3Settimana
I don't think gold is good because it has no productive value, see Warren Buffet. However, your arguments are wrong or rather speak in favor of gold.
1. gold has historically been an asset that yielded +-0 for a very long time and even that was enough for people and was "safe". But the price has increased tenfold in the last 20 years and there is a reason for this: the demand for gold is rising and, even more importantly, the Modern Monetary Theory. Inflation is unmanageably high. Money is only printed and backed by nothing but nuclear bombs and brute force. Government debt is constantly being increased globally according to the motto "If I have to pay, then make me pay". As a result, the value of real assets inevitably continues to rise at the same time as the level of debt.
2. you refer to the fact that gold can also be artificially created as a "danger", but this is actually the opposite. If the supply is actually much lower, the price would have to be much higher. What if it turns out that only a fraction of the securitized gold actually exists? If it is confirmed that a large proportion of the gold reserves held by the USA and Germany on paper have not been in the vaults for decades? The result would not be a crash but a rise in the price of gold to infinity.
1. gold has historically been an asset that yielded +-0 for a very long time and even that was enough for people and was "safe". But the price has increased tenfold in the last 20 years and there is a reason for this: the demand for gold is rising and, even more importantly, the Modern Monetary Theory. Inflation is unmanageably high. Money is only printed and backed by nothing but nuclear bombs and brute force. Government debt is constantly being increased globally according to the motto "If I have to pay, then make me pay". As a result, the value of real assets inevitably continues to rise at the same time as the level of debt.
2. you refer to the fact that gold can also be artificially created as a "danger", but this is actually the opposite. If the supply is actually much lower, the price would have to be much higher. What if it turns out that only a fraction of the securitized gold actually exists? If it is confirmed that a large proportion of the gold reserves held by the USA and Germany on paper have not been in the vaults for decades? The result would not be a crash but a rise in the price of gold to infinity.
•
77
•
2Settimana
Hey @Soprano, Exciting points! I absolutely agree with you on the analysis of the monetary system and MMT. We need real assets, no question. But I see the danger precisely in your arguments:
To be clear: For me, certificate gold and physical gold are directly related. You buy your gold in euros or dollars - so you are inevitably dependent on the market price. This determines your profit or loss. If you only hold it to buy bread rolls when the world ends, that's a completely different (pension) issue, but not an investment case.
Re 1: Where does the assumption that demand is rising healthily come from? Countries like China claim to be buying more gold than ever, but behind the scenes they are the second largest Bitcoin mining nation in the world - despite the ban! 😉 Anyone can claim to have gold without proving it. In my view, the price increase is not due to real scarcity, but to the claim of scarcity and the hype that the institutions are fueling.
Re 2: You say the price should rise to infinity if the lie is exposed. In theory, yes. But in practice, that means the market will collapse. If it turns out that your paper gold doesn't even exist, why would the certificate still be worth anything? It would be a worthless promise, while the price stands in a vacuum, but nobody trades anymore.
Anyone who holds gold in their portfolio ultimately trusts that the institutions are playing the game fairly - and according to your own MMT analysis, that is precisely what they are not doing. Who can guarantee you that they won't keep the price artificially low for another 50 years?
To be clear: For me, certificate gold and physical gold are directly related. You buy your gold in euros or dollars - so you are inevitably dependent on the market price. This determines your profit or loss. If you only hold it to buy bread rolls when the world ends, that's a completely different (pension) issue, but not an investment case.
Re 1: Where does the assumption that demand is rising healthily come from? Countries like China claim to be buying more gold than ever, but behind the scenes they are the second largest Bitcoin mining nation in the world - despite the ban! 😉 Anyone can claim to have gold without proving it. In my view, the price increase is not due to real scarcity, but to the claim of scarcity and the hype that the institutions are fueling.
Re 2: You say the price should rise to infinity if the lie is exposed. In theory, yes. But in practice, that means the market will collapse. If it turns out that your paper gold doesn't even exist, why would the certificate still be worth anything? It would be a worthless promise, while the price stands in a vacuum, but nobody trades anymore.
Anyone who holds gold in their portfolio ultimately trusts that the institutions are playing the game fairly - and according to your own MMT analysis, that is precisely what they are not doing. Who can guarantee you that they won't keep the price artificially low for another 50 years?
••
2Settimana
@Philipwdr That's a lot of points now. For example, I don't understand the contradiction between gold and Bitcoin for the Chinese. And why you still doubt the scarcity of money in 1. and say in 2. that most gold is just made up - so what?
I think that gold is already scarce. So the supply is low, but tends to increase. Theoretically, gold itself has minimal inflation. The fact that there is more of it rather than less is also the most important reason why it should go sideways under normal circumstances.
