Immediate impact of a default?
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@Jaime said in Immediate impact of a default?:
@Polygeekery I agree with your disagreement that gold is the answer. I simply brought it up as an example that any paper-based instrument will suffer, so they go with a well-known alternative. However, applying the simplest logic tells you that selling gold for real things is going to be difficult if the financial institutions are undergoing a period of unrest.
Your local grocer is much more likely to accept barter or trade than gold.
I think it depends on a lot of factors. Total economic collapse a la Weimar Republic, etc.? I think a lot of business owners would be quite happy to take gold. Things have as much value as people think they have. If paper (or electronic) money become worthless, I think gold or silver would retain their value much better.
I bet somebody on the internet knows what happened to the value of gold at times when paper money became worthless or the faith in paper money substantially decreased.
Weimar Leads to the Reich - Ray Wallace
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@jinpa said in Immediate impact of a default?:
Weimar Leads to the Reich - Ray "Sherlock" Wallace
Deflation bad, mmmkay?
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@dcon said in Immediate impact of a default?:
@Mason_Wheeler said in Immediate impact of a default?:
@Jaime said in Immediate impact of a default?:
Al financial instruments valued in US currency, both liability and asset, will be practically worthless. Physical things and labor will continue to be valuable - which is why the doom-sayers suggest you buy gold.
Which makes no sense even if the doom is real; how exactly do you expect anyone to buy a loaf of bread with gold even if they had it? They don't exactly make gold coins that small...
"I'll take a pound of gold for this loaf of bread."
Troy pounds or avoirdupois pounds?
Precious metals are usually measured using the troy weight system. Troy ounces are heaver than avoirdupois (customary) ounces (31.1034768 g vs. 28.349523125 g), but there are only 12 troy ounces in a troy pound, making it significantly lighter than a conventional pound (373.2417216 g vs. 453.59237 g). The possibility of taking advantage of the uninformed exists if payment in precious metal were to become widely accepted.
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@HardwareGeek I always found these units stupid and confusing. Just like carat, which can mean either 1/24th purity (gold) or 200mg (diamonds). Those aren’t even the same dimensions.
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@topspin said in Immediate impact of a default?:
@HardwareGeek I always found these units stupid and confusing. Just like carat, which can mean either 1/24th purity (gold) or 200mg (diamonds). Those aren’t even the same dimensions.
Carat is 200mg. Karat is 1/24 purity. Not that that is necessarily any less stupid and confusing, but they're not actually the same unit.
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@HardwareGeek TIL. But that difference doesn’t exist in German, and according to Wikipedia even in English it’s not that clear.
The karat (US spelling, symbol K or kt) or carat (UK spelling, symbol C or ct)[15][16] is a fractional measure of purity for gold alloys, in parts fine per 24 parts whole.
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@HardwareGeek said in Immediate impact of a default?:
The possibility of taking advantage of the uninformed exists
E_CLOSED_AS_DESIGNED
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@topspin said in Immediate impact of a default?:
UK spelling
Ah, well, there's your problem. Silly Brits.
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@HardwareGeek said in Immediate impact of a default?:
@dcon said in Immediate impact of a default?:
@Mason_Wheeler said in Immediate impact of a default?:
"I'll take a pound of gold for this loaf of bread."Troy pounds or avoirdupois pounds?
Precious metals are usually measured using the troy weight system. Troy ounces are heaver than avoirdupois (customary) ounces (31.1034768 g vs. 28.349523125 g), but there are only 12 troy ounces in a troy pound, making it significantly lighter than a conventional pound (373.2417216 g vs. 453.59237 g). The possibility of taking advantage of the uninformed exists if payment in precious metal were to become widely accepted.
Haha, imagine someone giving you a "pound of gold" for your loaf of bread and all you get is a troy pound!
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@topspin said in Immediate impact of a default?:
@HardwareGeek TIL. But that difference doesn’t exist in German, and according to Wikipedia even in English it’s not that clear.
The karat (US spelling, symbol K or kt) or carat (UK spelling, symbol C or ct)[15][16] is a fractional measure of purity for gold alloys, in parts fine per 24 parts whole.
