Interesting that this question comes up on August 15th… the day Nixon took the US dollar (and thereby, all linked currencies) off the gold standard.
About 244,000 metric tons of gold has been discovered to date (187,000 metric tons historically produced plus current underground reserves of 57,000 metric tons). Most of that gold has come from just three countries: China, Australia, and South Africa. The United States ranked fourth in gold production in 2016. All of the gold discovered thus far would fit in a cube that is 23 meters wide on every side.
> If it were brought together, all the gold deposits ever mined would fill just a little over three Olympic-sized swimming pools. Another analogy is that all global gold ever mined would be only one metre high if spread across a football pitch.
But are they gold coins? We can see Scrooge diving into and swimming through it. Either they are light and have low plasticity, or Scrooge is denser than any known element, and stronger than any known living creature.
Money is to Scrooge what the sun is to Superman. So under the right conditions, Scrooge is denser than any known element, and stronger than any known living creature.
The Money Bin is said to be 39 meters tall, and 37 meters per side. Pennies have a packing efficiency of 57%, so a cube of the Money Bin's contents would be 2.5x the volume of the real-world's gold supply.
Warren Buffet had this to say in a past letter to shareholders of Berkshire Hathaway:
"Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion."
“According to the International Olympic Committee, gold medals are required to be at least 92.5 percent silver, and are plated with about 6 grams of pure gold.”
Given people have been mining and coveting gold for thousands of years that is an incredibly small amount given the scale of the earth and other mineral deposits. Looking at gold's well known cousin - Silver which from the beginning of time has seen 1.5 Million tons mined, interestingly enough 90% of that amount has been thrown away - https://www.jmbullion.com/investing-guide/james/silver-suppl...
Not sure what the GP was on, "exemplarily" is a word but not often used, at least in speech (vs say "in an exemplary manner". Though in this case that doesn't work, perhaps "clear and exemplary" though it doesn't quite mean the same thing). "Dailily" is definitely not ("daily" is both an adjective and adverbial form).
I just edited my post to give suggestion though honestly in this case, given what you intended to convey and being a written format "exemplarily" is actually a pretty good choice of word! Just a bit of a mouthful to say out loud.
Just yesterday I (native English speaker) was reading a novel and the word "lonelily" was used, I thought it was an error but now see it is considered acceptable as an adverb at least according to one online dictionary.[0]
And those few extra words reinforce that for those who maybe aren't exactly sure about the exact definition of a cube (think about normies in your regular life). I'd say it's worth it.
> I'm not sure if that's more or less than I'd expect.
Most people "owning" gold in the world hold paper gold that isn't backed by physical gold. And the paper gold volume traded on a daily basis is several orders of magnitude higher than the physical one.
So even if it's less physical gold than one would expect (I didn't check you maths btw), there's "more" to it than just the physical gold.
Perhaps a stupid question from a non-economics laymen:
If people are holding 'paper' gold that isn't backed by physical gold, then doesn't that mean that gold as a product is more scarce than the market demand? Wouldn't it mean that by increase the volume of 'paper' gold assets we are artificially pricing gold incorrectly?
But the market is for paper gold, so the price is for paper gold.
Realistically, if you want some actual gold a lot of that price is going to be about delivery, storage, verification, etc, etc. The paper gold probably helps divert people who just want to bet on the price of gold away from the people who actually gold to do work (though inevitably the two groups will affect the price the other pays).
Bingo! We are artificially pricing gold incorrectly! USA has very little gold compare to others like Russia and China. Nixon realized this in the 70s and then we have fiat dollars. Most people don't know the price of gold other than what is being advertised on the market which is based on paper gold mostly. Having gold as valuable can undermine USA petroldollar dominance and bad for America in general as gold commodity USA has very little to influence worldwide order.
Do you have a source for that? At least the major ETFs seem physically backed? And just because trading volumes exceed available gold, this doesn’t necessarily imply that this is just “paper gold”
It's definitely less than the world's total GDP, considering that China and the USA are both at or above that. So, it would not be possible for every country to have a gold-backed currency without a major decline in wealth.
