Bleak with black coffee

Originally posted by Infose: ↑

To my understanding nowadays gold as a mean of payment is only being used by central banks and the IMF, the bank of last resort of the central banks.

Outside that domain it is only being used as a reserve of value in the same way as a resident of Australia could use Euros, US dollars or collectables. for that same purpose.

Gold is said to have an intrinsic value because it requires a certain quantum of work to be extracted from gold bearing rocks.

"In economics, Gresham's law is a monetary principle stating that "bad money drives out good.""

Gresham's law - WikipediaNot all financial crises lead to a currency crisis. Actually, in the past a lack of confidence in the banking institutions quite often caused an extraordinary increase in the demand for money with very severe consequences.

Almost everyone prefers holding cash.

"A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt (financial instrument) which yields so low a rate of interest."

Liquidity trap - WikipediaIf you fear for your money in the bank, what are you going to do? You rush to get it out in order to put it under your mattress, forcing banks to cut credit, the life blood of the economy and in that way bringing the real economy into a halt.

During the great depression when gold was money people were doing just that, a fact that led to the confiscation of almost all gold in the hands of the American public. as gold, that is, money, and gold, that iis money was being taking out of circulation. During the great recession hips of money were printed without hyperinflation having shown its ugly head again because the preference for liquidity (money) was very high.

Executive Order 6102 - Wikipedia.

I strongly suggest for you to review your ideas about what money is and what it is used for. An investment in an elementary book about money and banking would be appropriate.

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Hi Infose,

Thanks for the reply.

I believe that gold, silver and platinum coins from the mint are legal tender with a face value that could be used to transact.

However, no one does that as the face value of a 1oz gold coin is $100 vs the melt value of $3000+.

At the end of the day, we have to come back to reality and use our common sense.

For example, if you go down to the supermarket, you will see that most people consider the digits on their phones to be money.

That is the 'money' of today.

Furthermore, if you ask them why they are not using gold coins, let alone normal coins and notes, they will look at you funny.

Will they change their mind about those digits during a financial crisis?

Probably not.

Would they change their mind during a prolonged communications black out?

Perhaps.

All that matters is that they don't all suddenly have a change of mind and try to cash out their digits into something tangible.

Got to 'keep the faith'.