Gyroscopic Investing

I don't want to hijack the Gold as a Diversifier thread, but this interesting tidbit stems from that.

I think boglerdude is right when he says (in the 'Diversifier' thread):

As countries develop citizens dont need gold. India, a huge source of gold demand, will move away from gold as it modernizes. Central banks raise rates when the money supply gets too big. When they cant, you have a failed state and gold is more of an emergency tool like guns and food.

Stuper1 said

Have you been to India? I haven't, but I'm guessing people there won't be slowing down on their gold purchases any time real soon. Maybe in 200 years.

Which also makes sense to me, but then I read this article in the print version of a Bloomberg magazine which came through my mail slot, unsolicited. Looks like the citizens of India might not have a choice.

India’s Cash Crackdown Hits Gold Pawners

The gold-loan business has suddenly gotten bumpy. Prime Minister Narendra Modi’s decision last month to invalidate all 500-rupee and 1,000-rupee notes has Indians scrambling to get their hands on valid currency. Because almost three-fourths of payments for gold-loan interest and principal are made in cash, as opposed to, say, bank transfers, the shortage of legal tender is hurting lenders. Modi’s move, known as demonetization, is designed to crack down on tax evasion by forcing people to tender their cash to the bank, where it can be recorded.

...

Gold, says CEO Nandakumar, “is seen as the poor man’s credit card.”

You can read the rest here: https://www.bloomberg.com/news/articles ... ld-pawners

Will be interesting to see if bitcoin helps or hurts gold. eg bitgold

Havent seen this discussed. Tax free gold trading: https://en.wikipedia.org/wiki/United_Pr ... ssociation

this is a really interesting program in India of depositing gold in a bank and taking a loan and/or earn interest on it.

"All about Gold Deposit Scheme

Gold Deposit Scheme is a fixed deposit in gold. SBI (State Bank of India) lets their customer to deposit the gold that is lying idle under this scheme and in return get safety, earn interest and tax benefits.

Purpose of Gold Deposit Scheme

The Gold deposit scheme is offered to mobilise the idle gold in the country and put it in productive use and to provide the customer an opportunity to earn interest on the idle gold holdings."

https://www.bankbazaar.com/saving-schem ... cheme.html

Yep, in India you can truly say that gold is money.

thisisallen wrote:this is a really interesting program in India of depositing gold in a bank and taking a loan and/or earn interest on it.

"All about Gold Deposit Scheme

Gold Deposit Scheme is a fixed deposit in gold. SBI (State Bank of India) lets their customer to deposit the gold that is lying idle under this scheme and in return get safety, earn interest and tax benefits.

Purpose of Gold Deposit Scheme

The Gold deposit scheme is offered to mobilise the idle gold in the country and put it in productive use and to provide the customer an opportunity to earn interest on the idle gold holdings."

https://www.bankbazaar.com/saving-schem ... cheme.html

What I want is a gold annuity. Obviously interest is not going to be feasible if the annuity issuer just holds the gold, which is the only safe approach, but the longevity credits are more valuable than interest at my age.

the longevity credits are really based on interest .

if 30 of us bought a 3% 30 year bond and 1 of us died each year , our heirs would see just 3% as a return .

but if the deal was that for everyone who died , those who live get the interest of those who died than last man standing gets an incredible return from that same 3% bond . that is really how mortality credits work .

mathjak107 wrote:the longevity credits are really based on interest .

if 30 of us bought a 3% 30 year bond and 1 of us died each year , our heirs would see just 3% as a return .

but if the deal was that for everyone who died , those who live get the interest of those who died than last man standing gets an incredible return from that same 3% bond . that is really how mortality credits work .

No, longevity credits are based on... longevity. (The correct name is mortality credits, but it's pretty much the same thing.)

As a very oversimplified example, let's suppose that 1000 people, all aged 65, each provide 1000 ounces of gold each in 2017. We'll assume they are all in the best insurance bracket, so their median longevity is 17 years.

In that case, each one can be paid roughly 58 ounces a year for life, before allowance for the annuity company's profit margin and actuarial reserve, which might take away 1 ounce or so.

No interest is involved.

on the other hand have those who die pay for those who live and each year the gold they forfeit is redistributed .

mathjak107 wrote:on the other hand have those who die pay for those who live and each year the gold they forfeit is redistributed .

Yes, that is how mortality credits work.