Hacker News Reader

My read on it was that the Author is saying that maybe there is more truth to the conspiracy theories that America has looted everyone's gold out of the Fed for its own purposes than you might think.

His reasoning appears to be, "If the world is, as the Fed presents it, then we should be able get our gold back. But we can't." and then notes agencies that the auditing agency that was aggressively pushing even an accounting of the available gold has gone silent implying they have been made complicit somehow in the conspiracy.

Here on the outside we can't really know what is going on of course. And frankly if it got out that 1200 tons of gold was on the move I could imagine that would be a tasty target even for nation-state level thieves. But I also found it interesting when the Economist and others reported that the Fed was refusing to let auditors verify their gold deposits. That is a question that really needs an answer and we haven't gotten it yet.

Even if the Fed "lost" some of the gold (which would be a hilarious story), does it really matter? There has to be some liability clause in whatever agreement put the gold in the Fed's hands to begin with- if they lose track of Germany's property (or claim to have, or whatever), they're obligated to pay Germany back for it. Revealing that would be a gigantic embarrassment, sure, but primarily only concerning the American financial system's competence in running vaults. The U.S. budget could handle the payout in dollars, and Germany could take their payment and use it to buy another pile of gold if they like. Contrary to the ideas of the article author, ownership isn't a physical process, so all the speculation as to where some particular collection of element 79 resides should be irrelevant to the economic situation.

1200 tons of gold is worth around 44 Billion, a trivial amount of money as far the US government is worth. So the idea that it would be stolen by the government is ludicrous.

$44 billion current US dollars worth of gold can back 10 to 100 times that amount of "money" (depending on how far you stretch the definition of money) in a fractional reserve banking system. It's no trivial amount.

That's already built into our understanding of what "$44b" is. If not, then all values should be inflated by 10x, which would keep the $44b at the same ratio of the total pie - which is to say nothing.

No, in fact it is not. To help you understand why, if the US were to switch back to a gold-backed currency and somehow do it relatively seamlessly, it would need to find enough gold to back a money supply of about $7 trillion dollars (or $20+ trillion, depending...). All the gold in the world is currently "worth" less than $7 trillion dollars, and the US would be lucky to land 15% of that, or about 25,000 tonnes. In this scenario, that 1,200 tonnes would be worth $336 billion, and probably a lot more because "seamlessly" is a huge assumption.

That's completely irrelevant. The issue at hand is whether the US is able to pony up 1200 tons of gold, not whether they can back their whole currency base with gold at current exchange rate.

It's relevant to the hypothetical state stealing enormous quantities of gold from other states. They wouldn't do it to give all the citizens fancy necklaces and dental implants. The reason would be to shore up their currency. The economics of gold changes under that hypothetical scenario, and it's the current market price of gold that is completely irrelevant.

Replace "gold" in your statement by any other physical asset (silver, shells, rubies, ...) and you realize that this doesn't make much sense. If the world were to switch to a water-based currency and all other uses for gold would disappear 1200 tons of gold would be worthless

You can't just try to buy 1200 tons of gold and expect to get the current "exchange rate" for all of it. You will be paying massively more as you buy out the cheapest offers.

NASDAQ claims a gold market volume of barely 5 tons at this time. Good luck buying 1200 tons at a decent price.

Edit: Whoops. I meant to reply to your parent.

Of course, but it's highly nontrivial for the individual humans who are responsible for it.

Gold sort of works for sovereigns. It's crap for individuals. Any situation where you need to rely on physical gold is a situation where someone else will take it from you by force.

Yes, the value is much smaller since your power to keep it is smaller. But the amount will also be smaller. And I would say there are still quite a few situations where having something of trade value is better than having nothing.

If we're in the kind of crisis where all fiat money is useless, gold will be useless too. The only kind of thing that will have value are things that help you survive. A crate full of gauze pads and bandaids would be better than a whole stack of gold bullion in that situation.

You've never been through a country scale crisis.

In a country scale crisis people would be selling all their valuables for fire sale prices to pay for essentials, including gold. A fiat reserve currency, like the Swiss Franc or the Pound would be easier to use, less likely to be stolen and more valuable then gold shavings.

Gold isn't going to save you from a zombie apocalypse, nor can you eat it. It will however transport your wealth from one side of a currency crisis to the other while retaining value - as opposed to plastic notes with arbitrary numbers of zeros printed on them.

There is quite a continuum between fiat currency collapsing and the sort of zombie apocalypse you describe.

Fiat currency has become worthless many times in many countries without a total breakdown of civilization to the extent that gold no longer has any value (e.g., Argentina, Yugoslavia, Brazil, Weimar Germany, post-revolution France, ...)

I always imagined that if you were stockpiling large amounts of gold in your home it was more of a survivalist thing than a risk management thing.

> there are still quite a few situations where having something of trade value is better than having nothing

I struggle to think of ones where physically-held gold is better than cash. It only happens when your government fails. In that case (e.g. a Communist revolution or civil war) it's easier to kill you and take everything than negotiate. Where it might have had value, e.g. an American holding pounds sterling during the American Revolution, the old money held value. Selling gold to paranoid individuals is so profitable for a reason.

(The only time it may be useful is if you can tell someone about to harm you that you can pay them with something offsite. At that point, however, wired dollars are an easier sell than waiting for a gold shipment that may or may not be accompanied by Marines.)

It's not necessarily negotiating, it's likely fleeing your home country to some other place and having an asset you can easily turn into the local currency wherever you wind up. And at $1,200/oz you can carry/conceal a sizable amount on the "personal money" scale.

