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  1. #1
    me again is offline Registered User
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    Lightbulb Should Congress return to the gold standard?

    Johann and SteveFoerster made some interesting comments on using physical gold (or silver) to retain value, especially as global paper currencies continue to lose value due to:
    - overprinting of paper monies
    - that are not backed by any government with gold or silver

    So exactly what gives currency it's value, since no government is on the gold standard anymore?

    Quote Originally Posted by Johann View Post
    This sticks in my mind, though it is thought to be of weak authority:

    "A time is coming when there will be nothing left that will be of use or benefit, save a (gold) Dinār and a (silver) Dirham.”

    That might explain part of the resurgence of these coins. Similar things have been said in the West for many years.

    Quote Originally Posted by SteveFoerster View Post
    I worked with a couple guys who were from a group of Sufi finance radicals. They were really keen to promote a return to common use of a gold dinar and silver dirham. They were among the first ones to start minting them in modern times.
    It is not possible for the United States to return to the gold standard, especially with:
    - the abolition of paper currencies (thousand dollar bills are no longer printed)
    - the increased reliance on electronic currency (debit cards & credit cards)
    - all bank withdraws over 10k are now reported to the government

    On a different note:
    - Taxes must be paid on gold (or silver) stocks that increase in value (at cash out)
    - No taxes are paid on physical gold (or silver) when it increases in value (at cash out)

    Two thoughts come to mind: (1) Everything in the Western world is becoming increasingly reliant on electronic currency and (2) it's impossible for the Western world to return to the gold standard.

    Back to the original question: What gives paper currency (that is printed by the government) its value?
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  2. #2
    Johann is offline Registered User
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    Interestingly, (I thought), some sources say there was a plot by the late Moammar Ghadaafi ( or any alternate spelling you prefer) of Libya, to overthrow the U.S. economy by demanding payment for oil in gold. ISIS is said by some to work towards the same overthrow by instituting a gold standard, based on the gold dinar, which was being minted in some African countries. Some connect this plot of Ghadaafi's somehow with Hillary's emails . . .

    Whatever. All I know for sure is -- the coins are now available in the U.S., made in the U.S. and sold by a U.S. company. The following link is for proof only - not a solicitation to buy. Dinar Wakala - Introducing Gold Dinar & Silver Dirham in United States of America

    J.

    * Here in Canada, tax DOES regularly apply to gold / silver at cashout. It's called Capital Gains Tax. All such profits are required to be declared on our annual Income Tax return or... well, you know.
    Last edited by Johann; 08-06-2017 at 10:24 AM.

  3. #3
    Johann is offline Registered User
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    Quote Originally Posted by me again
    What gives paper currency (that is printed by the government) its value?
    Nothing. Nothing, that is, but the faith people put in it and the government that prints it - plus the "full faith and credit" of the nation that issues it. Loss of faith is usually followed by hyperinflation - e.g. Germany, Hungary, France in the 1790s etc.

    Outside of crisis-mode is the slower erosion of value. As the nation's credit report gets messier, down goes the buying power of the currency. That's why, where I live, a new car or four years of university, either of which cost around $2,000 in 1960, now cost $30,000. Even worse, it's why a house, built here for $12,000 in 1960 can now sell for $400,000+.

    J.
    Last edited by Johann; 08-06-2017 at 10:43 AM.

  4. #4
    Johann is offline Registered User
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    The Dinar Wakala site also refers us to the opencurrency-dot-com site. This is a movement to re-establish "sound" (.e. gold and silver-based) currency in the U.S. -and sell coins, of course. Many, many different coins. Congressman Ron Paul is advocating such a return, to "sound" money.

    Many links to his work, including: Sound Money |

    J.

  5. #5
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    Quote Originally Posted by Johann View Post
    The Dinar Wakala site also refers us to the opencurrency-dot-com site. This is a movement to re-establish "sound" (.e. gold and silver-based) currency in the U.S. -and sell coins, of course. Many, many different coins. Congressman Ron Paul is advocating such a return, to "sound" money.

    Many links to his work, including: Sound Money |
    If the U.S. government were to return to the gold standard, what would the exchange rate be for each paper dollar? The spot price is currently $1261 (at the time of this writing) for one ounce of gold. Click here to see the changing spot price: Spot Gold

    The U.S. government (and all other western governments) will NEVER return to the gold standard for many reasons. However, two primary reasons include:
    1. It would force each government to surrender it's gold reserve on-demand.
    2. It would prohibit governments from printing paper money on an as-needed basis.

