Bank safe box storage diversification and other tips

[goodasgold]

Libertarian666 brings up a good point. Plenty of government actions make no sense for the simple reason that different departments and agencies are responsible for different things. It's entirely possible for Agency A to be pursuing a policy entirely contravened by Agency B, or Law C, or court decision D, or point of common sense D.

Yep, just look at tobacco. The Agricultural Dept. of the Federal government spends huge amounts of money subsidizing tobacco farmers, while the Dept. of Health spends lots of money to discourage smoking. 

[murphy_p_t]

We will never go back onto a gold standard because politicians and central bankers hate it.

This implies that just because politicians want something to happen...that it will....that politicians are all-powerful.

[MediumTex]

We will never go back onto a gold standard because politicians and central bankers hate it.

This implies that just because politicians want something to happen...that it will....that politicians are all-powerful.

Well, if the politicians don't want something to happen (e.g., going back onto a gold standard), and it would require a majority of those politicians to vote for it in order for it to happen, then I don't see how it would happen.

It's not that they are all-powerful, it's just that they are the ones who control this particular decision and it's not in their nature (either individually or collectively) to give away power, and going back onto a gold standard would unquestionably reduce the power of all members of Congress.

[Libertarian666]

We will never go back onto a gold standard because politicians and central bankers hate it.

This implies that just because politicians want something to happen...that it will....that politicians are all-powerful.

Well, if the politicians don't want something to happen (e.g., going back onto a gold standard), and it would require a majority of those politicians to vote for it in order for it to happen, then I don't see how it would happen.

It's not that they are all-powerful, it's just that they are the ones who control this particular decision and it's not in their nature (either individually or collectively) to give away power, and going back onto a gold standard would unquestionably reduce the power of all members of Congress.

Not if the alternative is having a currency that no one will accept. In that case, it would be in their interest to go back on gold, as that is the only known way to ensure that people will take your money after a catastrophic currency failure.

[MediumTex]

This implies that just because politicians want something to happen...that it will....that politicians are all-powerful.

Well, if the politicians don't want something to happen (e.g., going back onto a gold standard), and it would require a majority of those politicians to vote for it in order for it to happen, then I don't see how it would happen.

It's not that they are all-powerful, it's just that they are the ones who control this particular decision and it's not in their nature (either individually or collectively) to give away power, and going back onto a gold standard would unquestionably reduce the power of all members of Congress.

Not if the alternative is having a currency that no one will accept. In that case, it would be in their interest to go back on gold, as that is the only known way to ensure that people will take your money after a catastrophic currency failure.

In that situation, wouldn't all major world currencies have to do the same, which would get us back to a world monetary system in which all currencies are pegged to gold, which no politician would want.

Do you think that it would only be necessary for the U.S. to do this?  If so, why? 

Why is the DOLLAR going to be the one that collapses?  As we have already discussed, a simultaneous international currency collapse simply isn't possible because every dollar seller MUST be a buyer of some other currency.  If people are selling the dollar, what will they be buying?  Why?

If you were talking about basically ANY country in the world other than the U.S. I might be able to comprehend your argument, but the U.S. dollar is in so much better condition from a structural perspective than any other currency in the world that I can't fathom why the dollar would be the currency to collapse.

What would the mechanics be of such a currency collapse?  If China stopped taking dollars, that would mean that the U.S. would stop buying Chinese exports.  If the Middle East stopped taking dollars, that would mean that the U.S. would stop buying Middle East oil.

In other words, it would be in no one's interest to see a collapse of the U.S. dollar, in part because the rest of the world wouldn't want to see the value of their treasury holdings collapse.

Since the rest of the world knows that the U.S. has the largest gold holdings in the world, hasn't the market already priced in the fact that if the world WERE to go back to a gold standard, the U.S. dollar would still be the dominant currency?

I feel like you are talking about a beautiful woman who looks in the mirror and only sees her imperfections no matter how much others reassure her that she is beautiful.  Even if she says "I don't feel beautiful" others would still view her as beautiful.  That's the U.S. dollar.  That's why, as Harry Browne observed, the U.S. dollar is the #1 currency in the world.

Even if you are just the best looking horse at the glue factory, if someone is forced to select the best looking horse they will select you.  All assets trade in relation to one another.

Remember, too, that no country today wants a strong currency.  That's an important point to keep in mind.

What is ironic is that from a long term perspective, the U.S. probably faces a greater risk of a strengthening dollar, as opposed to a weakening dollar.  See Japan.