Interested in a 280K diamond? Yeah, it's small, but you can sell it for a profit on a warm day!
OK, OK, but this one is 12C, provably, no temperature shenaningans! Take it to a mass spectrograph to check.
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@Jaime said in Immediate impact of a default?:
applying the simplest logic tells you that selling gold for real things is going to be difficult if the financial institutions are undergoing a period of unrest.
Your local grocer is much more likely to accept barter or trade than gold.Which is even more amusing when you realize that one of the things I have seen advertised to the doomdayers is gold accounts and IRAs. Anyone buying those to prepare for doomsday is monumentally dumb. Unless you have the gold in your possession it does you no good and do they really think that if everything goes to hell those companies are actually going to open their vaults and give them their gold?
Now that I think about it, the people selling that might be the smartest of the doomdayers. They're getting other people to buy the gold for them to keep if the world went to hell.
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@Polygeekery said in Immediate impact of a default?:
do they really think that if everything goes to hell those companies are actually going to open their vaults and give them their gold?
But they have a contract!!!
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@dkf I'm certain that's what plenty of them think.
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No
war plancontract survivesfirst contactsocietal collapse.
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@Polygeekery Wouldn’t they better off investing in large supplies of cigarettes?
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@Polygeekery said in Immediate impact of a default?:
Over recorded history gold has always purchased nearly the same amount of "stuff". A gram of gold in medieval times would purchase a certain amount of eggs or milk or whatever and would purchase the same amount today. On long timelines the price of gold almost perfectly tracks the rate of inflation.
I'm going to dispute, or at least put a huge question mark, around that statement?
Starting with modern times when tracking the value of gold is easy, there are clearly periods where the value of gold has changed by close to an order of magnitude without the inflation being that high, the most recent one being 2008. This page has about a century of data and even includes a nice "inflation adjusted" toggle. The default vertical axis is log-scale which is a bit confusing (but that can be turned off) and in any case the numbers are clear. For decades post-WW2 gold was worth about $300-400/ounce, for the past 20 years it's wildly swinging but in a $1500-2000/ounce bracket (inflation adjusted, raw numbers are even worse with the post-war period around $30-40!). Now inflation is not the only thing that defines "value" but with so large swings, I doubt looking at PPP or another comparable measure would really change much.
Going back further to "medieval times" (quotes because that's a 1000 years period covering the whole world, or at least the whole of Europe in most acceptations...) is obviously much harder. Medieval currencies are a mess that makes carat/karat look like the metric system vs. imperial
(we've lost half of the fun of Molière's spiel about money in the very opening (act 1, scene 1) of The Imaginary Invalid/The Hypochondriac)
I tried a bit for France though.
The currency most commonly used as a reference unit by historians is the livre tournois whose gold content has varied across the years (first graph in this page -- yeah, it's about the Louis not the livre but the graph is for the livre) from 0.9 to 0.3 g of pure gold.
I'm not going to list all pages I looked through to try and find equivalent modern values of the livre because 1) there are too many, 2) I searched in French to try and get works by actual historians and 3) there are far too many conflicting valuations. Just to give a flavour, this page has a table with the "(2006) EUR equivalent" of the livre across the years. It steadily falls down from 30 EUR in 1200 to less than 2 EUR in 1800, a factor of more than 10 while the gold content fell "only" by a factor of 3. But the same page also gives as a possible valuation (using a different method) 8 EUR for a livre of 1781!
So assuming a livre of 0.3 g of pure gold in 1800, that's about 0.01 ounce (I think?), so a value per ounce between EUR 2000-8000 (supposedly in today's money). That is way more value than the current gold price, which itself is way more than the price for most of the 20th century.
So I don't think gold is a "constant value" except if by "constant" you accept swings of an order of magnitude that last for decades.
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@Gurth said in Immediate impact of a default?:
@Polygeekery Wouldn’t they better off investing in large supplies of cigarettes?
Stable drugs that are easy to store for conditions that can't be cured seems like a good investment for when society goes to hell.
And painkillers.Tobacco can be grown by pretty much entirely uneducated farmers, medical drugs are harder to get and in lots of cases are necessary to survive.