The fact that the price has risen so sharply has nothing to do with the (official) supply, but only with demand. Gold is in greater demand than ever before because confidence in the system and in the leading currencies is at its lowest for 100 years. As long as there is a trend towards more distrust in politics, the gold trend will continue.
And of course it makes no sense to buy paper gold if you buy gold because you distrust the system. After all, we are talking about gold that really exists, the price of which would rise if it turned out that the actual quantity was less than the specified quantity.
I think that gold is already scarce. So the supply is low, but tends to increase. Theoretically, gold itself has minimal inflation. The fact that there is more of it rather than less is also the most important reason why it should go sideways under normal circumstances.
The fact that the price has risen so sharply has nothing to do with the (official) supply, but only with demand. Gold is in greater demand than ever before because confidence in the system and in the leading currencies is at its lowest for 100 years. As long as there is a trend towards more distrust in politics, the gold trend will continue.
And of course it makes no sense to buy paper gold if you buy gold because you distrust the system. After all, we are talking about gold that really exists, the price of which would rise if it turned out that the actual quantity was less than the specified quantity.
••
2Settimana
@Soprano printing money without a wealthiest households tax, guaranteed labor, and other liquidity retraction strategies is not MMT, it’s just printing money and trying to solve it by raising interest rates, which is widely demostrated that feed backs the inflation by raising debt costs and results in a poorer society (non financial conmpanies and households). I mean a QE is not considered MMT and it brings inflation. And btw it’s also widely demostrated that the biggest inflation pressures have been supply chain issues and energy supply issues as those povoked by wars (Ucraine, Iran, Yom Kippur and so on), pandemics (also related to supply chain halts), climate change (as droughts or floads in agricultural areas), among others and not creating money by itself only. Ortodox economic theory is pretty bad predicting and solving enonomic phenomena.
••
2Settimana
@market_genius_awvfj Oh well, they do a lot do absorb liquidity after printing money. The whole idea of "subscription economy" and "you'll own nothing and be happy" is to take property away from people so every money the gov prints or pays out flows right back into their own pocket without causing inflation. Currency still stays valuable when most people don't have any after paying their bills and taxes.
An economy does neither need to be top-down nor bottom-up. You can just do it top-only when you found enough ways to keep the masses occupied and quiet.
Your observation that the biggest economic shocks are entirely artificial and man-made events such as a wars and COVID doesn't make it any less concerning, does it?
An economy does neither need to be top-down nor bottom-up. You can just do it top-only when you found enough ways to keep the masses occupied and quiet.
Your observation that the biggest economic shocks are entirely artificial and man-made events such as a wars and COVID doesn't make it any less concerning, does it?
••
2Settimana
@Soprano sure, they are moving wealth from the poorest 99% to the richest 1% it is true but that is not what MMT says or what MMT is suposed to do.
••
2Settimana
@Soprano Let me try to untie the knots:
1. the China contradiction: states like China officially buy gold for their reserves (geopolitical hedging). At the same time, however, China is a giant in Bitcoin mining. I think big players like China, for example, are saying they are buying gold to unsettle everyone else, even though they are going "full Bitcoin". You shouldn't just look at what they say, but what they do.
2. scarcity vs 'invented' gold: this is not a contradiction, but the core problem. Physical gold is scarce, yes. But many times the amount of gold that actually exists is traded on the exchanges in the form of certificates. The problem is that the price you pay for your real bar is determined by this 'paper gold'. For me, physical gold is inextricably linked to 'paper gold'!
If 100 people think they own an ounce, but there is only one ounce in the vault, the price is manipulated. If the system is exposed, the high price of your physical gold will be of no use to you because the market will collapse - then it will simply no longer be possible to determine the price of physical gold.
3. demand through mistrust:
I absolutely agree with you there! The price of gold is rising due to dwindling confidence in politics. But this is precisely my argument: if you distrust the system so much, why do you rely on a system of paper derivatives and centralized exchanges to price your asset?
Gold is a bet on the failure of politics. For me, Bitcoin is the technological way out of the system that makes these policies possible in the first place.
In the end, the question remains: do you want an asset whose quantity we can only estimate (gold) or one whose quantity we know mathematically exactly (Bitcoin)?
All I can say is that I don't think we'll come to the same conclusion - but that's not a bad thing. I really appreciate being able to discuss this topic with someone at eye level.
Best regards Philip 😄
1. the China contradiction: states like China officially buy gold for their reserves (geopolitical hedging). At the same time, however, China is a giant in Bitcoin mining. I think big players like China, for example, are saying they are buying gold to unsettle everyone else, even though they are going "full Bitcoin". You shouldn't just look at what they say, but what they do.
2. scarcity vs 'invented' gold: this is not a contradiction, but the core problem. Physical gold is scarce, yes. But many times the amount of gold that actually exists is traded on the exchanges in the form of certificates. The problem is that the price you pay for your real bar is determined by this 'paper gold'. For me, physical gold is inextricably linked to 'paper gold'!
