Bratnia

Are 2020's Britannia's OK?

If only there were a secure, trustless, decrentralised ledger where all holdings could be verified and audited 😁

I thought it was stupid at the time, even with gold in the doldrums.

As ever things aren't just simple. The Fed increase/decrease special drawing rights (SDR's) which is a form of weighted basket of multiple currencies, which is somewhat like buying/selling gold. 2020 to 2021 and the Fed more than tripled the value of their SDR holdings. Iceland 2009 for instance and in terms of Krona (domestic currency) the price of gold soared during the financial crisis. As did the Euro. In terms of Euro's the price of gold remained relatively flat. Gold or Euro's would have served a Icelander as equally as well as a hedge against the collapse of their domestic currency.

Countries used to use gold for international trade settlements, British empire Pounds (Sovereign gold coins) and 400 oz average bars. London was the hub and physically moved bars between different country cages in reflection of that. Since the US dollar was transitioned to paper dollars were instead moved, electronically. The US strives to keep the dollar aligned to gold as that better stabalises international trade. It's not good if one day something earns/costs $10, and the next it earns/cost $5, or $15. But that's not a direct peg, rather a channel range, that the US manages by buying or selling gold to realign it to the dollar. The US treasury hold 8000 tonnes of gold, and lends that to the Fed at a $42.222/oz rate, so at $2111 market price of gold the Fed has a 50x leverage factor, which in turn it might use to buy or sell leveraged gold such as Options/Futures (there's 123 times more paper gold than physical gold). So the Fed in effect at a $2111/oz price have over a 6000x leverage rate on each ounce of gold and have access to up to 8000 tonnes of gold for that. And if the dollar weakens/price of gold increases, so does that leverage factor (fail safe).

A state creates its currency by printing it. In effect a 0% coupon undated bond (note). It's passed around, repeatedly taxed so it ends up back at the treasury and re-spent again. Fiat money is debt (credit). JP Morgan said that gold is money, everything else is credit. With gold as money the coin is worth its weight (isn't a debt (credit)). So all fiat currencies are debt. Where central banks tend to hold other countries currencies (debt) for diversity (if their own currency weakens they can settle international trade settlements in other currencies). When the US prints/spends, attempts to export inflation onto others, so others will print and buy more US debt (treasury's) to negate that otherwise loss. Lockstep of sorts, where (US) debt is typically increased at around a 6% yearly rate, so recent apparent huge debts are ... normal. Its a exponential function. Debt to GDP and deficit (importing more than exporting) are the more critical measures. Japan gets away with debt to GDP of 300%+ as much of what its treasury issues its central bank prints Yen and buys. More a case of a internal debt, as though a family had one member in £10,000 debt to another, just a internal money redistribution matter.
Or for a better explanation as Gruff posted the other day, from the man that works for Biden
https://content.invisioncic.com/l328053/monthly_2024_05/twittervid.com_LawrenceLepard_33b0b2.mp4.7263460e4d0d5b01816835577b8d0c26.mp4

Or ever landed on the moon

Doesn't matter what the scale factor, all washes, is just a number. 1850 / 4.24 = 436 factor if you prefer, current price of gold / former on-gold-standard price of gold. Or multiply by 1000, or 123 or whatever. I very much suspect that if the plan was to scale by 123 that first gold holding/trading would be suspended/prohibited or compulsory purchased as per US 1933. But those lessons have been learnt, so unlikely to be repeated IMO. As-is works (in the sense of being better than the alternatives). Were a better method identified it would be inclined to be adopted. Each method has both upside benefit and downside risks/costs. Anticipating a ending of the as-is - is a expectation of bad things such as a scorched earth.
Personally I like the former British based gold standard, broadly no inflation, borrowers had to pay a real rate of return in order to borrow (those that saved were pretty much guaranteed a decent real return on their savings) etc. The US/fiat system reduced the cost for states to borrow to near zero, deposit cash in a savings account and after tax and inflation you'll be lucky if that even offsets inflation (currency debasement), not good for those that have saved who instead have to take risks in order to potentially achieve a real rate of return.

To help kickstart the new Euro. In fairness the money to buy Euros had to come from somewhere and he likely opined that as gold had gone nowhere for a couple of decades, declined in both nominal and real terms, expected that to perhaps continue. Rules being rules perhaps dictated the daft manner in which that gold was sold. Central Banks aren't free to just dump gold into the markets - there are rules that have to be adhered to. Once the 2000's gold rise occurred only then did the apparent good choice flip to having been a poor choice. Easy with hindsight to highlight what alternative could have been used instead to far greater benefit/effect, pretty much impossible at the time to have such foresight.

