We are not dealing with stupid people here--although their arrogance may influence them to do stupid things.

Regarding silver as money: I agree with those who say that when the FRNs are no longer accepted, other things will be. Like Clark says, it may be coconuts. And in our culture, I think that if someone has 90% silver coins, they can readily be exchanged for "commodities" that they need. I fully expect--although it's not a sure thing--that at some point FRNs will have no value and when one has to feed their family, even gold "wafers" will be too much for a dozen eggs. If one has a silver dime, it would be quite convenient to be able to barter that for a dozen eggs.

Isn't "money" just a convenient tool for expanding the utility of barter? Isn't it all just barter in the end? You store the "fruits of your labor" (or whatever) in the form of FRNs (if you trust the government!) or gold or silver. I see silver like many others do as "the poor man's gold".

For those with a great deal of wealth, it makes sense to store value in gold. But if the dollar collapses, silver will fill the gap between the FRN and gold.

I have been enjoying this read very much. It is a topic of interest to me. Thanks for your many contributions to the forum.

Now I will continue my read... .

"It takes real work to acquire it from Mother Nature."

Yes, but the work required to mine and refine it has stayed remarkably constant over time. That makes gold the ultimate commodity to store value.
By applying "work" on or to land wealth is created, the value of which is directly related to the "work" applied. The work expended to obtain a specific amount of gold is used as a standard with which to measure the value of any other good (wealth).

Since you can exchange goods for gold (gold miners do have to eat), you have an opportunity to acquire a commodity which is the ultimate in stability and durability, and thereby in desirability to keep as savings to trade at some future time for consumption goods without experiencing a loss of value.

The two 30% plunge in silver price in 2011
Were nothing to do with supply or demand. Or the sneaky Chinese
dumping millions of ounces on the market that was unknown about.
The biggest drop cominig over the thinly traded Bank Holiday.
Pure paper manipulation, as you well know.
As a neo Austrian I would of thought you would desire a free market.

I am a simple man The numbers tell me the gold/silver ratio
is closing and at this rate can only go one way.
I buy gold/mostly silver phiz most every week.
Can't wait to exchange any spare fiat I have.
As a uninitiated sucker lets see where we are at re gold/silver ratio
in the next 18 months.

I don't read links. It's not my thing.

I like to have a one to one conversation. What happend here is the perfect example why I don't deal with links.

You see, I still don't know whether put forth your opinion, or whether you just want me to know what Gary North thinks.

Bischoff wrote, "From your comment, I surmise that you do not understand the term "value". "

Um, that wouldn't be my comment, that would be Gary North's comment.

I forgot, you don't read links.

"Gold is sometimes said to be a store of value. This should be worded differently. Gold is a valuable thing to store." ...

Unless you understand to what the term "value" refers, you simply cannot understand why gold stores value. From your comment, I surmise that you do not understand the term "value".

@DB: "Gold and silver have traditionally traded together into the mists of antiquity ... "

In the mists of antiquity, there was not much use for silver except for money and eating utensils for the wealthy. That changed completely in the 20th century. Since then so many uses have been discovered for silver the stocks have steadily diminished, so that now there is less silver in above ground stocks than there is gold. This has eliminated the utility of silver as "money". It has a much greater value as a necessary industrial commodity. A money commodity needs a relatively constant supply to prevent large swings in value due to shortages of the commodity. Silver does not have that quality.

The same cannot be said for gold. Gold is traditionally money and it has few other significant uses. Jewelry is just wearable money. Industrial uses of gold are minimal in relation to the substantial quantity of above ground stocks.

Money is a necessary commodity for trade and gold is the money commodity. It cannot be increased dramatically in quantity by the mere push of a button by a bureaucrat, so its users can be sure that their money cannot easily be diluted in value. It takes real work to acquire it from Mother Nature.

C: "The gold jewelry People wear is not really jewelry at all, but every other kind of jewelry is? When gold is used in a computer processor, is gold not simply considered to be just another commodity by the chip maker and the user?"

