I’m going to stray from the topics I normally cover to talk about gold.
The NY Times Magazine had some great articles on Hedge Funds and investing. One article in particular caught my attention.
The article was about gold and the people who follow it as an investment and those who believe it is the foundation of our world’s economy. As the article states, “To a small but extremely avid subculture in the American financial community, gold doesn’t mean bling, or King Midas, or them thar hills. Gold is money; and not just money, but the one true money.”
Which got me thinking and made me ask the question… Why do people still think that gold has any more significance than any other precious metal or commodity?
I understand that gold was a common denominator as currency between countries startingmore than athousandsyears ago. I understand that until it was delinked from our currency that it was possible to exchange currency for gold and that created a “world currency.”
But the world has changed since then. Where gold acted as the ultimate hedge against the devaluation of currency in the past, that is no longer the case. Gold is priced in dollars. Not services or other commodities.If the markets and economies were to crash, a basement full of gold bullion would just take space. I couldn’t imagine farmers trading chickens and milk cows or fresh vegetables for gold bullion. For guns , ammunition, gasand oil, yes. For gold no.
Nor could I imagine a scenario where our currency was completely devalued and a gold standard was reinstituted. The reality is that ourpopulation , and the world population has gotten too big. There isnt enough gold in the world, let alone in the US to reconstitute a new currency based on gold.
So to get to the point. Its easy to understand why the US needs to maintain oil reserves. Without, the country could grind to a halt. Government oil reserves would at least allow us to fight over who got to keep their lights on and their cars running.
What I don’t understand is why we still keep $10 billion dollars worth of gold stashed in depositories around the country.
My suggestion, let’s sell it.
Let’s sell ita little bitat a time so that we don’t freak out the markets and decimate the price.
Let’s sell it and pay down some of this country’s debt. I know its just a dent. But in order to pay off a debt, you have to make the first payment.
Let’s sell it before some other countrybeats us to it.
Let’s sell it while the price is over $42 per troy ounce.
Just storing and protecting all of that gold has got to cost a fortune. Let’s jump into the 21st century and sell it all.
And for the record, I’m not part of any organizations discussing this. I have not had any contact with the government regarding this idea. I am not part of any conspiracy although I fully expect to be entertained by such suggestions and by all the educational comments Im sure to receive on this post.
I agree…Let’s move from the past system of gold value to the system we actually use. The amount of gold in storage in no way covers the amount of US currency floating out there.
In regards to the comments about Cuban paying more, I always find that arguement flawed. Everyone in America is pursuing the “American Dream”, but we want to penalize the people who reach that dream. Why should someone pay a higher percentage b/c they have been successful. I would be defined as middle class but can see the difference in fair/unfair.
Comment by shawn -
$10B is book value, market value of US govt gold holdings is $90B! Let the sales begin.
Comment by Chris -
ITs not complicated… so called “gold bugs” like gold because it always has value. They believe that the federal reserve system is bound to crash, and when it does they’ll be sitting on the only stable form of currency. Its not that they believe that gold is superior to other forms of metal, it just has some properties that historically have made it conducive to monetarization. Its expensive per weight, its easily divisible, its homogenous (unlike “guns and ammo”, easy to melt, relatively plentiful.
I can’t say that I disagree with them… with the ridiculous debt this country has racked up, gold is becoming more and more important.
Comment by charlie -
good topic. it helps me forget about things like fans calling nash a commie.
lord knows the world needs suggestions.
i was talking to a special ed. teacher today who told me she feels children who suffer from various levels of autism have incredible thought patterns offering wonderful ideas on how to live our lives better. i replied, “if only you could teach them to tie their shoes.”
get rid of the gold. not only would it be financially wise, but it would give america a better name. i wish i dumped all those 1980’s baseball cards when i had the opportunity.
i can’t sell a gem mint jose canseco rookie card for 10 bucks. ever again.
all that said, i will go out on a limb and tell you i feel mars has a limitless amount of diamonds.
sell all the gold, get to mars, mine the diamonds- BOOM. we’re back in black!
Comment by joe -
Money doesn’t trickle down, it flows up.
When the little guy has more money, he spends it, and it gets to the big guy, who may or may not pay it to other little guys, but if he does, they’ll sure be spending it again.
The big guy can do whatever he wants with the money, because he has enough to throw around.
The little guy can’t. He’s got no real reason to save it, because what difference does that money make saved? But it lets him get those car repairs he’s been putting off, it lets him go out for dinner an extra time this week, or it lets him get new glasses for his kid.
And as he spends that money, that creates demand. Because, remember, it’s *demand* that drives things, not supply.
No matter how large the supplies are, it’ll never be bought in excess of demand. And the big guys know this. If there’s not a lot of demand, they’re not going to increase supply, because that costs them something, and won’t gain anything.
But if there’s a lot of demand, the big guys will do *whatever they can* to increase supply, because NOW, that increased supply means more money.
This is the insight behind Keynesian economics; it is demand that drives the economy, not supply. Now, Keynes said that the goverment should increase demand. Why? Because if the problem is one of trust, the government’s the only entity that can fix that.
But if the problem is simply one of liquidity, ie, your average person *doesn’t have enough money* to do what he wants to do, the government can’t help him by creating artificial demand, unless that artificial demand manages to get him hired. And it definitely can’t help him with voodoo economics that just give money to the rich guys without any incentive to actually spend it. But that government could try to get him more money, because as soon as he gets it, he’ll spend it.
Comment by Mike -
You may want to take a quick read of some of the economic ideas put out by the Austrian School of Economic thought at the Ludwig von Mises Institute (http://www.mises.org)and particularly this little piece (http://www.mises.org/story/1829) on gold.
Not a big proponent of these guys, but it is worth a read
Josh
Josh@prescott-thackery.com
Comment by Josh Kerbel -
There is no gold left in Fort Knox, that’s why they can’t sell it Mark . . .
http://www.apfn.net/Doc-100_bankruptcy10.htm
Can anyone prove it . . . ?!?!?
Comment by Shawn -
For those who want to tax Cuban and others (especialy post #1), please examine the concept that the more capital innovaters like Cuban has, the more opportunities he has start new companies (tax revenue) and create new jobs (tax revenue) instead of fat cats in DC in ivory towers and fancy offices taking money to decide where to hand out unearned money. Trickle down….yes! If it ain’t trickling, then it ain’t coming down! Cuban proves that economic theories are more than just theories. Just look around.
Comment by greg -
Sorry, the first poster was right. The national debt that we’re crying over was deliberately created by tax cuts for people like Mark who didn’t need them. We were all told it would stimulate the economy. It didn’t, and it’s not going to. Duh.
Proposing to sell $10 billion in gold is not a serious proposition for solving this country’s fiscal problems.
Comment by Jake -
You can’t imagine a scenario where our currency was completely devalued after Sept 11 ? What world are you living in ? What if instead of planes hitting NYC and Washington, it was a nuclear missile that was driven thru Wall Street and Washington DC and wiped out the entire population of the northeast? What would happen to the currency markets then ? Imagine a scenario where you have no stock markets or federal government in place for months. Unlike the dollar, gold and oil have inherent value in our world in their raw forms. Finally imagine a sinister scenario where someone other than our own government gets a hold of the original decks of the new bills in our system and uses them to flood the market with more money deliberately. Technology has spread so rapidly and is cheap to obtain that I have no doubt that our government will have to come up with newer bills soon.