Qaddafi paid his mercenaries in gold near the end of his reign.

There is plenty of physical gold in Germany's vaults: https://www.google.de/amp/www.wsj.com/amp/articles/germany-p...

The same principal applies to states, and that's why they shipped the gold to USA to begin with...to save it from the Russians.

Gold is for when that stuff hits the fan: no one will take your paper money or if they do, you'll need 50lbs of trillion billion dollar bills to buy a loaf of bread. By noon the price will double.

If you're net liquid worth is well into millions, why not have a few hundred gold coins laying around? You might lose money (compared to the stock market returns) but so what. Peace of mind. Never know. All eggs in one basket and all.

Eventually, hyperinflation causes money to be measured in a logarithmic scale... And it's fun to imagine the value if a dollar falling below the plank length.

Gold coins so people can steal them from you in this doomsday scenario? Gold is about as useful as monopoly money when facing a gang of people that will just kill you and take whatever they can.

Still, better to have them than not. Of course you're not going to walk around with 3 kilo gold chains around or tell people how much gold you got.

With gold, you will be the gang.

Only if you can persuade the gang they can't get more gold from killing you than working for you.

To build the gang you must recruit where `new-recruit-power < total-gang-power`. Since to start you are the only gang member, you can only recruit one dude who is 0.75 your strength. Now the gang is 1.75 strength, so you can go after another dude who's really strong, say 1.25. Now your gang has a strength of 3. Eventually you will be able to swallow up whole other gangs.

That is not at all how anything works. What is "gang power"? What factors contribute to it? Manpower, wealth, weaponry, or what?

Trust me it works.

What I mean is that it doesn't really matter if the Russians or the Americans have it, at least from a German perspective. Whoever has it has quite some power over Germany. That we might consider US or RU the bad guys is more based on propaganda than on actual facts. Both can be quite bad as well as helpful allys. And both probably have smart enough leadership to use this kind of chip for bargain rather than total exploitation. So it's not like the Russian would have stolen it, it's more like that the cold war might have had a different winner and Germany would be a semi-independent partner as it is now, just to the Russians rather than the Americans.

I have been to the NY Federal Reserve Building and seen much of the gold - from the outside of the open door of the vault. This is the highlight of the public tour of the FRB in lower Manhattan. There are many different cages inside the vault - some containing just a handful of bars, and some with gold stacked near to the roof. But we are not told which cage corresponds to which country - that information is secret.

All the bars look identical, to me anyway - there are no stacks of coins or goblets etc. that I could see. (Not all the cages are visible from the vault entrance).

The Fed states in the tour that sovereign nations can keep their gold in the vault, virtually free of charge. And take it back at any time. This is basically a service to the world that the US has provided since the second world war, when much of Europe wanted - for obvious reasons - to move their gold to a safe haven.

As the Federal Reserve is a very secure place, and great value for money, I think most nations have been fine to use that - much cheaper and easier than building a facility that is equally secure.

So personally I'm not sure about the conspiracy theories saying that the Fed refuses to release the gold; to me that is easy for any nation to test - just ask for it, it could be done publicly except that you signal to any thief the date/time of when to attack :-)

> the Federal Reserve is a very secure place

Until Simon Gruber shows up

Gold is no longer tied to power. Real estate now defines who is to be king. Look to the wealth funds of the middle east. They dont trade oil for gold these days. They buy land, the real international currency. The man with the most diversified land across many countries is king.

Land may be valuable at the moment, but that will likely change in the future when fresh, clean water will be more scarce and climate changes will render parts of Earth uninhabitable.

I'd recommend you reading this interview with M. Burry (guy who foresaw the real-estate crises in '08): http://nymag.com/daily/intelligencer/2015/12/big-short-geniu...

That's still a real estate issue; you're just saying that the three important factors in real estate are "location, location, and location" and that those factors aren't stable over time. Tell that to the Carthaginians.

>> fresh, clean water will be more scarce and climate changes will render parts of Earth uninhabitable.

If one wants to get all conspiracy-minded: Vancouver, Toronto ... not the warmest of cities. Neither are they in red zones for rising sea levels. And, being in Canada, have more fresh water per person than most anywhere on the planet.

In the past, diversified land holdings across many countries haven't been a great strategy, because they're too difficult for the foreign owner to hold on to politically and military. Land is expensive to protect.

>> Land is expensive to protect.

So you use your wealth to ensure that local authorities protect your interests. You setup people in power, vassal kings, to protect land interests above all others. Who is in charge now? Who are their friends? Do they own property scattered all over the globe? Do any of them care about a box of gold?

Again, as the previous poster suggested, in the past it didn't work so well. The local authorities might want to own your land too, and you will clearly not pay more for its protection than it is worth. There's no need to theorize when the history provides so many examples of wealthy people losing their vast land holdings as a result of change in the political climate.

So... McDonalds and the Pope?

I wouldn't agree with what you say completely. I wouldn't say gold is replaced by real estate. That doesn't mean that real estate can't be a source of power, though.

As long as you can protect it when challenged.

Well, for one he has some books to sell ;)

Yeah after reading more from his side, that's also what I'm guessing.

It seems the author is smart enough to know all this, so seriously: What's he attempting to achieve here?

Telling the truth. If there's a doomsday scenario USA might refuse to hand you the gold. He's saying that gold not in your hand is not really gold, because when you might need it everyone else will and they have it.