Gold in them thar Bills...

Now, I realize that there is something romantic about Swiss bankaccounts,
but lets not fool ourselves. Gold in the Zurich Free Transit Warehouse
depends on the good graces of the Swiss government. After WWII, the Swiss 
ended up with a real pile of Nazi gold in their vaults because they had
been remaining neutral during all of these years. The US demanded the
gold because it won the war. Here is an account from Paul Erdman's
_The Swiss Account_, a docudrama about the time period. It is a work
of fiction, but the true parts are as true as any history book. He
gives footnotes.

   Where that gold was concerned, even before the war ended, the Allies
  threatened to maintain an economic boycott on Switzerland unless it was
  turned over to them. The Swiss government agreed and also promised to 
  relinquish all other German assets in Switzerland, such as bank accounts,
  once it was determined how much was involved. 

   So no embargo was imposed. This promise was subsequentally reaffirmed 
  in a formal agreement signed in Washington after which the Swiss simply
  stonewalled. There was no proof, they claimed, that they had received 
  any looted gold from Germany. And as to the Nazi bank deposits, there was
  no way under Swiss law that private property could be seized. They insisted
  that the netire matter be turned over to an international court of 
  arbitration... which would have taken years. 

   In the end, the Allies caved in. On August 28, 1952, in return for a lump
  sum settlement of ninety million dollars, the Allies concented to declare all
  of the claims against Switzerland arising out of World War II as
  satisfied. That amount represented no more than five cents on the dollar. 
  The rest was simply kept by the Swiss, although a small amount was eventually
  given to the Red Cross. 

Now, as it stands, I really don't think that gold in a Swiss vault is 
, without question, better than US paper money. I can pay my US taxes
in US currency, but I can't eat gold. It's just shiny and neat. It's great
if you need to make gold chains and rings, but it's not that great for
anything other than electronics. In my computer, the silicon is worth
more than the gold. 

-Pete
r

Peter Wayner says:
> Now, as it stands, I really don't think that gold in a Swiss vault is 
> , without question, better than US paper money. I can pay my US taxes
> in US currency, but I can't eat gold. It's just shiny and neat. It's great
> if you need to make gold chains and rings, but it's not that great for
> anything other than electronics. In my computer, the silicon is worth
> more than the gold. 

As for "I can't eat gold", you can't eat U.S. Dollars, either. If you
need U.S. Dollars, Marks, Pounds, Yen, or anything else, and you have
gold, you can simply sell some gold. If you need food, you can buy it
with currency purchased with the gold, or can purchase it with the
gold directly.

As for "in my book, silicon is worth more than gold", I'll happily
trade you 100 kilos of silicon for 100 kilos of gold any day you like.
Assuming you aren't fibbing, you should take the trade, since the
silicon is worth more to you.

Of course, you'd be a fool. Silicon is plentiful, and costs pennies
the kilo. Gold is not plentiful -- the market value is around $10,000
the kilo.

Perry

> As for "in my book, silicon is worth more than gold", I'll happily
> trade you 100 kilos of silicon for 100 kilos of gold any day you like.
> Assuming you aren't fibbing, you should take the trade, since the
> silicon is worth more to you.
> 
> Of course, you'd be a fool. Silicon is plentiful, and costs pennies
> the kilo. Gold is not plentiful -- the market value is around $10,000
> the kilo.

Perry, I think its foolish to refute it simply on a literal basis, 
but then again, that's just lil' ole me. 

One could reasonably argue that you simply can't walk into the
corner 7-Eleven with a pound of gold and purchase 475 Big Gulps (tm),
but then again, there's an advocate for each point of view (ie,
Sternlight).

I personally like the gold/silicon comparison, if taken from a 
philosophical viewpoint. 

Information is arguably the gold of the future, and strong crypto
helps broaden the spectrum for each and every one of us.

Cheers,

_____________________________________________________________________________
Paul Ferguson                                                               
Mindbank Consulting Group                                    fergp@sytex.com   
Fairfax, Virginia  USA                                       ferguson@icp.net

Paul Ferguson x2044 says:
> One could reasonably argue that you simply can't walk into the
> corner 7-Eleven with a pound of gold and purchase 475 Big Gulps (tm),
> but then again, there's an advocate for each point of view (ie,
> Sternlight).

I can take the pound of gold to MTB down the block and have dollars,
yen, or anything else I like, within 15 minutes. I can then take those
to buy Big Gulps.

Perry

Perry Metzger writes:

> As for "in my book, silicon is worth more than gold", I'll happily
> trade you 100 kilos of silicon for 100 kilos of gold any day you like.
> Assuming you aren't fibbing, you should take the trade, since the
> silicon is worth more to you.
> 
> Of course, you'd be a fool. Silicon is plentiful, and costs pennies
> the kilo. Gold is not plentiful -- the market value is around $10,000
> the kilo.