Comment by Shake -
These are interesting ponderings, Mark. The hole in your discussion, though, is that you view Gold simply as another commodity, when it is not. However, the central idea of your thesis, i.e. depleting gold reserves to pay off debt is exactly the effect that was intended to be achieved when the international trading community sought an international gold standard following WWII. As Wikipedia’s write up on The Gold Standard states the effect of a gold backed currency was: A country in deficit would have to pay its debts in gold thus depleting gold reserves and would therefore have to reduce its money supply. This would cause prices to deflate, reducing economic activity and, consequently, demand would fall. The resulting fall in demand would reduce imports; thus theoretically the deficit would be rectified when the nation was again importing less than it exported.
In other words, it was a way to restore fiscal and trade discipline on the part of economies. The Gold standard is no longer followed though, because in practice, if central banks were to start depleting gold reserves, bank customers would start pulling out money knowing their money would be worth a lot less as a result which would spark a chain reaction bringing the economic disaster.
Comment by Pankaj -
Very interesting topic. I mostly agree with Mark. The idea that gold has value no matter what is ridiculous. Here’s a link with a short history of Gold (http://www.goldinstitute.org/history/). Two important facts to notice. In 1717 Issac Newton set the price of Gold, and it remained fixed at that price for two hundred years. The US didn’t adopt the gold standard until 1900. And from 1935 to 1970 the price of gold was fixed at $35. Over that time, $35 became a very cheap price for gold. It was so cheap, that manufactureres were looking for all kinds of new ways to use gold. This increased demand even more, but the price remained fixed, so supply lagged way behind. It is very expensive to mine for gold, and if you can only sell it for $35, it’s not worth the expense and risk.
Also during this time, it was illegal for US Citizens to own gold. So we were not able, as many people think, to convert our dollars into gold. If we had been allowed to do this, Ft Knox would be empty today. Foreign governments, however, were able to convert their dollar reserves into Gold, and this was a problem because we didn’t have enough to gold to cover. In 1973, Nixon removed us from the Gold standard, the price of gold was allowed to float freely, and it shot up to $120 per ounce. Why the huge increase in value? That’s what happens when prices are fixed arbitrarily. As stated before, demand was increasing, and nobody was spending the money to explore for new gold because there was no profit in it.
As someone pointed out, one of the attractive traits of gold is that it is durable, basically all the gold ever discovered still exists, so it’s not used up the way other commodities, like oil, are. This means supply is not likely to dwindle much. Another commenter suggested we wait to sell our gold reserves until the prices went back up to more historical highs, but we’ll be waiting forever. Unless there is a dramatic increase in demand, caused by the discovery of a new, practical, use of gold, then the price won’t return to the historic highs of the 70’s and early 80’s. It’s important to realize that those highs were caused by fixed prices and unreasonable ownership laws causing supply to lag so far behind the demand. That is not the case today.
Gold is a commodity. Despite its alluring history, its value will still behave like a commodity, and will be based on supply and demand.
Having said all that, I somewhat disagree that in the case of economic collapse, farmers wouldn’t trade chickens, milk cows, vegetables, etc for gold. It might not be gold, but we wouldn’t return to a pure barter system, at least not for long, because it is too inefficient. Some form of currency will always arise, whether it is gold, or diamonds, or paper money. In such an apocolyptic scenario, gold seems as likely as any other commodity to become the new standard currency. The farmer will trade chickens for gold, because he knows that the person with guns might not need chickens, and the person with tools might not need cows, and the person with oil might not need guns.
In such a situation, though, I kind of doubt that the U.S. would even exist anymore, so who knows what would happen to all that gold. I doubt it could be protected. It would probably be stolen by a roving gang of road warriors, thunderdome style and whatnot. At least until the value of gold was overtaken by the value of water, which would, of course, be hoarded by another gang this time a gang of water pirates, led by a dreadfully overdramatic Dennis Hopper. Next thing you know, Kevin Costner is drinking his own urine and so-long civilization.
Comment by Tim -
“I couldn’t imagine farmers trading chickens and milk cows or fresh vegetables for gold bullion. For guns , ammunition, gas and oil, yes. For gold no.”
I completely agree with this. But this is at the local level. What about at the macro level? You even said that “I understand that gold was a common denominator as currency between countries starting more than a thousands years ago.” And it still is.
Comment by Josh -
I think you fail to appreciate why the US still holds gold. It is for the same reason that other people and countries still do – for insurance. It’s like saying I’m going to cancel my homeowners policy since it costs me money each year and I’ve never had a fire. You hold it because the possibility of a catastrophe exists in the future.
Comment by Chris Graves -
I think you fail to appreciate why the US still holds gold. It is for the same reason that other people and countries still do – for insurance. It’s like saying I’m going to cancel my homeowners policy since it costs me money each year and I’ve never had a fire. You hold it because the possibility of a catastrophe exists in the future.
Comment by Chris Graves -
I think you fail to appreciate why the US still holds gold. It is for the same reason that other people and countries still do – for insurance. It’s like saying I’m going to cancel my homeowners policy since it costs me money each year and I’ve never had a fire. You hold it because the possibility of a catastrophe exists in the future.
Comment by Chris Graves -
amen.
Comment by Oliver -
The value of currency is merely a relationship game governed by supply and demand. For example, sand is worth very little since its everywhere. Oranges are worth more because they are limited in supply, and would be worth no more than sand if they were as plentiful as sand. Currency is no different, and the US dollar is held to the same laws of economic gravity as any other commodity, even if it is currently granted wide berth because of the history of US stability and its status as the world’s currency. But key to this is, if you print more and more dollars, it does not create wealth – it fractionalizes it / makes each dollar worth less in exchange for something else. Lately we’ve been doing that recklessly, IMO.
But to put that in perspective you need some history: The dollar was originally by definition 1/17 of an ounce of gold, and originally there was NO national currency in the US. A dollar was nothing but a receipt for deposit of value of something else, backed by gold. The backing was there to prevent private bankers from issuing receipts for which there was no gold (also known as inflation / inflating the notes). As pointed out above, more dollars means less purchasing value. If a bank was known to issue more than it had backed in gold, that bank’s receipts would not be accepted as currency at full value. If dollar holders grew suspicious, they’d return to the bank and demand gold… and you’d get a run on the bank, and those bankers were personally liable…. At least until they had the law changed in their favor in the 1850s, and years later, in 1911 The Fed was created to further insulate them from their actions and to “protect the dollar holders”.
But since the Fed came into play, that law of honest $$ went out the window, although the Fed had to still play it honest, technically at least. But soon enough, The Fed cranked up the money printing press during WWI for a variety of reasons, which flooded the market with new dollars leading to the ginned up boom in the 1920s that eventually was revealed as false, and was followed by the big bust.
After that and amid the depression, FDR OUTLAWED GOLD (literally, passed laws forcing people to turn over what they had in exchange for dollars), and then devalued the dollar to represent 1/35 an ounce of gold. Gold eventually became legal again, but the dollar was no longer formally exchangeable as a gold demand note. Only Central Banks of foreign nations could exchange their dollars for gold straight up with the Federal Reserve. (Bottom line is, folks who trusted the Fed and the Government got royally shafted, losing lots of wealth by holding dollars.)
