Buying crude oil with gold

Originally posted by sh76
Gold doesn't have much more "real value" than dollars. It's a currency, just like any other.

Sure it does. Gold is not a fiat currency. Fiat currency loses value to inflation because inflation is a tax. You cannot increase the supply of gold like fiat currency.
If trading with gold becomes a trend it threatens fiat currency, especially the world reserve currency. Did you even read the Ron Paul article "The End to the Dollar Hegemony?" It seems as if you did not.

Originally posted by Metal Brain
Sure it does. Gold is not a fiat currency. Fiat currency loses value to inflation because inflation is a tax. You cannot increase the supply of gold like fiat currency.
If trading with gold becomes a trend it threatens fiat currency, especially the world reserve currency. Did you even read the Ron Paul article "The End to the Dollar Hegemony?" It seems as if you did not.

Every currency is a fiat currency unless you can eat it. And quite frankly if countries start tossing nukes at each other I guarantee I'll be able to sell a bag of dry beans for at least bar of gold. It just amazes me that modern humans are so stupid that they convince themselves of things that no dog would put up with. My brother collected twelve big boxes of comic books and I said, "what are they worth?" And he replied, "Only what some idiot will pay for them."

Currency of any type is only a medium to facilitate exchange - nothing more. Grow up.

Originally posted by Metal Brain
Sure it does. Gold is not a fiat currency. Fiat currency loses value to inflation because inflation is a tax. You cannot increase the supply of gold like fiat currency.
If trading with gold becomes a trend it threatens fiat currency, especially the world reserve currency. Did you even read the Ron Paul article "The End to the Dollar Hegemony?" It seems as if you did not.

I did actually skim it, but Ron Paul bores me. Sorry. It's just that I have an aversion to broken records. Maybe it started when I was a boy and my mother actually played records for us and I developed that aversion to broken ones.

In any case, you can't increase the supply of gold, that is true. But the fact that gold has significant value is arbitrary. Other than as jewelry (a luxury), gold has no real inherent industrial use. If people suddenly decided the no longer wanted gold, it would be irrelevant as a currency. If anything, steel and wood and oil would make more stable currencies.

Originally posted by sh76
I did actually skim it, but Ron Paul bores me. Sorry. It's just that I have an aversion to broken records. Maybe it started when I was a boy and my mother actually played records for us and I developed that aversion to broken ones.

In any case, you can't increase the supply of gold, that is true. But the fact that gold has significant value is arbitrary. Oth ...[text shortened]... relevant as a currency. If anything, steel and wood and oil would make more stable currencies.

Back to the cattle standard!

Originally posted by TerrierJack
Every currency is a fiat currency unless you can eat it.

In medieval Norway, salt cod was apparently used as a currency. As P.J. O'Rourke joked, "their ATMs were a mess".

Originally posted by sh76
I did actually skim it, but Ron Paul bores me. Sorry. It's just that I have an aversion to broken records. Maybe it started when I was a boy and my mother actually played records for us and I developed that aversion to broken ones.

In any case, you can't increase the supply of gold, that is true. But the fact that gold has significant value is arbitrary. Oth ...[text shortened]... relevant as a currency. If anything, steel and wood and oil would make more stable currencies.

I'll be a good fellow and show you an excerpt from the article I think is significant. I get lazy sometimes too, so I'll try to help you out with the following portion of the article.

In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O'Neill, the major topic was how we would get rid of Saddam Hussein — though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O'Neill.

It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

Originally posted by Teinosuke
In medieval Norway, salt cod was apparently used as a currency. As P.J. O'Rourke joked, "their ATMs were a mess".

LOL

Originally posted by sh76
I did actually skim it, but Ron Paul bores me. Sorry. It's just that I have an aversion to broken records. Maybe it started when I was a boy and my mother actually played records for us and I developed that aversion to broken ones.

In any case, you can't increase the supply of gold, that is true. But the fact that gold has significant value is arbitrary. Oth ...[text shortened]... relevant as a currency. If anything, steel and wood and oil would make more stable currencies.

Well OK, but I think all this strays from the point. I think we all agree that whatever its relative merits as a currency compared to wood or cod, gold IS perceived to have intrinsic value; enough so that countries and individuals horde it, and enough so that Iran is willing to accept it in trade for oil.

According to the article, India and China may start using something other than the US dollar to buy oil. That's the point. Now I don't want to freak out and suggest this development will cause the end of the world, but if true, it could at least be viewed as a symptom of our economic problems, and a warning, because our currency will now be competing in a way it did not before.

Look, according to conventional wisdom, demand for the dollar rests on a few well known things. Dollar-denominated markets for debt are wide and deep. This makes it convenient to use for governments, corporations, and banks. Also, the dollar is the safe haven to which investors flee in times of crisis. Why? Because investors in crisis want the liquidity of dollar denominated markets, and US Treasuries are perceived to be stable. Perhaps the most important strength of the dollar, however, is the lack of alternatives to it. There are other stable currencies (Swiss Franc comes to mind), but they make up only a small percentage of international transactions.

