[Homestead] gold is money
cayadopi at yahoo.com
Sun Dec 7 18:48:37 EST 2008
It seems that there were changes to the law in 1977 which were upheld which later legalized gold contracts as enforceable. Therefore gold can be used as a currency.
"USING GOLD AS MONEY IS NOT FORBIDDEN
"Effective October 27, 1977 (twenty-five years ago) gold clauses once again became enforceable in US courts. On June 5, 1933 House Joint Resolution No. 192 was passed, which declared that it was against public policy to discharge debts by paying gold. That is, HJR 192 effectively made “gold clauses” (contractual agreements specifying payment in gold) unenforceable in court. They were not “forbidden” in the sense that you could go to jail for contracting in gold, you just could not avail yourself of the courts to enforce a gold clause in case of default.
"The so-called “legalisation of gold” at the end of 1974 actually repealed the provisions of the Gold Reserve Act of 1934 that forbade private ownership of gold. However, gold clause contracts were still in legal limbo, so the law “legalising” gold clause contracts was passed in 1977, and is codified at Title 31, United States Code, Sections 5118(a)(1) and (d)(2). The enforceability of these new gold clauses was tested and upheld in Fay Corp. v. Frederick & Nelson Seattle, Inc., 896 F2d 1227 (9th Cir.). "
Gold is money, and so is just about anything else.... LOL.
I agree with you that because of the limited supply of gold and the world's creation of an incredible amount of fiat paper currency, that coming up with a new asset backed currency, any kind of asset - becomes a challenge, but not impossible. (Actually there are rumors nos about a one-world, some type of asset backed currency, being discussed by the G-20.)
Since the 70s USD are "petro-dollars" as the world up until recently had to convert to USD to buy oil on the NY or UK exchanges. Now added to the mix are Euro-Dollars as some countries are no longer accepting US Dollars in payment for oil.
And I agree with your other posts that gold, if looked at as just a piece of metal, is good for sinkers, filings in teeth, jewelry, and not a whole lot more...
However, throughout history people have used some type of a medium of exchange in addition to barter. Some of those mediums of exchange have been pretty wild, others somewhat logical. There is always some mechanism in place to determine the value of the medium of exchange, regardless of what medium is being used - people exchanging goods/services set the value in one form or another.
Currently we are using fancy pieces of colored paper throughout the world as a medium of exchange. The value of the various pieces of paper - one brand of currency relative to another brand of currency is determined in the market place. Some value the pound worth more than the dollar, or the dollar worth more than the yen, etc.
When you live in one country and use that country's medium of exchange to purchase eggs, the person in the next country using their own medium of exchange to purchase the same quanity of eggs will be the pretty much the same - not currency terms, but in the amount of labor hours that need to be worked to obtain the medium of exchange to obtain same qty of eggs.
Gold (and to a much lesser degree silver) were chosen a long time ago for a number of reasons, including divisibility and portability, and limited supply. It also crosses borders easily. Gold is gold is gold no matter what country you are in.
One of the current problems facing us today, is that "eggs" are purchased across borders. So one currency needs to be exchanged for another when buying across borders. The prices of the currencies fluctuate constantly based on perceptions of who knows all what.... the stability of the government, the ability of the government to repay debts, interest rates on government bonds, the lack of dilution of the amount of paper in circulation, etc.
I believe in one of your emails you posted that say one ounce of gold today would buy X, and that no matter what is happening with the value of currency it would still only buy the same quantity of X or less of X. It also could buy more of X in the future. True, and key to a decision of whether or not to buy gold is whether you think gold (coverted to a paper currency or via direct exchange) will buy more or something in the future.
The value is still set by buyers and sellers and fluctuates, based on their perception of the future value of paper currencies.
The only reason to purchase or sell gold as a currency - as a store of value - is when a person believes the paper currency is going to fall or rise in value relative to the current and future perception of the value of gold.