This is circular reasoning, because if the currencies were backed by gold, its price would skyrocket to fit the GDP. You can't compare price of gold as a speculative investment to price of gold backing an entire financial system.
That does make sense... Is there any estimation for how much gold _would_ be required to for every country on the planet to have a gold-backed currency?
What if gold creates needless friction that prevents a higher GDP?
For example, in a global gold reserve system it is possible for individual countries to run out of gold, possibly reducing their GDP to nothing. This happened way more often than you think and for many wildly different reasons. For example, the famous Weimar Republic hyperinflation was caused by an outflow of gold due to forced reparation payments that go way beyond what a destroyed post war economy could bear. The moment there was no gold in the country, the currency became worthless. Soon after that, just six or seven years later the great depression happened.
People argue that gold solved the inflation problem but all it did was swing violently from inflation to deflation and back. Only people who have too much money and don't need more money benefited from this, a bonafide market failure.
One would expect a market economy to allocate money to those who need it most but instead our economy allocates money to those who don't need it. Nobody seems to be aware of this contradiction.
My personal opinion is that the gold shenanigan is nothing compared to the shenanigans going on in banks.
It all boils down to a monopoly of very few organisations over the entire money creation system, and the instabilities are a result of the fact that few managers at the top are given extremely crude tools to manage extremely delicate system. Every little error using those extremely crude tools has extreme consequences.
There was always one redeeming quality of gold-backed currencies, and it's the restriction of those crude tools.
As for Weimar republic, the gold was never the issue. They were given an impossible debt to pay as reparations, and they could have that debt denominated in whatever tangible way you can think of, it wouldn't be paid. The reason the common German was devastated by the inflation was that their local currency wasn't backed by gold, it was allowed to be printed indefinitely by a government trying to fulfill an impossible debt.
I'm not sure there is such a direct relation between GDP and amount of money in circulation. The same $1 can be spent many times in a year and add to GDP each time.
(I also wish we would stop thinking in terms of GDP, or that it's better to have a higher one)
1) Currency fuels nearly $100 Trillion of global economy.
0.0000% of them transacted in Gold or Bitcoin
2) The fundamental property and requirement of currency is fast, seamless transactions. Don't confuse this with store of value. If you want store of value buy cash/dividend producing assets.
3) It's incredibly dumb and naive (all Bitcoin maximalists and Gold Bugs are) to ask currency to both act as transaction and store of value (those are opposite requirements).
4) Gold Peaked in 2011 with a price of 1900. It has lost 10% in 11 years. Forget about beating inflation, it actually has lost value over 11 years.
Just a reminder is Boomer Gold == Gen X/Y Bitcoin.
All it took was Gen X/Yers embracing Bitcoin over Gold to make Gold irrelevant
All it will take would be Gen Zers embracing something over Bitcoin to make Bitcoin irrelevant
> If you want store of value buy cash/dividend producing assets.
Cash/dividends denominated in falling currency is not a store of value. Ie. a profitable business that takes revenue in and pays out dividends in Turkish Lira or Venezuelan Bolivar. Not an issue for those in west, but not everyone has access to stable currency/markets.
> to ask currency to both act as transaction and store of value (those are opposite requirements).
They are actually complimentary, with one use-case following the other. For anything to be become tradable (used as currency) it must first be valuable. Over time, money that hold their value better become the "better money", as its ability to hold value becomes self-evident, and everyone becomes willing to accept it. This is how we got to a gold standard over some thousands of years. Lesser valuable monies trade hands more frequently, and have higher velocity, not because they are preferred to be held, but because people view them as inferior stores of value. Ie. you hoard the gold coins, and daily trade with the silver and copper ones. The proliferation of trade denominated in silver or copper makes it appear that a society prefers silver or copper as their money, but this is a deceptive metric.
