Young people (working age population) generate economic activity (GDP) and pay taxes (source of Govt. income) more than old people.
If working age population is decreasing:
1.there is downward pressure on GDP. Govt. should not be increasing debt to GDP ratio.
2.there is downward pressure on tax collection (Govt. income). When it can’t increase its income, it has no basis of increasing the debt.
And probably a decade or 15 yrs after the peaking of working age population, the overall population will also start decreasing if fertility rate don’t improve substantially (as in case of Japan).
This is the reason why you will have debt defaults in Italy (TFR 1.4), Greece, Spain, Portugal etc. sooner rather than later.
I mean the following:
Price of a unit of Gold = Total Gold available in the hands of humans divided by (Base Money + total credit that has been created)
Please watch following video from 20 minutes 20 seconds:
Why in the world would you expect the value of all gold in human hands in the world to equal the value of all money in the world?
You realize that things other than gold can be used as money, right? If gold-stealing elves tomorrow took all the gold on planet Earth, would that mean that humans would have to give up the concept of money? Or could we use other things as money? Silver, for instance? Or cacao beans? Or coupons that have no intrinsic worth that we agree to treat as money?
As the history of gold-backed paper money showed, a piece of paper with a picture of a bar of gold drawn on it can work as money just as easily as an actual bar of gold. Better, in many ways. As long as you can exchange the coupon for an actual gold bar, then it works as money just like the gold bar. And it turns out that you can exchange fiat dollars for gold bars here in 2016, and so fiat dollars are a form of money.
If you had a pile of fiat paper dollars and tried to buy gold with them, but nobody on the planet was willing to trade gold for any amount of fiat dollars, then those fiat dollars would be worthless and would no longer be a useful form of money, any more than Confederate Greenbacks are today. Those pieces of paper would be ex-money, of interest only as curiosities. But that day is not today, and it’s not likely to be tomorrow either.
If you really are worried about a total collapse of all world fiat currencies, by all means buy some tangible assets like gold or silver and take delivery of them and stuff them under your mattress. But if the dollar becomes worthless a certificate that says you own a certain amount of gold in some bank in the Cayman Islands is going to be worthless too. And your gold is going to be worth only what you can negotiate for.
[QUOTE=TruthSeeker2]
If you measure all the wealth in the world in terms of gold, the price of gold would probably come to 10-100 times the present value of $1250 per ounce.
[/QUOTE]
I’ll confine myself to three comments.
(1) Your explanation implies that you wrote “wealth” when you meant “money.” Perhaps this was a typo, but the conflation of the two terms implies huge misconception.
(2) The argument you make for the price of gold would be unsound even if we were on a gold standard. Banking and credit existed long before Franklin Roosevelt cheated your great grandmother out of her gold.
But we’re not on a gold standard. How can an imaginary gold standard affect the real price of gold? Why not imagine a silver standard and then deduce something about the “correct” price for silver? Or mayonnaise?
Also note that economic contractions due to aging labor forces are completely separate from fiat currency, and the problems of negative GDP growth due to contracting labor couldn’t be solved by switching to a currency backed by gold or silver.
There is limited quantity of Gold/Silver in the world, ( and very difficult to mine as well) unlike mayonnaise. The current debt based system is an unsustainable one given the demographics and the trajectory of debt growth. Unless either Governments fix it (will cause a lot of pain to many), or move towards some other system, there will be people who will look towards gold standard.
I don’t like something physical like gold in this era of Internet, data encryption, biometrics etc. but unless Govts fix the current system, I will be tempted to buy gold.
BTW I am a software professional who got into stock trading a 1-2 yrs back. I used to think ant demographics (demographic pyramids, working age population, TFR ) while looking at Govts. ever increasing debts.
Then I read Harry Dent. He thinks in similar ways as well and seems to have predicted earlier bubbles as well.
So YouTube isn’t the culprit, it’s just a validator.
Jeeze Louise, six (6) frickin’ pages and people still don’t get it. Measure the $1912 in terms of gold, not paper. There’s no need for shotguns or caches, keep it at the bank, where it pays interest in, get this - in terms of gold! Wow! This is the unit of account. Gold isn’t an investment, it’s a type of money.
Whatever you invest in, whether a stock or a bond, that has a return has an underlying denominator. In the case of gold, it would be worth far more than the paper currency that is in use today.
You take the $1912
I’ll take the approximately 95.6 ounces of gold worth about $124,000 in today’s money.
How would a Gold Standard solve that problem? It would plunge us immediately into that recession. Is that a good thing?
If a balanced budget and a growing economy cannot be compatible under the Federal Reserve System, why would they be compatible under Gold?
Gold isn’t a solution to any of the problems we face. If imposed upon us by law, it would lead to much greater harm than anything happening to us now.
Also…where does the new gold come from if the economy is to grow? If the population goes up, then per capita wealth would decrease. How is this a good idea?
OP here. Had a strange login issue that seems to have cleared up, so I wasn’t able to participate in the thread. I was able to read and follow along, and that login issue might have been a fortunate accident - I learned a heck of a lot more quietly listening to the different sides than I ever could have by arguing.
In keeping with that, I wont state any opinions, but I want to personally thank everyone who’s taken the time to engage in the discussion - especially those who have championed opposing sides.
There’s been a lot of good perspective and interesting arguments. Thank you!
*I am not for gold standard. There are many different solutions. For ex. in the present system itself, just stop growing debt to GDP ratio
*Recession isn’t necessarily bad. Don’t make the bubble even bigger before it bursts. Just let the recession happen n let things find their equilibrium.
why gold prices will be rising? it’s probably less abt moving back to gold standard but more abt lack of confidence in the present system because of the way debt has been rising.
Dropping an interest rate by 1/10 of one per cent, per month, over a period of fourteen months… vs. dropping an interest rate by 1.4 per cent overnight.