The Government in cahoots with the Fed then continued over the years slowly printing more and more dollars than what they had in gold to back it up, and prices kept going up as the dollar lost its purchasing power. (What cost $5 in 1911 now costs over $100) This lasted until the late 1960s when during the Vietnam War the printing of dollars was way out of control. That’s when the French said, to hell with this BS – we are exchanging our dollars for gold at the published $35 per ounce in large quantities. This lasted for only a short period before Nixon realized the stores of gold would be consumed very quickly as other nations caught on to what was happening, and he summarily closed the gold window in 1972.
That was the equivalent of the FED defaulting on the dollar. The dollar quickly plummeted in value vs. gold, and the exchange rate went from $35 up to the mid $200s quickly… After that, and amid terrible inflation as the dollar adjusted to other items in the market, Gold speculators eventually created an irrational bubble (over $800), which collapsed in the early 1980s, not unlike the Internet stock bubble.
All that said, while the apocalyptic reasons for holding gold may be a bit extreme, just the same, we ought to be a little bit more concerned about the dollar’s relationship to other commodities across the board, gold or otherwise. Alan Greenspan alone has put more new dollars (freshly minted) into circulation than all other Fed Governors combined. In the last few years the dollar has dropped significantly (over 30%) to gold and other currencies like the Euro. The FEd and Government actions have big costs, and dollars savers are the ones paying the price.
Sad thing is, there seems to be no end in sight on using inflation (dollar printing) as a tool for government and economic policy. That said, I don’t buy Mark’s suggestion that Gold is not worth holding, at least personally. I do think one should be diversified and NOT hold ONLY gold.
As for cutting the gold out as a reserve item, I think it is terribly short-sighted since it provides some ballast for the nation should other nations continue the trend of growing skeptical of owning US dollars.
Just the same, we as individuals should look at our own financial actions through the lens of currency relationships to other items, be they stock, bonds, or commodities and rethink how we go about investing in a shaky economic environment with some very serious structural economic concerns. My guess is that many of us would be pleased to have a basement full of gold ten or twenty years from now vs. a basement full of dollars.
Its also worth noting that gold is what it is – and that many don’t like its competing nature with currencies since it forces politicians and bankers to be more honest about inflation than they’d prefer. As such, its now generally accepted that the gold market is manipulated by some very big players in an attempt to prevent gold from being the traditional safe haven it has always been, along with a few other reasons too complex to explain quickly.
That said, I’d also suggest everyone read up on inflation – as that’s the real ticket to understanding a lot about how things work out there and what is going down at the moment.
Comment by JC Ernharth -
Funny how someone who has probably raised ticket and concession prices every year to cover escalating business costs feels that dollars hold constant value.
Monetary and fiscal policy utilize an applause meter and a printing press to satisfy their voters. As a result, paper money will always need to be printed if elected and appointed officials wish to remain in office. Imagine if Bush said he was going to raise taxes and cut programs instead of borrow money and print dollars to balance the budget. With over $7 trillion in debt and $30 trillion in underfunded pension liabilities on an $11 trillion dollar economy the need for printed money over the next two decades will be as high as ever. With other paper currencies facing similar fates paper money will certainly fall against something. My guess is paper money will buy less stuff. Therefore, gold, silver, oil, Mavs tickets, etc should all continue to rise in dollars.
The reason why gold is more attractive to invest in then wheat or Mavs tickets is gold can go ballistic whereas other items cannot. If wheat or Mavs tickets rose dramatically we would all stop eating wheat or attending games. Gold, other than a store of value, has little economic use. Therefore, it is the perfect item to rise against increasingly worthless paper.
That is the thing about money. Everyone on this blog needs to make it but, the government can print it. So why would people store all their wealth in something so easy to inflate?
Comment by John -
In one of the best Twilight Zone TV show episodes, criminals stole a load of gold bars and instead of just hiding for a few months until their trail grew cold, they used suspended animation devices to “freeze” themselves into the distant future (a few centuries?) in their cave in Death Valley. When they emerged, they fought themselves over how to split the gold, in the process killing each other and losing their precious water. The sole survivor crawled through the desert dragging his heavy gold bars, finally meeting two people and with his dying breath offering them his gold for a sip of their water. But he was too far gone to save, and after his death, one of the two asked the other person what “gold” is, and the other replied that centuries ago it was considered valuable, but now it is worthless.
Stuff is worth whatever other people are willing to pay for it, basically for two reasons: they can use it, or they think they can sell it to someone else for more than they paid. The value of gold is determined by the same rules as anything else.
Larry
Comment by Larry -
I agree with Mark up to a point, but I think there is some political risks for any currencies. Cash may lose its value during bad times. I agree that farmers will not start trading chickens for gold bullion. But if the situation normalises, gold has the same value than before, some other equities may not have it.
Comment by Online Trading -
This is the worst idea ever Mark. 10 Billion dollars isn’t much compared to our debt so why don’t we sell off Yellowstone and California while we are at it? That should come close to the Trillion dollars this country would need to break even. Worst idea ever.
Comment by Josh -
the UK did precisely this a few years back, though a little too quickly. it appears to have had no ill effects, though you might like to research it to see if anyone’s actually studied/measured the outcome.
Comment by Saltation -
ok … I agree with you Mark up to a certain point. But you state “I couldn’t imagine farmers trading chickens and milk cows or fresh vegetables for gold bullion. For guns , ammunition, gas and oil, yes. For gold no.” In today’s reality you are 100% correct. But will this statement be true if the Peak Oil theory is correct? Will gold not replace petroleum as a standard for barter? I don’t think we should start ditching our gold to make a slight dent in our deficit. Just my two cents …
Comment by BlogDog -
Dollars are just paper. It is paper that people value.
Gold is gold, it has a value by itself.
If the US economy tanks, the dollar loses its value.
But the government doesn’t looses its gold.
Then… save the gold, just in case the dollar become worthless, and you will still be rich (as a country) in the event of a depression.
We should extend our national Gold reserves. It is insurance… just in case the money backed by paper (as opposed to gold) doesn’t work.
Comment by Jose -
The silly thing is that some people still believe that gold is linked to currency. I know a person who thinks that he can walk into the central bank and exchange his dollars for gold.
Comment by Tino Buntic -
This is the 3rd or 4th blog I’ve seen lately that has posted numerous responses in regard to Mr. Cuban’s intentions, tax structure, etc. If this needs to be discussed in one blog, so be it. But I don’t think we want to deter interested readers with too many flame wars.
On a gold note, I agree with Mark that Gold’s perceived value as a potential harbinger against fiscal catastrophe is generally overrated. But here’s an article from a guy who has been right before, who believes just the opposite: http://moneycentral.msn.com/content/P118105.asp
by Bill Fleckenstein.
Comment by Sean Sullivan -
Gold and diamonds (and other such commodities) are generally untraceable and/or can be mananged without leaving a paper-trail.
In this day and age of more agressive terrorism, one can speculate that the U.S. government may employ “stealth” bribes of various sorts to form alliances in areas of potential unrest. Rumor has it that this has already been done with various warlords in rich poor countries as Afghanistan; money doesn’t talk, it “screams” in a poor country.
Doing this from a position of military strength, this kind of thing is a great way for the U.S. to win a war without ever fighting. If anything, it is a strategy that will only see increasing use in the 21st century. The U.S. should arguably hold its position in Gold, if not accumulate. Private traders do not have the same constaints and should do what they feel is in their best interest.
Comment by chris franklin -
Hehe, Mark, a few Google searches can easily explain why we don’t just sell off our gold.
Comment by Devin Reams -
People who buy gold don’t intend to use it for barter, but plan to use it as a store of value for when “doomsday” comes and their fiat currency will be worthless.