    This is an old article, but it list the top 10 countries with the largest gold reserves:
    Top 10 Countries with Largest Gold Reserves - U.S. Global Investors

    1. United States
    Tonnes: 8,133.5
    Percent of foreign reserves: 74.9 percent

    2. Germany
    Tonnes: 3,381
    Percent of foreign reserves: 68.9 percent

    3. Italy
    Tonnes: 2,451.8
    Percent of foreign reserves: 68 percent

    4. France
    Tonnes: 2,435.7
    Percent of foreign reserves: 62.9 percent

    5. China
    Tonnes: 1,797.5
    Percent of foreign reserves: 2.2 percent

    6. Russia
    Tonnes: 1,460.4
    Percent of foreign reserves: 15 percent

    7. Switzerland
    Tonnes: 1,040
    Percent of foreign reserves: 6.7 percent

    8. Japan
    Tonnes: 765.2
    Percent of foreign reserves: 2.4 percent

    9. Netherlands
    Tonnes: 612.5
    Percent of foreign reserves: 61.2 percent

    10. India
    Tonnes: 557.7
    Percent of foreign reserves: 6.3 percent
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  6. #6
    Johann is offline Registered User
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    I think you're right, me again. I can't see a return to the gold standard. I note Saudi Arabia is missing from the "top 10." That surprised me for a bit - but who needs gold reserves when you're sitting on oil?

    Gold still fascinates me, though I own very little of it. I do have a 1960's Cuban banknote that says "pagará al portador en oro" (will pay to the bearer in gold) but I'm sure I'd be a desaparecido if I tried to redeem it back then! And now? Not a chance, I'm sure. No matter - microscopic quantity at today's prices, anyway.

    I have some other notes from the Hong Kong and Shanghai Banking Corporation that are denominated in "Customs Gold Units." I have never been able to discover how much gold a "Customs Gold Unit" represents, but:

    (a) It must be awfully small because
    (b) I only paid a couple of dollars for each note.

    The notes are just like me - chances of redemption slim to none.

    J.

    PS - I think the Hong Kong and Shanghai Banking Corporation is the parent or ancestor of HSBC Bank that operates internationally today. Not sure.
    Last edited by Johann; 08-06-2017 at 12:43 PM.

  7. #7
    Johann is offline Registered User
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    The various rationales, religious and otherwise, surrounding the attempted revival of the gold dinar and silver dirham are given on the Dinar Wakala site, here: WhyGoldDinar.

    I know the history and I can see the religious implications. I think the jury's out on the rest, but there are believers. I hope they sell some coins - I think that's their sole intent and I can't see anything wrong in that. Wow. Put a bit of Arabic calligraphy on a coin and it sure looks beautiful!

    Places like Dinar Wakala aren't going to undermine our money system, here in the West. That will eventually do itself in! Meanwhile, I like calligraphy and copied my first Arabic alphabet a few days ago. Hey, it's a start!

    J.
    Last edited by Johann; 08-06-2017 at 01:01 PM.

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  9. #8
    me again is offline Registered User
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    Quote Originally Posted by Johann View Post
    The various rationales, religious and otherwise, surrounding the attempted revival of the gold dinar and silver dirham are given on the Dinar Wakala site, here: WhyGoldDinar.

    I know the history and I can see the religious implications. I think the jury's out on the rest, but there are believers. I hope they sell some coins - I think that's their sole intent and I can't see anything wrong in that. Wow. Put a bit of Arabic calligraphy on a coin and it sure looks beautiful!

    Places like Dinar Wakala aren't going to undermine our money system, here in the West. That will eventually do itself in! Meanwhile, I like calligraphy and copied my first Arabic alphabet a few days ago. Hey, it's a start!

    J.
    Savvy westerners (and Middle Easterners) will acquire those gold coins through bartering and/or through paper currency -- and will slowly stockpile them. Thus:
    - There will be a slow trickle of gold from the Middle East to the West
    - Leading to a depletion of gold from the Middle Eastern
    - Public Middle Eastern transactions of gold coins will lead to this slow trend.
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  10. #9
    SteveFoerster is offline Resident Gadfly
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    Quote Originally Posted by me again View Post
    Savvy westerners (and Middle Easterners) will acquire those gold coins through bartering and/or through paper currency -- and will slowly stockpile them. Thus:
    - There will be a slow trickle of gold from the Middle East to the West
    - Leading to a depletion of gold from the Middle Eastern
    - Public Middle Eastern transactions of gold coins will lead to this slow trend.
    Just because the movement is Islamic doesn't mean the gold comes from the Middle East (Malaysia, for example, is nowhere near the Middle East). Besides, if the gold does move from somewhere else to here, it means they got something for it that they wanted. Trade benefits both parties.
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  11. #10
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    Quote Originally Posted by me again View Post
    Savvy westerners (and Middle Easterners) will acquire those gold coins through bartering and/or through paper currency -- and will slowly stockpile them. Thus:
    - There will be a slow trickle of gold from the Middle East to the West
    - Leading to a depletion of gold from the Middle Eastern
    - Public Middle Eastern transactions of gold coins will lead to this slow trend.

