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A Compelling Argument Against the Gold Standard...?

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CShirk Posted: Fri, Nov 16 2007 12:31 PM

I was talking with my dad about the gold standard, and he brought up what seems to me like a good point. One of the problems with the gold standard is the use of gold in modern technology. Gold is highly conductive...moreso than copper. It is thusly used widely in microelectronics, such as printed and integrated circuits, computer processors, et cetera. The average computer today, in fact, containts 2-3 ounces of gold. Gold is also useful because it is the only material that can be used in corrosive or very humid atmospheres for extended periods of time, again one reason for its usage in computers. It is also used for contacts in such applications as communications, spacecraft, and even jet engines (most modern engines are electronically injected). Its usage will probably continue to be seen in technology as conductors for plasma/ion drive systems and other advanced propulsion methods. A return to a gold standard could very well see these devices which are fundamental to our current society and our technolgy abandoned, or even simply cannibilized for the gold. Furthermore, it would make said devices that much more expensive as the "price" of gold increases.

Thoughts?

 

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Harksaw replied on Fri, Nov 16 2007 12:46 PM

First, there is no way that there could be two or three ounces of gold in a computer.  Based on that, computers would cost $1600 - $2400 for just their gold value! But you can get computers for $300 nowadays, and I have a hard time believing that any significant part of that cost is in its gold content.

If the gold became much more valuable, yes, the price of electronics using it would increase (or they would find a different metal to use.) But you would also see a computer recycling industry start up to pay people for their outdated computers and extract the gold. 

The fact that nobody is trying to buy my 166 mHz computer from 1995 for even $100 is evidence to me that there isn't an eighth of an ounce of gold in there.

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Dynamix replied on Fri, Nov 16 2007 1:07 PM

My short, politely-spoken reply to your dad would be, "So?"

Suppose that a gold standard reduces the availability of Commodity X, which requires gold for its production. Why is it that its availability has decreased? Because some of the gold that had previously been bid away for Commodity X's production is now being bid away for other purposes. Why? Because those individuals behind those other purposes are willing to pay more, and sellers of gold prefer higher profits to lower profits. Why should we care? Because higher bids are our signal that those making the bids value that commodity more than the lower bidders. Essentially, the higher a bid is, the more the person making the bid expects to profit from it.

Tell your dad that profits are "holes" in the economy's ground. The bigger the hole, the more people are attracted to fill it. And if we find, upon returning to a gold standard, that some holes begging to be filled with gold are bigger than Commodity X's hole, then we should fill those bigger holes. Yes, some of us will "lose" in the decreased availability of Commodity X, but on net our economy will have benefited on account of goods being redistributed in such a way as to decrease the "total cubic feet" of all of our holes. And prices are the sign posts that point to the location those holes. The goal of an economy is to hit equilibrium, which could be described as having all of our holes filled up. Obviously, we'll never actually get there, but it should be our (economic) purpose to always get as close as possible--even if the availability of Commodity X must be decreased so that the availability other, more highly valued goods (including the medium of exchange) may be increased.

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Bogart replied on Fri, Nov 16 2007 2:30 PM

You are basing the argument upon a fallacy.  That is that under a gold standard, an increasing price of gold increase relative to other goods is a bad thing.  Actually it is very postive thing as the growth in wealth increases the purchasing power of the currency/gold.  In this situation, business can accurately value future investments and thus make better decisions.  This is all unlike this current money system, theft system is a better term, where our theives in the Fed constantly decrease the value of money.  Of course business can not sort out the real growth from the devaluation of money and thus make bad investments.  Eventually these investments go belly up and we call this a recession.

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Harksaw:
First, there is no way that there could be two or three ounces of gold in a computer.  Based on that, computers would cost $1600 - $2400 for just their gold value! But you can get computers for $300 nowadays, and I have a hard time believing that any significant part of that cost is in its gold content.

You're absolutely right.

Apparently gold has some industrial uses, but I don't know where do people get the idea that it's used for it's conductivity, doing so would be just plain retarded, as silver's conductivity is almost 40% greater.

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ricarpe replied on Fri, Nov 16 2007 4:07 PM

Harksaw:
If the gold became much more valuable, yes, the price of electronics using it would increase (or they would find a different metal to use.) But you would also see a computer recycling industry start up to pay people for their outdated computers and extract the gold.

