Cash, are its days numbered?

Grumblegrunt

LE
Book Reviewer
You don't know if there is gold in Fort Knox or not.
The world has been on the U.S. dollar standard since 1971, so why would the USA need to sell its gold?

It could be a disaster for the USA if it had no gold, as governments rely on gold as a last resort to pay their security forces. In the event of a currency collapse, without gold a coup can result.

He who holds the gold, makes the rules.
the theories have been about for a while - the fuss over germany not being allowed to audit its own gold and the period it took for chavez to get venezuelas gold back cause some fuss as it has been selling and lending it out but not buying any.

I haven't done a big search but this sort of thing - if you are interested


america switched to paper gold a long time ago and that is what is traded. one reason why if they need to go on a new gold standard to balance the debt it would be around 50k per ounce but only for physical gold. and it would be reliant on the world accepting that it still has 8,500 tons.

post WW2 it had a lot more because we had to pay for everything in gold as did russia, canada, australia etc...

I seem to remember it got to 14,000 tons or so.
 

Grumblegrunt

LE
Book Reviewer
I'm not sure what you mean about bonds.
Are you talking about the Fed buying US Treasuries? FOMO?

Obviously now they're buying corporate bonds too and probably equities soon.
T Bills.

every time china lets a few hundred billion onto the market the US buys it back super quick then sells it on super slow.

china was the biggest single holder of US debt but has been downsizing it, it still buys it but sells a little bit more each time. it had 3 or 4 trillion at one point IIRC

I seem to remember it isn't technically the fed but a hidden account. I'll try to find out the information again it stuck in my mind because of the way they screwed their own people over during the gold confiscation.


so they bought it at 20 bucks an ounce then set the gold standard at 35 dollars an ounce

I think this is it

 

Glue_Sniffer

Old-Salt
the theories have been about for a while - the fuss over germany not being allowed to audit its own gold and the period it took for chavez to get venezuelas gold back cause some fuss as it has been selling and lending it out but not buying any.

I haven't done a big search but this sort of thing - if you are interested


america switched to paper gold a long time ago and that is what is traded. one reason why if they need to go on a new gold standard to balance the debt it would be around 50k per ounce but only for physical gold. and it would be reliant on the world accepting that it still has 8,500 tons.

post WW2 it had a lot more because we had to pay for everything in gold as did russia, canada, australia etc...

I seem to remember it got to 14,000 tons or so.
I agree with what you say.
But some of the reluctance of the U.S. government to release the gold, may be about control and influence over foreign governments, rather than a lack of physical gold existing.

The U.S. has certainly acted in a way that indicates they wish to protect the global dollar standard. For example, deposing Ghadafi and Saddam, stopping Facebook's Libra plans etc.

Certainly when the Covid crisis hit, there was an immediate flight to the dollar. I was glad to have some USD T Bills. But that's always the way, as gold is liquidated first.

What's your opinion on Brent Johnson's Dollar Milkshake Theory?
 

Glue_Sniffer

Old-Salt
Regarding the original topic, has anyone mentioned negative interest rates?
Obvious reason to outlaw (or discourage) cash.
 
except there is NO gold in fort knox and there hasn't been for 50 years.

the US reserve hasn't been audited since the 70's so it is purely trust by the world that they have something backing it up. its why they went from a gold to an oil standard..

interestingly something that came up during a search spurge a few years ago while reading up on Jekyll island - when they confiscated all the gold and silver from the locals in the 1920s they set the price they bought it for. they then set the dollar on a gold standard that made them a huge profit on the deal. this money was put to one side and is apparently used to buy back dumps of bonds to protect the dollar. I seem to remember it was worth something around three trillion dollars.
The US didn’t go from a gold standard to an oil standard. There’s no such thing as an oil standard

The Dollar was the last currency to be pegged to gold, but between 1971-76 they abandoned convertibility. In 1976, the federal government changed the definition of the Dollar, removing all mention of gold.

Since then, the Dollar has been a fiat currency, backed by government security rather than a commodity.
 

