I was keeping my eyes open looking for a place in Hong Kong that sold gold coins, when I happened upon a snake restaurant. I was hungry, so I inquired as to whether they had beer on the menu as well, since I like a beer with my snake, and the waiter said no problem, he would run down to the 7-11 at the corner, buy the beer, and serve it with my snake. Splendid.
Now I don’t have to tell you such a transaction would bring in armed intervention in the United Snakes. Serving beer without a license!? Bringing it in from one place to another! Reselling beer! Cooking and serving snakes! And there are no health inspectors. You are the health inspector. Saves time and money.
I was contemplating this as I dined, and at the same time how finding gold coins for sale is so difficult.
Now gold coins can be had, and there are those who claim, erroneously, they they can be had at a discounted price. But not in any meaningful way.
Those who want to buy gold coins do so through their bank, which makes sense since the most reasonable place to store them is in the safety deposit boxes in the banks. The banks prefer to trade in China Panda gold coins, and occasionally run out for lack of huge demand.
Since Hong Kong is the closest thing we have to a free market, there are lessons to be learned about gold, money and free markets.
Gold (and silver) coins are today what is traditionally called money. Money is a medium of exchange. Prices are signaled with money, how much in gold or silver indicates what the price is. And it also indicates prices rising and falling, in relation to the relatively stable medium of exchange.
The medium of exchange can be any commodity item, it is just in all times and places gold and silver trends to be the winner by popular accord
Some economists bridle at the widespread addition of “store of value” to the definition of money as a medium of exchange. The store of value is an attribute of any and every commodity item. If you are holding any commodity item, such as wheat in a silo, or pork bellies in a freezer (or salting them for dry storage) you are doing so as a store of value. The idea is to feed out that which is stored over time and as necessary or advantageous. Because the value of commodities change over time, and because dumping a commodity all at once lowers the value, people feed a given commodity out over time. Because gold is relatively scarce, its price is fairly stable in relation to other commodities, another attribute recommending it to market participants as a medium of exchange.
So when gold is being stored, it is a store of value. When it is employed in exchange, it acts as a medium of exchange. Since it can do both it is easy to assume it is both at the same time.
What makes gold relatively stable as an objective source of price signals is, as Spooner noted, when there is a surfeit of gold it is converted to plate, decoration and jewelry. When there is a shortage, that plate, decoration and jewelry is melted down for conversion to gold as money. Yes, gold is never destroyed since it is elemental, and yes, all the gold ever mined is still available, and yes, overall what is mined is miniscule in relation to what is available, but one critical factor in the relative stability of gold is the market actors that are either fashioning it into plate, decoration and jewelry, or melting it down into coin.
Gold as plate, decoration and jewelry is plentiful all over Hong Kong. But gold coins are hard to find.
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Implicit in what I said so far is the fact that what commodity serves as money does not offer stability as an absolute, only relatively. It is a neat slight of hand for the powers that be to attribute to money a false necessity of stability, then demonstrate gold fails to be absolutely stable, warranting a conclusion that we need a central bank to achieve absolute stability in money. Which is all the more astonishing since the central banks manipulate the price of their currency woefully.
To desire gold provide for stable prices is to submit to the evil of managed economy. To desire gold do something it is not intended to do leads one to legislate laws to “help” gold do what it is, in your erroneous thinking, “supposed” to do.
As to prices, in a free market, prices are constantly dropping. If prices are rising, something is wrong. Falling prices, all is well. gold allows us to see this relatively clearly.
Gold should not give us stable prices, gold should constantly signal prices are falling, and if not, warn us prices are not falling.
UW Prof. Jere Bachrach offered a seminar to the public on gold coins from the era the Ptolemys fell, which inadvertently noted that gold coins emerge in chaos. In times of peace and prosperity, it is credit extended among market actors, historically to surprising degrees, that make an economy hum.
One stores up gold in anticipation of the need being near. Another use is to use gold to back a venture that no one believes in, so they want to be paid in advance in gold since they doubt you will be able to participate in the market to the extent those working with you will be paid back on their credit. End times make gold coins useful, since there is little assurance the other actor will perform in a creditable way.
So here is a fair sketch of gold as money in an economy. Credit rules in peaceful times, voluntarily extended among market actors voluntarily. In time, the wealth of the productive attracts actors who in the name of the state slowly arrogate unto them selves control and eventually issuance of all credit tallies, with a view to taxing the transactions. As part of the process the state monopolizes money. The state replaces money with credit, and then legalizes fiat credit. Next it legalizes usury on fiat credit. Now the state controls the economy.
As the economy asphyxiates from state control, the state offers easy credit to funds risky ventures. And that is unstable. When the unstable economy comes down people want gold to settle up, since debased currency is of no value. hence gold trade is growing in USA.
Now Hong Kong has competing private companies issuing the currency, not the state. In Hong Kong the state doe snot control credit between businesses because it does not tax added value or transactions (just some net profits). In Hong Kong relationships are still king so credit is widely extended among market actors.
The people of Hong Kong do not hoard gold because they do not fear the end. and reasonably so. No matter what happens elsewhere, the economy in Hong Kong is solid and stable. So shops selling an end-times product, gold coins, are hard to find. Because they are not necessary in a relatively free market.
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