Interesting fact: Over the past 200 years commodity prices declined on average 3% a year.
So much for a hedge against inflation.
Comment by Barry -
you got it right exactly one time in business, yet now you possess the intellect to question the fundamentals of economic policy?
maybe you should stick to what you are good at, and let the 10,000 years + of humans using gold as a store of value be.
btw, i’ll buy the mavs from you with my stash of confederate dollars, what do you say?
Comment by elberto -
Funny how I remember gold getting up to $400+ dollars an ounce 25 years ago. To sell something
that can fluctuate so wildly in price when it is
as low as it has ever been seems foolish, like letting Steve Nash go to the Phoenix Suns. Good thing you had Dirk Nowitzki to help cover up the weaknesses of Terry and Stackhouse, but I don’t think this country has the same luxury. I
think we should wait for gold to hit $300 first.
Comment by Tom Snider -
Gold should more-or-less keep price with inflation. It has a yield. (Yes – though it sits in the banks the central banks do lend it.)
In that sense it is probably no better or worse an asset than the other assets that sit in the central bank vaults.
But it is nothing special.
The wierd thing about its monetization is that perfectly good resources (cash costs over $300 per OZ) are used to dig up and process more gold (causing considerable pollution I might add) so that it can be buried in vaults.
That is sick.
J
Comment by John H -
Gold is not a unique store of value, but is one that has a long history serving that role. Any hard asset that fits the bill can and would be used should the global fiat money system fail…which every single one has throughout history.
The ONLY thing that prevents politicians from stealing from the masses is having a hard currency – ie one that is backed and fully exchangeable with a valuable hard asset. Funny how the period from 1982-2002 is considered a great disinflationary period, yet the value of the US $ went down by 50%! The fiat money and fractional reserve system is a centrally planned monetary system that punishes savers.
I wonder why Mark believes that a small group of people can set the price of money more effectively than free markets, and also astounded that he would back a monetary system that guarantees that politicians will NEVER pay down our debt…..they just inflate it away or we’ll be crushed by a deflationary credit crunch. I suggest Mark read some economic history books!
Comment by James -
Hmm, intriguing. My first question is not that it is a dent in the debt, but how much of the overall amount of gold do we own worldwide? If it is a significant amount we could cause the price per troy once to plummet before we get the first billion sold, then the remainder would be worth less each time the world caught wind of what we were doing. You almost ‘undid’ it as an option by mentioning it, didn’t you? I bet you the very thought of this through this blog could cause a small scare that will affect the price of gold in the next few weeks or so.
New Business-Class Email Application Server: http://www.xmmailserver.com
Comment by Rob Thrasher -
Interesting point Mark. For the people complaining about your money and the taxes you are responsible for, tell them to write their local congress person and stop crying and start working.
Regarding the gold – I look forward to hearing intelligent debates regarding the pros and cons of holding gold reserves. clearly the gold standard is gone, but maybe trading some for oil (its limited in supply and its demand is growing exponentially – ie. china) may be a good idea. i wish i was versed in the topic well enough to shed light on the subject, but i guess im hoping that someone will do so on my behalf after reading the post.
Comment by Jeremy -
Nice post Bill.
The reality of the 80’s is that trickle down economics does work, to some degree.
If I were Mark, and my I wanted to make X per year (assuming that this was a reasonable number and the calculation is X= (actual income – (involuntary expenses + voluntary expenses)) {voluntary expenses being charitable contributions, payroll, etc}) then as my involuntary expenses went up, I would lower my voluntary expenses to keep a balance. Ways of lowering the voluntary expenses include lowering chartiable contributions, hiring less people, etc.
That being said, there are certain things that should be paid by both the rich and the poor. An example of this is Social Security. As it stands, the SS Wage limit this year is 90K, meaning that the money you earn over 90K is not subject to the 6.4% tax that is paid on the money that you earn upto 90K. If our SS system is so hosed for the future, there is one way of pumping more $$’s into it, remove the cap.
That being said, I am not advocating that as a solution, we need to fix the system, not throw more money at the problem. When the system is fixed then we can throw money into it (not allowing the government to play with it) and create a scenario where no one has to worry about not having the $ when they retire, but that is for another topic.
Comment by Grant -
I think it is clear that this is a none-too-subtle ploy by Mark Cuban to devalue the Denver Nuggets.
Comment by Bob V -
I’m sure there is a very legitimate case for keeping a sizeable stash of gold around and I’m sure the U.S. government knows it will probably never be used. While our economies will never return to the “Gold Standard”, this stash of gold could prove very helpful to the U.S. government if the U.S. suffered a catastrophe that significantly disrupted the flow of currency.
Comment by Steve-O -
In the late 1920s the United States and Canada witnessd the stock market collapse, followed by “The Great Depression.” And, everyone turned to their gold deposits as a medium of exchange. Wait, no, that never happened! I’m sorry, but Mark’s pragmatic approach is on point in my opinion. But, what Mark neglects to mention is that the gold reserves are there as an investment that diversifies the government’s portfolio. The value of the gold lies in the fact that there is a market for gold, just as there is a demand for U.S. Dollars, Madden 2006 and watching next years’ NBA champion Wizards play against the Mavs in the NBA Finals.
[Note: Nice trade, Stack and Jesus for Jamison, seemed to work out well for both teams, even though Laettner’s playing elsewhere.]
Comment by Zack -
#4 says: I don’t buy the fact that there isn’t enough either. Value scales to demand.
YES!
Although I think gold (precious metals et. al.) are played out because it’s all been horded by the governments and aristocracies of the world. Digital or personal currencies will evolve and central banking will recede. While not great for protection against inflation and such, it will allow for liberty from taxation on incomes and business transactions.
Comment by Jason -
P.S. The author of this post (and also Post 6 above) is a different Dave from Post #1!
Comment by Dave C -
While I am not informed enough to comment upon the wisdom of a gold-back currency, I have 2 other comments:
1) I agree with Mark, and have heard educated opinions of the same, that should our econonmy collapse, we would turn to a barter system, and gold would have little (probably not ‘no’) value in that market.
2) As a proud member of the Right Wing, I am saddended when I see gold-selling hucksters advetising a sort of apocalyptic ‘buy-gold-before-the-end-times” message to this crowd.
Comment by Dave -
Dave,
One thing that you are forgetting. MOST people like Mark (upper rich) are not going to change their income level. If the IRS takes 1 more dollar, that will come from charity, or pay raises for his employees, or some other source. His net income will not suffer.
I agree with the premise that EVERYONE should pay their fair share. I disagree with the sliding percentages. As long as he is paying the same percentage I am – more power to him – he made it, he should keep it.
Now, on the real topic, gold. Not saying that I have enough knowledge to agree or disagree with the premise (that gold has no intrinsic value anymore), but …
IF you agree with the premise, and IF you look at the original reasons for the reserve and still agree with them, then the gold needs to be replaced with a new item of intrinsic value.
Maybe that means increasing the oil reserves by $10 billion. Maybe it means putting $10 billion in something else in reserve.
Also, on the $10b – is that adjusted (by buying/selling) to current prices, or % of GDP, or anything? Or is it a number that was fixed years ago (xx tons of gold) and the total value of the reserves has been allowed to fluctuate ever since? What was the original value of the reserve in comparison to GDP ? What is it now ?