    Quote Originally Posted by SteveFoerster View Post
    Just because the movement is Islamic doesn't mean the gold comes from the Middle East (Malaysia, for example, is nowhere near the Middle East). Besides, if the gold does move from somewhere else to here, it means they got something for it that they wanted. Trade benefits both parties.
    Agreed. But the point is that if those countries (wherever they might be) choose to mint gold coins for currency transactions in the public domain, then gold horders will will slowly acquire them and will stockpile them -- thus removing them from the public domain.

    The trend of Western governments is to horde gold -- and not to use it as currency in the public domain. If Muslims in Malaysia mint gold coins for currency transactions in the public domain, then those gold coins will eventually disappear from the Malaysian public domain (over the long-term).
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  12. #11
    SteveFoerster is offline Resident Gadfly
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    Quote Originally Posted by me again View Post
    Agreed. But the point is that if those countries (wherever they might be) choose to mint gold coins for currency transactions in the public domain, then gold horders will will slowly acquire them and will stockpile them -- thus removing them from the public domain.

    The trend of Western governments is to horde gold -- and not to use it as currency in the public domain. If Muslims in Malaysia mint gold coins for currency transactions in the public domain, then those gold coins will eventually disappear from the Malaysian public domain (over the long-term).
    That might happen if those who want to stockpile gold didn't have options now, but it's already perfectly easy for Westerners (or anyone else) to accumulate gold and silver rounds.
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  13. #12
    Ted Heiks is offline Moderator and Distinguished Senior Member
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    How would going back to the gold standard federal budget defecit?
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  14. #13
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    Quote Originally Posted by SteveFoerster View Post
    That might happen if those who want to stockpile gold didn't have options now, but it's already perfectly easy for Westerners (or anyone else) to accumulate gold and silver rounds.
    However, lower gold prices could conceivably be negotiated in countries that have gold floating around in the public domain (as gold currency). Either way, the hoarding of gold from nations that mint gold coinage is a slow process. It will slowly disappear from the public domain (look forward 50 years). It's not something that happens overnight.

    The concept of minting gold coins and issuing them as currency (in the 21st Century) by Muslims cannot and will not last. It's no longer economically feasible as a long-term endeavor (at least not for sovereign governments).
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    Quote Originally Posted by Ted Heiks View Post
    How would going back to the gold standard [?] federal budget defecit?
    First, it's impossible for the U.S. government to economically go back to the gold standard (long term).

    Second, if the U.S. government did go back to the gold standard, then it would bankrupt the nation and it would be impossible to keep raising the federal deficit every year/decade because:
    (a) Gold currency cannot be manufactured out of thin air. It is limited.
    (b) Whereas paper currency (that is not back by gold or silver) can be printed in unlimited amounts, as long as people will accept it.

    Every nation that prints paper money (without backing it by gold) eventually has to return to gold. However, in the technology age, things have changed as never before. Printing paper money that is un-backed by anything of value cannot go on forever. Or can it? The dollar is currently backed by the military might and the economic strength of the United States. From a currency perspective, it will be interesting to see what unfolds in the next 100 years.
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  17. #15
    SteveFoerster is offline Resident Gadfly
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    Quote Originally Posted by me again View Post
    However, lower gold prices could conceivably be negotiated in countries that have gold floating around in the public domain (as gold currency).
    Negotiated by whom, in exchange for what?

    Either way, the hoarding of gold from nations that mint gold coinage is a slow process. It will slowly disappear from the public domain (look forward 50 years). It's not something that happens overnight.
    It's not something that would happen at all. Even if circulation went down, more can be minted. If noteworthy scarcity happens, their purchasing power would go up, and if it went up enough the hoarders would have more incentive to sell.

    The concept of minting gold coins and issuing them as currency (in the 21st Century) by Muslims cannot and will not last. It's no longer economically feasible as a long-term endeavor (at least not for sovereign governments).
    It's politically infeasible in the West, but that's the only deal breaker. There's no special economic reason that the state has to be the provider of a monetary system, regardless of the century.
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  18. #16
    me again is offline Registered User
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    Quote Originally Posted by me again View Post
    However, lower gold prices could conceivably be negotiated in countries that have gold floating around in the public domain (as gold currency).

    Quote Originally Posted by SteveFoerster View Post
    Negotiated by whom, in exchange for what?
    Bartering is not an exact science. Savvy gold investors can get better deals if they are willing to accept X number of gold coins for:
    - Small scale: one washing machine (or a/c, sofa, car, etc)
    - Large scale: X number of ship containers filled with (insert volume merchandise here)

    Bartering is frequently not taxed, which increases the profitability even more. Conversely, in the traditional Western market, deals are made "down to the penny" and are taxed.
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