B: In both of these cases, the stock to inventory flow is so short that gold jewelry and recoverable gold is considered part of the overall above ground gold inventory. Non-gold jewelry is not part of the gold stock, nor of the gold inventory.

C: "Constant marginal utility is a subjective term."

B: Constant marginal utility, as any marginal utility is just "marginal utility". It is neither "subjective", nor is it "objevtive", it simply "is".

However, if you question the "objevtive" value of gold, I will admit that it has its root in subjectivity. However, innumerable people across the world consider gold to be the ultimate store of value. (It has constant or near constant marginal utility for them). The fact that uncountable numbers of peoples recognize gold as the best commodity to store value, is the reason that gold takes on an "objective" standard of value.

C: "There are no absolutes."

B: I agree with this statement. However, if people, both past and present, for 3,000 years have held to the one recognition that gold is the ultimate commodity by which to store value, it is a good bet that they will continue to do so for the foreseeable future.

C: "If the People on an island do not consider gold to have any value, then it does not and it is not money. Something else on the island may have a perceived constant marginal utility and that "something" would be money, be it coconuts, salt, even seashells."

B: Gold as Money is a universal phenomenon, i.e. a market decision by so many market participants that this market could never be topped. If a little island population does not find utility in gold, and uses coconuts, salt, even seashells as an intermediate commodity in exchanges, it does not mean that coconuts, salt, even seashells all of sudden universally became money. If the little island population finds constant marginal utility in any of these non-gold things, by all means let coconuts, salt, and even seashells be considered money in their little univers. Nobody in the rest of the world would care.

C: "Historical bimetalism... ???"

B: I don't know what to do with that... ...

"Constant marginal utility is a subjective term.

There are no absolutes."

It depends what you mean by absolutes. In the case of gold, there is simply nothing else on Earth that can compare to gold for constant marginal utility.

In that sense, the constant marginal utility of gold IS absolute.

What Is Money?

"Gold is not money, except for central bankers. It has not functioned as money since 1933 in the United States and 1914 in Europe. ...

We cannot make scientific interpersonal comparisons of subjective utility. We cannot measure subjective gains and losses." ...

Click to view link

Is Gold Money?

"While money undoubtedly does serve as a store of value and a unit of account, these properties are derivative, not definitional properties. The reason that a medium of exchange necessarily is also a store of value is the anticipation of its exchange value in the future.

... the question of whether any particular good is or is not money, can be posed in this way: is the good in question accepted as the final means of payment for transactions?" ...

Click to view link

What Is Money?

"Gold's startling fall in price from $850 to $250, 1980-2001, reveals just how non-intrinsic [and lack of constant marginal utility] gold's value has been. The money supply doubled, prices doubled, and gold's price fell by 70%.

Anyone who says that gold has intrinsic value needs to explain this in terms of economic theory. If he appeals to something unique about gold, which makes it different from other commodities, then he is a monetary crank. A monetary crank is someone who argues for a theory of money different from his theory of the rest of the economy.

... It is not gold's price that fluctuates, they say; it is all those other prices. This argument does not console the person who bought gold in 1980 and sold in 2001.

... Gold has possessed stable value over long periods of time. Gold is sometimes said to be a store of value. This should be worded differently. Gold is a valuable thing to store." ...

Click to view link

Fibonacci numbers have absolutely nothing to do with gold "prices".

I let you in on a secret: Gold doesn't have a "price". Gold is Money. What's the price of Money... ??? Apply the Elliott Wave Principle all you like, it's not going to help you.

Instead, try to get a hold of the number of "naked" gold contracts trading on the markets, and you can get a much better picture on what gold will do than applying the Elliot Wave theory to gold prices.

Bischoff wrote, "Gold is money and nothing else."

That does not seem like a true statement.

The gold jewelry People wear is not really jewelry at all, but every other kind of jewelry is?

When gold is used in a computer processor, is gold not simply considered to be just another commodity by the chip maker and the user?

