Bank safe box storage diversification and other tips

Discussion of the Gold portion of the Permanent Portfolio

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Re: Bank safe box storage diversification and other tips

Post by Mark Leavy » Tue Jul 30, 2013 11:00 pm

LazyInvestor wrote: Any other issues and tips that one should think about and follow when storing in safe boxes?
Wine vault.
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Re: Bank safe box storage diversification and other tips

Post by Libertarian666 » Tue Jul 30, 2013 11:28 pm

Pointedstick wrote: So you think the world is going to lose faith in ALL fiat currencies?
Yes. Remember, this is the first time in history that every country is on the "fiat standard". Unless it is different this time, the biggest bubble in history (worldwide fiat currency) will end with the biggest crash.
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Re: Bank safe box storage diversification and other tips

Post by murphy_p_t » Tue Jul 30, 2013 11:58 pm

In reply to MT's comments, a few thoughts:

-Gold is money (and has been for thousands of years)
-Gold can replace USD for currency reserves
-Currencies have lost reserve status in the past...no reason to think the current one won't as well
-Recency bias seems to have a big impact on your argument
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Re: Bank safe box storage diversification and other tips

Post by Xan » Wed Jul 31, 2013 12:14 am

murphy_p_t wrote: In reply to MT's comments, a few thoughts:

-Gold is money (and has been for thousands of years)
-Gold can replace USD for currency reserves
-Currencies have lost reserve status in the past...no reason to think the current one won't as well
-Recency bias seems to have a big impact on your argument
Sure, and we hold far, far more gold than most other investors.

But none of that has anything to do with the mechanics of how our fiat monetary system actually functions.
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 1:05 am

Libertarian666 wrote:
MediumTex wrote: If you were talking about basically ANY country in the world other than the U.S. I might be able to comprehend your argument, but the U.S. dollar is in so much better condition from a structural perspective than any other currency in the world that I can't fathom why the dollar would be the currency to collapse.
Obviously we live in different worlds, since in the world I live in, the dollar is the currency of the most overextended, bankrupt entity the world has ever seen.

What color is the Sun in your world?
The U.S. has:

- Largest economy in the world

- Largest bond market in the world

- Largest stock market in the world

- Largest manufacturing infrastructure in the world when you exclude plastic crap production

- Largest and most powerful military in the history of the world

- Enormous natural resource deposits

- Incredibly productive economy

- Very productive and dedicated workforce (When was the last time you took a vacation?  How long was it?)

- Admirable levels of political stability compared to most of the world

- Strong protection of property rights

- Mostly corruption free government (Let's be honest about this one.  However screwed up our government is, if you offered 99% of cops a $100 bill not to write you a ticket they wouldn't take it, and if you offered 99% of politicians $100,000 to vote a certain way on a piece of legislation, they wouldn't take it.)

- No danger of military conquest from another nation

Which nations in history with even a few of the characteristics above have experienced currency collapses?

A currency collapse is mostly a result of capital flight or war.  I can't think of any currency collapse scenarios that wouldn't involve one or both of these factors.
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 1:10 am

murphy_p_t wrote: In reply to MT's comments, a few thoughts:

-Recency bias seems to have a big impact on your argument
Which part of my argument?

All I was really saying is that politicians do not typically do things to dilute their own power or restrict their ability to make war whenever they feel like it.  That's what a gold standard does.

As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.
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Re: Bank safe box storage diversification and other tips

Post by Ad Orientem » Wed Jul 31, 2013 1:15 am

When the world abandoned the last real gold standard in the 1930's the global population was estimated at around 2 billion and change. Today it's more than 3x that. The global economy is completely interconnected with currency markets trading 24/7. The number of nations with their own sovereign currencies has increased by a factor. And the volume of money in the world has increased by a factor so large I would have to use scientific notation to type it out. But the global supply of gold has increased by a relatively low percentage. Indeed the entire above ground supply of gold is believed to be somewhere in the neighborhood of 160,000 tonnes. Most experts doubt that there are more than another 50,000 tonnes remaining below ground that could be mined without prohibitive costs. Even if the US Government had every ounce of existing above ground stocks, there is no way we could establish a workable standard on which to base the world's principle reserve currency. It is simply not possible and to even attempt it would throw the world economy into complete chaos.