The current problem, as I see it, is at the international level of fiat currencies. All fiat currencies are being diluted in value as the governments around the world keep adding more currency into circulation. They are all falling in purchasing power. The trick is how fast each loses purchasingn power relative to each other.
Since we import a significant number of things we buy from other currencies, the various currency fluctuations affect our daily purchases. Should the dollar begin to slide against the currencies of the countries from which we import - the number of paper dollars we need to shop at Walmart increases and the foreign country will demand more dollars in exchange for their currency.
If one perceives that the dollar is going to be worth significantly less, not a store of value, one would be very smart to trade in those dollars for ANYTHING that will store value. Which of course includes, honey, shovels, sugar, seeds, fencing, land, tires, oil, diesel, nat gas, etc.
It can also include gold or silver. Gold or silver can be converted easily into other paper currencies. And it can also be used in enforceable contracts to purchase here in this country (unless the 1977 law has since been repealed).
When people fear hyper-inflation, a rapid loss of value in paper currencies, they run to anything else that stores value, not just gold. It could be every day goods a years worth of food, garden supplies, seed, fuel, clothes, shoes, anything used day to day or that can be bartered.
Others with greater wealth will buy other things, other currencies, gold/silver, land, anything they think will preserve their wealth.
There is one caveat to the past performace of gold since the early 80s, and that is the government's incessant artificial manipulation downward of gold prices thru short sales via direct market intervention. That "game" might actually become "game over" soon if the COMEX gold banks are emptied out at the rate so far this month - 40% gone the first week this month.
BobF posted a link yesterday about Backwardation in the gold futures contracts. This IS significant. The wealthy are taking physical delivery of gold. They no longer have CONfidence that the COMEX has enough gold in the gold bank vaults to back up the futures contracts. If they did, they would just leave the gold in the COMEX vaults - a nice safe place. They no longer perceive the COMEX to be a safe place. The rich are looking for something to store value. Why? I believe they fear the USDollar is going to not only tank (a given with all the money printing), but that hyper-inflation can no longer be ruled out.
Which brings us back to the point you actually made. 1 ounce of gold today will buy (let's say 20 barrels of oil) or USD $760. Say the dollar starts to devalue in 2010, and that same barrel of oil in 2010 costs in USD $1760.... it would still only cost 1 ounce of gold (more or less).
Another point you made is that, "When people had to "liquidate" a debt or asset, it was most often done in molasses or rum or whiskey which could be stored for a long time and kept its value." The key here is "something that could be stored for a long time and kept its value".
Personally, I find a LOT of value in things like canning jars, non-electric kitchen tools, knives, etc. But I can not use my canning jars to purchase say a new pair of pants at Walmart. I need an acceptable medium of exchange.... a USD $. But if today's pair of pants are made in China and cost $7.60,,, in a falling dollar world, that same pair of pants could be $17.60
(I'm just making up numbers btw.)
You can't eat gold, or wear it, or make it into anything useful (too soft),,,, but you can convert it by using it as a medium of exchange into something you can eat or wear or make, or desire.
Gold buyers and sellers ultimately decide the value, based on their perceptions of the future value of fiat currency. From the article posted yesterday, the perception seems that a whole lot of people not just in the US, but around the world are concerned about fiat paper dollars.
In the end, no matter what is used as a medium of exchange, it represents to a certain degree the amount of labor and skill required to produce something that another person wants. They dicker back and forth about the value --- the same as gold prices rising up and down.
<<<It is currently illegal to use gold as currency. When the 1933 exectutive
order prohibiting the private ownership of gold was partially lifted in the
1970's, only the provision for hold gold was removed. The prohibition
againstusing gold as currency still stands.>>>
<<<The current economy cannot return to a gold standard for the simple reason
that there is not enough gold in existence to back up the outstanding currency.>>>
<<<If you took all the extant gold and divided that into the countless trillions
of existing fiat currency, that would mean anyone with a high school class
ring would be a multi-millionaire.>>>
<<<<Trying to figure out what we are going to use as money is a lot like trying
to decide by what means we are going to power our cars ..... maybe the answer
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