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@remi And then there was the difference in gold price between countries in the long agos, so you could actually make a nice profit by collecting the currency of one country and shipping it to another and melting it down and selling it as gold bullion.
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@Carnage said in Immediate impact of a default?:
@Gurth said in Immediate impact of a default?:
@Polygeekery Wouldn’t they better off investing in large supplies of cigarettes?
Tobacco can be grown by pretty much entirely uneducated farmers, medical drugs are harder to get and in lots of cases are necessary to survive.
Which is why you wouldn’t want to use them as currency.
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@topspin said in Immediate impact of a default?:
No matter how much you may think the whole financial system is a scam built on a scam, the US economy isn't the Weimar republic.
Weimar republic is a natural endpoint for the fiat money system. With no tie to any physical good of solid value (like gold), any such system is always one government decision (to print money) away from hyperinflation.
Whether such a decision (that is, to print) has been made in the U.S. is a bit of a Schrödinger's dilemma. Lending to oneself at a near-zero interest rate is virtually indistinguishable from printing. Someone peeked into the box, leading to the current attempt to resuscitate dollar's value by jacking the interest rate. According to an economist I read sometimes, this'll actually start to work when the interest rate overtakes the inflation "in real terms of values" though. So it might be too little too late.
This same economist calculated that the U.S. would need to axe its whole public medical expenditure (amounting to 1/5 of the federal budget) to balance the books and be able to stop the debt spiral. Which they might not be politically willing to.
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@acrow said in Immediate impact of a default?:
@topspin said in Immediate impact of a default?:
No matter how much you may think the whole financial system is a scam built on a scam, the US economy isn't the Weimar republic.
Weimar republic is a natural endpoint for the fiat money system. With no tie to any physical good of solid value (like gold), any such system is always one government decision (to print money) away from hyperinflation.
Whether such a decision (that is, to print) has been made in the U.S. is a bit of a Schrödinger's dilemma. Lending to oneself at a near-zero interest rate is virtually indistinguishable from printing. Someone peeked into the box, leading to the current attempt to resuscitate dollar's value by jacking the interest rate. According to an economist I read sometimes, this'll actually start to work when the interest rate overtakes the inflation "in real terms of values" though. So it might be too little too late.
This same economist calculated that the U.S. would need to axe its whole public medical expenditure (amounting to 1/5 of the federal budget) to balance the books and be able to stop the debt spiral. Which they might not be politically willing to.
They could always also go down the route of "We won't be world police anymore. GLHF" and cut the military expenditure. Which they also don't want to do.
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@Carnage said in Immediate impact of a default?:
@acrow said in Immediate impact of a default?:
@topspin said in Immediate impact of a default?:
No matter how much you may think the whole financial system is a scam built on a scam, the US economy isn't the Weimar republic.
Weimar republic is a natural endpoint for the fiat money system. With no tie to any physical good of solid value (like gold), any such system is always one government decision (to print money) away from hyperinflation.
Whether such a decision (that is, to print) has been made in the U.S. is a bit of a Schrödinger's dilemma. Lending to oneself at a near-zero interest rate is virtually indistinguishable from printing. Someone peeked into the box, leading to the current attempt to resuscitate dollar's value by jacking the interest rate. According to an economist I read sometimes, this'll actually start to work when the interest rate overtakes the inflation "in real terms of values" though. So it might be too little too late.
This same economist calculated that the U.S. would need to axe its whole public medical expenditure (amounting to 1/5 of the federal budget) to balance the books and be able to stop the debt spiral. Which they might not be politically willing to.
They could always also go down the route of "We won't be world police anymore. GLHF" and cut the military expenditure. Which they also don't want to do.
Wouldn't work. They've already cut it. Defense spending is only 12% of federal budget now.
Also, no country stands independent without a military. ...Although the states have their own National Guard units, which are not part of that number. So the federal army could technically be cut. But that wouldn't balance even the federal budget by itself.
ETA:
When looking at U.S. federal spending pie-charts, keep an eye out for the word "discretionary", which means that the chart omits healthcare and social security, which are "mandatory" budgeting items.
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Another way to look at it would be:
Long-term budget view may surprise you
Spending on the military accounted for 19 cents of every dollar of federal expenditures in 2006. That might seem like a lot, until you consider the Cold War year of 1954.