[Libertarian666]

If you were talking about basically ANY country in the world other than the U.S. I might be able to comprehend your argument, but the U.S. dollar is in so much better condition from a structural perspective than any other currency in the world that I can't fathom why the dollar would be the currency to collapse.

Obviously we live in different worlds, since in the world I live in, the dollar is the currency of the most overextended, bankrupt entity the world has ever seen.

What color is the Sun in your world?

[Pointedstick]

If you were talking about basically ANY country in the world other than the U.S. I might be able to comprehend your argument, but the U.S. dollar is in so much better condition from a structural perspective than any other currency in the world that I can't fathom why the dollar would be the currency to collapse.

Obviously we live in different worlds, since in the world I live in, the dollar is the currency of the most overextended, bankrupt entity the world has ever seen.

What color is the Sun in your world?

Would it be fair to say that mental model you're working from is that the dollar is worthless trash that everyone in the world is on the verge of ditching as soon as they realize that it's a bunch of unbacked confetti conjured out of thin air by the most violent, least trustworthy band of organized criminals in human history?

[Libertarian666]

If you were talking about basically ANY country in the world other than the U.S. I might be able to comprehend your argument, but the U.S. dollar is in so much better condition from a structural perspective than any other currency in the world that I can't fathom why the dollar would be the currency to collapse.

Obviously we live in different worlds, since in the world I live in, the dollar is the currency of the most overextended, bankrupt entity the world has ever seen.

What color is the Sun in your world?

Would it be fair to say that mental model you're working from is that the dollar is worthless trash that everyone in the world is on the verge of ditching as soon as they realize that it's a bunch of unbacked confetti conjured out of thin air by the most violent, least trustworthy band of organized criminals in human history?

Everyone in the world? No. I don't expect everyone in the world to do anything at the same time.

What I expect is that the marginal demand for the dollar will take a nosedive at some point after an event that is unknowable in advance but will be heralded as "the reason" for its demise, just as the 1929 crash is considered by the unknowledgeable as "the reason" for the 1930's depression.

[Pointedstick]

Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?

[Libertarian666]

Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?

Yes. A gold-standard one.

[Pointedstick]

So you think the world is going to lose faith in ALL fiat currencies?

[Bean]

So you think the world is going to lose faith in ALL fiat currencies?

I have lost faith in fiat currency, but that has zero influence on the fact I have to pay bills and taxes in US Federal Reserve Notes.  I believe this is the primary reason fiat currency hasn't had a clear decline, it's fall with be in lock step with what ever failing government utilizes it.

[Mark Leavy]

Any other issues and tips that one should think about and follow when storing in safe boxes?

Wine vault.

[Libertarian666]

So you think the world is going to lose faith in ALL fiat currencies?

Yes. Remember, this is the first time in history that every country is on the "fiat standard". Unless it is different this time, the biggest bubble in history (worldwide fiat currency) will end with the biggest crash.

[murphy_p_t]

In reply to MT's comments, a few thoughts:

-Gold is money (and has been for thousands of years)
-Gold can replace USD for currency reserves
-Currencies have lost reserve status in the past...no reason to think the current one won't as well
-Recency bias seems to have a big impact on your argument

[Xan]

In reply to MT's comments, a few thoughts:

-Gold is money (and has been for thousands of years)
-Gold can replace USD for currency reserves
-Currencies have lost reserve status in the past...no reason to think the current one won't as well
-Recency bias seems to have a big impact on your argument

Sure, and we hold far, far more gold than most other investors.

But none of that has anything to do with the mechanics of how our fiat monetary system actually functions.

[MediumTex]

If you were talking about basically ANY country in the world other than the U.S. I might be able to comprehend your argument, but the U.S. dollar is in so much better condition from a structural perspective than any other currency in the world that I can't fathom why the dollar would be the currency to collapse.

Obviously we live in different worlds, since in the world I live in, the dollar is the currency of the most overextended, bankrupt entity the world has ever seen.

What color is the Sun in your world?

The U.S. has:

- Largest economy in the world

- Largest bond market in the world

- Largest stock market in the world

- Largest manufacturing infrastructure in the world when you exclude plastic crap production

- Largest and most powerful military in the history of the world

- Enormous natural resource deposits

- Incredibly productive economy

- Very productive and dedicated workforce (When was the last time you took a vacation?  How long was it?)