So, in my mind, the important question posed by MB's linked article is, what happens to the dollar if people start finding alternatives to it? Doesn't demand drop? Don't we have to start worrying about what we're doing to the dollar's perceived value by printing them out like mad? Can't the yuan, euro, or something else start to compete? Can't ECB or Chinese bonds start to become as attractive as US Treasuries? And what would all this mean to the US citizen who has stored his life's work in a dollar-denominated IRA?

Originally posted by sh76
Gold doesn't have much more "real value" than dollars. It's a currency, just like any other.

Any commodity that has actual uses, has actual value, determined by its relative scarcity. Dollars, and other debt based currencies have only the value of the promise to pay by the issuing government. Gold is used in the manufacture of electronic components and connectors. Of what use are Mexican 50,000 pesos notes issued in the '70s? Probably not very useful even as kindling.

There will always be a demand for commodity based currencies, especially at times when governments are threatened by ruin, military, financial or political. Historically fiat currencies have been always related to the solvency or the issuing government, and over time most eventually fail, when that government spends more than it can confiscate from its production by taxation.

The United State isn't immune to this, only more resistant due to its #1 ranking in economic production. What commodity currency emerges depends on the depth of trouble a government and nation faces.

Originally posted by TerrierJack
Every currency is a fiat currency unless you can eat it. And quite frankly if countries start tossing nukes at each other I guarantee I'll be able to sell a bag of dry beans for at least bar of gold. It just amazes me that modern humans are so stupid that they convince themselves of things that no dog would put up with. My brother collected twelve big bo "

Currency of any type is only a medium to facilitate exchange - nothing more. Grow up.

Commodities used as currencies most often have some usefulness, and demand besides their use as money.

In dire circumstances, ammunition, food and water might be valuable currencies. Supply and demand determines the value of any currency. Fiat currency has no use, and no value outside of that dictated by the issuing government. There is little difference in a paper US Federal Reserve $1 note, and a $1 million Zimbabwe note in actual value. Either can be used to start a fire.

Until the total breakdown of civilization, gold will have value greater than paper money. After that point, it's anyone's guess what will be of greater value. Gold could be melted down to ball for muzzle loading weapons vs. paper money...well you can make spitballs of it.

Originally posted by normbenign
Any commodity that has actual uses, has actual value, determined by its relative scarcity. Dollars, and other debt based currencies have only the value of the promise to pay by the issuing government. Gold is used in the manufacture of electronic components and connectors. There will always be a demand for commodity based currencies, especially at times when governments are threatened by ruin, military, financial or political.

Obviously the majority of speculators who are amassing gold reserves are not using them to make "electronic components and connectors", so we can assume that they are using gold as a de facto fiat currency. The value of gold on the open market surely outweighs its actual usefulness, and is basically a fetish.

Originally posted by normbenign
Commodities used as currencies most often have some usefulness, and demand besides their use as money.

In dire circumstances, ammunition, food and water might be valuable currencies. Supply and demand determines the value of any currency. Fiat currency has no use, and no value outside of that dictated by the issuing government. There is little diffe ...[text shortened]... d down to ball for muzzle loading weapons vs. paper money...well you can make spitballs of it.

It's better to buy non-trendy commodities that have greater real value than gold. Steel tools. Guns. Bullets. Drugs and liquor. Land. Vehicles. Etc.

Originally posted by Teinosuke
Obviously the majority of speculators who are amassing gold reserves are not using them to make "electronic components and connectors", so we can assume that they are using gold as a de facto fiat currency. The value of gold on the open market surely outweighs its actual usefulness, and is basically a fetish.

Hm. Interesting use of the word fiat here. I understand the use of the term "fiat currency" as related to the US dollar because the govt decrees its value "by fiat". What entity issues the fiat that makes gold a "fiat currency?" Why is valuing gold a fetish and valuing the US dollar not a fetish?

Originally posted by AThousandYoung
It's better to buy non-trendy commodities that have greater real value than gold. Steel tools. Guns. Bullets. Drugs and liquor. Land. Vehicles. Etc.

Don't forget food and water.

Originally posted by Teinosuke
Obviously the majority of speculators who are amassing gold reserves are not using them to make "electronic components and connectors", so we can assume that they are using gold as a de facto fiat currency. The value of gold on the open market surely outweighs its actual usefulness, and is basically a fetish.

Gold is purchased as a hedge against the inflation of true fiat currencies. Personally, I don't think the strategy is sound because if the fiat currency is disastrously devalued, so will gold be. However it it truthfully incorrect to say that gold or any other commodity useable as currency is the same as, or is a fiat currency. A fiat currency has value, only because government declares it to be so.