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@acrow said in Immediate impact of a default?:
@Carnage said in Immediate impact of a default?:
@acrow said in Immediate impact of a default?:
@topspin said in Immediate impact of a default?:
No matter how much you may think the whole financial system is a scam built on a scam, the US economy isn't the Weimar republic.
Weimar republic is a natural endpoint for the fiat money system. With no tie to any physical good of solid value (like gold), any such system is always one government decision (to print money) away from hyperinflation.
Whether such a decision (that is, to print) has been made in the U.S. is a bit of a Schrödinger's dilemma. Lending to oneself at a near-zero interest rate is virtually indistinguishable from printing. Someone peeked into the box, leading to the current attempt to resuscitate dollar's value by jacking the interest rate. According to an economist I read sometimes, this'll actually start to work when the interest rate overtakes the inflation "in real terms of values" though. So it might be too little too late.
This same economist calculated that the U.S. would need to axe its whole public medical expenditure (amounting to 1/5 of the federal budget) to balance the books and be able to stop the debt spiral. Which they might not be politically willing to.
They could always also go down the route of "We won't be world police anymore. GLHF" and cut the military expenditure. Which they also don't want to do.
Wouldn't work. They've already cut it. Defense spending is only 12% of federal budget now.
Also, no country stands independent without a military. ...Although the states have their own National Guard units, which are not part of that number. So the federal army could technically be cut. But that wouldn't balance even the federal budget by itself.
ETA:
When looking at U.S. federal spending pie-charts, keep an eye out for the word "discretionary", which means that the chart omits healthcare and social security, which are "mandatory" budgeting items.
If they aren't gallivanting around and fighting in other parts of the world, they could probably cut that 12% in half and still have a quite fearsome military.
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@acrow And lest anyone thinks I want to kill the elderly (which I don't), most of that budgetary share of medical care is because of extreme pricing in the U.S.. The reasons of which have been explored in other threads. But the end result is that treatment costs a lot more in the U.S., at least on paper:
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@acrow said in Immediate impact of a default?:
@acrow And lest anyone thinks I want to kill the elderly (which I don't), most of that budgetary share of medical care is because of extreme pricing in the U.S.. The reasons of which have been explored in other threads. But the end result is that treatment costs a lot more in the U.S., at least on paper:
Yeah,. the US opted for a healthcare system that is the worst of all available options.They probably should get on top of fixing it, but it's too stupidly politicized so short of falling apart completely because the money runs out, it's not going to get fixed either.
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@Carnage said in Immediate impact of a default?:
@acrow said in Immediate impact of a default?:
@Carnage said in Immediate impact of a default?:
@acrow said in Immediate impact of a default?:
@topspin said in Immediate impact of a default?:
No matter how much you may think the whole financial system is a scam built on a scam, the US economy isn't the Weimar republic.
Weimar republic is a natural endpoint for the fiat money system. With no tie to any physical good of solid value (like gold), any such system is always one government decision (to print money) away from hyperinflation.
Whether such a decision (that is, to print) has been made in the U.S. is a bit of a Schrödinger's dilemma. Lending to oneself at a near-zero interest rate is virtually indistinguishable from printing. Someone peeked into the box, leading to the current attempt to resuscitate dollar's value by jacking the interest rate. According to an economist I read sometimes, this'll actually start to work when the interest rate overtakes the inflation "in real terms of values" though. So it might be too little too late.
This same economist calculated that the U.S. would need to axe its whole public medical expenditure (amounting to 1/5 of the federal budget) to balance the books and be able to stop the debt spiral. Which they might not be politically willing to.
They could always also go down the route of "We won't be world police anymore. GLHF" and cut the military expenditure. Which they also don't want to do.
Wouldn't work. They've already cut it. Defense spending is only 12% of federal budget now.
Also, no country stands independent without a military. ...Although the states have their own National Guard units, which are not part of that number. So the federal army could technically be cut. But that wouldn't balance even the federal budget by itself.
ETA:
When looking at U.S. federal spending pie-charts, keep an eye out for the word "discretionary", which means that the chart omits healthcare and social security, which are "mandatory" budgeting items.