Bill
Comment by Bill -
The thing that makes gold so ideal for currency is that it meets the criteria of a currency. Rare, Divisible, Portable, Durable, and Valuable. Implement a gold-backed currency with 100% reserve (not our current messed-up fractional reserve) and you will eliminate inflation and the boom/bust cycles.
It’s not as if gold is the only resource that fits. A combination of gold, silver, and maybe even platinum would work. All share similar qualities listed above.
I don’t buy the fact that there isn’t enough either. Value scales to demand.
It’s something we won’t see anytime soon in North America, but we can dream.
Comment by Wraezor -
Dave,
I am sure Mark pays his fair share in taxes. Just because he has more money than you and I is not a reason to make him pay more in taxes. The same argument could be made by someone who makes less than you. You should pay more in taxes because you obviously don’t need it.
Comment by Chris -
I sorta like the idea. And, if people don’t think the money needs to go back to cover national debt, here’s one college-aged kid who’d love a few bucks! LOL!
Comment by Dan Nisbet -
Why not stop giving tax cuts to guys like you who obviously dont need it so we can start paying down our national debt…..
Comment by Dave -
I make $15,000/yr and I benefited from Bush’s tax cuts, i’m not sure how you didn’t. EVERYONE DID!
“40. Posted Jun 7, 2005, 5:12 PM ET by Jake
Sorry, the first poster was right. The national debt that we’re crying over was deliberately created by tax cuts for people like Mark who didn’t need them. We were all told it would stimulate the economy. It didn’t, and it’s not going to. Duh.
Proposing to sell $10 billion in gold is not a serious proposition for solving this country’s fiscal problems.”
Comment by John -
“26. Posted Jun 7, 2005, 8:56 AM ET by Saltation
the UK did precisely this a few years back, though a little too quickly. it appears to have had no ill effects, though you might like to research it to see if anyone’s actually studied/measured the outcome.”
And George Soros broke the bank!
Comment by Jim -
I hold a small stake in a gold ETF (GLD) as a diversification element in my portfolio. I’m a bit surprised you didn’t make the “supply v. demand” argument. As you note, the world’s population is growing, and so is the number of wealthy people. Consumer demand for gold should always be strong — which is more than you can say for commodities such as, say, aluminum, rubber, or oil.
Comment by Fred Zimmerman -
The phrase, “there is not enough gold in the world” is assinine. Gold was used as a measurement of value based on the avilable amount of gold. If there were a trillion pounds or one pound, we could still use gold (or silver) as a marker. It’s like a ruler. Whether we call it one inch or 1/12 feet doesn’t change the fact that I can exchange x amount of gold for a cow. Also, like all precious metals, it has industrial function, so it has more use than just ornamentation (which, as you well know, is one of the biggest industries in the world and further defines gold’s usefelness). The Bank of England and The Federal Reserve Act were both created so the government and world rulers could dictste the value of our money then force us to use no other currencies besides their own. Thus, inflation became an annual constant (never happened on the gold standard) and no idnependent banks could set their own rates, thus taking power away from the individual and giving it to the rich. Come on Mark. This is economics 101. Don’t tell me you don’t know that.
Comment by Nathan DeGraaf -
Sir,
I smile trying to picture your reaction to this, but here goes:
A very long time ago aliens (yep the aliens again) came to this planet for one reason and that was to mine gold. Their chief scientis Enki believed it possible to extact it from our oceans. This proved impractical and shaft mining as we know it was started.(shaft mine dating back 280 000 years have been found in swaziland in souther africa – by anglo american)
A few hundred thousand years later they decided to create a labourer to do this back braking task.
Thus human’s came into being.
What did they need so much it for you might wonder. They protect their planet ( it has a orbit that takes it very far from the sun ) with a shield of gold particles in the atmosphere.
Where are they now, and why are we still hording gold? They were responsible for our genetic engineering, so it must be programmed to a certain exstent but they will be back in our solar neigborhood in less than a hundred years so having a few tons to trade with does not sound like a bad idea.
Am i crazy? All of the above is writen in sumerian clay tablets that have been found in the middle east.
Want to know more? read the works of the author Zecharia Sitchin. Written more than 40 years ago.
Comment by Conrad Greyling -
All the gold in Fort Knox? Rumor has it that it was all shipped to the central banks in Europe many years ago, and that there is NO gold bullion stored in Fort Knox.
Rumor is not fact, of course, but I understand the charade of “auditing” the gold in Fort Knox was abandoned by the government, years ago.
Comment by Rob Bonter -
Mark: The reasons for Gold today and its “Real Intrinsic Value” is because of the enormous debt governments such as the US is continually burdening its population with (interest payments are sucking up a lot of cash), its triple deficits, Social Security costs are soaring out of control as is medicare and the absent of a manufacturing economy in the US of A….which has been moved off shore….It will all come to a head and the US economy will collapse as will the dollar and the price of Gold will soar to cover it all…..US will have to start all over again…wages will drop, cash flow will be reduced across all business, entertainment dollars will dry up etc. etc. etc. – Check out just the credit card debt that Americans are carrying…not to mention their mortgage debt and auto payments … cnanot go on forever…..sad state the US is in and it will have to get much much worse before it gets back to being better….Got Gold/Silver and reduce your debt to become a winner…Cheers
Read Jim Sinclair at http://www.jsmineset.com who is one of the most astute investment and monetary mines in the country who’s commentaries are coming to be truer each and every day – and its a freebie site….
Friday, June 17, 2005, 6:13:00 PM EST
TIC-TIC-TIC- BOOM!
Author: Jim Sinclair
Do you want to understand why the TIC holds the future of the dollar in its grip? It is quite simple and is outlined by Bloomberg below.
The US dollar is the final determinant of the direction but not necessarily the limit to the price of gold. The period from June of 2005 to March of 2006 is the “countdown” for gold becoming the currency of choice among all the sick paper currencies of the world. That countdown will pass so fast you will not even notice it go by.
The euro is a basket of junk and always has been. But that junk is less debt-full than the US dollar. The US dollar and therefore USA Incorporated is now headed for a Current Account Deficit at a cumulative level of 7½ percent of Gross Domestic Product. No nation can or ever has sustained such a level of international debt while flaunting every fundamental economic principle in the book.
The US Current Account deficit is the lead weight pulling on the US dollar. The shift of dollar direction now toward the derivative dollar market is looking like the long side is being transitioned to the over-weighted side.
I believe this is what Mr. Peterson was focusing on when he said nobody knows what the trigger will be. It could be as simple as a major financial figure in the US government saying something really stupid that will ignite a currency market conflagration that will show once and for all that the King has no clothes. Then we all get to pay the piper.
There is no way non-US entities are going to carry the US in this hemorrhaging deficit situation that the present administration is unwilling to face up to. The chances of them doing that are equal to me getting an invitation to attend a barbeque at a Texas ranch this Saturday. (If I did get one, I would likely be the one turning on the spit).
You can take all the dollar-positive talk and file it in the round file. There is nothing but fundamental rot in the dollar with its recent so-called strength that was simply a result of the poorly timed call on the Euroland referendum which was nixed by France and Holland.
That referendum call was made by the geniuses in charge of the EU in Brussels who were pushing for a new constitution as the EU economic recovery began rolling over hard a when the US went into anti-deflation mode. EU leadership showed themselves publicly to be a bunch of market and political pinheads. The question now is when the euro has paid enough for the poor timing of its leadership and what price.