Paper dollars initially represented a redeemable voucher for gold in a vault. Trading paper gold was more convenient than custodying actual gold. However you expected the paper to be redeemable for gold, which is why this paper bill had value in the first place.
A house bought in Turkey will always pay the rent-equivalent dividend (in whatever currency you denominate it)
A business bought in Turkey will pay the net-profit margin of the said business (in whatever currency you denominate it).
Both are inflation protected.
If you want economic risk protection because of inflation/hyper-inflation in your local currency, buy GOOG, AAPL or a broad basket of International Stock.
In a stable environment, using currency as store of value for anything more than 3 months is stupid
In an inflationary environment, using currency as store of value for anything more than a week is stupid.
Gold didn't act as store of value. Bitcoin didn't act as a store of value. Both are what it is --- speculative assets (not store of value).
If you really really really want a currency that acts as a store of value, of course there is the King Dollar, the greatest currency in the history of currencies.
Not sure about your logic here. The more exposure you have to an inflating/hyperfinflating currency, the more risk you carry. Your house holds value, but the rent in fiat you collect doesn't. Every month you collect X liras, but they become worth less and less. You're assuming you can reprice rent on demand, but contractually this is dependent on the locale.
> In a stable environment, using currency as store of value for anything more than 3 months is stupid
You only seem to be thinking in the single dimension of currency for the average person. You forget that all government treasury bonds (pretty big and important financial instrument in any economy) are denominated in some fiat currency. 10, 20, 30 year bonds. There are macro affects when people no longer expect or trust a currency to hold value. It is part of how debt crises occur.
> If you really really really want a currency that acts as a store of value, of course there is the King Dollar, the greatest currency in the history of currencies.
People think Bitcoin is a monetary experiment. But it really is the modern day fiat currencies that is the huge experiment.
>This is how we got to a gold standard over some thousands of years.
We started with gift based economies where people keep track of favors in their head and after that ancient Egypt introduced a grain standard which did the exact opposite of holding value and it worked for thousands of years and encouraged long term investments like the pyramids as there is no point in making the rest of the economy wait eternally.
The Roman empire ran the first silver/gold growth pyramid scheme which forces it to conquer more and more territory to mine more silver and gold as they fail to circulate throughout the economy and lead to pointless economic stagnation. Egypt fell victim to this overexpansion and once the Romans ran out of easy territory to capture, they couldn't mine enough silver to pay their soldiers, forcing them to reduce the silver content of their coins. This is especially problematic if those soldiers are foreign mercenaries who are former refugees driven off their home by the Huns. Since there are plenty of privately wealthy people with gold and silver, they try their hand at playing Caesar and hire their own army, only to get killed by another self proclaimed Caesar or by their own men if they run out of money. Some Caesars tried to impose price controls by threatening capital punishment instead, with little success.
What we are looking at are two thousand failed years of permanent money. Madmen trying to do the same thing over and over again with the same expected outcome.
Honestly your whole argument has a pretty huge flaw and that one has nothing to do with store of value or medium of exchange but rather with a property that any successful medium of exchange must have. A medium of exchange doesn't need a high velocity or be a good store of value, those can be desirable in some contexts but they miss the essence of what it means to be money.
Money is an asset whose primary property is to be highly liquid. Liquidity is the ability to trade one asset for another. Money is effectively a joker. Money that is widely accepted is more liquid than money that isn't. Money that is difficult to handle and transport is less liquid than money that is compact and lightweight. Money that needs to be weighed and verified is less liquid than stamped coins or bank notes of fixed denominations.
Government approved money that can be used to pay taxes or loans is more liquid than privately issued money where people have to voluntarily agree to accept the currency.
If you build your money on a commodity, that commodity will need to be versatile and either be the foundation of your economy or have a wide variety of uses.
Not even money itself is perfectly liquid. A soda vending machine may not accept large bank notes or credit cards, meanwhile self checkout may only take credit cards and no cash.
