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Old 03.08.2011, 21:09
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Re: Referendum for Gold Swiss Franc (GSF)?

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Because loan growth destroys the gold deposit ratio of 10:1.... In other words economic growth is limited to short boom-bust economic cycles. The gold standard was horrible for huge swings in the economy. The US also cornered the market in gold between 1920 and 1929.... Then the great depression hit and only one country made it out alive..... France. France was the only country to keep its currency artificially low while its gold reserves went through the roof. So today everyone wants to run the "Emile Moreau" currency system. Thats why the Fed wants a week USD. During a crisis large gold reserves destroy your economy. Thats why no one can figure out why Chinas huge USD holdings are good? Its always ended in tears.
I don't get all that, but thanks for taking the time.
To me, as a logical-thinking engineer, it makes sense to back a currency by something tangible, like gold. The free-floating currency seems more like a smoke-and-mirrors act. Over the last few years, gold remains the "safe haven" and investors (ie: people who own all the money) keep buying into gold. So in this sense, is gold again becoming the "unofficial" global currency once again? Or is it just forming a bubble like the housing thing or dot-com boom?
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  #22  
Old 03.08.2011, 22:34
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Re: Referendum for Gold Swiss Franc (GSF)?

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I don't get all that, but thanks for taking the time.
To me, as a logical-thinking engineer, it makes sense to back a currency by something tangible, like gold. The free-floating currency seems more like a smoke-and-mirrors act. Over the last few years, gold remains the "safe haven" and investors (ie: people who own all the money) keep buying into gold. So in this sense, is gold again becoming the "unofficial" global currency once again? Or is it just forming a bubble like the housing thing or dot-com boom?
The system was designed mainly by politicians for politicians, not by engineers. If a currency would be backed by something real (gold, copper, cotton, oil, etc.), they couldn't manipulate it so easy. No more printing press. Banks would lose, too. The price of houses would fall, as Zuger mentioned. Credit would be scarce and expensive, but a house would cost probably 10-20% from what it costs now and most people would buy with cash. The growth will be boring slow if any, no more boom-bust cycles.
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Old 03.08.2011, 22:45
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Re: Referendum for Gold Swiss Franc (GSF)?

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Only a bunch of retards would pass that. Everyone knows that gold sovereigns get taken out of circulation by citizens the moment they are circulated. The treasury would sell the coins at a loss, and for what? To get them taken out of circulation? Anyone else notice that 5CHF coins dont go further back than 1968? Thats because they were silver before then and are now hoarded.
Never knew that. good job I didn't spend them the other day when I found my gf had some stored away!!
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Old 03.08.2011, 23:19
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Re: Referendum for Gold Swiss Franc (GSF)?

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The system was designed mainly by politicians for politicians, not by engineers. If a currency would be backed by something real (gold, copper, cotton, oil, etc.), they couldn't manipulate it so easy. No more printing press. Banks would lose, too. The price of houses would fall, as Zuger mentioned. Credit would be scarce and expensive, but a house would cost probably 10-20% from what it costs now and most people would buy with cash. The growth will be boring slow if any, no more boom-bust cycles.
I prefer slow but constant and stable growth, rather than the "exciting" boom-bust cycles...
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Old 04.08.2011, 08:20
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Re: Referendum for Gold Swiss Franc (GSF)?

So lets see then.If a currency(lets say the CHF) was backed to a gold price instead of an economy, then you would presumably have to look at how much gold Switzerland produces no? Surely youre not suggesting having a sovereign currency that will be affected in value by a commodity that is produced in the main by other countries? Ie one day Mr Buffet and Mr Sorearse decide that they don`t like Bern anymore so they decide to put some sell orders on the gold price and hedge their bets by buying puts on the CHF, then you and I poor morons would be getting less money each day the two gnus gurus decide it. Thats surely not very bright is it?
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Old 04.08.2011, 13:42
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Re: Referendum for Gold Swiss Franc (GSF)?