- Admirable levels of political stability compared to most of the world

- Strong protection of property rights

- Mostly corruption free government (Let's be honest about this one.  However screwed up our government is, if you offered 99% of cops a $100 bill not to write you a ticket they wouldn't take it, and if you offered 99% of politicians $100,000 to vote a certain way on a piece of legislation, they wouldn't take it.)

- No danger of military conquest from another nation

Which nations in history with even a few of the characteristics above have experienced currency collapses?

A currency collapse is mostly a result of capital flight or war.  I can't think of any currency collapse scenarios that wouldn't involve one or both of these factors.

[MediumTex]

In reply to MT's comments, a few thoughts:

-Recency bias seems to have a big impact on your argument

Which part of my argument?

All I was really saying is that politicians do not typically do things to dilute their own power or restrict their ability to make war whenever they feel like it.  That's what a gold standard does.

As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

[Ad Orientem]

When the world abandoned the last real gold standard in the 1930's the global population was estimated at around 2 billion and change. Today it's more than 3x that. The global economy is completely interconnected with currency markets trading 24/7. The number of nations with their own sovereign currencies has increased by a factor. And the volume of money in the world has increased by a factor so large I would have to use scientific notation to type it out. But the global supply of gold has increased by a relatively low percentage. Indeed the entire above ground supply of gold is believed to be somewhere in the neighborhood of 160,000 tonnes. Most experts doubt that there are more than another 50,000 tonnes remaining below ground that could be mined without prohibitive costs. Even if the US Government had every ounce of existing above ground stocks, there is no way we could establish a workable standard on which to base the world's principle reserve currency. It is simply not possible and to even attempt it would throw the world economy into complete chaos.

The unhappy truth is that the gold standard sucked. It was obsolete even during its supposed heyday in the pre-World War I years. There was a chronic shortage of specie and hard cash practically everywhere west of the Mississippi. That's why the hottest political issue in Gilded Age American politics was bi-metalism (free silver). To try and recreate one today would require one of two courses of action. Either a currency reset where basically you would trade in a $100 bill for a $1.00 bill (or coin) which would again throw the world into chaos, or setting the value of the dollar so low vs gold that it would limit real convertibility to millionaires. And a "gold standard" sans convertibility is not a gold standard. It's "trust us, would your government lie to you?" Even setting aside the lack of credibility you still would not have enough specie. And what to do with the paper money used by the rest of the world? How does one value paper next to our supposedly gold backed dollars? What happens when they trade their paper for our dollars and then try to redeem said dollars for specie and cart our gold reserves off to some foreign capital? How do you pay off our fiat based bonds with a gold backed currency?

And to be perfectly honest, I think a rigid gold standard is a really crappy idea.  There is nothing sacred about the gold standard. Nations as far back as the Roman's routinely cheated when they needed more money or simply abandoned the GS altogether. No hard money standard ever lasted more than five minutes after the outbreak of some great crisis where the state found itself in need of more money than it held in specie. Because a gold standard robs governments of monetary flexibility to react to crisis. To be clear, I am NOT a fan of unrestrained money printing.  But there are times when some government intervention in a crisis is needed.  I am not an economic anarchist.  Could the FED have acted to prevent a financial meltdown in 2008-09 the way it did had we been on a gold standard?  I doubt it.  Of course some might argue that there would have been no crisis because the loose money that fueled the bubble would not have been there.  Maybe, and maybe not.  But the gold standard never stopped bubbles as evidenced by the various financial panics and stock market crashes in the 19th century up to the Great Depression.

I like gold where it is.  Gold is far better off acting as an extra-national reserve currency that is not tied to or under the control of any government.  In it's present role gold serves as a far more effective check on central bankers and irresponsible governments then it ever did in the days of the gold standard.  If you are comfortable with your country's paper money then you hold dollars.  If you think the FED is getting a bit too hinky with the printing press than you can trade your dollars for gold as a form of protest and a "vote of no confidence" in the FED's policies (not to mention insurance).  Anyone who thinks central bankers don't keep an eye on the price of gold, I have bridge I will sell you real cheap.

I could go on but I think the broader point has been made. People who dream of going back to the gold standard are living in a fantasy world. It is simply not possible. And I don't mean it would be difficult or inconvenient. Nor am I saying it could be done with some minor dislocations. It is NOT POSSIBLE. You cannot create a viable currency for a country as large as the United States in the modern world based on gold. Period. And of course no one country can unilaterally go on a gold standard. Half or more of the countries in the world have no gold reserves at all!