Actually, this is happening in Asia.  People are collecting any and all electronic devices--computers, televisions, cell phones--and then burning them to melt the plastic and redact the metals from them.  Then they take all the metal they have collected (i.e.: copper, gold, etc.) to a recycler and exchange it for currency.

I only happened across this information by accident.  The report was really about the health problems of the people who practice this method of 'recycling' in Asian countries.

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Paul replied on Fri, Nov 16 2007 8:17 PM

Ivan Ivanov:
Apparently gold has some industrial uses, but I don't know where do people get the idea that it's used for it's conductivity, doing so would be just plain retarded, as silver's conductivity is almost 40% greater.

But it /is/ used for conductivity - good quality connectors, etc., are always gold-plated.  Silver is no good: it just oxidizes. 

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Paul:
But it /is/ used for conductivity - good quality connectors, etc., are always gold-plated.  Silver is no good: it just oxidizes.
 

I think it's just a marketing ploy.
I'm open to beeing wrong about this, but I think other then protecting the conductor from outside influence, plating it doesn't increase it's quality.
Also, I just looked up copper's conductivity (I believed the first poster on his word at first) and it's actually higher then gold's, only abput 5% lower then silver's.

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Torsten replied on Sat, Nov 17 2007 6:05 AM

CShirk:
I was talking with my dad about the gold standard, and he brought up what seems to me like a good point. One of the problems with the gold standard is the use of gold in modern technology. Gold is highly conductive...

How would this be an argument against the Gold standard? Use in technology AND as currency would simply increase the demand for gold. This would also encourage innovators to search for no means to source gold. In the end this would lead to a higher supply of gold.

Furthermore I don't see why one has to have a (obligatory?) gold standard. To me the problem would be solved with contracual freedom. Simply put into the contract how much gold of what quality you'd like to have for a specified good and the problem is solved. 

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Paul replied on Sat, Nov 17 2007 6:19 AM
Yes, connectors are plated to avoid oxidation affecting conductivity at the junction.  Also sometimes for very fine wire - it's more ductile than copper.  The amounts needed are tiny, so it's hard to believe any gold price will affect the price of electronics, at least due to direct gold content.  (Apparently one ounce of gold is enough to make over 60 miles of wire or plate 200 square feet)
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bfq replied on Sat, Nov 17 2007 10:21 AM

CShirk:

I was talking with my dad about the gold standard, and he brought up what seems to me like a good point. One of the problems with the gold standard is the use of gold in modern technology. Gold is highly conductive...moreso than copper.

Thoughts?

 

your dad is misinformed.  copper has lower resistivity and higher conductivity than gold.  gold i think is less corrosive.

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Bostwick replied on Sat, Nov 17 2007 1:20 PM

CShirk:

 Furthermore, it would make said devices that much more expensive as the "price" of gold increases.

 

Thats a common argument against gold money, that it "wastes" resources. However, that is a completely anti-economic view point. Resources are not wasted, they are used. If in a free market gold is used as money it is because the market has determined that use to be more valuable than the producion goods, that is an oppurtinity trade-off, not "waste."

We are getting into the recycling fallacy here. 

If it is unprofitable to recycle copper that means that labor is more scarce than copper (probably because mining is more efficient than recycling). Under these conditions recycling would be a drain on the economy because its an inefficient use of labor.  So the claim that not "wasting" resources is universally desirable is false.

Peace

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CShirk:
The average computer today, in fact, containts 2-3 ounces of gold
 

That is a preposterous statement. The gold value alone of a PC would be $1600 to $2400 if that were true.

The aveage PC has less than ONE GRAM of gold. People harvest hundreds of computers to come up with "2-3 ounces." 

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ricarpe:
Actually, this is happening in Asia.  People are collecting any and all electronic devices--computers, televisions, cell phones--and then burning them to melt the plastic and redact the metals from them.  Then they take all the metal they have collected (i.e.: copper, gold, etc.) to a recycler and exchange it for currency.
 

Yes. I saw a show on TV where this was the case. And they also stated that the cost of doing this was about as expensive as actually mining for gold. If there were 2-3 ounces of gold in a PC, it would not be a secret left for Asian recyclers to discover. The amount of gold in a PC is miniscule. It is used because it can be stretched so thin.