What the balance will be is certain to be defined by the marketplace. An interesting question is when, price wise, does one piece of junk meet another piece of junk on an equal basis in the US$2.7 trillion per day turnover market? That would represent the low for the euro and the high for the dollar. That is the point from which gold takes on the mantle as the debtless currency. Is it 1.2020 on the euro, the low of this week? It well could have been.
U.S. Current Account Gap Widens to Record $195.1 Bln (Update3)
June 17 (Bloomberg) — The current account deficit grew more than expected to a record $195.1 billion from January through March, increasing U.S. dependence on borrowing from abroad to feed Americans’ appetite for imports.
Demand consumer goods helped widen the first-quarter gap from $188.4 billion in the fourth quarter of last year, the Commerce Department said today in Washington. The median forecast in a Bloomberg News survey of economists called for a $190 billion gap in the broadest measure of U.S. trade.
The deficit may grow further as the U.S. economy expands faster than those of Western Europe and Japan, and consumers buy more imported clothing, electronic goods and oil. Foreign investors and central banks are financing the gap by about $2 billion a day, through purchases of Treasury bonds, stocks and other securities.
“It’s probably going to continue to widen,” said Jay Bryson, global economist at Wachovia Corp. in Charlotte. “The concern is that foreigners could decide they’re not going to finance it anymore, but we haven’t seen that yet. In the long run, it has to be corrected, but that could take a long time.”
More…
Jim Sinclair’s Commentary:
What party ever went on forever? This one ends as soon as zero down payments and appraisers over valuation of property values come to an end. I suggest that will happen this year not next. It does not have as much to do with the interest rate existing right now. The US home consumer only cares about upgrading, without paying for the pleasure. As long as the US consumer can get bigger and better without actually writing a check, the debt burden is something to worry about tomorrow. Tomorrow will come and it will likely be this year!
June 16, 2005
The Trillion-Dollar Bet
By DAVID LEONHARDT and MOTOKO RICH
American homeowners have made a trillion-dollar bet that mortgage rates will remain near record lows for at least a few more years. But with some interest rates already rising, economists worry that the bet could turn bad.
The problem is that new types of mortgages that hold down monthly payments for families – helping many buy homes that they would not otherwise be able to afford – also require potentially far higher payments in future years.
The bill will soon start to come due in a serious way, as the initial period of fixed payments, typically set at artificially low rates, expires for millions of homeowners with adjustable-rate mortgages.
This year, only about $80 billion, or 1 percent, of mortgage debt will switch to an adjustable rate based largely on prevailing interest rates, according to an analysis by Deutsche Bank in New York. Next year, some $300 billion of mortgage debt will be similarly adjusted.
But in 2007, the portion will soar, with $1 trillion of the nation’s mortgage debt – or about 12 percent of it – switching to adjustable payments, according to the analysis.
The 2007 adjustments will almost certainly be the largest such turnover that has ever occurred.
More…
Jim Sinclair’s Commentary:
Why not? Most of them are comedians anyway although their jokes tend to be drowned out by the noises they make when their snouts are deep in the public trough.
June 15, 2005
Comedian for Senator? Don’t Laugh
By DAVID CARR
MINNEAPOLIS, June 13 – The swells who showed up before Al Franken’s speech at a Democratic fund-raiser to down finger food and punch were thrilled to see him, all the more so because he continues to make threatening noises about running for the Senate here in 2008.
A former writer and performer for “Saturday Night Live” and more recently a radio host on Air America,
Comment by Philip Vukasinovic -
Poster #80 couldn’t be more wrong. Just because home prices rise doesn’t mean they can’t one day fall. The re-affirmation was happening in the stock market in the late 90s also. Does anyone remember past real estate crashes ? Our economy will get into trouble one day. Its not a question of if but when. The following article details the asset bubble we are in because of what the Fed has done.
http://moneycentral.msn.com/content/P119372.asp
Comment by Shake -
Carl,
I have to agree with Mark. 4 – 6 thousand tons of gold are pulled out of the ground every year and transplanted across an ocean to a reserve vault somewhere. In the process, it creates very little economic value. In times of trouble, I can think of hundreds of things I would rather own than gold. Securities of good companies have much more intrinsic value, as does land, or oil, etc. People are re-affirming everyday that real estate is a preferred store of value as home prices continue to rise. So if our economy gets into trouble, I will feel alot better about owning my house, or shares of Wal-Mart than I would about owning a bar of gold. The first two can at least earn money for me. The gold bar works well as a paperweight.
Alex Buffett Rozek
Comment by Alex -
Dear Mark,
You’ve disappointed me again. You financed a movie called Enron that was a totally distorted an inaccurate depiction of what really happened at Enron. In the movie, you commented about Arthur Anderson being involved with conspiracy and obstructing justice by shredding documents. Then why did the Supreme Court reverse their case 9-0 and fully acquit them from any wrongdoing? Plus, Enron didn’t cause the downfall of Enron. The big investment firms did. That is, Citigroup, Chase, Merrill and Imperial Bank of Canada. They were fined over $300 million for fraud by the SEC.
About your article June 6th, I’m an expert on Hedge Funds and you can’t make general statements that Hedge Funds are a safe, conservative way of investing becuase they’re not. Under Reg. D of the SEC, you have to have a liquid net worth of over a million dollars excluding your house and car and other toys and you have to make over $200,000 a year income. They get into extremely illiquid investment that are extremely risky because they want to hit a home run. But in reality a lot of them lose a substantial portion of their money. They have no structure and they want to hit a home run because that’s how they make big money on the back end. They get approximately 30% of the profit not counting their annual fees that they charge to manage the fund. And then if you get into funds of Hedge Funds by investment firms like Chase and Merrill, they charge big upfront commissions and fees of 8-10% and you still have to pay that 30% incentive fee even though the fund has lost money. Mark, let me see if you can figure that one out! Hedge funds have only averaged 9.4% per year. What’s such a good deal about that? You also mentioned about gold and how the Government should sell all their gold reserves. It comes out to approx. $10 billion. If they sold that on the open market today, that would cause the gold market to collapse and that’s not 1/50th of the money to even pay the annual government’s budget of defense. We are in a very crucial time in our economy. Interest rates are controlled not by the Government but because of supply and demand for money. Short term rates are going through the roof because everybody and their brother is borrowing short term and long term rates are tanking because the Government has record deficits due to the war and out of control spending. If the Govt. keeps going this way and the dollar continues to drop in value, we will go into what we call stagflation where commodity prices will rise rapidly and the US buying power will drop dramatically. The only reason the economy is doing fairly decent is because of the housing boom in refinancing and the Govt. spending money like crazy. If not for that, the economy would be in the toilet. So if our economy gets into stagflation, the only thing that will be worth anything (which there is a very limited supply of in the world) is GOLD.
So try to give me a better reason why the Government should sell their gold reserves. If you want to be a real big time blogger, you’ve got to do your homework and be more accurate with your statements because a lot of people read your site and depend on your information. Dont’ do things half assed in the financial world with your blog site. I’ll be watching and reading what you’re doing.
Carl Roba
Comment by Carl Roba (Mr. Blog of the Financial World) -
Why don’t we just take the gold we own and create huge coins through one of the mints, stamp them with a value of 1 trillion a piece and hand them off to the largest holders of the debt as payment in full. If they don’t like it, cut their heads off. Right? Seriously though, the hydrogen idea was the best i’ve read so far.