The unhappy truth is that the gold standard sucked. It was obsolete even during its supposed heyday in the pre-World War I years. There was a chronic shortage of specie and hard cash practically everywhere west of the Mississippi. That's why the hottest political issue in Gilded Age American politics was bi-metalism (free silver). To try and recreate one today would require one of two courses of action. Either a currency reset where basically you would trade in a $100 bill for a $1.00 bill (or coin) which would again throw the world into chaos, or setting the value of the dollar so low vs gold that it would limit real convertibility to millionaires. And a "gold standard" sans convertibility is not a gold standard. It's "trust us, would your government lie to you?" Even setting aside the lack of credibility you still would not have enough specie. And what to do with the paper money used by the rest of the world? How does one value paper next to our supposedly gold backed dollars? What happens when they trade their paper for our dollars and then try to redeem said dollars for specie and cart our gold reserves off to some foreign capital? How do you pay off our fiat based bonds with a gold backed currency?

And to be perfectly honest, I think a rigid gold standard is a really crappy idea.  There is nothing sacred about the gold standard. Nations as far back as the Roman's routinely cheated when they needed more money or simply abandoned the GS altogether. No hard money standard ever lasted more than five minutes after the outbreak of some great crisis where the state found itself in need of more money than it held in specie. Because a gold standard robs governments of monetary flexibility to react to crisis. To be clear, I am NOT a fan of unrestrained money printing.  But there are times when some government intervention in a crisis is needed.  I am not an economic anarchist.  Could the FED have acted to prevent a financial meltdown in 2008-09 the way it did had we been on a gold standard?  I doubt it.  Of course some might argue that there would have been no crisis because the loose money that fueled the bubble would not have been there.  Maybe, and maybe not.  But the gold standard never stopped bubbles as evidenced by the various financial panics and stock market crashes in the 19th century up to the Great Depression.

I like gold where it is.  Gold is far better off acting as an extra-national reserve currency that is not tied to or under the control of any government.  In it's present role gold serves as a far more effective check on central bankers and irresponsible governments then it ever did in the days of the gold standard.  If you are comfortable with your country's paper money then you hold dollars.  If you think the FED is getting a bit too hinky with the printing press than you can trade your dollars for gold as a form of protest and a "vote of no confidence" in the FED's policies (not to mention insurance).  Anyone who thinks central bankers don't keep an eye on the price of gold, I have bridge I will sell you real cheap.

I could go on but I think the broader point has been made. People who dream of going back to the gold standard are living in a fantasy world. It is simply not possible. And I don't mean it would be difficult or inconvenient. Nor am I saying it could be done with some minor dislocations. It is NOT POSSIBLE. You cannot create a viable currency for a country as large as the United States in the modern world based on gold. Period. And of course no one country can unilaterally go on a gold standard. Half or more of the countries in the world have no gold reserves at all!

I have said this on several different threads but it's worth repeating. The world has gotten too big and far too complicated. The only metal that one MIGHT be able to find in sufficient quantity to back a major currency is silver.  Oddly no one seems very interested in silver these days. Which to my mind is probably just as well.

Sorry, the days of the gold standard are over.  And good riddance.
Last edited by Ad Orientem on Wed Jul 31, 2013 1:31 am, edited 1 time in total.
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Re: Bank safe box storage diversification and other tips

Post by Libertarian666 » Wed Jul 31, 2013 8:22 am

Ad Orientem wrote: Even if the US Government had every ounce of existing above ground stocks, there is no way we could establish a workable standard on which to base the world's principle reserve currency. It is simply not possible and to even attempt it would throw the world economy into complete chaos.
This is probably the silliest claim of all.

There is obviously some number where there would be enough gold.

If the dollar were repriced at 1/50,000 of an ounce of gold, would there be enough gold? If not, what if it were 1/100,000 of an ounce?

Math may be hard, but it's not that hard.
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Re: Bank safe box storage diversification and other tips

Post by Pointedstick » Wed Jul 31, 2013 9:37 am

Do I have it right?
Libertarian666 wrote:
Pointedstick wrote: Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?
Yes. A gold-standard one.
MediumTex wrote: As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

If, Libertarian666, I assume you believe MT that politicians don't actually like gold because it constrains them, then the only way I can imagine politicians adopting a gold standard is if they were forced to. So what this sounds like is that the world population is going to get tired of unfettered politics, inflation, and war and demand the governments of the world adhere to a gold standard, constraining their power to make war and devalue currency.

