How safe is digital gold?

[RenewableCandy]

Reminds me of an ancient Chinese fable about a chap walking around minding his own business when he caught sight of a string of cash floating through the air (coins had square holes in the centre and you threaded them on a string, which you could then tie up your sleeve for safekeeping). He ran for it, grasped the 2 ends in his hands and threw himself on the rest of it to stop it drifting away, but when he got up again all he had caught were the 2 fistfuls: the rest had escaped.

His mate the local Sage said "You got only what you could hold in your hands because cash is a medium for buying and selling, not a thing for hoarding".

Reminds me that the Chinese were the first to have paper money. They were also the first to have paper money become worthless.

The hoarding thing is interesting. Is hoarding paper money wrong? If not, why not?

Referring to money "hoarding" is actually saving. Is saving wrong? Or does it depend on which type of money you save?

I think the guy meant it's better to use it on things you need, and not have too much excess...perhaps the fable was actually about the reasons for the problems with money the Chinese had, that you mention...I must admit one thing I don't know about the ancient Chinese is whether they charged interest on loans...I know they were doing by the 19thC and it was a disaster, at least for poor people.

[Catweazle]

Whatever happens to currency and gold in the future, the owner of a cabbage will always be able to sell it.

Your right, being useful, a cabbage will always find a ready buyer.

That's rather the point, though

What are they going to pay you with for your cabbage.

If you are both lucky and you have a coincidence of wants, then of course money is totally uneccessary as you can make a direct exchange of your goods.

However, as I mentioned previously, in any economy above the most primitive, to find oneself always in the fortunate postyion of having a coincidence of wants become very rare.

It is at this point that money evolves as a special commodity that has a universal exchange value. It doesn't need to be gold or silver. It is just very likely to be them for all of the reasons mentioned in my previous posts.

so...

Yes, in a post peak world, ryou will always have a ready buyer fro your cabbage.

however, the money paid for you cabbage may well be gold or silver

Which is just as well since the guy who makes ploughs doen't like being paid in cabbages. He does, though like being paid in gold because the guy who proviudes hiom with his iron al;so likes being paid in gold...

etc etc etc.....

The point I'm making is that once people are hungry and Gold is recognised to be "useless" they might have to give me quite a lot of it for a cabbage. A cabbage, on the other hand, has a recognised value that is unlikely to decrease as people get hungrier. As I posted earlier, I'll be quite happy to take Gold post-crash, but I'm not sure how much it will be worth so I'll accept the going rate then rather than hoard it now.

I feel that Silver is a slightly different option, it has anti-bacterial uses as well as useful mechanical properties and at a pinch makes a fair currency too.

Cabbages are good. Thing is a cabbage rots after a while.

[Little John]

Whatever happens to currency and gold in the future, the owner of a cabbage will always be able to sell it.

Your right, being useful, a cabbage will always find a ready buyer.

That's rather the point, though

What are they going to pay you with for your cabbage.

If you are both lucky and you have a coincidence of wants, then of course money is totally uneccessary as you can make a direct exchange of your goods.

However, as I mentioned previously, in any economy above the most primitive, to find oneself always in the fortunate postyion of having a coincidence of wants become very rare.

It is at this point that money evolves as a special commodity that has a universal exchange value. It doesn't need to be gold or silver. It is just very likely to be them for all of the reasons mentioned in my previous posts.

so...

Yes, in a post peak world, ryou will always have a ready buyer fro your cabbage.

however, the money paid for you cabbage may well be gold or silver

Which is just as well since the guy who makes ploughs doen't like being paid in cabbages. He does, though like being paid in gold because the guy who proviudes hiom with his iron al;so likes being paid in gold...

etc etc etc.....

The point I'm making is that once people are hungry and Gold is recognised to be "useless" they might have to give me quite a lot of it for a cabbage. A cabbage, on the other hand, has a recognised value that is unlikely to decrease as people get hungrier. As I posted earlier, I'll be quite happy to take Gold post-crash, but I'm not sure how much it will be worth so I'll accept the going rate then rather than hoard it now.

I feel that Silver is a slightly different option, it has anti-bacterial uses as well as useful mechanical properties and at a pinch makes a fair currency too.

Cabbages are good. Thing is a cabbage rots after a while.

Actually, I fully take on board your point about using gold post-crash. This is why I would not put the majority of my own exchange value in gold right now, for pretty much the same reason as you.

I have, though taken possession of a small amount in the event of things taking a sudden turn for the worse in the fiat supply. Nothing more than that though, at present

[Catweazle]

Talking of paper money:

Zimbabwe's Reserve Bank issued its first $100 billion note. It's not as much as it sounds. The Zimbabwean shopper will need four to buy a dozen eggs, and another for his bus fare. On paper, it's worth only slightly more than it is
as paper, that's to say about 7p.

[Little John]

Talking of paper money:

Zimbabwe's Reserve Bank issued its first $100 billion note. It's not as much as it sounds. The Zimbabwean shopper will need four to buy a dozen eggs, and another for his bus fare. On paper, it's worth only slightly more than it is
as paper, that's to say about 7p.