I have said this on several different threads but it's worth repeating. The world has gotten too big and far too complicated. The only metal that one MIGHT be able to find in sufficient quantity to back a major currency is silver.  Oddly no one seems very interested in silver these days. Which to my mind is probably just as well.

Sorry, the days of the gold standard are over.  And good riddance.

[Libertarian666]

Even if the US Government had every ounce of existing above ground stocks, there is no way we could establish a workable standard on which to base the world's principle reserve currency. It is simply not possible and to even attempt it would throw the world economy into complete chaos.

This is probably the silliest claim of all.

There is obviously some number where there would be enough gold.

If the dollar were repriced at 1/50,000 of an ounce of gold, would there be enough gold? If not, what if it were 1/100,000 of an ounce?

Math may be hard, but it's not that hard.

[Pointedstick]

Do I have it right?

Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?

Yes. A gold-standard one.

As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

If, Libertarian666, I assume you believe MT that politicians don't actually like gold because it constrains them, then the only way I can imagine politicians adopting a gold standard is if they were forced to. So what this sounds like is that the world population is going to get tired of unfettered politics, inflation, and war and demand the governments of the world adhere to a gold standard, constraining their power to make war and devalue currency.

Do I have it right?

[MediumTex]

Do I have it right?

Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?

Yes. A gold-standard one.

As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

If, Libertarian666, I assume you believe MT that politicians don't actually like gold because it constrains them, then the only way I can imagine politicians adopting a gold standard is if they were forced to. So what this sounds like is that the world population is going to get tired of unfettered politics, inflation, and war and demand the governments of the world adhere to a gold standard, constraining their power to make war and devalue currency.

Do I have it right?

Over time, the people often come to HATE a gold standard, especially the people who are in debt.

It's hard for me to imagine a popular uprising leading to a return to a gold standard.

[Libertarian666]

Do I have it right?

Interesting. And do you anticipate that some other currency will be more attractive to people shell-shocked by this event?

Yes. A gold-standard one.

As I think we mentioned in the PP book, gold to politicians is like holy water to a vampire.

If, Libertarian666, I assume you believe MT that politicians don't actually like gold because it constrains them, then the only way I can imagine politicians adopting a gold standard is if they were forced to. So what this sounds like is that the world population is going to get tired of unfettered politics, inflation, and war and demand the governments of the world adhere to a gold standard, constraining their power to make war and devalue currency.

Do I have it right?

That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.

[Pointedstick]

That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.

Do you expect that the rest of the world--or a lot of it--will flock to that new country due to their stronger gold-backed currency and proceed to hand them the de facto crown of reserve currency issuer?

[MediumTex]

That is one possibility. The other obvious possibility is that one government or some set of governments decides they are tired of the US getting away with murder via the "exorbitant privilege" and that they will stop it by creating a new currency regime based on gold, to supplant the dollar.

That's the one I expect.

Well, given how rocky the euro experiment has been so far, I'm not concerned at all about a euro-like gold backed currency coming onto the scene.

Why on earth would a sovereign nation give away so much control over its economy to some UN-like monetary authority that would manage this new gold-backed international anti-dollar currency?

I can almost guarantee that one of the very first problems with the new currency would arise when strong exporter nations tied to the new currency began to realize that it was no longer possible to enhance the competitive position of their export industries by tweaking the currency to devalue it a bit in relation to other currencies.  This is what China has been doing for years and it has caused enormous wealth to flow into China.  If you were to take that ability away from nations like China it would seriously damage their ability to maintain competitive export industries, which is one of the reasons that most nations would say they have no interest whatsoever in such a new currency.

In a global economy, no one wants a strong currency.  No one.  See Switzerland's euro peg in 2011 if you don't believe me. 

Whether we like it or not (and I don't like it), we live in a world in which many functions are simply being outsourced to those who do them best.  Thus, the world has outsourced manufacturing to China, it has outsourced energy production to the Middle East and Russia, and it has outsourced the efficient delivery of violence via military action to the U.S.

Despite what they say, no one really wants to disrupt this arrangement because too many people benefit from it.  They like cheap stuff from China, they like cheap oil and gas from other countries, and they like not having to maintain huge military budgets because they can just rely on the U.S. to deal with any problems that may arise which require lots of violence to resolve.

It's fine to say all of this stuff is stupid (and I would agree), but that's the way it is, and the U.S. dollar is an integral part of it all.