OneGuyFromBarlick

The price of gold is rising, always a sign of money in flight looking for a safe haven when interest rates are very low. What puzzles me is that the amount of gold traded is estimated to at least four times the total world supply. How does that work, must we add 'phantom gold' to our modern currency systems?

Terry Pratchett's 'Money' does a good assessment on the subject of Gold as an standard for money supply. Gold has intrinsic value for nice to have things like jewelry and ornaments then in industry for electronics etc: after that its the mythical value called confidence. Anything else would do equally as well as long as people were confident in it. In an over hyped world of asset values their true value is now being exposed, things are not worth what the propaganda of the salesmen say they were worth. Consequently people now turn back to the myths of yesteryear and focus on gold as the ultimate confidence metal. Why is trading in excess of what is held in bank vaults? because people are using what is still in the ground as tomorrows asset. Smoke and mirrors. The real assets of this world are the people not stuff and yet the establishment willingly throws them on the scrap heap as being of no value. The current pandemic has demonstrated this fact as clear as a bell, take the people out of the loop and the world economies collapse.

Good post, I agree and it has made me think.

plaques wrote: ↑28 Jul 2020, 07:06 Terry Pratchett's 'Money' does a good assessment on the subject of Gold as an standard for money supply. Gold has intrinsic value for nice to have things like jewelry and ornaments then in industry for electronics etc: after that its the mythical value called confidence.

That book is one of my favourites. It was written just before the credit crunch. If you haven't read `Going Postal' you'll love that too - Moist von Lipwig invents the postage stamp for sending letters. Before the first day of issue is over people are swapping them and paying big money for ones that are printed in smaller runs.

The Spanish conquistadors were shocked to find that some of the early people of Central and South America had an abundance of gold available but weren't particularly interested in it. Shiny soft stuff, not much use- copper was better.

Stanley wrote: ↑28 Jul 2020, 06:36 The price of gold is rising, always a sign of money in flight looking for a safe haven when interest rates are very low. What puzzles me is that the amount of gold traded is estimated to at least four times the total world supply. How does that work, must we add 'phantom gold' to our modern currency systems?

It's called trading - ideally you buy low and sell higher many times over, so the same gold gets bought and sold many times even in a short time period, using the same money time and time again. Whether you are buying or selling each transaction contributes to the total total traded figure, eg if you buy a million quids worth and sell it again at no profit that still makes 2 million traded and yet everyone is in exactly the same position as before. Same as 'Rate of turnover of capital employed' or 'capital turnover ratio' in business. The amount of gold traded in London daily is many times the physical amount mined.
In the meantime the government makes a little and there are transaction fees.
At 180 billion pounds a day it soon adds up!

Thanks China. No wonder I am poor! I only believe money if I can hold it in my hand.
I still remember when I sold a house I got the whole lot in a carrier bag and carried it 50 yards to the Building Society to deposit in a savings account at a higher rate. The bank thought I was potty. I can still feel the weight...

I suppose they can also buy gold that hasn't yet been dug out of the ground.

I suspect that like debt, futures and shorting stocks it's just one more way of trading in phantom commodities as a vehicle for profit. (Was that too bleeding obvious?)

You can make a loss too! For all the winners someone has to be a loser, or be left holding bullion or currency or other commodities valued below the purchase price.
Trading isn't for the faint of heart. Bots (automatic apps which trawl the markets searching for an opportunity) trade millions of times faster than humans can collate the data and make an informed decision. Bots can get it wrong when markets react illogically, but on average they make more logical trades without sentiment. Literally millions of pounds are traded every second by these means, which is where Big Harry scored by shaving milliseconds in your example.
But as my late wife used to say about money: "it's only bits of paper"... Now it isn't even paper, it is just numbers showing electronically in accounts.

That's the impression I get. The old white fivers promised changing of paper into money when that inferred gold sovereigns which were current at the time but when modern banknotes say "I promise to pay the bearer on demand the sum of five pounds" that doesn't mean gold!



(A note like this is worth about £500 now in good condition)

The end of eviction and mortgage holidays fast approaches, only a month away now. This can wasn't kicked far enough down the road. Could be a bleak September for many families.

Reports of firms that have been furloughing workers are thinking seriously about redundancies as the lockdown continues and the changes in the system mean they are having to pay NI and a proportion of wages to furloughed workers when they have no income. Tin hats lads!

The danger now is that if unemployment goes up people will naturally have less to spend and inflation becomes deflation ie: prices going down. With bank interest rates at rock bottom we may actually see negative interest rates imposed. You will be paying the banks to keep your money safe right up to the point where they go bust then you lose it all.

I can't argue against that Ken as I have no evidence but that's certainly an extreme possibility. At the moment I can't see anything but dark clouds ahead and all we have is a government whistling in the wind and putting out expensive TV adverts forecasting a golden future.
Will someone please prove to me that this is pessimism and not stark reality!

Stanley wrote: ↑31 Jul 2020, 03:36 The end of eviction and mortgage holidays fast approaches, only a month away now. This can wasn't kicked far enough down the road. Could be a bleak September for many families.

