Hi Cockerel
I do get where you are coming from. "Paper gold" will be redeemed for more paper, imo."
The questions that are pertinent to me at this point are:
1 Will the “paper system” totally fail? No banks? No loans? No checks or money orders? No PayPal. No way to pay the electric bill, water bill, sewer bill, insurance, or mortgage. In short, the system would have completely broken down. A depression would look like a picnic.
2 What would happen to fiat denominated debt? Would you own the home that had a mortgage or would the lender wn it? Same question for your car, your items bought on a credit card. How would one buy gas? At what price?
3 Could anyone operate in today’s world with just physical. Could you buy a loaf of bread? ..pay your mortgage? ....buy a postage stamp? ...pay at a distance (as with a check)? Of course our system today is based on paper and electrons and trust. Trust that is on shaky grounds to say the very least. Trust that has been placed in the wrong hands. Trust that has lead to temptation.
4 If one believes that eventually the paper system will go the way of the Dodo, what would replace it? Sure one ounce coins may be useful for buying say a farm, but not a nail or brick. Price discovery would be next to impossible for a long time if we suddenly switch to physical gold and silver for exchange. Gold would become so valuable relative to goods and services, that to buy a loaf of bread would require so little gold, that something on the order of a gold dust flake would be required. There would imediately be some form of paper or electronic gold credit needed to be useful for exchange starting the cycle all over.
Believe me I am not arguing with you or even disagreeing with you, just pointing out that we would be better of if gold and silver just found their real exchange rate within the paper world. If the paper world dies, we would not be able to recognize the new world, but I am sure it wouldn’t have satellite TV, internet, mail order, grocery stores, cheap shipping, dog food, shopping malls, cell phones, ... the list goes on and on. All of the service industries and their workers would be at risk. All government employees would be at risk. Farmers would be kings (and at last get some respect)!
I would imagine the real fiat exchange rate for an ounce of gold could be hundreds of thousands of US $s if the entire world made paper forms of gold illegal. No options, no futures, no unallocated accounts, no gold receipts, etc. I would rather not think of a future with only physical, only because I can’t imagine any type of graceful transition. I can’t imagine how much physical you would need to survive a transitional period if the paper system collapsed. I would much rather see the crooks eliminated and let price discovery exist without derivatives and banking parasites.
OK, rant over. Peace. :)