I suspect what Peter Wayner was referring to was either pure silicon,
which is indeed expensive (dollars per gram no longer in my memory
bank, alas), or silicon that has been processed into SuperSPARCS,
Pentia, and the like. Not raw-out-of-ground silicon (from beach sand
and even rice hulls...no lie). A tiny sliver of silicon is much more
valuable gram fro gram than gold is. Even a blank wafer of ultrapure
silicon may be...I'd have to do some calculations and get some current
prices. 

Be this as it may, electronic money depends on _reputation_, on the
expectation that a depositor or payee will get what he thinks he will,
whether in gold, in dollars, in francs, in Safeway discount coupons,
or in Get Out of Jail Free cards.

The stability of the final currency, inflation rates, etc., are
orthogonal to the issues of expectation and reputation. That is, when
one opens a bank account in dollars or rupees, one worries about the
bank returning the dollars or rupees, not the "meta" (and important,
but at a different level and time horizon) issues of the ultimate fate
of the rupee.

In any case, free banking means accounts can be denominated in
whatever the market wants...chunks of silicon, gold coins, Xeroxed
Slovenian currency, or whatever.

--Tim May


-- 
..........................................................................
Timothy C. May         | Crypto Anarchy: encryption, digital money,  
tcmay@netcom.com       | anonymous networks, digital pseudonyms, zero
408-688-5409           | knowledge, reputations, information markets, 
W.A.S.T.E.: Aptos, CA  | black markets, collapse of governments.
Higher Power: 2^756839 | Public Key: PGP and MailSafe available.
Note: I put time and money into writing this posting. I hope you enjoy it.

> Be this as it may, electronic money depends on _reputation_, on the
> expectation that a depositor or payee will get what he thinks he will,
> whether in gold, in dollars, in francs, in Safeway discount coupons,
> or in Get Out of Jail Free cards.

	Since the topic of backing seems to go towards gold, what about
the purity of the bullion and who (which government) presses it?  Gold
pressed by the Canadian government at .999 troy oz might not be worth a
whole lot as backing if that government collapses tommorow. 
What's to say it isn't iron pyrite or any similar looking
material if the government isn't there to back it?  Anything to say on this,
Perry?  

-Alex Reynolds

Alexander Reynolds says:
> 	Since the topic of backing seems to go towards gold, what about
> the purity of the bullion and who (which government) presses it?  Gold
> pressed by the Canadian government at .999 troy oz might not be worth a
> whole lot as backing if that government collapses tommorow. 

Pardon, but what does the purity of the gold have to do with who mints it?

> What's to say it isn't iron pyrite or any similar looking
> material if the government isn't there to back it?

Have you ever heard of doing an assay?

Perry

> > 	Since the topic of backing seems to go towards gold, what about
> > the purity of the bullion and who (which government) presses it?  Gold
> > pressed by the Canadian government at .999 troy oz might not be worth a
> > whole lot as backing if that government collapses tommorow. 
> 
> Pardon, but what does the purity of the gold have to do with who mints it?

My parents used to live in Canada and purchased some gold there; I was
using Canada merely as an example.  But the question of how the reputation
of a country might effect the reputation of its gold reserves stands.

> > What's to say it isn't iron pyrite or any similar looking
> > material if the government isn't there to back it?
> 
> Have you ever heard of doing an assay?

Yes, but that would be at the expense of the owner, and if it looks like
gold, feels heavy in the hand like gold, and if it has the word Canada and
the number .999 stamped on it, then people (bankers) might take it at face
value (or might not, depending on the stability of that country).

Alexander Reynolds <chrome@jhunix.hcf.jhu.edu> writes
>
> 	Since the topic of backing seems to go towards gold, what about
> the purity of the bullion and who (which government) presses it?  Gold
> pressed by the Canadian government at .999 troy oz might not be worth a
> whole lot as backing if that government collapses tommorow. 

Gold is gold.  As a jewelers son I can assure you that it is quite easy
with a touchstone and a few chemicals to assay the gold.  This is what
makes gold such an easily convertable currency, you can easily determine
the purity and weight of the bullion.  I have seen coins pressed by the
17th century spanish empire (from the Atocha, mostly silver, but a few of
the gold ones as well) that one could still negotiate today.  The value of
the coin or bullion is not that it has the backing of a particular
government, it comes from the material used.  

This very fact is what distinguishes gold and other scare materials from
paper currency.  If the U.S. government collapses your dollars are going to
be just paper, but your gold coins will always be gold and can always be
used for negotiation.  This is why gold increases in value as governments
and economies become unstable (e.g. the recent problems in Russia caused a
slight increase in the price of gold as more people bought it, just in
case...) because it will always have a value regardless of which government
happened to package it.  In fact, it need not even be packaged/minted by a
government; I could just as easily melt down some jewelry and package it as
bullion myself and anyone else who I wish to negotiate my gold with could
easily verify the weight and purity of the gold themselves.

jim

Peter Wayner <pcw@access.digex.net> writes:
[...]
> Now, as it stands, I really don't think that gold in a Swiss vault is 
> , without question, better than US paper money.

Money will always be just paper, but gold will always be gold...

jim