If they aren't gallivanting around and fighting in other parts of the world, they could probably cut that 12% in half and still have a quite fearsome military.
Possibly. I understand that a lot of the cost is bureaucracy and astronomical salaries for the thousands of generals. But don't hold me to that; I don't have a pie chart handy to prove it.
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@acrow said in Immediate impact of a default?:
@Carnage said in Immediate impact of a default?:
@acrow said in Immediate impact of a default?:
@Carnage said in Immediate impact of a default?:
@acrow said in Immediate impact of a default?:
@topspin said in Immediate impact of a default?:
No matter how much you may think the whole financial system is a scam built on a scam, the US economy isn't the Weimar republic.
Weimar republic is a natural endpoint for the fiat money system. With no tie to any physical good of solid value (like gold), any such system is always one government decision (to print money) away from hyperinflation.
Whether such a decision (that is, to print) has been made in the U.S. is a bit of a Schrödinger's dilemma. Lending to oneself at a near-zero interest rate is virtually indistinguishable from printing. Someone peeked into the box, leading to the current attempt to resuscitate dollar's value by jacking the interest rate. According to an economist I read sometimes, this'll actually start to work when the interest rate overtakes the inflation "in real terms of values" though. So it might be too little too late.
This same economist calculated that the U.S. would need to axe its whole public medical expenditure (amounting to 1/5 of the federal budget) to balance the books and be able to stop the debt spiral. Which they might not be politically willing to.
They could always also go down the route of "We won't be world police anymore. GLHF" and cut the military expenditure. Which they also don't want to do.
Wouldn't work. They've already cut it. Defense spending is only 12% of federal budget now.
Also, no country stands independent without a military. ...Although the states have their own National Guard units, which are not part of that number. So the federal army could technically be cut. But that wouldn't balance even the federal budget by itself.
ETA:
When looking at U.S. federal spending pie-charts, keep an eye out for the word "discretionary", which means that the chart omits healthcare and social security, which are "mandatory" budgeting items.
If they aren't gallivanting around and fighting in other parts of the world, they could probably cut that 12% in half and still have a quite fearsome military.
Possibly. I understand that a lot of the cost is bureaucracy and astronomical salaries for the thousands of generals. But don't hold me to that; I don't have a pie chart handy to prove it.
There is also vast amounts of black budgets in there, so even if you had a pie chart, it'd be wrong.
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@remi said in Immediate impact of a default?:
So I don't think gold is a "constant value" except if by "constant" you accept swings of an order of magnitude that last for decades.
Ahem
@Polygeekery said in Immediate impact of a default?:
On long timelines the price of gold almost perfectly tracks the rate of inflation.
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@Polygeekery said in Immediate impact of a default?:
@remi said in Immediate impact of a default?:
So I don't think gold is a "constant value" except if by "constant" you accept swings of an order of magnitude that last for decades.
Ahem
@Polygeekery said in Immediate impact of a default?:
On long timelines the price of gold almost perfectly tracks the rate of inflation.
The same long timeline that results in all of us being buried next to our gold and our three favorite slaves in a pyramid?
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@izzion said in Immediate impact of a default?:
@Polygeekery said in Immediate impact of a default?:
@remi said in Immediate impact of a default?:
So I don't think gold is a "constant value" except if by "constant" you accept swings of an order of magnitude that last for decades.
Ahem
@Polygeekery said in Immediate impact of a default?:
On long timelines the price of gold almost perfectly tracks the rate of inflation.
The same long timeline that results in all of us being buried next to our gold and our three favorite slaves in a pyramid?
Considering a Roman Solidus of 4.5g gold used to be a soldier's salary for about 3 months and would be just under $300 in today's prices, I think we have to scale down this expectation to about a broken tamagotchi and our favorite street cat.
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@Polygeekery on timelines long enough for your statement to make sense, any foodstuff perfectly tracks inflation -- just ignore the pesky last century, it's just short-term fluctuations.
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@remi the farther you go back the muddier the comparison gets. I actually didn't intend to include the Medieval era in that as I qualified it with "since".
