(no subject)

[which_chick]

Today we're going to talk about Executive Order 6102, a feature of the Roosevelt administration that you might have missed due to falling asleep in high school history classes. Executive Order 6102 made it illegal for Merkins to own gold coins and bullion, a state of affairs that persisted for about forty years.



Here's the executive order. Owning gold was illegal basically because the government said so. (Unfortunately, that's the base reason for things being illegal. Sometimes things are also illegal because they're dangerous or unhealthful or whatever, but mostly stuff is illegal because the government says so. The government is frequently like parents, only more expensive.) The order contained exceptions for coin collecting and so forth as well as a $100.00 exemption for each individual, but basically, if you had gold coins or bullion, you had to turn it over to a bank that was a member of the Federal Reserve System forthwith and they'd give you paper money in exchange for your gold. They paid $20.67 an ounce for the gold and then turned around and set the price of gold at $35.00 an ounce shortly after EO 6102. However, Merkins were not allowed to try to sell their gold to anyone else for what the market would bear. They had to take their gold to the bank window and get paper money at the $20.67 per ounce exchange rate that the government said was OK. Estimates are that the government made about fifteen dollars per ounce of gold on this transaction, so odds are real damn good that they weren't paying a fair market price to their own citizens.

Turn around, bend over the desk and assume an accomodative stance, willya? Uncle Sam wants to get busy.

It remained illegal for Merkin citizens to own large piles of gold (coins or bullion) until the very end of 1974 when Public Law 93-373 removed bans to the trade in gold as a commodity.

Comments

[which-chick.livejournal.com]

I don't know that we have a situation where we are looking at the possible, comprehensive, total collapse of the dollar. If it ever does become a concern for me, I'll be sure to mention it here.

At the moment, I'm more concerned that my (quite pitiful, in the grand scheme of things) pile of money will be eroded away as the government inflates its way to consumer satisfaction for the bulk of Americans. People in debt (most Merkins) LIKE inflation. Inflation, for people in debt, provides them with at least the illusion of progress. They'll get wage increases and they'll be able to pay off their big debt (houses and cars), debt that they incurred using old, expensive dollars, with their new, cheaper (and worth less, if not worthless) dollars. They will probably think they're winning.

Inflation tells a different story for people who are net creditors (me and other bloated plutocrats) as well as for anyone with a moderate-to-large pile of money about the place. For people like that, inflation fritters away their wealth and basically punishes them for being good, hard-working exploiters of the underclass. I mean, hell, what on earth am I saving money for if the government's just going to piss the value of the dollar away? Why the FUCK did I bother?

The only saving grace in an inflationary environment is that interest rates tend to go up. They just don't ever go up fast enough to keep the big-piles-of-money from shrinking. *sigh* Traditionally, one of the things people have done with big piles of money in inflationary environments is to put it in gold OR stuff it into a different, not-so-inflationary currency. (It is my considered opinion that all paper currencies inflate. All of them.)

Gold, at the moment, is interesting because it's going up and can be considered a pretty good indicator of what people-with-money think about the dollar. (I'm not terribly interested in what people-without-money think about the dollar. Generally, it's been my experience that they don't.) I don't adore it as a hedge against inflation, mostly because it's inert. You don't get interest on your gold. All that gold does for you is mark time -- you get out of it pretty much what you put in, but there's no opportunity for your money to grow while it's off being gold. I don't see it as an inherently losing strategy, but it's not a winning one, either. I don't think things are bad enough at the current time to merit the various costs of dumping capital into an inert situation.

If I were concerned about the imminent and total collapse of the dollar, I'd be out stocking up on things that could be considered valuable that were NOT little pieces of green paper backed by the full faith and credit of the United States. Gold is a pretty good thing for that. Most everyone agrees that gold has value and the world has, historically, maintained a pretty lively market in gold. You'd probably be able to find a buyer for your gold no matter where you were. Gold is reasonably portable and compact (not like, say, wheat or cotton). Five hundred dollars in gold fits easily in the palm of my hand. (I own one Canadian Maple Leaf which contains 1 troy oz of gold. It was a gift. Prices today were around $550 an oz.) It's nonperishable. It comes in convenient carryable sizes suitable for fleeing the country. You could do a lot worse, really. Plus, it's pretty.

[fooliv.livejournal.com]

But what I was getting at was that the Seventies was the last big mega-inflationary (or even moderately-inflationary, by third world hellhole standards) burp, and the goldbugs got mangled, eventually. Gold is *traditionally* a useful hedge against inflation, because it's got worth, traditionally. In modern practice, I don't see that it's of intrinsic worth beyond its value in portability terms, and all that means is that if you're dumb enough to store it under your bed, and the Bad Men find out about it, if there's social trouble there's a good chance they might be coming through the door for you. A position in wheat futures might be more difficult to slip into your back pocket, but the temptation to horde wheat futures like Smaug under the mountain is pretty much nil.

I guess I'm saying that gold seems to attract sticky-fingered hobbits, in finances as well as fiction.