The Fed are only lent the gold, from the Treasury who own it. Non redeemable gold notes at $42.222/ounce for economic management purposes. The Fed are also the custodians, and I'd expect that the Treasury would have practices in place to reassure any of its concerns in that respect.

A state creates its currency by printing it. In effect a 0% coupon undated bond (note). It's passed around, repeatedly taxed so it ends up back at the treasury and re-spent again. Fiat money is debt (credit). JP Morgan said that gold is money, everything else is credit. With gold as money the coin is worth its weight (isn't a debt (credit)). So all fiat currencies are debt. Where central banks tend to hold other countries currencies (debt) for diversity (if their own currency weakens they can settle international trade settlements in other currencies). When the US prints/spends, attempts to export inflation onto others, so others will print and buy more US debt (treasury's) to negate that otherwise loss. Lockstep of sorts, where (US) debt is typically increased at around a 6% yearly rate, so recent apparent huge debts are ... normal. Its a exponential function. Debt to GDP and deficit (importing more than exporting) are the more critical measures. Japan gets away with debt to GDP of 300%+ as much of what its treasury issues its central bank prints Yen and buys. More a case of a internal debt, as though a family had one member in £10,000 debt to another, just a internal money redistribution matter.
Or for a better explanation as Gruff posted the other day, from the man that works for Biden
https://content.invisioncic.com/l328053/monthly_2024_05/twittervid.com_LawrenceLepard_33b0b2.mp4.7263460e4d0d5b01816835577b8d0c26.mp4

Recent US debt of near $35 trillion will at a typical average real rate of 6%/year increase, in ten years time will be 1.06^10 = 1.79 times larger in real terms, stand at more than $62 trillion. As in another ten years on from that it might stand at $112 trillion. Equally however it possibly stood at a 1 / 1.79 = 0.56 smaller level ten years earlier. Either way and tax revenues/spending etc. will be multiples times larger (smaller in backward looking direction).
In 1960 US debt was $286 billion, so has grown 122 fold in 63 years, at a 7.9% annualised nominal rate. Inflation over the same period around 2.7% annualised.
The US system puts a cap on debt expansion, so the government have to periodically go to congress to ask for the debt ceiling to be increased - as a backstop to prevent any one government over-doing it.
That wont fail (excepting some exceptional circumstances) even though it seems like debt is at highs and only growing at rates that some mistakenly belief will result in failure.

US debt clock https://www.usdebtclock.org/
and you can see how the debt is increasing (top left) and how much is coming back in the way of taxes (top middle/right) and other data such as where its being spent by the treasury/government. It's all a balance, you could divide each figure by 100 (or multiple each figure by 100) and ... its still overall the same balance. What matters is if spending is too large/fast, or not fast enough ...etc. Gold in contrast is a non fiat commodity currency, worth its weight. A one ounce gold coin might have bought a Roman soldier a nice suit just as it might buy a modern day man a nice suit.

Or ever landed on the moon

Swapping gold for Euro's along with decades of the UK paying to uplift the EU (net contributor) and then be expected to pay again to leave, is more a reflection of general UK Parliament incompetence, is more often a liability rather than a asset. As was opening up the voting system for those MP's to one and all, when the majority poorer get to decide where money should be spent that's just a leveling down exercise. Nice for a brief period when everyone gets a few quid more, mid to longer term - a disaster.

Or ever landed on the moon

If he does that's the same as raining 1000's of nukes down onto his own (70%+ of Russian's live within continental Europe) that NATO/US have upgraded and increased since Ukraine. In a sense we should be grateful that its Putin, there are others within Russia who are screaming to press the big red button. And once you're past 200 odd nukes it becomes a global factor (nuclear winter starvation, global radiation levels etc.). Good for gold? Maybe. Perhaps not (food/water/ammo/medical more preferred).

Doesn't matter what the scale factor, all washes, is just a number. 1850 / 4.24 = 436 factor if you prefer, current price of gold / former on-gold-standard price of gold. Or multiply by 1000, or 123 or whatever. I very much suspect that if the plan was to scale by 123 that first gold holding/trading would be suspended/prohibited or compulsory purchased as per US 1933. But those lessons have been learnt, so unlikely to be repeated IMO. As-is works (in the sense of being better than the alternatives). Were a better method identified it would be inclined to be adopted. Each method has both upside benefit and downside risks/costs. Anticipating a ending of the as-is - is a expectation of bad things such as a scorched earth.
Personally I like the former British based gold standard, broadly no inflation, borrowers had to pay a real rate of return in order to borrow (those that saved were pretty much guaranteed a decent real return on their savings) etc. The US/fiat system reduced the cost for states to borrow to near zero, deposit cash in a savings account and after tax and inflation you'll be lucky if that even offsets inflation (currency debasement), not good for those that have saved who instead have to take risks in order to potentially achieve a real rate of return.