It is like saying that "over time the US stock market has grown reliably at 12%". This is true. But you can also cherry pick certain time periods that violate this. What about 2007-20??". Or 2019-current? Or 1939-1939? Sure. But what about any random 40 year period? Generally speaking you will see roughly 12% annual growth over that time period.
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@Polygeekery said in Immediate impact of a default?:
@Jaime said in Immediate impact of a default?:
Physical things and labor will continue to be valuable
Yes. Generally speaking markets revert to barter.
@Jaime said in Immediate impact of a default?:
which is why the doom-sayers suggest you buy gold.
They're idiots. Sort of. I've heard the argument that you should buy gold because it is the only thing that would retain its value in times of.......whatever. This is technically true but effectively meaningless. In times of unrest and collapse gold won't buy shit because it has no utility. You would be better served to stockpile bottled water, packaged food, medications, tools, guns, etc. Things that have utility and value if currency becomes useless. At least you could use those things or trade them for things that you need.
The "doom-sayers" I've read on this topic aren't looking at it as an alternative means to purchase goods, but exactly what you mention below, as an alternative investment to the relatively volatile and uncertain stocks and bonds market, and as a stopgap alternative to stuffing money under the mattress or getting a CD.
Regarding gold as a commodity, there is one thing that's different today vs centuries ago: Gold has a greater value in manufacturing and technology. If people start hording gold in any significant impact, it may not only make its value greater, but also increase prices on circuit boards and other goods that use gold in its manufacturing process.
Finally, after skimming the thread, I didn't see this being mentioned, but apologies if it was brought up already: It's important to note that merely rejecting the budget and not raising the debt ceiling in and of itself will not make the US default. It is a step towards that, but it by itself will not cause the doomsday scenario laid out (although it will have significant impacts on the economy). We've gone through this same thing a few times in the last few decades, some of which had lasted a few weeks before a compromise was made prior to us driving off the cliff.
Politics has been increasingly polarized, but I still have hope that the politicians don't chop their own heads off to spite their body. If the two sides are stubborn enough to refuse any sort of compromise and get us into a default, nobody's political career will survive before their next term. Either side will point fingers blaming the other for getting us into the hypothetical clusterfuck, but I think the public is going to just say "fuck everybody there" and start some sort of revolution that makes both parties obsolete.
And that's all I'll say before I get into
territory.
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@Polygeekery said in Immediate impact of a default?:
@remi the farther you go back the muddier the comparison gets. I actually didn't intend to include the Medieval era in that as I qualified it with "since".
Well most of my data was about the 18th century which isn't "medieval."
It is like saying that "over time the US stock market has grown reliably at 12%". This is true. But you can also cherry pick certain time periods that violate this. What about 2007-20??". Or 2019-current? Or 1939-1939? Sure. But what about any random 40 year period? Generally speaking you will see roughly 12% annual growth over that time period.
Leaving aside
, 
and 
(which is 
of course), I get the idea that you're trying to tell, but I still disagree on how you're saying it. Gold always had some value, and that value always was "a lot" (yes, yes, not very accurate but that's the point). So in that sense, I get your point that gold can be used as a long-term store of value, with little fear that it will suddenly become worthless.But I think trying to put any kind of formalisation of "the value of gold is constant across time" is wrong. The graph I linked for the 20th century makes that obvious, gold is close to 10x more valuable now than in the immediate post-WW2, and that after adjusting for inflation! So no, gold doesn't "track inflation" in any significant way.
You could store your wealth in gold and reasonably expect that it would still be worth something in 50 or 100 years, whatever happens in between. You would, however, be very wrong to expect that gold to buy you comparable amounts of stuff now and then. It could be 10x less.
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@remi I maintain that due to gold's increasing useful value as an industrial commodity and its relative steadiness in supply (IIRC there's only enough gold in the world to fit in a 20x20x20m cube, and can be recycled indefinitely), its future value is going to trend upwards rather than down.
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@The_Quiet_One Until our industrial society collapses, anyway. There's not much value in industrial commodities if there's no industry.
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@The_Quiet_One this may well be, especially since while it is recyclable, there's probably going to be some losses with tiny quantities are spread out in a huge variety of electronic devices. But then again, this requires this application of gold (as opposed to its only application for thousands of years as a store of value) to still exist in the future.