But loads of folk of on the UK staycations booking all the sites supposedly (I presume less vacancy space though)

chinatyke wrote: ↑28 Jul 2020, 14:19

Stanley wrote: ↑28 Jul 2020, 06:36 The price of gold is rising, always a sign of money in flight looking for a safe haven when interest rates are very low. What puzzles me is that the amount of gold traded is estimated to at least four times the total world supply. How does that work, must we add 'phantom gold' to our modern currency systems?

It's called trading - ideally you buy low and sell higher many times over, so the same gold gets bought and sold many times even in a short time period, using the same money time and time again. Whether you are buying or selling each transaction contributes to the total total traded figure, eg if you buy a million quids worth and sell it again at no profit that still makes 2 million traded and yet everyone is in exactly the same position as before. Same as 'Rate of turnover of capital employed' or 'capital turnover ratio' in business. The amount of gold traded in London daily is many times the physical amount mined.
In the meantime the government makes a little and there are transaction fees.
At 180 billion pounds a day it soon adds up!

Gordon Brown flogged the UK excess Gold,(his problem that he announced it n advance, did not think like a trader, sell, assume price goes cheap and buy back more at the same price to increase. Thatcher sold the silver.

I commented recently on Mark Zuckerberg making so much money during the covid crisis but now this makes his previous wealth look like a kid's pocket money. It's worrying to see individuals with this sort of wealth - it gives them far too much power.
`Facebook founder sees wealth hit $100bn after TikTok rival launch' LINK

True Peter, and if one comments on it there are immediate allegations of 'the politics of envy' coming into play. It isn't that at all, it's just common sense. That wealth is locked up somewhere and isn't circulating in the economy at low level like a single mother's benefit payments. That's the sort of money that stimulates the real, ground level, economy.
One of the main problems today is that the local, ground level economy is starved of input and it will get worse.

Think how much brass the 50's pension women would have put back into the economy. Sally will get her pension in October just 6 years late. The state have already drawn it and spent it over the last 50 years and owes her abut £50,000 most of which, if she had received it would have been spent. Think of the last few years if Sally and all the thousands of other women who have been ripped of had been paid, Boris would not have to borrow as much brass. Unintended consequences?

Exactly Ian and that's only one example. When the 2008 crisis hit Joseph Stiglitz was attacked for saying the government should go out and throw cash out of the window to be picked up by the general population, 'Helicopter Money'. Instead they squandered it on bailing corrupt banks out and creating artificial money to inject into the market where it sank in and vanished like water on the ground in a drought. There is still a school of influential thought that believes Stiglitz was correct.
Austerity was all about making the benefits system and pensioners pay for these policies. I said then it was a massive mistake and still believe that. Covid has made them do it, 'furloughing' is 'Helicopter Money' by another name but this time it is money we haven't got so we have to borrow. QED.
[I watched the Lloyd's Bank advert on TV last night and thought "In a pig's ear' as they promised to always be with us supporting us. Right.......!]

Stanley wrote: ↑09 Aug 2020, 03:21 I watched the Lloyd's Bank advert on TV last night and thought "In a pig's ear' as they promised to always be with us supporting us. Right.......!

They're after attracting the woke crowd who will lap it up, not you!

Therefore 'woke' = unthinking idiots!
I still tend to the school that believes the best description of a bank is an institution that lends you an umbrella when the sun is shining and demands its return as soon as it starts raining.

The repayment of personal loans (credit cards etc) is at its fastest rate since 2008 the financial crash. Loans to this sector are down by 15.9 % this may because a bit of common sense is kicking in or by necessity that there is less money to spend. Whatever the reason these loans are a very profitable business for the banks and a downturn in this area combined with defaults on business loans means less money to loan out and less profits for the banks. Nobody as yet is talking about cutting dividends or reducing bank rates into the 'negative' area. It goes without saying that if people spend less then the High Street suffers etc , etc, The downward spiral towards deflation and more job losses continues but lets not talk about that just in case the natives start getting restless. Loans.

I'm glad to see that at least Klarna `pay later' company is coming under fire.

Interesting article Ken. The wonder to me is that it didn't happen earlier, consumer credit has long been at ridiculous and in many cases insupportable levels for years. However I note "The forecasters at EY Item Club expect consumer credit to rebound in 2021, but the total stock of debt is not expected to rise above pre-pandemic levels that peaked at £225bn until at least 2022." I hope they are wrong, just think of the amount of liquidity that has been sucked out of ordinary families in interest payments.
Loans at interest are necessary to finance industry and if the return is greater than the interest paid make sense but I have always had sympathy with those communities who ban usury as an evil. On the domestic level this has turned out to be true in many cases, especially with those loans at sky high rates like pay day loans. I still believe that the reason those weren't banned outright was because it was debt that was keeping consumer spending, and consequently our flawed economy, off the rocks. I use credit sensibly but only within the bounds of what I can afford and pay off every month. I haven't paid any interest to banks for many years now, not because I am wealthy but because I make sure I stay within my personal limits. I am one of the lucky ones and know it. God knows what the pressure is if you have a family to feed and house and have no other way of surviving.