If 100 people think they own an ounce, but there is only one ounce in the vault, the price is manipulated. If the system is exposed, the high price of your physical gold will be of no use to you because the market will collapse - then it will simply no longer be possible to determine the price of physical gold.
3. demand through mistrust:
I absolutely agree with you there! The price of gold is rising due to dwindling confidence in politics. But this is precisely my argument: if you distrust the system so much, why do you rely on a system of paper derivatives and centralized exchanges to price your asset?
Gold is a bet on the failure of politics. For me, Bitcoin is the technological way out of the system that makes these policies possible in the first place.
In the end, the question remains: do you want an asset whose quantity we can only estimate (gold) or one whose quantity we know mathematically exactly (Bitcoin)?
All I can say is that I don't think we'll come to the same conclusion - but that's not a bad thing. I really appreciate being able to discuss this topic with someone at eye level.
Best regards Philip 😄
•
11
•2Settimana
@market_genius_awvfj The fundamental principle MMT is that increasing quantity of money doesn’t cause any inflation (as was expected before) but under the condition that access to money is restricted.
••
2Settimana
@Philipwdr Dear Philipp, I think you are concentrating too much on this paper gold. I completely agree with you on that point.
But now let's get specific. What if I REALLY buy a gold bar that I can touch and put in my own vault at home - and everyone else just buys this paper gold?
I then get my gold bar extremely cheaply because everyone believes that there is, for example, 200 tons of gold. People are prepared to pay €130 for one gram of it.
If it now turns out that there are only 20 tons, that means that one gram should be worth €1300 ...
Unfortunately, Bitcoin has even more serious risks than gold. There are really many conceivable scenarios in which Bitcoin falls to 0. You can debate whether each of them is very likely or not, but they are definitely mathematically realistic and no more disprovable than that the entire gold system is a complete scam.
But now let's get specific. What if I REALLY buy a gold bar that I can touch and put in my own vault at home - and everyone else just buys this paper gold?
I then get my gold bar extremely cheaply because everyone believes that there is, for example, 200 tons of gold. People are prepared to pay €130 for one gram of it.
If it now turns out that there are only 20 tons, that means that one gram should be worth €1300 ...
Unfortunately, Bitcoin has even more serious risks than gold. There are really many conceivable scenarios in which Bitcoin falls to 0. You can debate whether each of them is very likely or not, but they are definitely mathematically realistic and no more disprovable than that the entire gold system is a complete scam.
••
2Settimana
@Soprano actually not, MMT says you can print money as long as there are hands available to work (and the state guarantees jobs in public companies and strategic sectors) and resources you can extract if you make that money flow into a miner company for instance to put more copper in the market, MMT doesn’t support increasing quantity of money in a full employment scenario or in a non productive economy. The problem is that if your industrial network is nothing, the money goes to banks and banks put that money in the market no matter how, then inflation raises, IR raises then the banks get paid more and banks, FED and government fall into an infinite loop. A QE where the ECB or FED buys lomg term bonds back from BoFA and Blackrock by printing money is not an MMT measure, it’s a bubble pump.
••
2Settimana
@market_genius_awvfj So why is it called the Modern Monetary Theory if it uses the concept of employment from the 1800s? Full employment is no longer desirable for the following reasons: a) Robotics and AI are doing more and more jobs better than humans do b) Millennials and GenZ don’t even want to do the jobs they already have full-time. c) All people that are unemployed either do not possess the skills required by the market or they do not want to work or both. You can not simply have a person who can’t spell their own name work as a doctor just because you printed money to pay their salaries.
There is a reason why no politician even promises to create full employment because it sounds suspiciously like forced labor. And the whole reason why we let prisoners watch TV all day instead of making them do work is that they wouldn’t create economic value anyway. There just isn’t any use case for hundred thousands of people shoveling dirt anymore.
So what do you mean? Is full employment a “benefit” of the MMT? Or is full enslaved workforce a prequisite just so we can have MMT?
And I guess I don’t even have to explain that extraction of resources isn’t an option either Europe simply doesn’t have the resources we need otherwise we wouldn’t have economic problems in the first place.
There is a reason why no politician even promises to create full employment because it sounds suspiciously like forced labor. And the whole reason why we let prisoners watch TV all day instead of making them do work is that they wouldn’t create economic value anyway. There just isn’t any use case for hundred thousands of people shoveling dirt anymore.
So what do you mean? Is full employment a “benefit” of the MMT? Or is full enslaved workforce a prequisite just so we can have MMT?
And I guess I don’t even have to explain that extraction of resources isn’t an option either Europe simply doesn’t have the resources we need otherwise we wouldn’t have economic problems in the first place.
••