Do I have it right?
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 10:11 am

Pointedstick wrote: Do I have it right?
Libertarian666 wrote:
Pointedstick wrote: Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?
Yes. A gold-standard one.
MediumTex wrote: As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

If, Libertarian666, I assume you believe MT that politicians don't actually like gold because it constrains them, then the only way I can imagine politicians adopting a gold standard is if they were forced to. So what this sounds like is that the world population is going to get tired of unfettered politics, inflation, and war and demand the governments of the world adhere to a gold standard, constraining their power to make war and devalue currency.

Do I have it right?
Over time, the people often come to HATE a gold standard, especially the people who are in debt.

It's hard for me to imagine a popular uprising leading to a return to a gold standard.
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Re: Bank safe box storage diversification and other tips

Post by Libertarian666 » Wed Jul 31, 2013 11:54 am

Pointedstick wrote: Do I have it right?
Libertarian666 wrote:
Pointedstick wrote: Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?
Yes. A gold-standard one.
MediumTex wrote: As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

If, Libertarian666, I assume you believe MT that politicians don't actually like gold because it constrains them, then the only way I can imagine politicians adopting a gold standard is if they were forced to. So what this sounds like is that the world population is going to get tired of unfettered politics, inflation, and war and demand the governments of the world adhere to a gold standard, constraining their power to make war and devalue currency.

Do I have it right?
That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.
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Re: Bank safe box storage diversification and other tips

Post by Pointedstick » Wed Jul 31, 2013 12:22 pm

Libertarian666 wrote: That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.
Do you expect that the rest of the world--or a lot of it--will flock to that new country due to their stronger gold-backed currency and proceed to hand them the de facto crown of reserve currency issuer?
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 1:10 pm

Libertarian666 wrote: That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.
Well, given how rocky the euro experiment has been so far, I'm not concerned at all about a euro-like gold backed currency coming onto the scene.

Why on earth would a sovereign nation give away so much control over its economy to some UN-like monetary authority that would manage this new gold-backed international anti-dollar currency?

I can almost guarantee that one of the very first problems with the new currency would arise when strong exporter nations tied to the new currency began to realize that it was no longer possible to enhance the competitive position of their export industries by tweaking the currency to devalue it a bit in relation to other currencies.  This is what China has been doing for years and it has caused enormous wealth to flow into China.  If you were to take that ability away from nations like China it would seriously damage their ability to maintain competitive export industries, which is one of the reasons that most nations would say they have no interest whatsoever in such a new currency.

In a global economy, no one wants a strong currency.  No one.  See Switzerland's euro peg in 2011 if you don't believe me. 

Whether we like it or not (and I don't like it), we live in a world in which many functions are simply being outsourced to those who do them best.  Thus, the world has outsourced manufacturing to China, it has outsourced energy production to the Middle East and Russia, and it has outsourced the efficient delivery of violence via military action to the U.S.

Despite what they say, no one really wants to disrupt this arrangement because too many people benefit from it.  They like cheap stuff from China, they like cheap oil and gas from other countries, and they like not having to maintain huge military budgets because they can just rely on the U.S. to deal with any problems that may arise which require lots of violence to resolve.

It's fine to say all of this stuff is stupid (and I would agree), but that's the way it is, and the U.S. dollar is an integral part of it all.
Last edited by MediumTex on Wed Jul 31, 2013 1:13 pm, edited 1 time in total.
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Re: Bank safe box storage diversification and other tips

Post by Mdraf » Wed Jul 31, 2013 1:13 pm

Pointedstick wrote:
Libertarian666 wrote: That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.
Do you expect that the rest of the world--or a lot of it--will flock to that new country due to their stronger gold-backed currency and proceed to hand them the de facto crown of reserve currency issuer?
That's exactly what happened to the British Pound when it handed the crown to the USA:

Wikipedia:
"The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed £850 million (£35.1 billion as of 2013),  mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins. This was abandoned on 21 September 1931, during the Great Depression, and sterling suffered an initial devaluation of some 25%."
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Re: Bank safe box storage diversification and other tips

Post by Ad Orientem » Wed Jul 31, 2013 1:17 pm

Mdraf wrote:
Pointedstick wrote:
Libertarian666 wrote: That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.
Do you expect that the rest of the world--or a lot of it--will flock to that new country due to their stronger gold-backed currency and proceed to hand them the de facto crown of reserve currency issuer?
That's exactly what happened to the British Pound when it handed the crown to the USA:

Wikipedia:
"The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed £850 million (£35.1 billion as of 2013),  mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins. This was abandoned on 21 September 1931, during the Great Depression, and sterling suffered an initial devaluation of some 25%."
You are reiterating one the many points from my earlier post. The gold standard is a joke because no one will adhere to it in a crisis. The first casualty of World War I was the old gold standard. The US also abandoned it when we entered the war.
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 1:21 pm

Mdraf wrote:
Pointedstick wrote:
Libertarian666 wrote: That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.
Do you expect that the rest of the world--or a lot of it--will flock to that new country due to their stronger gold-backed currency and proceed to hand them the de facto crown of reserve currency issuer?
That's exactly what happened to the British Pound when it handed the crown to the USA:

Wikipedia:
"The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed £850 million (£35.1 billion as of 2013),  mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins. This was abandoned on 21 September 1931, during the Great Depression, and sterling suffered an initial devaluation of some 25%."
So who do you think that the U.S. will be handing the reigns to?

China?  They would NEVER want a burden like that.  Imagine how hard it would be for them to artificially depress the value of the new world reserve currency?

Maybe Russia?  Nah.

The EU?  Please.  An economic union that isn't aligned with a political union simply isn't a durable arrangement, which has been demonstrated frequently in recent years.

Japan?  The nation with far more debt than the U.S.?  No.

Maybe go back to the British Pound?  Just kidding.

The British handed the reigns to the U.S. because the U.S. was starting to eclipse Britain in virtually every way, but especially when it came to the strength of the U.S. military and the productivity of the U.S. economy.  Well guess what?  Those advantages are still in place 100 years later.  The U.S. still has the most productive economy in the world and it still has the most powerful military in the world.

There will come a day when it is time to decommission the U.S. dollar as world reserve currency, but today is not that day, and tomorrow won't be either.

Why not just enjoy living in such a nice economic and political arrangement?  Why complain so much about what might happen in the distant future (especially when you have no control over it whatsoever)?
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Re: Bank safe box storage diversification and other tips

Post by Pointedstick » Wed Jul 31, 2013 1:25 pm

I agree with Ad Orientem. Shackles so fragile that a government can simply remove them when it becomes inconvenient are no real restraint at all.

I would love to hear a good counter-argument to this. From my perspective, the gold standard seems like something that inherently tends toward being discarded everywhere it's been tried due to its inconvenience to the maintainer.
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Re: Bank safe box storage diversification and other tips

Post by Mdraf » Wed Jul 31, 2013 1:33 pm

I agree that it is easily abandoned.  As I said elsewhere everyone loves credit, the more the merrier and damn the consequences.  As for who will/can replace the US?  No country in sight right now.  That's why the dollar retains its value.
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 1:37 pm

Mdraf wrote: I agree that it is easily abandoned.  As I said elsewhere everyone loves credit, the more the merrier and damn the consequences.  As for who will/can replace the US?  No country in sight right now.  That's why the dollar retains its value.
You think the dollar wouldn't retain its value if there were another country to take over reserve currency status?

If that were the case, how would you explain the fact that the British pound is still a stable and viable world currency 100 years after losing its reserve status?

When Hall of Fame players retire, they don't feed them to the dogs.  Such players usually remain respected figures for the rest of their lives.  I wouldn't expect any reserve currency issuer to be treated differently, even after its playing days are over.
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Re: Bank safe box storage diversification and other tips

Post by Mdraf » Wed Jul 31, 2013 1:52 pm

MediumTex wrote:
Mdraf wrote: I agree that it is easily abandoned.  As I said elsewhere everyone loves credit, the more the merrier and damn the consequences.  As for who will/can replace the US?  No country in sight right now.  That's why the dollar retains its value.
You think the dollar wouldn't retain its value if there were another country to take over reserve currency status?

If that were the case, how would you explain the fact that the British pound is still a stable and viable world currency 100 years after losing its reserve status?