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So lets see then.If a currency(lets say the CHF) was backed to a gold price instead of an economy, then you would presumably have to look at how much gold Switzerland produces no? Surely youre not suggesting having a sovereign currency that will be affected in value by a commodity that is produced in the main by other countries? Ie one day Mr Buffet and Mr Sorearse decide that they don`t like Bern anymore so they decide to put some sell orders on the gold price and hedge their bets by buying puts on the CHF, then you and I poor morons would be getting less money each day the two gnus gurus decide it. Thats surely not very bright is it?
The gold standard is based more on how much gold a country holds, not so much how much it produces (altho oobviously that does have an effect also). As for manipulating the price of gold, well yes, of course it can be done, but since it's something tangible, a currency backed by gold can't be manipulated as wildly (eg: hyper-inflation) as a currency that's backed by nothing, no?

At least thats what I figured out from this:
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gold being a single fungible commodity, its prices can be easily adjusted.
Take for example; today there are 100 tones of gold into the market. So, all the prices are adjusted to that. a laptop can be bought for 1 KG of gold. Now tomorrow if someone brings another 100 tones of gold into the market, the prices will be readjusted the new value of gold. Yeah the prices will rise, but then now everybody has an incentive to save their gold. People will start holding back their gold since the prices are high this literally means some amount of gold is pulled back from the market(so some gold is dumped and some is taken back as a reaction to this), when the gold is distributed across the market(basically when your salary increases because there is more gold into the market) you will start spending at the regular rate. In numerical terms if the gold supply rises at 2% per year, and economy grows at 4% per year, then the investors and share holders will adjust the prices by 2%(less).
Similarly if gold supply rises at 4% per year and economy grows only at 2% per year, then the people will bring up the prices by 2%.
Every ounce of gold you have now fetches more, and you work and give more to earn an ounce of gold.
So you start working in terms of half ounces.
Main difference between fiat currency and gold currency inflation would be that information travel will be much faster.
The gold standard was used for centuries, right? And was only really stopped in 1971 when the US decided to end it. Which actually seemed to go against the US Constitution:
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Section. 10.

Clause 1: No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
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Old 04.08.2011, 13:59
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Re: Referendum for Gold Swiss Franc (GSF)?

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Mate, Switzerland is the 6th most indebted country in the world.... Some one owns these homes. And the banks need these homes to keep their value or the value of their loan books will be worthless. If houses start to lose their value then the interest rates in CH will rise substantially.
Interest rates rise -> fewer people can afford real estate -> real estate value drops -> ownership costs remain more or less the same, but renting gets more expensive -> more people buy.
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Old 04.08.2011, 14:04
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Re: Referendum for Gold Swiss Franc (GSF)?

Yea, it seems housing is a major factor of a nations currency:
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If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which already dare to challenge our Government to a trial of strength and bid defiance to the laws of our country"
-Thomas Jefferson, 1791
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Old 04.08.2011, 14:08
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Re: Referendum for Gold Swiss Franc (GSF)?

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The gold standard was used for centuries, right? And was only really stopped in 1971 when the US decided to end it. Which actually seemed to go against the US Constitution:
No, decades.... Not centuries. As we know it today it started roughly after the Franco-prussian war. Fell apart in 1914 and finally gave way to a quasi Dollar/Gold standard after WWII...

There has always been 2 kinds of currencies (yielding and non-yielding). For the last 7000 years people used either grain (country currency that yields a return) or silver (city currency that yields nothing, gave rise to the "money changers")....

Gold was used but not as much as silver and grain standards. A very good run down of this is given in the book "A History Of Interest Rates"....

Gold wasnt plentiful enough to be used as widely as the European gold standard allowed. So silver was more important. With several gold strikes in California, Australia, and South Africa we saw reserves pile up large enough to create a monetary union based on Gold.

The only other time this happend was in Spain in the 1600's.... But funny enough, with so much gold coming in from the new world Inflation EXPLODED! So much gold came in that credit was delievered to every Tom,Dick, and Harry who had a bit of gold to his name.

And when the inflows stopped 90 years after it started? Massive deflation set in.

And thats how the last Gold standard ended in 1929..... So the gold standard makes sense. But it has an end game just as every system.
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Old 04.08.2011, 14:10
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Re: Referendum for Gold Swiss Franc (GSF)?