Constant marginal utility is a subjective term.

There are no absolutes.

If the People on an island do not consider gold to have any value, then it does not and it is not money. Something else on the island may have a perceived constant marginal utility and that "something" would be money, be it coconuts, salt, even seashells.

Historical bimetalism.

"Would the Old man now a 100 years later be scratching his head
as to why the firm that bears his name shorts silver above all other
commodites. In fact by way of days world production silver is shorted
above rice wheat oil and gold by all the known top crooks, JPM, HSBC
et al. Why?"

No, J. P. Morgan would know exactly why there are shorts on silver. As a matter of fact Prof. Fekete wrote a very informative article on the subject published by the DB when silver plunged last year.

Silver is considered by the uninitiated to be Money. Those who mine and inventory silver keep production and inventory figures very secret, especially the Chinese.

Then, when the uninitiated buy silver, because it is "cheaper" than Gold, thinking that there is a fixed relationship between Gold and Silver, they lie in wait. The real price of silver is determined by its demand as industrial commodity. That demand fluctuates with the economy. When silver prices shoot up over and above what makes sense for industrial use, you can skin the suckers who pump money into the market thinking they are safeguarding value. They are not.

Once enough of the uninitiated have piled into the silver markets and created a silver bubble, those who understand the sucker's play will pull the plug on them. Yet, the uninitiated will do it again, and again. They have been totally bamboozled by the pervasive propaganda about gold and silver. Especially here on the DB.

P.T. Barnum was right, there is a sucker born every minute. Rising silver prices, followed by a sharp plunge prove it.

If you can see silver being used as currency again, load up on silver. Personally, I think it is a sucker's play.

I don't see silver return as currency. Silver is much more valuable as an industrial commodity, than to be used as a monetary standard, especially since Gold has been recognized as Money for millenia.

Even so the governments of China, Britain and Austria have made silver at one point in time their monetary standard, it was done primarily to use silver also as currency without having it to be redeemable for gold. As you know, the silver monetary standard didn't last. Gold as Money won out again, as it has for 3,000 years. Government interference doesn't work when it comes to deciding what money is.

The silver price is set in the commodity markets. As for gold, it has no price. It is money. If the Fed inflates the currency much more, there will quickly come a point at which no gold will be available to be exchanged for paper currency.

Just think, would you sell your oz of gold for a million Zimbabwe dollars... ??? No... ??? How about for 10 million Zimbawe dollars... ??? Do you see the point... ???

There will come a time when when USD/FRNs can no longer be exchanged for gold at any "price". That's called "backwardation" (spot price being higher than nearest future price). I personally believe that situation may very well occur before the "price" ever reaches $3,000/oz.

"riots, wars, mass starvation and billions of casualties. "
UUmmm, now that you mention it.

"global economic collapse" and "precipitous population decline"

Click to view link

This endless argument over silver is useless. The FOFOA camp claims that gold will go up like a meteor. That's all very nice. That doesn't preclude silver from rising also. It's not expected to rise as much as gold,, so what. It still has value. Millions are buying silver. Whatever has accepted value can be used.

Click to view link

All this talk about bubbles is ridiculous if it doesn't relate to supply and demand.

There is an unlimited supply of dollars and a limited supply of gold. There is a perpetual demand for gold,,,, unlike tulip bulbs. The CBs tried very hard to destroy the demand for gold. They leased out all of their [our] gold. They created paper-gold to draw off demand for the finite supply. All of this was done to destroy demand for gold.

Brown's bottom was the best that they could do. They finally had to capitulate because the Indians, Chinese and Arabs have a better grasp of history than the West.

The CBs had to start buying again.

The PTB desperately wanted all trust and confidence to be vested in the paper in your wallet and the paper in their vaults. They wanted this same confidence to be imbued into both plastic and pixeled digits. They MUCH prefer the electronic money over the paper. The paper can't be "disappeared" like the pixels.