When Hall of Fame players retire, they don't feed them to the dogs.  Such players usually remain respected figures for the rest of their lives.  I wouldn't expect any reserve currency issuer to be treated differently, even after its playing days are over.
It only definitely lost its reserve status post WW2.  It's still a stable currency now but will only buy $1.50 instead of $5.00 then
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 2:21 pm

Mdraf wrote:
MediumTex wrote:
Mdraf wrote: I agree that it is easily abandoned.  As I said elsewhere everyone loves credit, the more the merrier and damn the consequences.  As for who will/can replace the US?  No country in sight right now.  That's why the dollar retains its value.
You think the dollar wouldn't retain its value if there were another country to take over reserve currency status?

If that were the case, how would you explain the fact that the British pound is still a stable and viable world currency 100 years after losing its reserve status?

When Hall of Fame players retire, they don't feed them to the dogs.  Such players usually remain respected figures for the rest of their lives.  I wouldn't expect any reserve currency issuer to be treated differently, even after its playing days are over.
It only definitely lost its reserve status post WW2.  It's still a stable currency now but will only buy $1.50 instead of $5.00 then
Steady and systematic currency devaluation is the goal of all central banks all over the world.

The U.S. is unremarkable when it comes to long term grinding currency devaluation, and such devaluation tells us nothing about the long term viability of the U.S. dollar in relation to other world currencies.

This chronic single digit devaluation is part of the reason that we hold 25% in gold.

Just to make sure I understand the point you are making, do you believe that the U.S. dollar is at a greater risk of seeing a decline in value than almost any other world currency in the world?  If so, I assume that the last five years have been happy times for you as the dollar has strengthened, rather than weakened, in relation to other world currencies.  Perhaps the pleasant surprises will continue.  I wouldn't rule it out.  In response to the worsening condition of the Japanese government's finances over the last 20 years, the value of the yen has remained stable or strengthened.
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Re: Bank safe box storage diversification and other tips

Post by Mdraf » Wed Jul 31, 2013 4:11 pm

MediumTex wrote: Just to make sure I understand the point you are making, do you believe that the U.S. dollar is at a greater risk of seeing a decline in value than almost any other world currency in the world?
Not at all. In fact the exact opposite. Sorry if I didn't make  myself clear.
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Re: Bank safe box storage diversification and other tips

Post by MediumTex » Wed Jul 31, 2013 4:23 pm

Mdraf wrote:
MediumTex wrote: Just to make sure I understand the point you are making, do you believe that the U.S. dollar is at a greater risk of seeing a decline in value than almost any other world currency in the world?
Not at all. In fact the exact opposite. Sorry if I didn't make  myself clear.
Oh okay, so we are back to the U.S. dollar basically being the best looking horse at the glue factory?

That's sort of how I see it.
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Re: Bank safe box storage diversification and other tips

Post by Mdraf » Wed Jul 31, 2013 4:45 pm

MediumTex wrote:
Mdraf wrote:
MediumTex wrote: Just to make sure I understand the point you are making, do you believe that the U.S. dollar is at a greater risk of seeing a decline in value than almost any other world currency in the world?
Not at all. In fact the exact opposite. Sorry if I didn't make  myself clear.
Oh okay, so we are back to the U.S. dollar basically being the best looking horse at the glue factory?

That's sort of how I see it.
Me too  since everybody is in fiat.  But what Libertarian666  was saying is that IF another country backstopped by gold then it would become a strong currency and possibly the world reserve currency. And I agree with him.  However a strong currency is a liability since it impacts negatively on balance of trade so nobody wants one in this age of globalization. The only economy which could -or rather used to - do well without the need to export is/or was the USA
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Re: Bank safe box storage diversification and other tips

Post by Pointedstick » Wed Jul 31, 2013 4:58 pm

Mdraf wrote: Me too  since everybody is in fiat.  But what Libertarian666  was saying is that IF another country backstopped by gold then it would become a strong currency and possibly the world reserve currency. And I agree with him.  However a strong currency is a liability since it impacts negatively on balance of trade so nobody wants one in this age of globalization. The only economy which could -or rather used to - do well without the need to export is/or was the USA
There's another problem: being a reserve currency issuer means that when other people need money, they borrow it from you. If your currency is backed by gold, then that requires mining more gold during a period of heightened demand for your money, or devaluing your currency by making each dollar worth less gold, which kind of defeats the point of having a gold-backed currency that's supposed to be hard to devalue.

The basic thing is that for a variety of reasons, nobody wants a strong currency. Austrian economics buffs do, but very few other people have such a desire. That's just not the world we live in.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
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