In any case and even if that's the case, that doesn't make it "tracking inflation."
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@The_Quiet_One Only that much? That’s what I would expect to be in Fort Knox alone if I still thought gold was stockpiled there.
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Their latest figure for all the gold in the world is 171,300 tonnes - which is almost exactly the same as the amount in our super-villain's imaginary cube.
A cube made of 171,300 tonnes would be about 20.7m (68ft) on each side.
A 20m cube would have a mass of 154600 tonnes.
But not everyone agrees with the GFMS figures.
Estimates range from 155,244 tonnes, marginally less than the GFMS figure, to about 16 times that amount - 2.5 million tonnes.
That bigger figure would make a cube of sides 50m (166ft) long
According to the US Mint, Fort Knox currently holds 147.3 million ounces (4581.5 tonnes). Historically, its maximum was 649.6 million ounces (20200 tonnes).
TIL the name Fort Knox is inaccurate. The United States Bullion Depository is located adjacent to the US Army's Fort Knox, on land that was formerly part of the Army base, but is not part of it. However, that doesn't really make it any less secure.
The depository is a secure facility. Between its fenced perimeter and granite-lined concrete structure lie rings of razor wire. The grounds are monitored by high-resolution night vision video cameras and microphones. The subterranean vault is made of steel plates, I-beams and cylinders encased in concrete. Its torch-and-drill resistant door is 21 inches (53 cm) thick and weighs 20 short tons (18 metric tons). The vault door is set on a 100-hour time lock, and can only be opened by members of the depository staff who must dial separate combinations. Visitors are not allowed inside.
And the Army mechanized cavalry unit next door would defend it, if necessary.
Also, gold is not the only valuable stuff stored there.
During World War II the signed original Constitution of the United States, Declaration of Independence, Articles of Confederation, Lincoln's Second Inaugural Address and drafts of Lincoln's Gettysburg Address were stored in its vault for protection, as was a Gutenberg Bible and an exemplified copy of Magna Carta. After the war, the depository held the Crown of St. Stephen as well as stockpiles of opium and morphine. Today it is known to hold ten 1933 Double Eagle gold coins, a 1974-D aluminum penny, and twelve gold (22-karat) Sacagawea dollar coins that flew on the Space Shuttle Columbia, specifically STS-93 in 1999.
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@remi said in Immediate impact of a default?:
@The_Quiet_One this may well be, especially since while it is recyclable, there's probably going to be some losses with tiny quantities are spread out in a huge variety of electronic devices. But then again, this requires this application of gold (as opposed to its only application for thousands of years as a store of value) to still exist in the future.
In any case and even if that's the case, that doesn't make it "tracking inflation."
The supply is still a bit variable in that some of the available gold has not been mined yet. Although I'm not sure if this is accounted for in determining its overall value.
Also, the whole "tracking inflation" thing is pointless from a historical perspective. It tracked inflation historically because it was the currency. It was a big point in the long debate over whether we should adopt fiat currency some 150 years ago. Without currency being backed by gold, of course its value is going to be more or less independent of whatever the USD, yuan, or any other currency does.
@Zenith said in Immediate impact of a default?:
@The_Quiet_One Only that much? That’s what I would expect to be in Fort Knox alone if I still thought gold was stockpiled there.
At its peak, Fort Knox accounted for 80% of the gold in circulation.
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@The_Quiet_One said in Immediate impact of a default?:
The supply is still a bit variable in that some of the available gold has not been mined yet. Although I'm not sure if this is accounted for in determining its overall value.
"All" the gold in the earth is definitely not accounted for, because gold is one of those pesky mineral resources that can exist at more or less any concentration, from tiny minuscule traces up to large(-ish) amounts. IIRC currently gold mines are profitable with gold concentrations as low as 1g/ton of rock but in the not-so-distant past you'd have to be at least at 10 g/ton.
Look up things like proven/probable resources and reserves for how the mining industry tries to quantifies that, but there's a huge uncertainty in there. Given that, gold prices certainly account for some of the yet-unearthed gold, but they can't account for all of it.