These properties are independent of whether the currency retains its value or has a high velocity. Of course, extreme shocks in either of these properties may ruin liquidity but most currencies tend to limp along even with 20% inflation which according to you should be enough to ruin liquidity and make everyone and their dog switch to gold but again, dollars are more liquid than gold so people prefer those.
I went on a tour of a disused gold mine near Dahlonega, Georgia (a town that sprung up due to the Georgia Gold Rush of the early 19th century). During the tour the guide pointed out little flecks of gold in the wall and mentioned that the property likely still had billions of dollars worth of gold in it, but the low hanging fruit had already been plucked, and the cost of extraction of the rest would be too high. That's pretty wild to me, that you can know where BILLIONS of dollars of gold is, but not get at it. On the other hand, thinking of how dangerous and expensive mining must be, it's not entirely surprising.
76 comments
[ 13.2 ms ] story [ 2535 ms ] threadAll currently known above- and below- ground gold deposits, plus Uganda's claim, would require a cube that is cf. 35 meters wide on each side.
[1] https://www.reuters.com/article/uganda-gold-idUSKBN2NP17M
> If it were brought together, all the gold deposits ever mined would fill just a little over three Olympic-sized swimming pools. Another analogy is that all global gold ever mined would be only one metre high if spread across a football pitch.
https://www.bullionbypost.co.uk/index/gold/how-much-gold-has...
"Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion."
https://www.berkshirehathaway.com/letters/2011ltr.pdf
How much is in an Olympic gold medal?
Not much. They are gold-plated these days.
https://www.nytimes.com/2022/02/10/sports/olympics/gold-meda...
“According to the International Olympic Committee, gold medals are required to be at least 92.5 percent silver, and are plated with about 6 grams of pure gold.”
This is exemplarily clear communication from a government agency.
> 244,000 metric tons
They're not using pounds or the imperial ton (1 imperial or long ton is 1.016 metric tons). https://en.wikipedia.org/wiki/Long_ton
Much of the rest of the site appears to also be metric. https://www.usgs.gov/faqs/how-much-silver-has-been-found-wor...
But not all - https://www.usgs.gov/faqs/how-large-lifetime-supply-minerals...
To prevent cavities, brush your teeth twice daily.
(OK, I'll go back to my cave now.)
("This is exemplarily clear communication from a government agency.")
[0]https://www.collinsdictionary.com/ko/dictionary/english/lone...
If you've ever seen a tennis court, you know exactly how big that would be. It also works equally well regardless of metric or imperial background.
That did seem surprising, and the actual number would be closer to a third of a teaspoon per person.
(19300 kg/m^3 * 23 m * 23 m * 23 m)/7970000000 persons ~= 0.0294 kg/person
Vertically that would be the equivalent of three floors (of the sports gym).
This is not a lot.
I'm not sure if that's more or less than I'd expect.
Most people "owning" gold in the world hold paper gold that isn't backed by physical gold. And the paper gold volume traded on a daily basis is several orders of magnitude higher than the physical one.
So even if it's less physical gold than one would expect (I didn't check you maths btw), there's "more" to it than just the physical gold.
If people are holding 'paper' gold that isn't backed by physical gold, then doesn't that mean that gold as a product is more scarce than the market demand? Wouldn't it mean that by increase the volume of 'paper' gold assets we are artificially pricing gold incorrectly?
Realistically, if you want some actual gold a lot of that price is going to be about delivery, storage, verification, etc, etc. The paper gold probably helps divert people who just want to bet on the price of gold away from the people who actually gold to do work (though inevitably the two groups will affect the price the other pays).
This is just the first result in an internet search for gold rehypothecation:
https://goldsilver.com/blog/what-is-gold-hypothecation-and-r...
