http://www.survivalblog.com/2007/06/
letter_re_greenspan_gold_and_t_1.html
Letter Re: Greenspan, Gold, and the Safe Store of Value
***Begin Quote***
Dear Mr. Rawles,
Regarding the use of gold as a store of value, it’s important to realize that gold often functions as a fiat currency. It does have intrinsic value for jewelry, electronics, rust-proofing, and some chemistry applications but the vast majority of its value comes from the shared expectation that people will accept it as being valuable in the future. The only difference from fiat dollars is that it’s harder – but not impossible – to increase or decrease the gold monetary supply, and that supply isn’t controlled by any government.
{Extraneous Deleted}
JWR Replies: I agree that gold will have only marginal utility for barter during an economic collapse. It will only come into its own in the recovery phase. Gold can act as a “time machine”, preserving your buying power from now until the far side of a currency collapse.
{Extraneous Deleted}
***End Quote***
Interesting comment and response.
Greenspan in his younger days WAS a gold bug before he want Darth Vader on the American People. Like Freedman, the economists seem to “see the light” and turned to the dark side to earn a handsome living.
Gold has imho a function today. JWR alludes to it as a time machine. It IS the only “safe store of value”. Just as in the “non-modern times”! You can’t use, for example, grain as a store of value because it spoils or the rats get at it.
Money is a token that everyone will accept in exchange for the things they have to sell. The essential functions of money are: medium of exchange; unit of account; standard of deferred payment; and store of value. Effective money has to be: divisible; fungible; measurable; and countable.
Leaving aside the TEOTWAWKI scenario, gold is valuable today imho because:
(1) It avoids the “inflation tax”. In 1970, I had a dollar. That same dollar today can only purchase five cents what it could back then. Where did the “other” ninety five cents of purchasing power go? Yup, stolen by the Federal Reserve! When the FRB produces inflation by printing more greenbacks, it acts as a tax on savings. Anything dollar denominated is taxed. You really didn’t thing that your house was “worth” that much more. Did you? No, it’s the “dollar” is worth less.
(2) It avoids the “estate tax”. There’s a rumor that when Trump’s casinos were in trouble his dad went into one of them and bought a few million in chips. An untaxed gift? An off the books loan? Something else? Envision you have save some gold coins, you die, your executor just passes them to your heirs, like furniture, books, or your clean undies. No estate tax on those.
Bear in mind, the Smithsonian exhibit reports that a “fine men’s garment” has cost two ounces of gold in the days of the Romans, before the French Revolution, during the Victorian Era, and for most of American history. Having bought a “less than fine” American suit recently, I can assure you that standard is alive and well today!
So gold is an “interesting investment”. It doesn’t pay interest. May be lost or stolen. But, not by the gooferment. And, can’t be taxed. Interesting!?
# # # # #
Reinke Faces Life 