Also, the whole "tracking inflation" thing is pointless from a historical perspective. It tracked inflation historically because it was the currency.
Uh, no. Saying that $1=this or that amount of gold has nothing to do with how much stuff that dollar buys (which is what inflation tracks). Inflation is not the currency.
Besides, even that correspondance was a bit... "guidelines more than rules" if you go back far enough (i.e. middle ages), and many countries played fast-and-loose with the definition of their currency when that suited them.
But it's not wrong that tracking any economic indicator across several centuries is partly pointless, though it's more because some indicators didn't make sense in a pre-modern economy (and many more cannot be reliably estimated either).
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@remi
That reminds me of a podcast I listened to this week where the visiting recording artist (Alex Callier mainly know from Hooverphonic) talked about selling of your back catalog to pension funds because they are interested in the small but rather steady revenue flow that even a b-list artist or one-hit wonder makes. Of course these will be worthless if streaming and radio die in the apocalypse. Not really, the funds will probably go down sooner but whatever.
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@LaoC said in Immediate impact of a default?:
@izzion said in Immediate impact of a default?:
@Polygeekery said in Immediate impact of a default?:
@remi said in Immediate impact of a default?:
So I don't think gold is a "constant value" except if by "constant" you accept swings of an order of magnitude that last for decades.
Ahem
@Polygeekery said in Immediate impact of a default?:
On long timelines the price of gold almost perfectly tracks the rate of inflation.
The same long timeline that results in all of us being buried next to our gold and our three favorite slaves in a pyramid?
Considering a Roman Solidus of 4.5g gold used to be a soldier's salary for about 3 months and would be just under $300 in today's prices, I think we have to scale down this expectation to about a broken tamagotchi and our favorite street cat.
Soldiers in India get ₹43,767 per month (source), which is $532. So more like a pile of silver and one slave.
What? Prices and salaries in the so-called 1st world are all funky. If you want to make sense of things, compare historical values to those of the saner parts of the world.
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@Polygeekery said in Immediate impact of a default?:
To borrow from their vernacular, in "shit hits the fan" scenarios gold would actually be worthless for that time period and bottled water and food would be the best investment one could ever make.
If we hit Weimar levels, gold will be valuable. If we hit Mad Max levels, it's time for guns and water.
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@PotatoEngineer said in Immediate impact of a default?:
@Polygeekery said in Immediate impact of a default?:
To borrow from their vernacular, in "shit hits the fan" scenarios gold would actually be worthless for that time period and bottled water and food would be the best investment one could ever make.
If we hit Weimar levels, gold will be valuable. If we hit Mad Max levels, it's time for guns and water.
:@Roses:
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@PotatoEngineer I doubt Weimar Germany kept their public infrastructure in tip top shape. But urbanization wasn't that far along either, so a lot of people had their own wells.
Now that we're in the post Mad Max era...
Did you know that pharmacies sell chlorine tablets for treating water while out camping? If you're keeping a survival kit, you might want to include some in it.
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@PotatoEngineer said in Immediate impact of a default?:
@Polygeekery said in Immediate impact of a default?:
To borrow from their vernacular, in "shit hits the fan" scenarios gold would actually be worthless for that time period and bottled water and food would be the best investment one could ever make.
If we hit Weimar levels, gold will be valuable. If we hit Mad Max levels, it's time for guns and
watergasoline.Sheesh.
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@boomzilla said in Immediate impact of a default?:
@PotatoEngineer said in Immediate impact of a default?:
@Polygeekery said in Immediate impact of a default?:
To borrow from their vernacular, in "shit hits the fan" scenarios gold would actually be worthless for that time period and bottled water and food would be the best investment one could ever make.
If we hit Weimar levels, gold will be valuable. If we hit Mad Max levels, it's time for guns and
watergasoline.Sheesh.
Um, actually water is as valuable, if not more, in Mad Max as gasoline. Civilization collapse is a result of "water wars" (Mad Max 2) and Immortan Joe's power comes from controlling a water source (Mad Max 4).
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@MrL sure, that's what they say. But their Frankenstein fleet of vehicles and the mutants who drive them is what keeps the water flowing to them.