Grumblegrunt

LE
Book Reviewer
the effects of the gold dinar project is fascinating - axis of evil anyone?

this milkshake theory

Is the dollar losing demand? Brent believes there are many reasons that the demand of the dollar using debt service alone, there is 40 Trillion of dollar debt. The US dollar is still the biggest funding currency in the world and no country can walk away from the dollar until they pay it off. The supply of the dollar can be expanded except with new trade policies the US is making it harder to get US dollars and to get dollars Here are the ways that the US is in control of the dollar payment systems: Treasury Federal Reserve Chips & Swifts Systems The Dedollarisation trend is real however and countries are fed up with the US Dollar. Some of the top pretenders are the Euro, The Yuan, and Bitcoin. But there is no distribution system for any other currency in the world other than the dollar. Dollar Milkshake at 12:08 The dollar milkshake theory is one where the dollar appreciates in value relative to other currencies because the US is sucking up all the stimulus from other countries that are heavily using quantitative easing. Over $200 billion dollars of debt must be paid by emerging markets over the next 24 months and since most emerging markets currency is struggling this will only make the dollar even stronger. Instead of paying off a depreciating dollar these economies have to pay off an appreciating dollar and their aren't enough dollars to go around. There is no place else for capital to go. There is no place for the money to go - international bonds have too much negatively yielding interest. International stocks are also risky. Gold is the only place for all the money to go to. And the leverage ratio in gold is actually much less than the leverage ratio of dollars. As money flows into the US from around the rest of the world, a short squeeze will happen and the liquidity will decrease but the US dollar will reign supreme. The dollar will go to the all time high, euro yields will double, and gold will go lower in the short term. US stocks will have a massive blow-off top and hit amazing all-time highs. But the world financial industry cannot survive on a dollar that is too strong. In the long term, gold will win out over the dollar.

 

Glue_Sniffer

Old-Salt
The US didn’t go from a gold standard to an oil standard. The Dollar was the last currency to be pegged to gold, but between 1971-76 they abandoned convertibility. In 1976, the federal government changed the definition of the Dollar, removing all mention of gold. Since then, the Dollar has been a fiat currency.
Yes, but the fact that oil is sold in USD, has led to the term petrodollar, implying that the requirement for oil acts to support the USD.
 

Grumblegrunt

LE
Book Reviewer
The US didn’t go from a gold standard to an oil standard. The Dollar was the last currency to be pegged to gold, but between 1971-76 they abandoned convertibility. In 1976, the federal government changed the definition of the Dollar, removing all mention of gold. Since then, the Dollar has been a fiat currency.
all currencies are fiat

the strength of it was due to the petrodollar which is why they destroyed everyone in the gold dinar project or declared them evil - china, NK, Russia, Libya, Syria, along with egypt, nigeria along with many african states and does it's best to stop the saudis moving away from the dollar.

iran sends oil to china and gets credit notes in return which I found interesting. not sure if it is as corrupt as the iraqi oil for food program Maurice Strong was guilty of fiddling.
 

Glue_Sniffer

Old-Salt
The US didn’t go from a gold standard to an oil standard. There’s no such thing as an oil standard

The Dollar was the last currency to be pegged to gold, but between 1971-76 they abandoned convertibility. In 1976, the federal government changed the definition of the Dollar, removing all mention of gold.

Since then, the Dollar has been a fiat currency, backed by government security rather than a commodity.
You're correct that the dollar is not directly backed by crude oil though. That's why they often move in opposite directions. A weakening dollar often raises the oil price.

And it's true that the USA armed forces are the ultimate backers of the USD.
 

Grumblegrunt

LE
Book Reviewer
Yes, but the fact that oil is sold in USD, has led to the term petrodollar, implying that the requirement for oil acts to support the USD.
as I understand it the US told the saudis they would protect them and keep the house of saud in power as long as all oil was sold in dollars to standardise the price..

 

Glue_Sniffer

Old-Salt
all currencies are fiat

the strength of it was due to the petrodollar which is why they destroyed everyone in the gold dinar project or declared them evil - china, NK, Russia, Libya, Syria, along with egypt, nigeria along with many african states and does it's best to stop the saudis moving away from the dollar.
Hence my statement that the U.S. armed forces are the ultimate backers of the USD.
 

Grumblegrunt

LE
Book Reviewer
Usually when the saudis complain the oil price is too low they threaten to leave the dollar - I wonder if the recent drawdown of US troops and patriot batteries has anything to do with it.

the house of saud is in a permanent notice to move - it's why they own half of london.

not sure if Kensington and Chelsea can cope with 2500 princes though.
 