Comment by chris -
So Mark, you’d be comfortable converting your fortune into currency and sitting on it for 100 years and watching a 20 fold devaluation take place (similar to the one that has taken place the previous 100 years)? The point is simple, gold will hold value, while currencies are inflated – specifically because gold is a finite resource that is hard to artificially inflate over any significant duration. Gold is a protection against the theft of value through inflation of currency; the government prints a dollar today, devalues my dollar instantly, spends it tomorrow, and pays me back in 20 years when it’s worth 1/3 what it was when it borrowed the dollar. It’s one of the greatest con games ever invented, and it has cost the US economy countless trillions. Gold backed currency and socialism are incompatible, that’s precisely why FDR had to eliminate it – hard to run social programs that destroy the value of the dollar through massive debt & printing when you’re constrained by having to back dollars with gold. It’s ironic that you think we should pay on the national debt with gold, when the lack thereof (lack of a backed currency) is the whole reason we have trillions in debt. You really need to educate yourself heavily on what you’re talking about.
We don’t need gold amounts to keep pace with the increase in human population or economic value – gold is pegged on a ratio, not in some static proportion; thus it can be re-pegged at any time based on the amount of gold in proportion to a lot of factors.
On a side, gold has high practical value in that it’s a luxury (thousands of years of jewelry) and human desire for luxury is unlimited (i.e. it has multiple uses, not just as a brick sitting around a vault).
Comment by Jonathan -
China is one of the biggest holders of America’s debt.
Those who own Treasury bills (Like GWB, the Social Security Trust, and China, to name some of the bigger players) own a little piece of the debt.
Comment by Mike -
Nice post Sterling. “The World is Flat” by Thomas Friedman highlights ideas like these. This country has a big hole to dig out of before we can even contemplate doing anything with all the gold the government has.
Comment by Shake -
During the past 25 years, the United States has gone from being the largest lender to the leading borrower in the World.
Selling the gold would not be a great idea. Our federal, state, and local governments are poor at monetary management.
Everyone can remember when we had a budget surplus under President Bill Clinton. I found it very funny that they called it a budget surplus when we in actuality it was more like a balanced check book.
Our government bodies do not meet fiduciary goals:
-Making payment due dates;
-Minizing current and late interest payments;
-Minimizing capital idea time;
Of course it has has become the standard for many large businesses to have negative loses for a period, quarter, or fiscal year. Government is no different. We are lucky that our government has cash flow.
But, what will happen if the United States continues to generate and import less inventors? What will happen if real wages in the United States don’t out pace growth in other countries?
Our governmental bodies need to be downsized slowly. We also need to give companies 100% payroll tax credit if they pass the credits onto non-management employees and new entry level recruits. We also need to downsize and consolidate our armed forces/and intelligence budget.
We also need to start providing convicted criminals with reall skills before they re-enter our society.
After completing these goals, we can consider touching assets like our gold in Fort Knox.
Comment by Sterling -
Do you realise if you take all the gold found since the begining of time on earth and made a big cube, it would only be the size of a tennis court?
Comment by Lance -
Mark-
The United States was on a Gold Standard until 1972 when Nixon was advised to make the dollar free floating. Unfortunately, the country saw six years of inflation as a result of that move. It wasn’t until Paul Volcher tightened up the money supply with high interest rates did we see inflation tamed. Money needs to retain value.
The reason currency is tied to metal is to put some limit on government from printing too much money.
The problem now is that there probably are too many dollars in circulation which will have an inflationary effect. If the problem gets too extreme, we’ll have to go back to a gold standard. It’s good that we keep some gold on hand. Sorry about the Mav’s.
Comment by John Laub -
Comment 68 should read, “The intelligence was fixed around the policy”, not the other way around.
Comment by Mark -
Hesham, if you click on my signature, it will give you an idea of how that debt works.
Comment by Jon -
Charlie
The intelligence said no such thing. The policy was fixed around the intelligence, and not vice versa. See the Downing Street Memo (only available through foreign news services…wonder why), Richard Clarke, Paul O’Neil, and the list goes on and on. While the news media certainly didn’t do their job, there were plenty of sources which prior to the invasion were handing out the truth. But they were just a bunch of cowardly appeasers according to our government.
The Army is being destroyed day by day and will be hollow soon enough. What I’d like to see is people like Mark Cuban, and all of the other War cheerleaders from Bush on down start encouraging their friends, family and supporters to enlist in the armed services. If this fight they seem to so truly believe is a life or death struggle for our nation then sending their loved into harm’s way is the right thing to do. Unless of course somebody else should do the dying for them. The Army needs any warm body they can get their hands on. Maybe a sign your son and daughter up night at the Mavericks season opener right at center court.
Be proud you changed your mind. It’s the sign of an open mind and not an ideologue. It’s a shame our leaders have no such capacity.
Comment by Mark -
so… I am not the most educated with regards to politics… but when the largest economy in the world is in debt… who is this debt to? who does the US ‘owe’ a trillion dollars to? and if so, why dent that with just $10B when it will still be a trillion (roughly) while the gold would have value to many countries if the Dollar collapeses.
if somebody could answer my question (regarding the debt) I would appreciate it!
Comment by Hesham -
Mark- Are you are an idiot? I don’t think so. But if the govt does sell their gold I will buy it. I bet you would too. You know all the “paper” wealth you have now is not real and could disppear in a deflationary instant. Gold is real. Buy it with both hands while you still can.
Comment by ace -
thirty7, ever hear of the broken window fallacy? You can’t improve the economy by stealing $10B from it and then spending it.
You look at how poorly the dollar has been doing mostly do to our national debt- I can’t imagine how much it would sink if we suddenly got rid of an integral part of the collateral on that debt.
Comment by charlie -
Mark, I bet that Cuban doesn’t support the Iraq war anymore, and he just won’t admit it. I supported the Iraq war at first- every intelligence source “knew” that Iraq possessed WMDs and had a chemical/biological weapons program. Now that its turned out to be 100% lies and nothing more than an excuse for a select few corporations with political ties to make billions at the expense of every other individual and business in america… I oppose it- but I can’t admit that to people in person, all the “I told you so”s are obnoxious and its not worth it. If I feel this way, I guarantee you that there are a couple million others who feel the same way.
Comment by charlie -
Why not be more creative Mark? Use that $10 B to start the Hydrogen Revolution. Finance the restructuring of our petroleum industry to that of a Hydrogen industry. Hydrogen fuel stations, the support facilities for this stations, and of course the vehicles to utilize such fuel would all be created as part of this revolution. The wages from the new jobs and labor forces in America would bring the economy up and reduce the debt through the generation of new taxes. A Hydrogen based transportation industry would bring about a new currency standard elimination: the reduction of power of those with oil. No longer would our young people be affected by oil and gas wars. The trillions of dollars spent on “defense” could be put on the offensive towards seriously reducing oil from our energy priority list. The environment would be cleaned up because the only bi product would be water.
I go into more depth on my blog. enjoy- thirty7
Comment by thirty7 -
@charlie
Thanks for answering, I’ll go look that article up.
Comment by hoop -
You said we keep about 10 billion in depositories. How far is that really going to go when you’re looking at a national debt in the trillions, and also when you align it to the risk of what could potentially happen to the markets if the gold sale isn’t executed properly?
Comment by Adam Silverman -
Here’s a suggestion to help with out nations debt. Probably the easiest thing to do instead of selling gold or guns or oil or widgets. Vote Democrat next election. Seemed to work when Clinton was in office, the nations debt disappeared and we got a scandal that didn’t kill anything but a few useless sperm. Quit voting for Republicans who tax you the taxpayer to fund their own little endeavors, example the Iraq War. Seems like we had a better America when everyone had jobs and the nations debt got whittled away to nothing.