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Kakugo replied on Sat, Nov 17 2007 6:40 PM
The argument doesn't hold water. Using a bit of common sense you can argue the following: 1)With so much paper money around and paper prices on the rise shouldn't we stop using paper money too? And what about metal coins? The price of zinc and nickel have been steadily on the rise lately while copper value has litterally skyrocketed in the past two years. Oh and don't forget that pennies and cents (be them US dollars, British pounds, Euros etc) are usually more expensive to mint than their face value (for example a 2 cent Euro coin actually costs 2.02 cents to mint). 2)Gold has always been a commodity. Imagine the Ottoman Sultan saying "we should stop using the golden piastra because gold is also used to make jewelry, fake teeth etc" or imagine the French King saying "we will stop using golden ecus because gold is needed to fashion sceptres, crowns, rings etc". Ridicolous isn't it? 3)In electronics gold is in much less widespread use than it used to be. Let me give you an example. I own a 1988 Honda motorcycle: believe it or not a few of the electrical connectors are gold plated. They are completely maintenance free and will probably outlast the bike itself. Remember that here we are talking about a mass-produced bike. Of course this practice was discontinued to cut costs: Honda first switched to good quality copper, then to a cheaper copper alloy. In order to reatrd oxydation they developed new connectors that, sealed with vaseline, are almost airtight. I also have a 2003 Honda and, believe me, despite being a very expensive motorcycle built in small numbers it doesn't have a single gold-plated connector. Talk about R&D and the wonders of capitalism! About the chemical-physical characteristics of copper, silver and gold. Electrical and chemical conductances are exceptional in all three cases with silver being first, copper second and gold third. As for corrosion resistance gold comes first, copper second and silver third. Where gold really beats the competition is in its malleability and ductility: a single gram (1/31 troy oz) of pure gold can be beaten into a sheet of one square meter just 230 atoms thick; likewise one gram of gold can be drawn into 165 meters of wire of diameter 20 micrometer. So you see: copper is an excellent value for money but on some applications you really can't beat gold... money included!
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Several things here.


A. The use of silver may off set some gold currency.

B. There is no reason to "cannabilize" gold, even if we were to assume a constant in the velocity of exchange, the fact that gold as an input cost would increase would not stop entrepreneurs from developing businesses around gold to increase profits. Gold is an in put cost now, yes, gold will always be an input cost. Do you know how entrepreneurs offset increases in in put prices? They increase purchasing prices.

 
C. As the purchasing power of gold increases, it is assumed that ceteris paribus the price of everything else falls. That is as purchasing power rises that which one is purchasing descends relative to the price of moneys. 

 

 

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ricarpe replied on Sat, Nov 17 2007 10:12 PM

Jason Dean:

ricarpe:
Actually, this is happening in Asia.  People are collecting any and all electronic devices--computers, televisions, cell phones--and then burning them to melt the plastic and redact the metals from them.  Then they take all the metal they have collected (i.e.: copper, gold, etc.) to a recycler and exchange it for currency.
 

Yes. I saw a show on TV where this was the case. And they also stated that the cost of doing this was about as expensive as actually mining for gold. If there were 2-3 ounces of gold in a PC, it would not be a secret left for Asian recyclers to discover. The amount of gold in a PC is miniscule. It is used because it can be stretched so thin.

It made it on to television?  Interesting.

 It was an article which included photos, I just can't remember the search terms I used when I came across it.  Still, it was slightly sickening to see people gathered around piles of electronic devices, burning them to get whatever metals they could from them.

 I'm making no claim as to the amount of gold inside a computer.  I can't imagine it to be two to three ounces though, with the value of gold on the market as high as it is.  My point was only to shed light on the fact that people do search it out however they can.

As an edit to my post above, though: the word I should have used is 'extract' not 'redact'.  I've been experiencing many late nights as I wrap up my final semester at university, and sometimes my brain is near the consistency of outmeal....

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Jason Dean replied on Sat, Nov 17 2007 10:27 PM

ricarpe:
It made it on to television?  Interesting.
 

Well, we saw two different things. The people I saw extracting the gold did it with expensive machinery, and they were Americans. It was on a TLC or Discovery, etc. show, "The Secrets of Gold" or something like that.

Google it. The amount of gold in a PC is less than one gram. There are 31 grams to a troy ounce. 

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ricarpe replied on Sun, Nov 18 2007 6:28 PM

ricarpe:

Jason Dean:

ricarpe:
Actually, this is happening in Asia.  People are collecting any and all electronic devices--computers, televisions, cell phones--and then burning them to melt the plastic and redact the metals from them.  Then they take all the metal they have collected (i.e.: copper, gold, etc.) to a recycler and exchange it for currency.
 

