From: bolden@beta.math.unc.edu (Jeffrey Bolden)
Subject: Re: Views? :
Organization: University of North Carolina
Date: Mon, 28 Dec 1992 06:32:35 GMT

In article <1992Dec28.052850.5919@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
>In article <1992Dec16.204932.5375@samba.oit.unc.edu> bolden@beta.math.unc.edu (Jeffrey Bolden) writes:
>>Joh Haas -  I've deleted the discussion because most everyone knows the
>>major points of contention.  To sumarize:
>>
>>1)  I think we should use oil because it has an intrinsic value.  You
>>think we should use gold because its portable, and we would have rely
>>on commodities (a problem if a crash came).  I continue to contend that if
>>the crash came it really wouldn't matter if you had gold or dollars they
>>both be equally worthless.
>
>refer to my previous post. the above makes 0 sense because the value
>of real, intrinsic items like gold goes up when the value of paper goes
>down, as it does during a crash. the usefulness of gold as a commodity
>of exchange has been sufficiently refuted. if you can't take it with you,
>it's no good. simple as that.
>

	Sure real intrinsic items that are worthless except for trade.

>>2)  You still haven't responded
>>to a strong counterpoint though:  Do you honestly think all the gold in
>>the world is worth more than all of the US currency in circulation?
>
>probably, but i don't see what the point is. it doesn't matter how much
>there is in the world, but rather how much the US gov't owns to do
>market transactions with to maintain the standard.
>

	No it matters a great deal.  If there isn't enough currency in
circulation we have massive deflation.  If there much more currency then
gold, then the currency isn't really backed in gold.  You can't back 5
trillion in dollars with 500 bil in gold.


>>3)  Regarding the likelyhood of a crash, you argued that a default on the
>>deficit was likely to occur, and would lead to the crash.  I disagree with
>>both points.  First, I don't think we'll default, it goes to far against
>>the protestant work ethic .....  stuff our leaders out into.  
>
>read "Bankruptcy 1995". blind faith like the above is what got us into
>this mess. it will eventually reach the point where they will have no
>choice.
>

	Haven't read it, but not one recognized economist thinks the US is
likely to default.  That includes orginations like the Word Bank, and IMF.
 I've seen enough chicken little books already.

>>	Second, even if we did default that would simply ake it very
>>difficult if not impossible for the country to borrow.  Do you really
>>think that this would lead to the end of our culture.  You mentioned riots
>>do to people's savings.  Most people's savings is in their home, not in
>>the bond market.  Their pensions might get killed, but corporate bonds
>>would retain their value. 
>
>get serious!
>corporations are as much in debt as persons and the government. corporate
>bonds are as good as the ability of the corporation to repay, which it can't
>do while losing money, which is what happens in a depression.
>why do you think the pensions would get killed anyway?
>

	If the govt. defaults they probably would issue a general amnesty
on dept (the banks are goners anyway).  Besides why would a default
neccarily lead to a depression.  Many countries have defaulted on their
debt, and had booms in their economy (they just have to trade in goods no
paper with foreign countries).

>as to how bad the social unrest will be *when* the crash occurs, who knows?
>it might not be that bad. but it would be foolish not to consider the
>possibility.
>
>
>>4)  Finally, there is a question of who wants large of gold.  If someone
>>did don't you think that South Africa would have sold them all they wanted?
>
>silly.
>first of all, production is limited because the gold isn't lying around,
>it has to be mined. more importantly though, supply and demand states
>that if they flooded the market, they would get less, so it is not
>in their best interest. also, they would sell more when prices were high
>if they had the choice.
>

	This is simply false.  SA had enormous supplies of surplus gold,
as does the US and the USSR.  Your simply mistaken.  Besides the cost for
SA to mine gold is minimal, it vertually is "just lying around".  The
problem is there isn't enough demand to absorb large quanties of gold.

>--
>charles

-JMB