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Interest rates rise -> fewer people can afford real estate -> real estate value drops -> ownership costs remain more or less the same, but renting gets more expensive -> more people buy.
Hmmmm... Tell that to the Americans who have chosen to rent because "house prices will never stop dropping".... Also, house prices in CH dropped 25% from 1992 until 2001. Didnt increase home-ownership at all. So in theory I understand what youre saying. Its a rational decision, or so you would think. But people arent rational most of the time.
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Old 04.08.2011, 14:19
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Re: Referendum for Gold Swiss Franc (GSF)?

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Hmmmm... Tell that to the Americans who have chosen to rent because "house prices will never stop dropping".... Also, house prices in CH dropped 25% from 1992 until 2001. Didnt increase home-ownership at all. So in theory I understand what youre saying. Its a rational decision, or so you would think. But people arent rational most of the time.
In America the real estate market was/is bloated because there is too much junk real estate and rising gas prices are penalsing those who bought that junk real estate in peripheral locations believing they could use the savings to offset the long commute.

Real estate in good locations is still a solid investment, even if there may have been a short-term downturn.
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Old 04.08.2011, 14:25
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Re: Referendum for Gold Swiss Franc (GSF)?

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No, decades.... Not centuries. As we know it today it started roughly after the Franco-prussian war. Fell apart in 1914 and finally gave way to a quasi Dollar/Gold standard after WWII...
So why does the US Constitution, cribbed in 1787, specify gold and silver?

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Clause 1: No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts
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Old 04.08.2011, 14:28
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Re: Referendum for Gold Swiss Franc (GSF)?

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So why does the US Constitution, cribbed in 1787, specify gold and silver?
HA HA!!!! For the sake of making lenders feel better about lending to the US! We were bankrupt my friend. There was no gold in the US back then. We ran a current account deficit until 1900. Also, we had inflation from fiat currencies from 1800 until 1840, when deflation set in. These "States" that had to back everything by gold???? They had none. FYI, 9 of the 16 States went bankrupt in 1840..... They had NO gold.

There was an event in 1849 though that changed all of that. Thats why San Francisco has its 49ers.
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Old 04.08.2011, 14:30
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Re: Referendum for Gold Swiss Franc (GSF)?

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In America the real estate market was/is bloated because there is too much junk real estate and rising gas prices are penalsing those who bought that junk real estate in peripheral locations believing they could use the savings to offset the long commute.

Real estate in good locations is still a solid investment, even if there may have been a short-term downturn.
Tell that to the Japanese.... Switzerland is the oldest country in Europe. Demographically we are in a liquidity trap. Thats why house prices have moved sideways since 1992.....
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Old 04.08.2011, 14:31
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Re: Referendum for Gold Swiss Franc (GSF)?

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The gold standard is based more on how much gold a country holds, not so much how much it produces (altho oobviously that does have an effect also). As for manipulating the price of gold, well yes, of course it can be done, but since it's something tangible, a currency backed by gold can't be manipulated as wildly (eg: hyper-inflation) as a currency that's backed by nothing, no?

:
seeing as no soveriegn state declares its gold reserves, youre on a hiding to nuthin matey
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Old 04.08.2011, 22:27
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Re: Referendum for Gold Swiss Franc (GSF)?

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seeing as no soveriegn state declares its gold reserves, youre on a hiding to nuthin matey
The UK is a sovereign state, and here are their latest published reserves (including gold): http://www.bankofengland.co.uk/stati...Tempoutput.pdf

In the last few weeks we've had both the South Korean & Mexican central banks declaring new gold purchases - nearly all central banks declare their gold reserves.

What they don't do is tell anyone the proportion of their reserves that is 'leased' or 'loaned' out.

http://en.wikipedia.org/wiki/Gold_re..._gold_holdings
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Old 11.08.2011, 08:37
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Re: Referendum for Gold Swiss Franc (GSF)?

This is an awesome idea. And only a country like Switzerland could allow it as most politicians would definitely vote against this all over the world. However, in a referendum all is possible.
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