Yes. I saw a show on TV where this was the case. And they also stated that the cost of doing this was about as expensive as actually mining for gold. If there were 2-3 ounces of gold in a PC, it would not be a secret left for Asian recyclers to discover. The amount of gold in a PC is miniscule. It is used because it can be stretched so thin.

It made it on to television?  Interesting.

 It was an article which included photos, I just can't remember the search terms I used when I came across it.  Still, it was slightly sickening to see people gathered around piles of electronic devices, burning them to get whatever metals they could from them.

 I'm making no claim as to the amount of gold inside a computer.  I can't imagine it to be two to three ounces though, with the value of gold on the market as high as it is.  My point was only to shed light on the fact that people do search it out however they can.

As an edit to my post above, though: the word I should have used is 'extract' not 'redact'.  I've been experiencing many late nights as I wrap up my final semester at university, and sometimes my brain is near the consistency of outmeal....

Oatmeal, not outmeal.  Yeah, I'll be very happy once the semester is over, especially because it's my last for my undergrad! Smile

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auace replied on Sun, Nov 18 2007 8:05 PM

 

The main reason for using gold is because of its corrosion resisitance. Not so much for its conductivity. It also disapates heat very well, is very effective at doing this even in a thin layer.
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auace:

 

The main reason for using gold is because of its corrosion resisitance. Not so much for its conductivity.

 

The primary uses of gold in computers are contact plating, because of its lack of oxidation,  and those really realy tiny wires that connect microchip electrical contacts to the chip carrier.

 So there is far less gold than people might imagine.

NASA uses gold as a radiation shielding, such as on the glass faceplates of space-suits, and in foil form on the outside of spacecraft. Gold is, after all, twice as dense as lead.

Let's not forget another wonderful use of gold, as a sparkly highlight in liquer. 

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CShirk replied on Mon, Nov 19 2007 12:16 PM

Yeah...ounces was a typo. My mistake. It should have been grams. Either way, I get the impression that its use in miscellaneous applications does not necessarily bar its use as specie. Kind of like how jewelry and other usages didn't necessarily affect the value under the gold standard?

 

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CShirk:

I get the impression that its use in miscellaneous applications does not necessarily bar its use as specie. Kind of like how jewelry and other usages didn't necessarily affect the value under the gold standard?

 

It would seem from my reading that commodity money works well when the commodity itself has intrinsic value.

That's not to say that a simple fiat currency doesn't work too, but as with greenbacks and colonial scrip their intrinsic value was set by being able to pay your taxes in them.

Watching "The Money Masters" right now, very interesting. 

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CShirk:

Yeah...ounces was a typo. My mistake. It should have been grams. Either way, I get the impression that its use in miscellaneous applications does not necessarily bar its use as specie. Kind of like how jewelry and other usages didn't necessarily affect the value under the gold standard?

 

Well, even grams is incorrect according to my sources. And even if there were 2-3 grams of gold in a PC, that's not a lot. It would be around $50-75 of gold, less than 1/10 of of one ounce. But in reality, the amount is less than one gram, less than $25 worth of gold, and less than 1/31 of one ounce.

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Thorgold replied on Tue, Nov 20 2007 10:27 PM

The answer to your question is this: It is irrelevant how much gold a computer contains.

Why? Simple. Gold price is not going to change if we should suddenly start using a gold currency instead of government mandated fiat.

If you think it might change, then you are not really understanding what gold is all about. Gold worth the same throughout human history, which is why we are talking about it in the first place. This means that if we can afford to put certain amount of gold into computer today and afford to buy that computer with fiat, we will certainly be able to do the same with gold currency.

 

This is actually the fundamental issue. I am not going to explain why, so that I do not destroy your interest for learning about gold, just the fallacious argument against it. Understanding this matter will help you to escape a finacial ruin in more than one way. But, rest assured you're not alone in this assumption. Mny if not most so called gold-experts are either lying about what is known to them to not be true, or do not understand gold at all.

Now, some may say what about government suppression of gold price? This would be valid, however the suppression argument is marginal to the matter at hand here.

 

Keep it up with your dad. Find out why the amount of gold is irrelevant and why the price of gold doesn't change and give it back to your dad, so that he too, can have a joy of an intelligent conversation. Hint: find out what is the price of gold? 

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