Comment by Jason -
>Once again, it’s perception
The value of anything is theoretical until it changes hands (partially or fully) or something “just like it”, then the rubber meets the road.
Wanna buy an ’89 Honda Civic for $1,000,000? Doesn’t mean it’s worth that much if you say “yes”, unless the deal completes. 😉
Comment by Daniel Farfan -
I have wondered about the value attached to gold for several years. I really don’t grasp the basic idea. It’s a hunk of material removed from the earth. It’s the same as any precious metal, diamond, etc. It’s some type of perceived value. I think the idea of value correlated to something such as oil, water or other natural resource makes more sense on a basic level. Even more obscure is the idea of money as a whole. We trade goods and services in return for paper. The only thing that creates value in the paper is the ‘good faith’ of the government and population’s acceptance that this paper represents something more than monopoly money. Thinking simply, that’s really strange. Going further, why would a professional BB team be worth $200Mil+. It’s just a bunch of guys trying to put a ball through a hoop. For some, this may rank just above women’s softball on the entertainment scale. For others, it becomes ingrained in their whole life being. Once again, it’s perception.
Comment by g13 -
Mark,
You’re right, the U.S. should sell its access gold to pay down our national debt. The reality is; the U.S. likes material things and will not let the gold go regardless. It will never be put into practice. Move onto the next post, dude.
Comment by mycquester -
Wasn’t that debt created by disconnecting the money supply from it’s gold backing in the first place?
The idea that it is even possible to pay off the national debt is absurd. The whole economic system is based on ever expanding debt, for both the country and it’s citizens.
What you do with that puny amount of gold is not really a relevant debate. Unless of course you’re just stirring the publicity pot.
Comment by SmartMoneyDaily -
while you’re at it, put a bulletin board on shaq’s head. the shaqronome might be great for well placed ads promoting the pistons.
Comment by tom -
while you’re at it, put a bulletin board on shaq’s head. the shaqronome might be great for well placed ads promoting the pistons.
Comment by tom -
hoop, Greenspan has actually wrote an essay where he talks about how we need to return to a gold-backed monetary system and how the federal reserve bank is an evil institution that causes depressions and recessions and steal money from the American people…. extremely ironic in retrospect. I believe the essay is titled “Gold and Economic Freedom”, you can probably find it somewhere on the internet.
So at least you know where Greenspan stands.
Comment by charlie -
hoop, Greenspan has actually wrote an essay where he talks about how we need to return to a gold-backed monetary system and how the federal reserve bank is an evil institution that causes depressions and recessions and steal money from the American people…. extremely ironic in retrospect. I believe the essay is titled “Gold and Economic Freedom”, you can probably find it somewhere on the internet.
So at least you know where Greenspan stands.
Comment by charlie -
errr… what does Warren Buffet and Greenspan have to say about this idea? hehehe
Comment by hoop -
here’s my question to maybe an economics major… suppose the US sold all its gold, what would the government use as collateral on its debts? Then national parks? Foreign military bases?
Comment by charlie -
Post #39 is correct. I think we would have been better off paying down the debt instead of giving tax cuts. Although long term interest rates are not high I believe they will be before the end of the decade. Right now even the Fed can’t explain why long term interest rates are high. I think this explains why nothing is trickling down and businesses are not hiring and spending. The longer term outlook just isn’t that great because of mounting debt.
Comment by Shake -
In the November 1997 edition of Worth Magazine, Peter Lynch makes a case for owning the stocks of gold-mining companies. He has an excellent reputation as an astute investor, and didn’t earn that by overweighting natural resources and precious metals during his career. He simply was looking at supply-demand.
In his excellent book entitled One Up On Wall Street, he makes a compelling case for buying what the government is selling. He made enormous sums for Fidelity Magellan shareholders by buying newly-privatized utilities in England. Now that central bankers have been selling their gold, I think the same strategy could apply. Fade the government in the marketplace!
By the way, the blokes at England’s central bank sold a lot of their gold at under $300/oz. a couple of years ago. I bet it sounded like a good idea at the time.
Comment by John -
Gold has been real money and a store of value for thousands of years. Any fiat currency such as the U.S. dollar from the beginning of civilization has been dramatically devalued and destroyed by the mere fact the politicians will continue to print more and more until it is worthless. Look at the worlds main currency the dollar, it has about 5% of the purchasing power it did maybe 50 years ago. An ounce of gold still buys as much crude oil as it did 40-50 years ago, and you cant say that about the dollar. At least when we were on the gold standard it forced discipline in the system so the fed could not print money at will, hell now a day they don’t even make the M3 numbers public. The fed has a major problem they are trying to fund the federal budget deficits without destroying the dollar, and trying to raise interest rates to save the dollar without destroying the economy. All the ingredients are in place for the gold market to trade much, much higher. This correction we have had as of late from $730 to $550 an ounce is the last great buying opportunity. If one knows history you know commodity bull markets last around 20 years, and have vicious corrections in the process. In the mid seventies the gold price went from $60 to $200 before correcting 50% to $100 before going up over eight times to its 1980 high of $800 and change. There is a lot of cheap money out in the world sloshing around, and in the next 2 to 5 years the gold price will be multiples of the 1980 high. A history lesson once again, the mean on the Dow Jones/Gold ratio is around 5 to 1. So before this bull market in gold is over I think you will be able to buy 1 unit of the Dow with between 1 and 3 ounces of gold. Mr.. Cuban now is the time for you to buy gold, as it will outperform any other asset class in my opinion in the next 5 years, and yes I own Rentrak and a lot of it.
Comment by Werner -
Good Lord, you people are naive!
First of all, we will NEVER return to a gold standard. The Fed Reserve is making a KILLING — by controlling how much money is printed they control the inflation rate, and in order to “qwell inflation” they raise interest rates! Not to mention how much they make off the national debt…. either way, they CASH IN bigtime! It is THEIR system, and THEY profit from it: it was DESIGNED that way.
Secondly, digital/electronic currency will NOT save us money on taxes! ROFLMAO!! That is the SURE WAY for the government to get its take right off the top BEFORE you ever see it! Eventually we WILL become a “cashless society,” just like Singapore. (Remember CFR member Steve Forbes’ flat tax idea? That would have ushered us into it…) Your taxes will be DEDUCTED before your deposit is ever made! Eventually we will be a TWO-CLASS SOCIETY, the elites and the serfs. NOW do you see why things are becoming so hard for the middle-class working guy? They want to GUT the middle class altogether!!
Geez, you people need to read up on the New World Order. If you deny what is going on you are DELUSIONAL. Open your eyes, it is unfolding before your very eyes!!
Comment by John -
I have a good contact for Gold mine in Ghana. Please contact me.
here is my number
66 4 124 7812
Comment by Ms. Thitinan -
very good!!!!
Comment by 11nong -
Ask Me How To Acquire Gold Bullion at 40cents on the Dollar !
Spend $100, Get $250 in Gold.
No Tricks, Just Facts.
http://www.mark.freeservers.com
Email me for the full details:
GoldFromHome@safe-mail.net
Comment by Mark -
What do you think now, Mark, that gold is at a 25-year peak of $550/ounce?
Comment by Andy -
My gold investments have done rather well. Having said that I don’t see a need for feds to hold any gold unless they think our economy is heading for uber crisis sometime in future.
Comment by Steven -