When generally there's 123 times more paper-gold than physical gold if everyone suddenly wanted 'their gold' back, then a large number are going to be disappointed. The financial system collapses/wars etc. The holder of the gold has a large factor in saying who might get their gold, who might be disappointed. So rather than drive towards that WW3 event the US retains the 8000 tonnes of gold in-hand itself. As does the UK the second largest - holding 5000 tonnes. Who actually owns that/how it might be shared out against claims in the event of all gold being being demanded to be repatriated is a nuclear WW3 pathway that other central banks accept is best avoided. The exception might be if the debt clock https://www.usdebtclock.org/ were agreed to be stopped and all figures within that scaled down (divided) by a 123 (i.e. paper-gold ratio) factor, your £1,230,000 house becomes worth £10,000, your £123,000/year wage is reduced to £1000. The £12,300/year tax you were paying is reduced to £100/year etc. Or somewhat along those lines, a return to a gold standard, where international trades are again settled via the transfer of gold, and where each claimant to their gold gets 1/123 (0.8%) of 'their gold' returned to them. Even if that was peacefully agreed wars will soon break out as some nations spend all of their gold (run with a international trade deficit for a number of years and are left with no other option other than invading another for their gold).
So in one context yes they don't have (all of) it (but that is debatable/subjective as they could say they do, just serve themselves first, everyone else/most lost theirs), or in the situation of a nuclear scorched earth. In more usual calm /civilised times it might be considered more proper to say they 'hold' that gold rather than stating a 'own' claim. So yes Fort Knox/others combined more likely do hold 8000 tonnes in total, as does the Band of England hold 5000 tonnes (or thereabouts).

Brown was a terrible chancellor and worse PM….
”End of boom and bust” totally oblivious to the vast problems his borrowing was building up
”I saved the world” after applying a sticking plaster to a financial system under severe strain caused by his policies
Hammering those who saved for a pension
And as chancellor, his avarice for power as PM which ended in a very messy premiership
The list goes on and on.

All to help the newly (then) started Euro - that we got no thanks for. And the sale auctions totally incompetently managed, pre-informing the markets of the amounts/times. Perhaps that's Scots/Labour for you, alongside other greats such as Sturgeon (do more harm than good). Oh look, they've just reappointed yet another failure (Sweeney).

The BRICS issue with the US is primarily how its weaponised the dollar. All (dollar based international) transactions clearance passing across, up, back down and out of the US financial system - and where it opted to block (sanction) some. The likely resolution will be for a alternative clearing 'house' that isn't politically influenced - that's also linked into the US system, so even if the US block one directly they'll still be able to transact through the other. The US of course will try and put up barriers to that however, will prefer to retain is 'weapon'. The UK could have been presented as a great such alternative, but our PM (BJ) opted to instead insult Russia and jump into the Ukraine war with little thought other than how he might act like a second Churchill. Outside of the EU, and had we opted to follow more former Swiss style neutrality and central safe-haven could have had the UK in a very good position.

The BRICS issue with the US is primarily how its weaponised the dollar. All (dollar based international) transactions clearance passing across, up, back down and out of the US financial system - and where it opted to block (sanction) some. The likely resolution will be for a alternative clearing 'house' that isn't politically influenced - that's also linked into the US system, so even if the US block one directly they'll still be able to transact through the other. The US of course will try and put up barriers to that however, will prefer to retain is 'weapon'. The UK could have been presented as a great such alternative, but our PM (BJ) opted to instead insult Russia and jump into the Ukraine war with little thought other than how he might act like a second Churchill. Outside of the EU, and had we opted to follow more former Swiss style neutrality and central safe-haven could have had the UK in a very good position.

Recent US debt of near $35 trillion will at a typical average real rate of 6%/year increase, in ten years time will be 1.06^10 = 1.79 times larger in real terms, stand at more than $62 trillion. As in another ten years on from that it might stand at $112 trillion. Equally however it possibly stood at a 1 / 1.79 = 0.56 smaller level ten years earlier. Either way and tax revenues/spending etc. will be multiples times larger (smaller in backward looking direction).
In 1960 US debt was $286 billion, so has grown 122 fold in 63 years, at a 7.9% annualised nominal rate. Inflation over the same period around 2.7% annualised.
The US system puts a cap on debt expansion, so the government have to periodically go to congress to ask for the debt ceiling to be increased - as a backstop to prevent any one government over-doing it.
That wont fail (excepting some exceptional circumstances) even though it seems like debt is at highs and only growing at rates that some mistakenly belief will result in failure.