"Under current federal law, gold bullion can be confiscated by the federal government in times of national crisis"

Read more: Click to view link

Also included in the original gold confiscation act is the prohibition against hoarding paper money.

GOV doesn't care how much money or currency you have,,, just as long as they have control of it.

I've been in a couple of countries during a currency change. ONLY GOV will give you the new currency for exchange. The gold stays out of their control. GOV wants paper and pixels to be the ONLY available store of value.
When you buy gold, you are trying to place your future outside the control of thugs and thieves. The price of gold would then be relative to the percentage of people worldwide who are under the dominion of thieves.

Sweden isn't buying any gold.
Click to view link

Look at their corruption index.

Click to view link

Then, look at India.

So when you talk about the price of gold, this is often a discussion of the price of freedom.

"We figure there are several years to go yet, though there is always the possibility that those elites trying to manage the world's larger economy will turn to outright confiscation at some point. We don't see how they tolerate US$5,000-an-ounce gold."

THINK PAPERLESS SOCIETY IN TERMS OF MONEY. Everyone who does not already use a debit or credit card will be given a card with a certain monetary value attached which can be used like a debit card. My golf range card is a perfect example. Now the government saves billions by not having to PRINT money AT ALL.

This new money will be tied to something: gold, commodities, government data. In reality little changes as the central banks still exercise their marriage rights with the leading world governments. Unless of course there is a complete meltdown of society as we know it, riots, wars, mass starvation and billions of casualties. Then we may start again with beads, trinkets and eventually gold and silver. Or not.

Ian you have taught many of us a great deal with your,
understanding of economics. Thank you.
Nothing else is Money,but Gold. (J.P.Morgan). Very true I read the very
quote in Ron Chernow's The House Of Morgan.
Would the Old man now a 100 years later be scratching his head
as to why the firm that bears his name shorts silver above all other
commodites. In fact by way of days world production silver is shorted
above rice wheat oil and gold by all the known top crooks, JPM, HSBC
et al. Why?
All forms of currency finds its level against gold. True.
As seen by Ben opening up countless dollar mines as we watch gold fly.
Is there all of a sudden less gold about, No just more fiat.
Gold being the Banksters second favorite short in a ugly unfree market.
What would true price's, value be?
Silver has allways been used and known as money up untill 40 years ago
with a value set against the God of gold. Yes it has gone up and down
Back in the silver shortages of the 1300s it was 9/10 to one
The average is 15/1. In supply it has never been the 50/1
JPM and the silver paper merchants would have us believe.
All that silver Central Banks had for coinage has long
been sold. Idustrial uses are growing like mad very true.
" Silver is so idustrial"
Hmm 40 million Silver eagles sold by the US Mint alone last year
would suggest otherwise. The US only mined 38 million oz in 2011.
Silver sales in dollar terms matched golds from the US mint for the first time last year,
Gold accumilates, Silver is used and invested.
With the ratio between gold and silver being mined closing and
Silvers many uses when comes the point in a true free market
when silver is worth its wieght in gold?

Gold is Money! Silver is so Industrial!

Right: High gold price is indicative of bad job by government (centralbankgov) - Always conflict going on since gold equals freedom & liberty.

Wrong: Gold and silver recently experienced a hyperbolic mania moon shot bubble. Not necessarily a final top. Just like the chart of Apple Computer your parabolic bubble bull blastoff will look like a hockey stick with a slow rise at first then the chart steepness. Since no tree can grow to the sky, the price always tops out and then crashes in what can be viewed later as an Elliott Wave Theory A, B, C decent.

Elliott Wave Principle (Theory) will show the whole rise as a 5 wave structure with wave three being the longest and strongest on the chart if the rise is impulsive (main direction of market) or three pronounced waves (A, B, C) if it is not impulsive. So, expect to see gold work lower to a .618 retracement of the $1,907 (temporary top) in three phases before mounting another advance.

Ny Delwyn Lounsbury - THE DEFLATION GURU
Click to view link
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