Value

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I'm curious to know how much gold would be the equivalent of 1015 (a quadrillion) dollars.

Friday morning, the price of gold took a 1.4% drop rather fast from the high of $1795/oz to $1770/oz.

In trying to answer this question, I got caught up in two different weights of ounce or pound. I really hope that kilogram is unambiguous. There's also the "bid" vs. the "ask" price. So I'm going to round to $57000/kilo.

Therefore: $1015 / ($57000/kilo) = 1.75 * 1010 kilos = 17.5 million metric tonnes. Each tonne is 1.1 (ordinary) tons. Therefore, let's round further to 18 million tons of gold.

It appears that a bit under a quarter-million tons have been discovered on the earth.

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Be Really Careful Investing

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BarbieLee's picture

All that glitters is not gold.

LONDON (Reuters) - A forgery crisis is quietly roiling the world’s gold industry.

https://www.reuters.com/article/us-gold-swiss-fakes-exclusiv...

Even the experts have snake bite. Banks have taken in and been passing out fake gold bars. This came on the market about four or five years back. The other scam is more certificates for gold are sold than what is actually in the vaults. Speculators are finding the paper they purchase for X amount of gold isn't in the bank or securities as claimed.

Oklahoma born and raised cowgirl

That Second Scam

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Daphne Xu's picture

That second scam is probably as old as banking. A bank loans money by creating a credit account that one can write checks on. The check is deposited into another account in the bank. The back reduces the number in the first account, increases the number in the second account, and finally pays itself according to the order on the check. (The money need not exist in the bank, for the bank to pay itself.)

Or perhaps the check is deposited into an account in a different bank. The second bank presents the check, along with a thousand other checks, to the first bank. The first bank presents checks drawn on the second bank to offset the claims, paying the residual amount or demanding the residual amount.

Only a small amount of money need be present. The system failed only once: the Great Depression.

-- Daphne Xu

Money

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Daphne Xu's picture

"Having too much is not nearly as bad a problem as having too little." Indeed!

"I've been poor and I've been rich. I prefer the latter."

"One of us has to die. I'd rather it were you."

-- Daphne Xu

Gold, Money and Value

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Actually this is a subject that I know something about!
Crash, you are right, the total volume of mined gold is small - less than 250,000 metric tonnes.
That includes gold that has been lost - burials, shipwrecks and the like.
But it may be an overstatement, because as Shakespeare said "All that glisters is not gold".
It is in interest people who have glistering metal to call it gold. That includes the gold reserves of the world.
Some include "known gold reserves" as existing gold, by from my experience if it is not mined and refined and assayed it is not gold.
Geological models are fallible, and the promoters of mining stocks drawn favorable conclusions.
As for value, at least gold is a thing with inherent value, not like a piece of paper with a dead man's portrait on it.
To explain that I tell the story of three men A, B and C. C says "I will be a bank, A give me that $1m and I will confirm that I am holding it for you with this deposit certificate". He then says to B "I will loan you $1m" and gives it to him. So B has $1m and A has $1m. That is $2m! Where did the extra $1m come from?
Well?
Maryanne

Where?

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Daphne Xu's picture

The bank created it.

The bank is a lot more likely to get away with it if they take in (say) 100,000 deposits of (say) $10,000 each, and then offers 900 $1 million-dollar loans. I think that the large number of deposits and loans is a critical issue for getting away with it.

-- Daphne Xu

Here

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Actually the answer is that we all created it. The financial system is built on beliefs. We think that the money is real because A believes the bank (C) will pay it if required, and C believes B will pay it back. We have ascribed value to the paper by faith, and all financial systems depend on that. Gold is not paper, but it still only has the value we believe it to have.
Maryanne

Money is Ephemeral

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crash's picture

That's one of the oddest things about this stuff that is so critical to modern human life. Money does not exist. It's an idea. A way of keeping score. Yet without enough of it I cannot pay my internet bill and will not be able to post here. If you want to understand virtual reality think about where your bank deposit lives.

It is the wonder of double entry accounting! And the rule of law. Modern banking creates money as credit out of thin air and the promise to repay. In Maryanne's story about A, B and C above the first million is a deposit the second million is a loan. They both represent the same "real" money. stored on the bank's shelf. If the banker is honest, or scared, he might offer to give the depositor some fraction of the interest he is charging on the loan.

Of course today, the banker, "C" above would "give" both A and B a million dollars in credit since we no longer have even the fiction of "real" money. As long as everyone in the market trusts the "legal tender" then it really is two million dollars.

What is wonderful or horrible about it is who we deem trustworthy to receive credit. Usually we grant credit to the people who need it least.

Your friend
Crash

There is a logic to it...

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If you look, for example, at a pint... In Italy you can find a pint that is bigger in volume than a gallon in UK, or US. Gold... Don't try to find logic there. It is a legal roulette. Russian roulette. You will do better betting on blowing your brain out on the first try ;-)

Sort of On Topic Here

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Daphne Xu's picture

The 7 Deadly Innocent Frauds of Economic Policy
by Warren Mosler

The USD is the creation of the government. So to utilize this popular government/household analogy in a meaningful way, we need to look at a currency created by a household.
 

One example of the right analogy would be parents creating coupons they can then use to pay their children for doing various household chores. And to make it all work, the children would be required to give their parents 10 coupons a week to avoid punishment.
 

These coupons are now the new household currency. Think of the parents as ‘spending’ these coupons to purchase ‘services’ (chores) from their children.
 

The parents, like the government is now the issuer of its own currency. Now you can see what it’s like when a household is the issuer of its own currency.
 

Can you now see that the parents must first spend their coupons by paying their children to do household chores, to be able to collect the payment of 10 coupons a month from their children? How else can the children get the coupons they owe the parents to avoid punishment?
 

Likewise, in the real economy, the funds we need to pay taxes must come from government spending (or government lending, which I’m saving for later).
 

And, neither the government, nor the parents, from inception, can collect more of their own currency than they spend.

That's one reason why I oppose "fiscal responsibility" at the Federal level. (Some form of fiscal responsibility is needed, but not the usual type.) If the government runs a surplus in one year, it's only possible because they ran a deficit earlier. The Feds distribute the money first, then they get the taxes.

Taxes give the printing press output its value.

I understand the basics of MMT. (I refuse to call it "Modern Money Theory".) I think that it has a problem that all economic theories appear to have: not separating advocacy from theory. A goldbug could understand MMT in principle -- in fact one who understands a fiat currency is the only kind who shouldn't be outright dismissed.

-- Daphne Xu

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