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
(Disclaimer, I am in no way an economist :) )
For example, in a global gold reserve system it is possible for individual countries to run out of gold, possibly reducing their GDP to nothing. This happened way more often than you think and for many wildly different reasons. For example, the famous Weimar Republic hyperinflation was caused by an outflow of gold due to forced reparation payments that go way beyond what a destroyed post war economy could bear. The moment there was no gold in the country, the currency became worthless. Soon after that, just six or seven years later the great depression happened.
People argue that gold solved the inflation problem but all it did was swing violently from inflation to deflation and back. Only people who have too much money and don't need more money benefited from this, a bonafide market failure.
One would expect a market economy to allocate money to those who need it most but instead our economy allocates money to those who don't need it. Nobody seems to be aware of this contradiction.
It all boils down to a monopoly of very few organisations over the entire money creation system, and the instabilities are a result of the fact that few managers at the top are given extremely crude tools to manage extremely delicate system. Every little error using those extremely crude tools has extreme consequences.
There was always one redeeming quality of gold-backed currencies, and it's the restriction of those crude tools.
As for Weimar republic, the gold was never the issue. They were given an impossible debt to pay as reparations, and they could have that debt denominated in whatever tangible way you can think of, it wouldn't be paid. The reason the common German was devastated by the inflation was that their local currency wasn't backed by gold, it was allowed to be printed indefinitely by a government trying to fulfill an impossible debt.
(I also wish we would stop thinking in terms of GDP, or that it's better to have a higher one)
Ppl complain about bitcoin, but fiat is the same.
Printed currency value is pure speculation.
0.0000% of them transacted in Gold or Bitcoin
2) The fundamental property and requirement of currency is fast, seamless transactions. Don't confuse this with store of value. If you want store of value buy cash/dividend producing assets.
3) It's incredibly dumb and naive (all Bitcoin maximalists and Gold Bugs are) to ask currency to both act as transaction and store of value (those are opposite requirements).
4) Gold Peaked in 2011 with a price of 1900. It has lost 10% in 11 years. Forget about beating inflation, it actually has lost value over 11 years. Just a reminder is Boomer Gold == Gen X/Y Bitcoin. All it took was Gen X/Yers embracing Bitcoin over Gold to make Gold irrelevant All it will take would be Gen Zers embracing something over Bitcoin to make Bitcoin irrelevant
Cash/dividends denominated in falling currency is not a store of value. Ie. a profitable business that takes revenue in and pays out dividends in Turkish Lira or Venezuelan Bolivar. Not an issue for those in west, but not everyone has access to stable currency/markets.
> to ask currency to both act as transaction and store of value (those are opposite requirements).
They are actually complimentary, with one use-case following the other. For anything to be become tradable (used as currency) it must first be valuable. Over time, money that hold their value better become the "better money", as its ability to hold value becomes self-evident, and everyone becomes willing to accept it. This is how we got to a gold standard over some thousands of years. Lesser valuable monies trade hands more frequently, and have higher velocity, not because they are preferred to be held, but because people view them as inferior stores of value. Ie. you hoard the gold coins, and daily trade with the silver and copper ones. The proliferation of trade denominated in silver or copper makes it appear that a society prefers silver or copper as their money, but this is a deceptive metric.
Paper dollars initially represented a redeemable voucher for gold in a vault. Trading paper gold was more convenient than custodying actual gold. However you expected the paper to be redeemable for gold, which is why this paper bill had value in the first place.
A business bought in Turkey will pay the net-profit margin of the said business (in whatever currency you denominate it).
Both are inflation protected.
If you want economic risk protection because of inflation/hyper-inflation in your local currency, buy GOOG, AAPL or a broad basket of International Stock.
In a stable environment, using currency as store of value for anything more than 3 months is stupid
In an inflationary environment, using currency as store of value for anything more than a week is stupid.
Gold didn't act as store of value. Bitcoin didn't act as a store of value. Both are what it is --- speculative assets (not store of value).
If you really really really want a currency that acts as a store of value, of course there is the King Dollar, the greatest currency in the history of currencies.