They've got a major problem when the fiat value becomes worth less than the actual product value of the medium used (paper). At that point, poeple may as well use blank pieces of paper as exchange units since they will have more intrinsic exchange value.

spooky

I suppose, though, the printed image on the note places a notional limit on the inflation that can occur to it since, if people used blank pieces of paper, the current Zimbabwean inflation rate would look tame by comparison. I would think that the average Zimbabwean is using some other form of currency on the street. God knows what.....

Probably metals......

Possibly potatoes

[Catweazle]

I would think that the average Zimbabwean is using some other form of currency on the street. God knows what.....

Probably metals......

Possibly potatoes

Possibly Cabbages......

[Little John]

I would think that the average Zimbabwean is using some other form of currency on the street. God knows what.....

Probably metals......

Possibly potatoes

Possibly Cabbages......

possibly

[jcw]

They've got a major problem when the fiat value becomes worth less than the actual product value of the medium used (paper). At that point, poeple may as well use blank pieces of paper as exchange units since they will have more intrinsic exchange value.

I've heard that the British two-pence piece is worth less than its copper content. They always struck me as a bit large for their value, even when they were first introduced.

(It's illegal to melt them down for the metal, in case anybody gets ideas.)

Possibly Cabbages......

Or bananas, although I seem to remember that Catweazle was unfamiliar with them.

[landyowner]

I've heard that the British two-pence piece is worth less than its copper content. They always struck me as a bit large for their value, even when they were first introduced.

(It's illegal to melt them down for the metal, in case anybody gets ideas.)

Yep, the 1p and 2p which were minted in and before 1990 I think have a higher copper value than face value. I thinkthe copper value is just over twice the face value of the coin. Time to start hoarding pre-1990 pennies I think

[Catweazle]

Or bananas, although I seem to remember that Catweazle was unfamiliar with them.

I would like to state, for the record, that I have never been "familiar" with a Banana.

Thankyou.

[RenewableCandy]

Getting back to Zim and their paper money, apparently they're having difficulty paying their own army now. I don't know whether that's a good thing (after all if they're not being paid perhaps they'll do something useful like grow food) or a bad thing (loads of hungry blokesroaming around with guns...til they run out of ammo anyway).

[Little John]

Getting back to Zim and their paper money, apparently they're having difficulty paying their own army now. I don't know whether that's a good thing (after all if they're not being paid perhaps they'll do something useful like grow food) or a bad thing (loads of hungry blokesroaming around with guns...til they run out of ammo anyway).

My guess is it's a bad thing RC.

Lots of likely poorly educated men who have been trained to be killers roaming round with guns in a pissed-off state of mind

not good...

[kenneal - lagger]

It's not so bad really. The only people with anything left worth taking are Mugabe's lot. ':D'

[jcw]

Here's a short mp3 of a recent interview with GoldMoney.com's CEO James Turk.

They talk about the recent prosecution of the company e-gold over money laundering matters, and the precautions which GoldMoney takes to comply with the law (they're based in Jersey) and safeguard customers' interests.

http://www.kereport.com/DailyRadio/Daily072208.mp3

[Little John]

Here's a short mp3 of a recent interview with GoldMoney.com's CEO James Turk.

They talk about the recent prosecution of the company e-gold over money laundering matters, and the precautions which GoldMoney takes to comply with the law (they're based in Jersey) and safeguard customers' interests.

http://www.kereport.com/DailyRadio/Daily072208.mp3

I am bound to say, jcw, that I would not personally place my exchange value in e gold with any company. The reason being this just another form of fiat. A "promise to pay" if you like. Little different to the original goldsmiths of old who would store your gold for safe keeping and then issue you with a note that promised to "pay the bearer" of the note. At some point, the goldsmiths realised that there was not likely to be more than 10% of the depositors ask for the their gold back at any one time. They then went on to realise that they could lend out gold in the form of promisory notes alone on the basis that the note could "in theory" be redeemed at any point. As a consequence, people bagan to use these promisory notes as exchange units. Thus, paper fiat was born. Of course, if the depoisitors ever lost confidence in what now amounted to something similar to a modern bank, there would be a bank run. 90% of the depositors were dissapointed, to say the least, to find the bnank didn't actually posess their gold at all.

Eventually, our governments tidied up this problem of the goldsmiths lending money into existence by making it illegal for anyone other than a central bank to issue fiat. Of course, the CB was still playing the same fractionall reserve lending game itself, lending money into existence. But they held a store of gold to act as a fundamental back-up in the eventiuality that the depositors wanted their real money (the gold) back. Following the depression of the thirties and absolutely since the seventies, the paper fiat of the western world has been de-pegged from a gold standard. This means that our paper fiat is now backed by absolutely nothing. Yep...that's right...bugger all!

I see companies offering e gold as a re-invention of the role of the old goldsmith. People are placing their fiat into these companies without seeing the gold in question. The temptation to do a bit of fractional reserve shennanigans must be incredibly high.

Give me real money every time. Physical bullion...