Glue_Sniffer

Old-Salt
Usually when the saudis complain the oil price is too low they threaten to leave the dollar - I wonder if the recent drawdown of US troops and patriot batteries has anything to do with it.

the house of saud is in a permanent notice to move - it's why they own half of london.

not sure if Kensington and Chelsea can cope with 2500 princes though.
I think the Saudis have been pushing the oil price lower, to try and push the Iranians and the U.S. shale producers out of business.
 
I think the Saudis have been pushing the oil price lower, to try and push the Iranians and the U.S. shale producers out of business.
They were also told if they screw with our oil industry, they would be left to wither on the vine. I think Trump had a good “ heart to heart” with the Crown Prince and told him what would happen to him without American backing. It seems to have worked.
 
all currencies are fiat

the strength of it was due to the petrodollar which is why they destroyed everyone in the gold dinar project or declared them evil - china, NK, Russia, Libya, Syria, along with egypt, nigeria along with many african states and does it's best to stop the saudis moving away from the dollar.

iran sends oil to china and gets credit notes in return which I found interesting. not sure if it is as corrupt as the iraqi oil for food program Maurice Strong was guilty of fiddling.
The US$ was convertible to gold until Nixon decoupled in 1971. After Bretton Woods, the US$ was pegged to gold and all other currencies and most commodities were traded against it.

Oil has been traded globally in US$ since Bretton Woods, before the dollar floated or the Saudis became the major global supplier. As a result, oil contracts are denominated in US$; oil purchasers in countries other than the US first purchase US$ and then use those $ to buy oil.

The term petrodollar simply refers to Dollars paid to oil producing nations for oil exports, particularly those who’s economies are based solely on oil exports. So oil based economies are particularly vulnerable to the price of the US$, so are highly correlated.
Meanwhile the value of the currency of an oil producer with a diverse economy is not driven by the price of oil.

The US$ is neither backed by the price of oil nor directly dependent on it. For a start, the US is obviously a highly diversified economy. It’s currency value is highly dependent on cash flows driven by its reserve status.
 
Can I ask, as i always wanted to go to Berlin, what was the east German Beer like? My son who served in Germany, he drinks it all the time the west stuff that is, me i can give or take it can be a bit harsh?
Pull up a sandbag and I’ll tell you...

The Schultheiss brewery company was split by the wall. In the east it was then called something like ‘5 Year Plan’ beer but the taste (and the bottles) were identical.

Our QM used to send the squadron minibus through Checkpoint Charlie and stock up on the stuff. He then used to take the empties to the wash down point on the tank park, wash off the labels from and take them to the Schultheiss brewery in Spandau.

Because of the exchange rate he was effectively being paid to drink.

And never told the rest of us until his leaving barbecue the jack bästard...
 
Cash will always be needed - you can't buy anything from a shop if the internet goes down or there's a problem with the banks servers, so you use cash instead.

Also if a country such as China wanted to DDOS a banks servers or take out some internet infrastructure, the country would be fooked if cash didn't exist.

You now have lots of space junk in low orbit & problems with the earths magnetic field which is starting to affect satellites and other tech. If the sats get taken out you are then using under sea cables (which can be cut) and then your country is isolated internet/server wise.

They say 'Cash is King' for a very good reason - it's something that exists and is not just virtual - it can't be hacked from you and bank/computer errors can't take it away from you.
Actually ‘cash’ has made up a very small proportion of the money supply for a very long time, as @Banker will confirm.

In fact, depending how long you want to go back, promissory notes were a way of introducing more ‘money’ into the economy as far back as the Napoleonic Wars, due to the lack of specie. That’s why it says ‘I promise to pay the bearer on demand...’ on bank notes.

Banks will lend out far more than they actually hold on their books, as on a normal day to day basis they know that people don’t want access to all their money. That’s why a run on a bank is so problematic.

Look at ‘M0, M1, M2, M3’ on here:


 
Actually ‘cash’ has made up a very small proportion of the money supply for a very long time, as @Banker will confirm.

In fact, depending how long you want to go back, promissory notes were a way of introducing more ‘money’ into the economy as far back as the Napoleonic Wars, due to the lack of specie. That’s why it says ‘I promise to pay the bearer on demand...’ on bank notes.

Banks will lend out far more than they actually hold on their books, as on a normal day to day basis they know that people don’t want access to all their money. That’s why a run on a bank is so problematic.

Look at ‘M0, M1, M2, M3’ on here:


The ability of a bank to loan is dependent on its capitalisation. It’s ability to pay transactional account balances is dependent on its liquidity.
 

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