Not sure about your logic here. The more exposure you have to an inflating/hyperfinflating currency, the more risk you carry. Your house holds value, but the rent in fiat you collect doesn't. Every month you collect X liras, but they become worth less and less. You're assuming you can reprice rent on demand, but contractually this is dependent on the locale.
> In a stable environment, using currency as store of value for anything more than 3 months is stupid
You only seem to be thinking in the single dimension of currency for the average person. You forget that all government treasury bonds (pretty big and important financial instrument in any economy) are denominated in some fiat currency. 10, 20, 30 year bonds. There are macro affects when people no longer expect or trust a currency to hold value. It is part of how debt crises occur.
> If you really really really want a currency that acts as a store of value, of course there is the King Dollar, the greatest currency in the history of currencies.
People think Bitcoin is a monetary experiment. But it really is the modern day fiat currencies that is the huge experiment.
We started with gift based economies where people keep track of favors in their head and after that ancient Egypt introduced a grain standard which did the exact opposite of holding value and it worked for thousands of years and encouraged long term investments like the pyramids as there is no point in making the rest of the economy wait eternally.
The Roman empire ran the first silver/gold growth pyramid scheme which forces it to conquer more and more territory to mine more silver and gold as they fail to circulate throughout the economy and lead to pointless economic stagnation. Egypt fell victim to this overexpansion and once the Romans ran out of easy territory to capture, they couldn't mine enough silver to pay their soldiers, forcing them to reduce the silver content of their coins. This is especially problematic if those soldiers are foreign mercenaries who are former refugees driven off their home by the Huns. Since there are plenty of privately wealthy people with gold and silver, they try their hand at playing Caesar and hire their own army, only to get killed by another self proclaimed Caesar or by their own men if they run out of money. Some Caesars tried to impose price controls by threatening capital punishment instead, with little success.
What we are looking at are two thousand failed years of permanent money. Madmen trying to do the same thing over and over again with the same expected outcome.
Honestly your whole argument has a pretty huge flaw and that one has nothing to do with store of value or medium of exchange but rather with a property that any successful medium of exchange must have. A medium of exchange doesn't need a high velocity or be a good store of value, those can be desirable in some contexts but they miss the essence of what it means to be money.
Money is an asset whose primary property is to be highly liquid. Liquidity is the ability to trade one asset for another. Money is effectively a joker. Money that is widely accepted is more liquid than money that isn't. Money that is difficult to handle and transport is less liquid than money that is compact and lightweight. Money that needs to be weighed and verified is less liquid than stamped coins or bank notes of fixed denominations.
Government approved money that can be used to pay taxes or loans is more liquid than privately issued money where people have to voluntarily agree to accept the currency.
If you build your money on a commodity, that commodity will need to be versatile and either be the foundation of your economy or have a wide variety of uses.
Not even money itself is perfectly liquid. A soda vending machine may not accept large bank notes or credit cards, meanwhile self checkout may only take credit cards and no cash.
These properties are independent of whether the currency retains its value or has a high velocity. Of course, extreme shocks in either of these properties may ruin liquidity but most currencies tend to limp along even with 20% inflation which according to you should be enough to ruin liquidity and make everyone and their dog switch to gold but again, dollars are more liquid than gold so people prefer those.
And what gives an asset ultimate liquidity? Liquidity is desire to be owned by someone else. Something needs to make it desirable, what could that be?
Otherwise we'd be using feathers as money.
What is there more of, but higher demand, such that its value is generally higher than gold?
Silver ~1,740,000 metric tons, or a cube 55m on each side. [3,4]
Link 3 has a neat visual of the silver, gold, and platinum cubes side-by-side (a tad bit out of date).
[1]: https://pubs.er.usgs.gov/publication/pp1802N
[2]: https://sdbullion.com/blog/how-much-platinum-is-in-the-world
[3]: https://www.visualcapitalist.com/the-platinum-series-the-his...
[4]: https://www.usgs.gov/faqs/how-much-silver-has-been-found-wor...